Wilson Horne considers the case of BDW Trading Ltd v URS Corp Ltd [2023] in relation to the good prospects of recovery of losses for defects in the relevant buildings notwithstanding the distant expiry of the contractual limitation period. 

Case name, reference & Bailii link 

BDW Trading Ltd v URS Corp Ltd [2023] EWCA Civ 772 & [2024] 2 W.L.R. 181 

Case Transcript: https://www.propertylawuk.net/wp-content/uploads/2024/07/181-BDW-Trading-Ltd-v-URS-Corporation-Ltd.pdf 

Summary

The case concerned the extended limitation period applicable to claims under the DPA brought into force by section 135 of the BSA. The claimant developer engaged the defendant to provide structural design services for two developments of residential apartment buildings. Having sold the buildings for full value, the developer discovered structural defects in the buildings, although no physical damage. The developer brought a claim of negligence against the defendant, seeking damages in respect of the costs it had incurred in investigating and remedying the defects. The developer was permitted to amend its claim to add a claim under section 1 of the DPA in respect of structural design defects against its former structural engineer, even though the developer had retained no interest in the relevant building. 

Facts 

The developer had instructed the designer to undertake the structural design of two tower block developments. Practical completion of both developments had taken place by 2012 and the apartments were sold to individual purchasers. Following the Grenfell Tower disaster in 2017, the developer undertook investigations of its developments. In 2019, it discovered significant defects in the structural design of the two tower blocks, although no physical damage had occurred. The developer commenced negligence proceedings against the designer in 2020, being out of time to bring claims under the contracts between the parties. The designer argued that the developer had suffered no actionable damage because it had sold the buildings before the problems were identified; therefore, the developer had suffered no loss because the defects were unknown at the time it owed the developer a duty of care; and when the developer did incur the costs of remedial works, it no longer owned the building and was therefore not entitled to recover its expenditure. 

Issues 

• Were the losses claimed recoverable as being within the scope of the designer’s duty of care? 

• When did the cause of action in tort accrue? 

• Was the Court right to grant permission for the developer to bring an additional claim under the DPA? 

• What was the effect of section 135 of the BSA? 

• Was the developer owed a duty of care under 1 of the DPA by the designer? 

• Was it a condition precedent to the making of a contribution claim under section 1(1) of the Civil Liability (Contribution) Act 1978 that a third party had brought a claim against the Developer? 

First Instance

The judge held that, apart from one head of loss for reputational damage, the losses claimed by the developer were within the scope of the defendant’s duty of care in negligence. The claimed losses were in principle recoverable, since the developer’s cause of action in negligence had accrued no later than the date of practical completion, when the developer still owned the buildings. Subsequently, section 135 of the Building Safety Act 2022 came into force, which inserted section 4B into the Limitation Act 1980, under which the limitation period for a claim under section 1 of the DPA was 30 years where the developer had become entitled to bring the claim before the commencement of section 135 of the 2022 Act. The developer applied for permission to amend its particulars of claim so as to add a claim under section 1 of the DPA and a contribution claim against the designer under section 1 of the Civil Liability (Contribution) Act 1978, on the basis that both the developer and the designer were liable to those with an interest in the apartments for the damage suffered as a result of the defects. The designer applied for the amendments to be struck out, contending that (i) section 135 of the 2022 Act did not apply to litigation that had commenced before section 135 came into force; (ii) as a developer, it could not bring a claim under the DPA; and (iii) the developer could not bring a claim under the 1978 Act because no third party had brought a claim against it. The deputy judge dismissed the application, finding that the developer’s claims were reasonably arguable without deciding the points of law raised by the designer. 

Decision On Appeal

On appeal, the Court of Appeal made the following findings on each issue. 

Where a developer employed a structural designer to provide structural design services for a building, the standard duty of care in negligence imposed on the designer obliged it to protect the developer against the risk of economic loss caused by structural defects in the design of the building which would have to be remedied, and it was not necessary that the developer was under an obligation to remedy such defects or that the developer had had a proprietary interest in the building at the time when the defects were remedied. In the present case, the developer’s claim was a conventional claim for damages in respect of economic losses comprising the costs of investigating and remedying the defects caused by the designer, rather than reputational losses; and accordingly, the losses claimed by the developer were within the scope of the designer’s duty of care in negligence. 

Where there was an inherent structural design defect in a building which did not cause physical damage, actionable damage occurred and a cause of action in negligence accrued as against the designer on practical completion of the building, rather than when the builder discovered the fact or facts that might cause him to bring a claim. Therefore, the developer’s cause of action had accrued, at the latest, on practical completion of the buildings, and since practical completion had occurred at a time when the buildings were owned by the developer, there was no reason in law not to conclude that the developer had a completed cause of action in negligence against the defendant at that stage. 

The Judge had correctly applied the test of whether the new claims introduced by the amendments were reasonably arguable; that, in particular, the principles relevant to an application to make an amendment following the possible expiry of a limitation period (namely that the amendment would not be permitted if the party opposing it could show that it was reasonably arguable that the new claim introduced by the amendment was time-barred) did not apply, since it was not said that the claims which the developer sought to introduce by the amendments were time-barred.  

The effect of section 135 of the BSA was that section 4B of the Limitation Act 1980 applied to a claim under section 1 of the DPA that had been ongoing at the time when section 135 had come into force; that, in particular, (i) the ordinary meaning of section 135(3) of the 2022 Act , which provided that the amendment made by section 135(1) was to be treated as always having been in force, could not have been any clearer, (ii), although section 135(6) contained an express carve-out from section 135(3) for claims which had been determined or settled before section 135 came into force, there was no such carve-out for ongoing claims, (iii) there was no principle that an entitlement to plead a time bar constituted an accrued right which could not be removed by later legislation and (iv) a carve-out from section 135(3) for ongoing claims would have been difficult to justify on policy grounds; and that, accordingly, the limitation period for the developer’s claim under section 1 of the DPA was 30 years from the date on which the right of action accrued. 

The duty imposed by section 1(1) of the DPA on a person taking on work for or in connection with the provision of a dwelling was capable of being owed to persons who were not individual lay purchasers of the dwelling, such as commercial developers. Likewise, the duty imposed by section 1(1) was capable of being owed to a person who themselves, by virtue of section 1(4) , owed the section 1(1) duty to another. Further, recoverability of damages on a claim under section 1 was not linked to or limited by ownership of the dwelling in question. Iin the present case, it was clear that the designer, as a person taking on work for or in connection with the provision of a dwelling, owed a duty under section 1(1) to the developer, as a person to whose order the dwelling was provided; and that, accordingly, as a matter of law, the developer had a valid claim against the designer under section 1 of the DPA that had been properly added by way of amendment. 

It was not a condition precedent to the making of a contribution claim under section 1(1) of the Civil Liability (Contribution) Act 1978 that a third party had brought a claim against the contribution claimant, and  the right to make a claim for contribution under section 1(1) of the 1978 Act was established when the three ingredients in section 1(1) could be properly asserted and pleaded, namely (i) the contribution claimant was liable, or could be found liable, to the third party, (ii) the contribution defendant was liable, or could be found liable, to the third party and (iii) their respective liabilities were in respect of the same damage suffered by the third party; and that, accordingly, the claimant’s contribution claim under section 1 of the 1978 Act had been properly added by way of amendment. 

Comment

The effect of section 135 of the BSA was to apply a 30-year limitation period in respect of a claim under the DPA when the cause of action had accrued prior to the commencement of section 135.