The Supreme Court has found in favour of Barratt Redrow in its dispute with consulting engineer URS, paving the way for the developer to sue the engineer for its role in the design of buildings that Barratt had put up that, since subsequent changes in building safety law, 聽needed remediation works.
The long-awaited judgment in URS Corporation Ltd v BDW Trading is being hailed as an important victory for BDW Trading (a Barratt Developments company), with wide ranging ramifications for housing developers, architects, designers and consultants. Lawyers say that it should unlock and bring clarity to numerous ongoing disputes about building safety following the Grenfell Tower fire and subsequent Building Safety Act.
BDW had engaged URS, which was subsequently acquired by the US consultancy Aecom in 2014, as a structural design consultant in connection with multiple high-rise residential developments. In March 2020, BDW brought a claim in negligence against URS in relation to structural design defects it had discovered in the developments. BDW had discovered the defects after having sold the developments to third parties. It nonetheless performed remedial works to rectify the defects, the cost of which forms the basis of the losses it is claiming against URS.
However, URS challenged BDW鈥檚 entitlement to take action, given that it had fixed the buildings voluntarily and that it has all been rather a long time ago anyway.
In dismissing URS鈥� appeal, the Supreme Court has effectively given the go-ahead for Barrat Redrow to bring legal action against URS 鈥� and by extension for developers facing heft remediation bills to pursue their entire supply chain for contributions, potentially opening a floodgate of legal action that will have all developers breathing a sigh of relief and lawyers rubbing the hands.
There were four parts to URS鈥� appeal, as explained by Rob Horne, head of construction disputes at Osborne Clarke, which acted for BDW: 鈥淭he first was that there was a legal principle that a voluntary act could not lead to recoverable loss. The Supreme Court found there was no such legal principle but that voluntary actions would be relevant to causation and potentially mitigation of loss. It noted, however, that responsible developers who act to remedy building safety defects should not be penalised by barring their rights to recovery. In particular, at paragraph 69: 鈥楳oreover, the policy of the law favours incentivising a claimant in BDW鈥檚 position to carry out the repairs so as to ensure that any danger to homeowners is removed鈥�.
聽鈥淭he second was that only claims made directly under the Defective Premises Act would be subject to the extended 30 year limitation period. This was not accepted. The Supreme Court instead found that any claim based on the Defective Premises Act 1972 聽(DPA), even if brought in tort or for contribution, would be subject to the extended 30 year limitation period. In particular at paragraph 116: 鈥楾his would 鈥減enalise鈥� responsible developers, such as BDW, who had been pro-active in investigating, identifying and remedying building safety defects.聽 Not only had they acted responsibly but they had done so in response to and in accordance with the government鈥檚 strong encouragement.聽 Such penalisation of developers would be contrary to the purpose of the legislation.鈥�
鈥淭he third was that a developer (such as BDW) could not be owed a duty under the DPA. The Supreme Court did not agree, holding that the language of section 1(1)(a) of the DPA, giving rights where dwellings were provided 鈥榯o the order of any person鈥�, conferred rights upon a developer. That was the case even though a developer could simultaneously owe a duty and be owed a duty under the DPA. In particular paragraph 153: 鈥楳oreover, the purpose of the DPA is better served if the DPA duty is widely, rather than narrowly, owed. So, for example, on the facts of the present case, it would better serve the policy of ensuring the safety of dwellings if BDW itself had rights under the DPA against a party primarily liable for the defects.鈥�
鈥淭he fourth was that a claim in contribution could only be made once a settlement was finalised or judgement entered. Again, the Supreme Court disagreed, finding that it was sufficient that BDW had made a payment in kind (by performing remedial works) in compensation for the damage suffered by the homeowners.鈥�
Explaining the implications of this judgment, Horne said: "For residential developers there is now significantly more clarity over the full effect of the retrospective limitation period introduced by the Building Safety Act (BSA). Ultimately, the aim of the BSA was to ensure that safety failures are properly addressed and that those responsible bear the costs. This case furthers that aim by ensuring that developers have a clearer path to recover funds from designers and constructors who designed and built unsafe buildings.
"There is significant commentary in the judgment supporting a proactive approach towards remedying defects, particularly as they relate to health and safety. The Supreme Court has commented that proactive developers who, in effect, do the right thing in effecting necessary safety works, should not be penalised by having rights of recovery barred. Such developers are able to recover the remedial costs from those most responsible for the safety defects in question. This is further supported by the clarification that getting on with remedial work without the formalities of judgment or settlement will not prevent a claim in contribution. As always though, any claim by a developer would still have to show it acted reasonably in the steps it took to deal with the defects."
Other construction lawyers were also quick to jump onto the significance of the judgment.
Julia Tobbell, a partner at Forsters, said: 鈥淭he Supreme Court has held that the new 30-year limitation period, introduced by the Building Safety Act (BSA), does not just apply to claims under the Defective Premises Act 1972 (DPA). The retrospectivity can also apply to other claims arising by virtue of s.1 of the DPA, such as onward claims by developers against contractors, which the Court deemed essential if the new statutory framework is to operate as Parliament intended.聽 The Court noted that holding those responsible for building safety defects accountable was the fundamental purpose of the BSA, and any other conclusion would undermine that intention.
聽鈥淭he Court also found that the duty to build homes properly under s.1 of the DPA is not just for the benefit of the homeowner, but also the developer who procures the contractor to carry out the works. The developer can both owe a duty (to the homeowner) and be owed a duty (by the contractor). This reading gives the DPA far more teeth.
鈥淭his case will be a relief to proactive developers who took on remediation costs even where they had sold the building to third parties.聽 Although their decision to voluntarily take on repairs may be a factor in assessing reasonableness of mitigation, it does not bar them in principle from being able to recover from negligent contractors.鈥�
David Savage, a partner at Charles Russell Speechlys, said: 鈥淭he Supreme Court鈥檚 judgment marks a significant clarification of the legal routes available to developers seeking redress for fire safety defects in the wake of the Grenfell tragedy. By unanimously dismissing URS Corp鈥檚 appeal on all four grounds, the Court has confirmed that developers can, in appropriate circumstances, recover losses in negligence even where they do not hold a proprietary interest in the affected property, and where the losses were argued to have been voluntarily incurred.
鈥淭his judgment will be welcomed by developers. It provides a clear endorsement of the recovery routes for their losses associated with remedying fire safety related defects, against those responsible for the issues arising, including as modified by the Building Safety Act 2022.鈥�
Alex Delin, construction partner at Irwin Mitchell, said: 鈥淔or developers who discover defects in high-rise residential buildings, the judgment is significant, setting a marker for how losses may be ameliorated in the future. It is also another sign the Court will interpret the law to encourage developers to remediate buildings as soon as possible and share the costs with all those held to be responsible.鈥�
He added: 鈥淚t is worth noting that the voluntary nature of those losses may be considered as to questions over mitigation based on the facts, which we will expect to become a key argument in defence of these claims going forward, rather than an argument that they bar the claims altogether (as URS contended). The extent of the reasonable costs to be recovered in negligence will also remain up for grabs. Nevertheless, it is clearly a win for developers.鈥�
A Barratt Redrow spokesperson said: 鈥淲e are pleased that in this landmark case, the Supreme Court has dismissed the appeal on all grounds and clarified the responsibility of wider companies for remediating defects in developments they were involved in building. Whether remediation is required because of defects in design, supply of inappropriate products or workmanship issues, it is vital that the companies who played a part step up and put things right, as we have done with the developments in this case.鈥�
Further reading: The full judgment can be found at
Got a story? Email news@theconstructionindex.co.uk
