The Court of Appeal confirms door is wide open for fire safety defect claims by developers
The outcome is rather unsurprising but, even so, the Court of Appeal’s judgment in URS Corporation Ltd v BDW Trading Ltd  EWCA Civ 772 provides some useful guidance on:
- The retrospective effect of the extended limitation periods brought in by s.135 of the Building Safety Act 2022 (the “BSA”).
- Who is owed a duty under s.1(1)(a) of the Defective Premises Act 1972 (the “DPA”).
- Recoverability of damages under the DPA.
- When a party can bring a claim in contribution under s.1(1) of the Civil Liability (Contribution) Act 1978 (the “CL(C)A”).
In summary the Court of Appeal held that:
- The extended limitation periods under the BSA apply equally to proceedings ongoing at the date the BSA came into force.
- Developers can both owe and be owed a duty under the DPA, which enables developers to bring claims against the construction and design teams under s.1(1)(a) of the DPA.
- Recoverability of damages under the DPA is not linked to or limited by property ownership, such that damages for breach of the DPA are recoverable in the usual way.
- A claim can be brought under the CL(C)A regardless of whether a claim has first been made, or intimated, by the building owners.
Housing developer BDW Trading (“BDW”) engaged a construction engineering firm, URS Corporation (“URS”), to design homes for two developments in London and Leicester, respectively. Building works for the London development were completed in or around March 2007 to February 2008, while the Leicester development was completed between February 2005 and October 2012. BDW sold both developments after practical completion and transferred its interests in them by December 2008 and May 2015, respectively.
Following the Grenfell Tower disaster in 2017, BDW conducted a review which identified structural design defects in respect of the London and Leicester developments. BDW subsequently incurred significant costs investigating the defects and carrying out mitigation, including evacuating one apartment block in the London development, and undertaking permanent remedial works.
The underlying dispute concerns URS’ liability to BDW for the losses BDW had incurred in investigating and remediating the design defects in the developments. However, the Court of Appeal’s decision is concerned with a number of Appeals by URS as to whether BDW was entitled to amend its claims against URS to add claims under the DPA and CL(C)A in light of the new limitation provisions under the BSA. Permission for such amendments had been granted by the High Court.
There were three Appeals:
The first appeal was in relation to the decision of a preliminary issue regarding BDW’s claim against URS in negligence (which was dismissed).
Second and Third Appeals – Grounds
The Grounds, broadly, were that:
- s.135 BSA could not apply to proceedings ongoing at the point of enactment / coming into force of the BSA;
- a developer owed duties under the DPA, it was not itself owed any duty;
- BDW had suffered no loss under the DPA as it did not own the properties when the defects were discovered; and
- no claim could be made under the CL(C)A because no claim had first been made, or intimated, by the apartment owners such that there was no legal right to bring a claim under the CL(C)A.
Second and Third Appeals – Outcome
The Court of Appeal dismissed all Grounds. Of particular interest is that:
As to (1), the Court of Appeal found that the specific wording of s.135 of the BSA, namely, “is to be treated as always having been in force”, was clear that it was intended to have retrospective effect and there was no carve-out for ongoing proceedings.
As to (2) the Court found it was clear on the words of s.1(1)(a) that the dwellings were “provided to the order of” BDW (as developer) and so BDW was owed the DPA s.1(1) duty by URS. Additional submissions by URS that:
- Duties were owed only to “lay purchasers”, rather than companies or commercial organisations, was untenable and inconsistent with the wording in s.1(1), and it would also be unusual and impossible to police in practice.
- What was “provided” was not dwellings, but a development, was also untenable and a similar argument was rejected in Rendlesham Estates v Barr  EWHC 3968 (TCC).
As to (3), the Court of Appeal found that recoverability of damages under the DPA is not linked to, or limited by, property ownership.
As to (4), the Court of Appeal found that as a matter of statutory construction there was nothing in the wording of s.1(1) of the CL(C)A to suggest that the making or intimation of a claim was a condition precedent to the bringing of a claim in contribution. The Court of Appeal also considered the fact that while the need to make a claim is expressly referred to in s.1(4) CL(C)A, there is no similar requirement in s.1(1), which suggests it was never intended to be a condition precedent to bringing a claim in contribution.
The Court also noted that s.1(6) CL(C)A refers to “any such liability which has been or could be established” which strongly suggests that the potential liability of party B (in this case BDW) does not need to be established in fact before the right to claim a contribution against party C (in this case URS) arises. The Court also considered that there was no reason why BDW should have to wait for a claim from party A, for example the homeowners, before being entitled to seek contribution from URS as that would reward laziness.
- The decision of the Court of Appeal is very much in line with the “polluter pays” principle, which is one of the key values behind the BSA.
- In terms of context, the fact that the developer, BDW, identified defects as the result of a review, albeit one precipitated by the Grenfell Tower disaster, is similar to the exercise many developers are currently undertaking, or have already undertaken, in respect of their portfolios. This is particularly true of those developers who are obliged to do so in accordance with the terms of the developer remediation contract.
- This is significant as, following the Court of Appeal’s decision, it appears developers are very much pushing against an open door in respect of bringing claims against contractors for defective fire safety works post-BSA. The decision will no doubt give developers comfort as to the prospects of recovery where they have remediated buildings and are not in receipt of a claim.
- We can therefore expect to see a greater number of claims relying on the provisions of the DPA and CL(C)A, and parties applying to amend existing claims to take advantage of this judgment.