URS Corporation Ltd v BDW Trading Ltd

Factual and Procedural Background

This opinion concerns two related appeals arising from claims by a developer, referred to as BDW Trading Limited ("BDW"), against a consulting engineering firm consolidated within URS Corporation Limited ("URS"), involving defective structural designs in two residential developments: Capital East and Freemens Meadow. The developments were completed between 2005 and 2012, and sold to purchasers before structural defects were discovered in 2019. The defects rendered the buildings dangerous, requiring remedial works and evacuations, although no physical damage was evident at the time of discovery.

BDW initiated proceedings in 2020, alleging negligence by URS in the design of the developments. The claims were initially limited to negligence and excluded breach of contract, likely due to limitation concerns. The substantive appeal challenges a High Court judge's 2021 order resolving preliminary issues largely in favor of BDW, particularly concerning the scope of URS's duty and the date of accrual of the cause of action in tort. Subsequently, following the enactment of the Building Safety Act 2022 ("BSA") which extended limitation periods under the Defective Premises Act 1972 ("DPA"), BDW sought to amend pleadings to add claims under the DPA and the Civil Liability (Contribution) Act 1978 ("CL(C)"). URS opposed these amendments, leading to a second appeal concerning the grant of permission to amend.

Legal Issues Presented

1. Whether the scope of URS's duty of care extended to the losses claimed by BDW, given that BDW no longer had a proprietary interest in the developments at the time defects were discovered.
2. When the cause of action in tort accrued: at practical completion of the developments or upon discovery of the defects in 2019.
3. Whether BDW’s claim should be struck out if the court finds against them on the first two grounds.
4. Whether the court erred in granting permission for BDW to amend pleadings to add claims under the DPA and CL(C), particularly in light of limitation periods and the retrospective effect of the BSA.

Arguments of the Parties

Appellant's Arguments (URS)

• URS contended that their duty of care was limited to protecting BDW’s proprietary interests and potential claims by third parties, which were time-barred at the time of defect discovery.
• They argued the cause of action in tort could only accrue upon discovery of defects, not at practical completion.
• They submitted that BDW suffered no actionable damage because they had sold the developments for full value prior to defect discovery and were not liable to carry out remedial works.
• URS challenged the grant of permission to amend pleadings, arguing the judge misapplied the test and should have decided points of law at the amendment stage.
• They asserted that BDW, as a developer, was not owed a duty under the DPA by URS and that claims under the DPA and for contribution were unsustainable.
• They also argued the longer limitation periods introduced by the BSA could not apply retrospectively to ongoing litigation.
• Regarding contribution claims under the CL(C), URS maintained that such claims require prior claims by third parties against BDW, which were absent.

Respondent's Arguments (BDW)

• BDW maintained that URS owed a conventional professional duty of care co-existent with contractual duties, covering economic loss arising from negligent design causing structural defects.
• They submitted the cause of action accrued at practical completion, when the defective design was incorporated into the buildings, regardless of knowledge of defects.
• BDW argued that limitation periods under the BSA apply retrospectively, including to ongoing litigation, and that the amendments were reasonably arguable and properly permitted.
• They contended that BDW, as a developer, was owed a duty under s.1(1)(a) of the DPA, and that recoverability of damages under the DPA is not limited by ownership at the time of remedial works.
• BDW argued that the CL(C) does not require prior claims by third parties before a contribution claim arises and that their claim for contribution was properly pleaded.
• They stressed policy considerations supporting recovery for responsible developers who undertake remedial works to protect occupants and purchasers.

Table of Precedents Cited

Court's Reasoning and Analysis

The court conducted a detailed analysis of the scope of duty, accrual of cause of action, and the validity of amendments in light of the BSA’s retrospective limitation provisions. It affirmed the conventional professional duty of care owed by URS to BDW, encompassing economic loss arising from defective structural designs, regardless of BDW’s proprietary interest at the time defects were discovered.

The court rejected URS's argument that the cause of action only accrued upon discovery of defects in 2019. It relied on binding precedent, notably Pirelli and Murphy, to confirm that knowledge of defects is irrelevant to accrual. Instead, the cause of action accrued at practical completion when the defective design was irrevocably incorporated into the buildings, constituting a "damaged asset".

The court also analyzed the application of the DPA, concluding that URS owed a statutory duty under s.1(1)(a) to BDW as the person ordering the provision of dwellings, and that BDW’s rights under the DPA were not limited by their subsequent sale of the buildings. The court rejected the notion that the DPA duty was confined to individual purchasers, emphasizing that developers could also be owed duties under the statute.

Regarding the CL(C) claim for contribution, the court held that no formal prior claim or intimation by third parties against BDW was required for BDW to claim contribution from URS. The statutory language supports the right to contribution arising once the parties are liable for the same damage, regardless of whether the underlying claim has been formally made.

On the retrospective effect of the BSA’s extended limitation periods, the court interpreted s.135(3) as unequivocally retrospective, applying to ongoing litigation without exception for parties who had commenced proceedings before the Act's commencement. The only carve-out applies to claims finally determined or settled before the Act came into force. This interpretation was supported by statutory interpretation principles and relevant authorities.

The court found no error in the deputy judge’s exercise of discretion in permitting BDW to amend pleadings, applying the reasonable arguability test and appropriately leaving complex legal questions for trial rather than summary determination.

Holding and Implications

The court DISMISSED both the substantive appeal and the amendment appeal.

The holding confirms that:

• The duty of care owed by design professionals to developers includes economic loss from defective designs, regardless of the developer’s proprietary interest at the time of defect discovery.
• The cause of action in tort accrues at practical completion of the building, not at the date of discovery of defects.
• The retrospective limitation periods introduced by the Building Safety Act 2022 apply to ongoing litigation and afford BDW longer limitation periods under the DPA.
• BDW may amend pleadings to add claims under the DPA and for contribution under the CL(C), with no requirement for prior third-party claims to have been made against BDW for contribution claims to arise.

The decision has direct consequences for the parties by maintaining BDW’s claims and permitting the amendments, but does not establish new precedent beyond reaffirming established principles on accrual and limitation in construction negligence cases.