BDW v URS: Is building safety still under and open to construction?
The Court of Appeal has issued a decision covering extended limitation periods under the Building Safety Act 2022 (BSA) and on the points at which causes of action accrue. S153 of the BSA extended the time limits for bringing certain types of claims, including those under s1 of the Defective Premises Act 1972 (DPA), from 6 to 15 years and introduced a 30-year retrospective limitation period for such claims. S1 of the DPA requires construction works to be undertaken such that the building is fit for habitation upon completion.
This means that even residential developments completed up to 30 years previously can be the subject of claims that they are not ‘fit for habitation’ under contemporary standards.
BDW originally developed and owned residential tower blocks in the Isle of Dogs and Leicester between 2005 and 2012. BDW had appointed URS to design these blocks and following an investigation beginning in late 2019, claimed their negligent design had caused structural deficiencies in those blocks. BDW rectified these defects despite the fact it had sold its interests in the blocks and neither current owners (nor any other party) had made a claim against BDW. BDW sought to recover the cost of undertaking these remedial works and other ancillary losses in this claim which remain the subject of ongoing court proceedings.
Essentially, the Court of Appeal confirmed:
- URS had a duty to produce a design with reasonable skill and care,
- the defective design caused a risk of harm that would cause BDW economic loss,
- a cause of action can accrue in negligence where there is no physical damage at practical completion, i.e. the latest point at which the defects are irrevocably incorporated into the building,
- that BDW were the owners at that point years prior, notwithstanding their having sold their interests, meant they could still make the claim under the new statutory limitation period,
- BDW owes duties to third parties including the flat owners via the same mechanism,
- under the Civil Liability (Contribution) Act 1978, 3rd parties may claim damages against BDW after BDW successfully sought a contribution from URS for the same damage, and
- the point at which the cause of action in a contribution claim accrues is when the contribution is sought – i.e. at the time of trial. Even before the 30-year retrospective limitation period was introduced, the limitation period was 2 years and so, since the contribution hasn’t yet been sought, the claim remains open to BDW.
It is notable that BDW succeeded despite the fact they didn’t own the building and the previously rarely used DPA has now come to prominence. The thrust of the BSA was that liability could spread far and wide – this case means that there is plenty of scope for claims to be made on buildings built in the last 30 years that are not ‘fit for habitation’. However, despite this, there remain outstanding questions, some of which are addressed below.
Irrevocable Incorporation or Practical Completion?
While the CoA held BDW’s cause of action accrued upon practical completion, in the same breath, it held it accrued at the point the defective design had been "irrevocably incorporated" into the buildings – and therefore, at that moment, BDW suffered actionable damage. It is feasible, for example, in fire safety cases with defective cladding (i.e. a non-structural issue which is therefore more easily remediable), that the point at which the defect had been irrevocably incorporated may not be at practical completion, but – assuming they are included in the contract – at the end of the Defects Liability Period or after the Certificate of Making Good. It could be argued that it would only be after those points that the defects became irrevocable. Where a building was practically completed over 30 years ago, but the defects became irrevocable less than 30 years ago, there may still be an actionable claim.
While BDW were the owner of the block in this case, it is not unusual for an SPV to be a developer/owner and at some point after selling the development, for that SPV to be dissolved. In such a case, would a historic corporate veil be pierced and a parent company be able to make a claim? This remains a point to be formally decided in the courts.
While the DPA concerns fitness for habitation – i.e. residential use – there remains an open question as to how liability would be apportioned (or arguably even deemed) in a mixed-use development, given the DPA seemingly cannot apply to non-residential parts. This again remains a point to be litigated.
Human Rights Act
The Court of Appeal left open to URS the possibility of a defence under the European Convention on Human Rights (ECHR) as provided for via the Human Rights Act 1998 (HRA). The right to a fair trial meant that if URS had a defence if it could show it had destroyed documents they had thought were statute-barred – a point which could be raised at trial. The underlying point was as to retrospectivity being a breach of a right to a fair trial, especially where a claim had started pre-BSA and was latterly amended to include claims under the BSA. A recent case at the European Court of Human Rights held that a retrospective law that changed the outcome of pending litigation violated the ECHR. While dismissed by the CoA here and a challenging claim to make, a submission could be made for a senior court to issue a Declaration of Incompatibility under the HRA so Parliament could in turn remove retrospectivity from the BSA.
While URS may rue the fact they missed out on a more dissenting voice on the bench such as that of Carr LJ, rather than those of Asplin and King LJJ, which were broadly in agreement with Coulson LJ; they may well appeal to the Supreme Court. At the time of writing, we await further news.