In a decision that will be welcomed by property developers, the Supreme Court has ruled that if a developer voluntarily remedies defects in a development, there is no rule of law preventing it from seeking damages from the party responsible for the defects.
In 2019, after conducting investigations following the Grenfell Tower disaster, a major property developer discovered a number of design defects in two sets of high-rise residential developments (“the Developments”). The defects were caused by the negligent design of the Defendant and created risks to the occupants’ safety. In 2020-2021 the developer voluntarily carried out works to remedy those defects. By that time it had no proprietary interest in the Developments and any claim made against it by the owners or occupiers would have been time barred. It sought to recover costs relating to the works from the structural engineers that had provided the designs for the Developments.
Ruling on the preliminary issues, the High Court found that the structural engineers’ duty of care included the losses claimed, except for losses concerning reputational damage. The losses were recoverable in principle and were not too remote. Whether the developer had caused its own loss or failed to mitigate its loss were issues that could only be determined at trial. After Section 135 of the Building Safety Act 2022 (BSA) retrospectively extended the limitation period for accrued claims under Section 1 of the Defective Premises Act 1972 (DPA) from six years to 30 years, the developer successfully applied to the Court to amend its claim in reliance on Section 135. The structural engineers’ appeal against the Court’s initial decision and its decision to allow the amendments was dismissed by the Court of Appeal.
Ruling on the structural engineers’ further appeal, the Supreme Court rejected the argument that English law recognised a principle of voluntariness which rendered the developer’s loss too remote or outside the scope of the structural engineers’ duty of care. In any event, it was strongly arguable on the assumed facts that the developer had not carried out the remedial works voluntarily, in particular because of the risk of death or injury to homeowners if it did not do so and for which it might be liable. The developer had a legal liability to the homeowners to carry out the repairs. Even if it had a limitation defence to claims from those homeowners, it did not bar the legal liability itself. It would also suffer reputational damage if the defects went unremedied.
The Supreme Court held that the retrospective effect of the extension of the limitation period applied in respect of claims which are dependent on the limitation period in Section 1 of the DPA as well as claims brought under that section. Section 135(3) of the BSA refers to ‘an action by virtue of’ Section 1 of the DPA. The Court also noted that a central purpose of the BSA was “the need to identify and remediate historic building safety defects as quickly as possible, to protect leaseholders from physical and financial risk and to ensure that those responsible are held to account”. That purpose would be seriously undermined if Section 135(3) were restricted to actions under Section 1 of the DPA.
The Supreme Court found that the structural engineers owed a duty to the developer under Section 1(1)(a) of the DPA. The duty is owed to those to whose ‘order’ a dwelling is built, and the relevant work had been carried out by the structural engineers to the order of the developer. The Supreme Court also agreed with the Court of Appeal that the fact that there had been no judgment against the developer nor a settlement between it and a third party, and no third party had asserted any claim against it, did not prevent it from bringing a claim against the structural engineers under Section 1 of the Civil Liability (Contribution) Act 1978.
The judgment may come to be relied on by insurers seeking to resist an argument that a payment made by them was “voluntary” and as such undermined their right to subrogate and/or claim a contribution.
URS Corporation Ltd v BDW Trading Ltd (Rev1) [2025] UKSC 21
