UK Supreme Court judgment facilitates building safety claims from developers

Why should I read this?

Under the Building Safety Act 2022 (BSA) and Government Remediation Contract, developers shoulder liability for the remediation of historic building safety defects. This is in the form of:

• Remediation Contribution Orders where developers are ordered to meet the cost of building safety defects and any relevant steps for buildings in England that are at least eleven metres high or have at least five storeys and contain at least two dwellings;
• Claims under the Defective Premises Act 1972 (DPA), where a dwelling is unfit for habitation;
• Building Liability Orders; where liability can be shared with associates of a developer if the developer does not have sufficient funds to meet a claim; and
• Government Remediation Contract, where developers are required to fund the remediation of buildings they have developed or refurbished.

Liability under these claims extends back 30 years (except for DPA claims for works to an existing dwelling, which have a 15 year limitation period from 28 June 2022). This has presented developers with a problem as they are unable to pursue their supply chain under contractual claims where liability typically expires after 12 years.

This decision has therefore  been crucial to determining whether developers can pursue their own claims under the DPA and the Civil Liability (Contribution) Act 1978, so that this liability can  be shared with their supply chain under the longer limitation periods offered for building safety claims.

Background to this case

This case originally concerned a claim by property developer BDW against a structural design consultant, URS, in relation to defects discovered in high-rise residential buildings.

BDW undertook remedial works prior to the commencement of the Building Safety Act 2022, without receiving a claim for these defects from homeowners.

BDW sought to recover damages from URS initially under a claim for negligence. Following the introduction of the 30-year retrospective limitation period introduced by s.135 BSA, BDW also claimed under s.1 DPA and via the Civil Liability (Contribution) Act 1978 (the “Contribution Act”).

What did URS v BDW decide?

This case was decided at first instance in the TCC, but appealed to the Court of Appeal and most recently to the Supreme Court who essentially upheld the first instance and Appeal Court’s decisions and whose judgment enables developers to make flow down claims from their supply chains in the following ways:

1. Developers are owed a duty under s.1 DPA
   The developer is a party to whose “order” a dwelling is being built. Importantly this means that developers are owed a duty under the DPA (even if they no longer have a proprietary interest in the property) and can claim against contractors and consultants if a dwelling is unfit for habitation. Developers can thereby benefit from the longer limitation periods offered under a DPA claim to pursue flow down claims.
2. The 30 year retrospective limitation period extends to claims that are dependent upon the s.1 DPA claim
   The retrospective 30-year limitation period (under s.135 BSA) for s.1 DPA claims extends to claims that are dependent upon a s.1 DPA claim - for example a claim for damages for repair costs in the tort of negligence, or a claim for contribution in respect of those repair costs under the Contribution Act. This broadens the available claims available to developers under longer limitation periods.
3. Repair work incurred in advance of a claim is still recoverable
   There is no rule of law that prevents the recovery of repair costs in a negligence claim simply because the claimant “voluntarily” incurred them. Rather, whether such costs are recoverable depends on issues of causation and mitigation. Factors that make undertaking the repairs reasonable, in the absence of a claim, include the risk of personal injury/death, commercial reputational damage and public interest or moral pressure.
4. A contribution claim can be brought even without a judgement/settlement in relation to the underlying liability
   BDW was not prevented from bringing a claim for contribution against URS by the fact that there had been no judgment against BDW or settlement between BDW and any third party. No third party had ever asserted any claim against BDW. It is sufficient that BDW had made a payment in kind (by performing remedial works) in compensation for the damage suffered by the homeowners.

What else do I need to know?

This decision is not surprising but does provide welcome clarification on the options available to developers. Until now, building safety liability rested with developers with uncertainty in relation to the liability of its supply chain. However, this case has confirmed the possibility of flow down claims against the supply chain via contribution claims, negligence claims and claims under the DPA which are also afforded the benefit of longer limitation periods than the typical 12 years available for claims in contract.

Further reading on building safety

Our previous article on the Court of Appeal decision is available here.

Please refer to our Business Topic page on the Building Safety Act.

Written by Gemma Irving Lees.