Developer’s Diligence Recognised: Supreme Court judgment: URS Corporation Ltd -v- BDW Trading Ltd [2025] UKSC 21

The Supreme Court, following the Court of Appeal, rejected this argument. Rather, it found that it was strongly arguable that that BDW did not undertake remedial works voluntarily². It remarked that if BDW had not carried them out, it and others would have been exposed to potential risk – in particular, personal injury or death to homeowners. In any event, the Supreme Court regarded the principle of voluntariness as more relevant to causation and mitigation, which relates to the reasonableness of BDW’s actions in carrying out the remedial works. As a result, the Supreme Court did not need to decide whether BDW’s cause of action had already accrued prior to the sale of the developments. This is because BDW had incurred costs to rectify defects caused by URS’s negligence. As such, the Court of Appeal’s decision on this point stands – namely that, at the latest, the cause of action accrued on the date of practical completion.

Nevertheless, the Supreme Court gave its thoughts on the point, with regard to the leading case of Pirelli v Oscar Faber³ (Pirelli). Importantly, it stated that the Pirelli case was decided on the “false premise” that cracks in a building constitute physical damage rather than pure economic loss. Rather, this is in fact pure economic loss when those cracks arise from negligent design or construction. Even so, the Supreme Court observed that this does not mean the reasoning in Pirelli is wrong (i.e. the cause of action in negligence accrues upon damage occurring and not when it could reasonably have been discovered) and did not consider it appropriate to overrule Pirelli on limited submissions alone despite having convened a 7-person panel.

Ground 2 – Does section 135 of the BSA apply in the present circumstances and, if so, what is its effect?

By virtue of section 135 of the BSA, the limitation period for BDW’s claims under section 1 of the DPA was retrospectively extended to 30 years. URS attempted to contend that the retrospectivity of the BSA “did not apply to collateral or incidental issues or deem matters of historic fact to be other than they were”⁴ and, as such, did not apply to BDW’s claims in negligence and for contribution against URS. Giving short shrift to this argument, the Supreme Court held that the BSA’s retrospectivity does apply to claims which are dependent on section 1 of the DPA. This was based simply on the wording of the statute, “an action by virtue of” section 1 of the DPA and not “actions under” it. Therefore, the meaning of the words of the DPA was taken to be that the extended limitation period also applies to negligence and contribution claims. 

Furthermore, the Supreme Court remarked that any such restriction to actions under section 1 of the DPA would seriously undermine the purpose behind the BSA. Drawing upon the Explanatory Notes, it confirmed that “ensuring [that] those directly responsible for building safety defects are held to account was central to the BSA”⁵. If the limitation period was restricted, homeowners would have 30 years to claim against a developer under section 1 of the DPA, but it would not apply to negligence or contributions claims by the developer against contractors – i.e. those ultimately responsible. 

Ground 3 - Did URS owe a duty to BDW under section 1(1)(a) of the DPA and, if so, are BDW’s alleged losses of a type which are recoverable for breach of that duty?

Section 1 of the DPA requires parties taking on work for, or in connection with, a “dwelling”’ to perform their work in a professional manner, ensuring the building is fit for habitation upon completion. This duty is owed to:

1. those who order the dwelling’s construction; and
2. every person who acquires an interest in that dwelling. 

It was common ground that BDW owed a duty under the DPA, as section 1(4) imposes such a duty on developers. However, the Supreme Court had to decide whether BDW was simultaneously owed a duty by URS by virtue of BDW “ordering” the work and URS “taking on” the work. URS submitted that a person cannot owe duties and be owed duties simultaneously.

The Supreme Court held that:

1. URS did owe a duty to BDW, as the developer who “ordered” the work;
2. there is no good reason why a developer cannot both owe and be owed a duty and there was no inconsistency and no logical fallacy in saying that a developer can both owe and be owed a duty⁶; and
3. BDW ought to be caught as developer and first owner who ordered the work by virtue of the duty under section 1(1) of the DPA⁷. 

As for the losses claimed by BDW, the Supreme Court was quick to determine that they were recoverable. For the purposes of the DPA, losses must result from ownership of a dwelling which was unfit for habitation. Therefore, it follows that once a DPA duty had been established, losses incurred by BDW to remedy defects caused by URS’s breach, were certainly of a kind contemplated by the DPA.

Ground 4 - Is BDW entitled to bring a claim against URS pursuant to section 1 of the Contribution Act notwithstanding that there has been no judgment or settlement between BDW and any third party and no third party has ever asserted any claim against BDW?

As BDW had incurred costs relating to the remedial works, it sought a contribution by URS for those costs under the Contribution Act. The ground for this was that BDW and URS shared liability to the homeowners of the development for the damage caused by the defects.

URS argued that its liability under the Contribution Act, if any, crystallises only after BDW’s liability to the homeowners is established by:

1. a Court judgment entered against it;
2. an admission of liability; and/or
3. a settlement with the homeowners. 

At the time of the Supreme Court’s judgment, the homeowners had not issued a claim against BDW. As such, it was URS’s contention that a contribution claim had not yet arisen. However, BDW argued that its right to recover a contribution arose as soon as damage was suffered by the homeowners for which BDW and URS are each liable, despite the homeowners having not yet recovered, or even claimed, compensation from BDW⁸. 

The Supreme Court disagreed with both parties and espoused the correct position, namely that a right to recover a contribution arises when:

1. damage has occurred for which both parties are liable; and
2. one of the parties has paid, been ordered, or agreed to pay compensation for that damage⁹. 

It is important to note in relation to point (ii), that remedial works represent a payment in kind¹⁰, which BDW did in the present case. 

Practical considerations 

The Supreme Court unanimously dismissed URS’s appeal which will come to the delight of BDW, other developers and supporters of the wide application of the BSA. 

For starters, it is now clear – proactive developers who take steps to remediate buildings (even when they no longer have a propriety interest in them) can recover the costs incurred from negligent parties. This is the case even where developers are under no enforceable legal obligation to do so. Indeed, this aligns with the underlying purpose of the BSA and the generally held principle that the “polluter pays” (those who are negligent should be held to account). However, the rules of causation and mitigation will continue to apply. 

In addition, the Supreme Court confirmed that developers are owed a duty under the DPA by those involved in providing a dwelling. As such, developers can be confident that they will have a claim against any party whose actions render a dwelling unfit for habitation. Importantly, this provides further recourse for developers to recover losses, down the contractual chain, in addition to claims rooted in negligence.

It is also clear that negligence and contribution claims continue to be a lifeline to developers when faced by DPA claims from homeowners. In the context of DPA-related claims, the retrospectivity of the limitation period does not affect the reasonableness of remedial works carried out by developers for causation or mitigation purposes. As such, necessary remedial works carried out after 28 June 2022 (the enactment of the BSA), are likely to be seen as reasonable. However, the position is less clear for remedial works carried out before 28 June 2022. Here, it comes down to a question of fact. However, one may suggest that given the general public interest in ensuring building safety post-Grenfell, any remedial works ought to be considered reasonable. 

Lastly, the legal position relating to contribution claims is now clearer. If a party, such as developer, incurs costs for the same damage for which another party is also liable, the developer will be able to claim a contribution from the other party. This is helpful for developers, as they can seek a contribution despite a homeowner not even having issued a claim.

One can see how the Supreme Court took into account the public policy considerations underlying the BSA, driven by the view that those responsible for building defects do not escape liability and residential occupiers are not left in unsafe buildings as a result of inaction.