Building Safety Act - the first case.docx

There has been much legal commentary around the Court of Appeal decision in URS

Corporation Ltd v. BDW Trading Limited , covering as it did some points arising under

the Building Safety Act (‘BSA’). Despite the legal chatter, it’s hard to characterise this

as a case which delves into much detail in relation to the BSA itself. It does,

however, mark the start of the use of the longer limitation periods because of

amendments to the Defective Premises Act (‘DPA’) brought about by the BSA.

The bulk of the decision deals with issues around the extent of a professionals’

liability in tort and when a tortious cause of action arose against the designers of an

allegedly defective building, where no physical damage was immediately apparent.

The Court concluded by re-affirming the general position that such rights accrue at

the date of practical completion.

What has interested both legal commentators and the construction professions is the

Court’s answer to some other novel questions concerning the DPA (as amended by

the BSA). The Court of Appeal was asked to consider:

• Can developers bring a claim under the DPA?

As we reported on here, the DPA imposes duties on those taking on work in

connection with the provision of a dwelling to see the work is done in a professional

(or workmanlike) manner so that the dwelling is fit for habitation when completed.

Consequently, developers, contractors, engineers and architects could potentially

face claims under the DPA which, as a result of changes brought about by the BSA,

now extend back 30 years for claims which arose prior to 28 June 2022 (the date the

BSA came into force).

None of this was in dispute. The question the Court had to address was whether a

developer could themselves bring a claim under the Act.

URS’s position was that a developer could not bring a claim under the DPA. They

argued that the DPA was intended to apply to lay purchasers of defective properties

only, not commercial entities.

They also suggested that it couldn’t be right that a developer could both owe duties

to other parties under the DPA, whilst also being able to claim under the DPA itself.

Put another way, a developer couldn’t sue under the DPA and be sued under it.

The Court rejected these arguments and ruled that a developer could bring a claim

under the DPA.

• Does the retrospective 30-year limitation period apply where proceedings are

underway?

Yes – the Court found nothing in the BSA that would have the effect of carving out

ongoing proceedings from the retrospective application of the longer limitation

period. Only those claims which have been finally determined or settled between the

parties would be outside the new period, which is a specific carve out in the new

legislation.

Commentary

Claims under the DPA were always going to be a developing feature of the PI claims

landscape. The question many underwriters mused was to what degree this

relatively unused piece of legislation was going to act as a catalyst for claims going

forward?

Prior to this decision, the general thinking in the industry was that the DPA primarily

existed for individuals. Whilst the extension of the liability period from 6-years to 30

years post completion of the project was going to have an impact, it was probably

unlikely to open the floodgates from individual homeowners. Indeed, as we

discussed in our earlier piece on the DPA, inviting homeowners to embark on costly

and uncertain litigation in order to secure redress was unlikely to fuel an enormous

number of claims.

The ‘clarification’ brought about by this decision, that commercial developers can

now make use of the longer period under the DPA, is potentially another matter

entirely. There is little doubt that it could have a significant impact on the answer to

our previously posed question.

Insurers’ wariness is likely to be that the DPA route becomes increasingly familiar in

the sector as developers seek to recover costs incurred as a result of righting the

wrongs of the last 30-years. The question of whether there will be a fair and

equitable distribution across industry of the costs associated with those potential

liabilities is one that remains to be answered.

For the moment, little has changed since July 2021, when we first wrote about the

changes to the DPA. Insurers will continue to monitor the effect of the changes to

the DPA. There is as yet no significant reaction from the PI market to the URS case.

For insureds concerned by the case, our advice remains consistent:

• The potentially ‘strict’ nature of liability under the DPA makes a ‘legal liability’

policy essential. Any firm operating with a ‘negligence only’ policy would

need to determine if a suitable extension to cover can be arranged.

• This was not a ‘fire safety matter’ as such, but a structural engineering matter.

The focus of recent advice in relation to the DPA has been because of its

potential to drive ‘fire safety’ claims. This case shows that the effect of the

changes to DPA have the potential to impact all types of PI claim – fire

related and otherwise. As ever, firms need to keep their PI limit under review

to ensure that its levels of protection are adequate.

• Record retention will be vital. The defence of any claim is only as good as its

evidence base and firms who have not purged ‘old’ files ought now to

consider the appropriate time to maintain them. A cautious approach would

see firms retain records from 1992 where the limitation period for DPA claims

expired only earlier this year (by virtue of the year’s grace given). Bear in

mind that any projects which were practically complete prior to 28 June 2022

carry a 30-year limitation too. In the case of a building completed on 1 June

2022, that would potentially take limitation to 2052. For all projects practically

complete from 28 June 2022, a 15-year period is consistent with the new

liability period and that must again be the place to start.

• Whilst the case is interesting it was not one which tried the substantive liability

questions – URS might yet still prevail on those when (and if) the case goes

to full trial. There may also be a further appeal on these points and, should

that be the case, we will of course report further.