Supreme Court resolves key construction and professional negligence issues in URS Corp Ltd v BDW Trading Ltd

The Supreme Court handed down its keenly awaited judgment in URS Corp Ltd v BDW Trading Ltd [2025] UKSC 21 on 21 May 2025. The dispute concerns whether a developer (BDW Trading Ltd) can recover the cost of remedying allegedly dangerous defects in two residential developments from the structural engineers (URS Corporation Ltd) responsible for their design. Our specialist construction insurance team consider the key points for insurers, brokers and professional consultants.

Aside from the important analysis of s135 Building Safety Act 2022 (BSA) and the extended limitation period for claims under the Defective Premises Act 1972 (DPA), the Supreme Court's judgment considers when a cause of action accrues and adds to the body of case law interpreting the Saamco scope of duty test (recently recast in Manchester Building Society v Grant Thornton). As such, whilst the case has considerable significance for construction disputes, it is also a must-read for professional negligence lawyers.

Facts

 Practical completion of the two sets of multiple high-rise residential tower blocks took place between 2007-8 and 2005 to 2012 respectively.  Following completion, BDW sold the individual apartments to leaseholders on long leases. By 2015, it had disposed of its freehold interest in each of the blocks. Defects came to light in 2019 during the course of BDW's post-Grenfell investigations. While BDW had no legal interest in the properties at that point, it nevertheless paid for the multi-million pound remedial works in 2020 and 21, no doubt motivated by concern over the risk of injury to residents and consequent risk to its reputation, as well as by the considerable pressure on developers to act responsibly by the Government and the public in light of the tragic Grenfell Tower fire in 2017.

The claim against URS and the issues under appeal

 In March 2020, BDW issued a claim in tort against URS (its contractual claim being time-barred), seeking to recover the costs of the remedial work plus losses described as "reputational damage".

URS denied liability on various bases, including that BDW had voluntarily incurred the remedial costs which made them irrecoverable as a matter of principle.

The case proceeded to a trial of preliminary issues on assumed facts including that:

• URS had acted negligently in breach of its concurrent contractual and tortious duty to exercise skill and care, causing the defects (which presented a health & safety risk to occupiers) by its negligent design.
• BDW did not to have an obligation in law to remedy the defects when it did so.

Fraser J ruled in favour of BDW in his 2021 judgment, finding that the losses claimed were recoverable as they fell within the scope of URS's duty (save for the claimed reputational losses, which he held were irrecoverable). The remedial costs were not too remote as they were within the reasonable contemplation of the parties at the time that they entered into the building contract. He also held that other issues of legal causation were too fact-specific and could only be determined at trial. This included URS's assertion that BDW's assumption of the repair costs broke the chain of causation and/or reflected a failure to mitigate its loss. URS appealed but the Court of Appeal again sided with BDW. URS appealed again and the Supreme Court upheld the Court of Appeal's judgment, finding in favour of BDW on each issue.

The appeal concerned:

1. Whether the repair costs incurred by BDW were within the scope of URS's duty in relation to both BDW's tortious claim and its clam under the DPA;
2. How section 135 Building Safety Act 2022 (BSA) (which changed the limitation period for DPA claims) applies in this case;
3. Whether a developer such as BDW could be owed (as well as owe) a duty under the DPA;
4. Whether BDW was entitled to bring a contribution claim against URS even though it had not itself been sued, threatened with proceedings, settled with the leaseholders and freeholders or been the subject of a judgment.

Some context: section 135 Building Safety Act 2022 and the Defective Premises Act 1972

Central to the appeal were s135 BSA and s1 DPA.

The DPA places an obligation on those involved in the provision of a dwelling to see that work is carried out in a workmanlike or professional manner, with proper materials, so that the dwelling is fit for habitation. Section 135 of the BSA increased the limitation period for claims under the DPA from 6 to 15 years for new claims and from 6 to 30 years for claims already accrued before the BSA came into force on 28 June 2022. Section 135 expressly has retrospective effect, as s135(3) states "The amendment… is to be treated as always having been in force".

 The implementation of s135 of the BSA had 2 important implications for BDW's claim against URS:

1. First, it meant that a DPA claim by BDW against URS was no longer time-barred. When BDW issued proceedings in 2020, its claim against URS under the DPA was time-barred, since the cause of action accrued on practical completion notwithstanding it had not been (and could not have been) discovered – per Pirelli (see below). When s135 came into force, BDW amended its case to plead a claim under the DPA against URS. URS opposed the amendments, but the court permitted them.

    

2. Second, the extended time limit undermined URS's argument that BDW had acted voluntarily, as BDW no longer had a limitation defence to a DPA claim brought by the leaseholders / freeholders upon discovering the defects in 2019. As such, it is harder to characterise BDW as volunteering to remedy the defects with the Developments as they could be sued by the leaseholder / freeholders if they did not do so. URS argued that s135 should be interpreted so that the amended time limit was only relevant in an actual DPA claim; it could not rescue BDW's claim in tort by "rewriting history".

Pirelli v Oscar Faber

The House of Lords in Pirelli^[1] held that time for limitation purposes starts to run, in the case of a defective building, on the date that the damage came into existence, even if it is not yet capable of being discovered. Pirelli is controversial, both due to perceived unfairness to claimants and because it is based on what the Supreme Court described as the "false premise" that any loss caused by delivery of a defective building amounts to physical damage, rather than pure economic loss.

It is otherwise settled law that the damage in such a case is "the pure economic loss of having a defective premises which has a lower value than it should have and/or requires repair" (in the words of Lords Hamblen and Burrows).

It was widely expected that the Supreme Court would take the opportunity to overrule Pirelli, but the Justices declined to do so, finding that it was unnecessary to do so for the purpose of considering the appeal and, in any event, Parliament had introduced the Latent Damage Act 1984 after the judgment in Pirelli, so the current regime must have been intended by the legislature.

Ground 1: scope of duty and the alleged voluntariness principle

URS argued that, by essentially volunteering to remediate the property, BDW's actions broke the chain of causation, were outside the scope of its duty and represented a failure to mitigate its loss. The Justices agreed that BDW's alleged voluntariness was better analysed in this case as a break in the chain of causation or a failure to mitigate loss, but these issues were too fact-sensitive to be resolved by the Supreme Court in the absence of full evidence and argument, so these issues will need to be dealt with at trial. As such, the scope of duty argument was considered in isolation.

URS argued that the losses were not of a type, and did not represent the fruition of, a risk against which URS were duty-bound to guard BDW against; alternatively, they were too remote. In addition, URS argued that there was a "bright-line rule of law", labelled a "voluntariness principle", and that as BDW's losses were voluntarily incurred, they could not fall within the scope of URS's duty in any event.

URS relied on 4 cases; one of which described the alleged principle as follows:

"No person aggrieved by an injury is by common law entitled to increase his claim for damage by any voluntary act; on the contrary, it is his duty, if he reasonably can, to abstain from any act by which the damage could be in any way increased."[2]

The Supreme Court considered that the losses were exactly the type of losses that URS was bound to guard BDW against and were not too remote. The majority of the Supreme Court (agreeing with the judgment of Lords Hamblen and Burrows) rejected URS's submission that there was a voluntariness principle, although Lord Leggatt in his concurring judgment considered that, although "there is a general principle of the common law that damages cannot be recovered for consequences of a choice freely made by the claimant", it did not apply in this case.

In any event, BDW had not been acting truly voluntarily because:

1. There was a risk that the defects would cause injury or death to the occupiers, for which BDW might be legally liable. As such, BDW may well have suffered a contingent loss.
2. BDW did have a legal liability to the homeowners under the DPA, despite the limitation defence which "bars the remedy and does not extinguish the right".
3. BDW was at risk of reputational damage if it did nothing once it discovered the defects. The fact that it could not recover compensation from URS for damage to its reputation was irrelevant to the question whether it was acting voluntarily in remedying the defects.

In addition, Lord Leggatt considered that voluntariness was not determined by whether BDW was subject to an enforceable legal obligation.

Accordingly, while the remedial costs were within the scope of URS's duty, lawyers and litigants will have to await the outcome of the trial to see a full analysis of the legal causation issues in this case.

Ground 2: how does s135 BSA apply?

 URS argued that the limitation period extended by s135 BSA only applied to "pure" DPA claims themselves and not to negligence claims such as BDW's claim, nor to contribution claims, such as BDW also brought against URS. The Court carried out a close textual analysis of s135 and concluded that s135(3) does what it says: the new limitation period is retrospective and is not confined to pure DPA claims. To find otherwise would lead to an inconsistent position and was not supported by the wording of the statute itself, which referred to actions "by virtue of section 1" DPA, which was wide enough to encompass negligence claims and contribution claims. This aligned with Parliament's objective of ensuring that those responsible for defects paid to remediate them.

Ground 3: can developers be owed a duty under the DPA?

 URS argued that there are 2 mutually exclusive categories under the DPA: those who owe duties under s1, such as contractors, professional consultants and developers; and those to whom duties are owed under s1(1)(a), such as purchasers and occupiers.  However, the Supreme Court had no reservations in finding that developers could both be owed and owe a duty under the DPA. This was consistent with typical contractual arrangements for constructing buildings and the DPA's dual aims of ensuring that purchasers of new dwellings could trust that the building that they had purchased was properly constructed and fit for habitation (and to give them a remedy if this was not the case) and to drive high standards in the construction industry.

URS also argued that, even if it owed a duty to BDW under the DPA, the cost of the remedial works could not be recovered in such a claim because they did not arise as a result of the ownership of a dwelling that was unfit for habitation. The Supreme Court gave this argument short shrift, holding that the costs of remedial works were clearly contemplated by the DPA.

Ground 4: is BDW entitled to bring a contribution claim?

 URS argued that BDW did not have the standing to bring a contribution claim, since it had not been threatened with proceedings, sued, been the subject of a judgment or settled a claim concerning the remedial works. BDW argued that the right to recover contribution arises as soon as damage is suffered.

Lord Leggatt gave the leading judgment on this issue, finding that both parties were incorrect and that the true answer lay somewhere between the parties' extreme positions. He held that the right to contribution arises when:

1. Damage has been suffered by the claimant for which each defendant is liable; and
2. A defendant has paid or agreed to pay compensation in respect of the damage to the claimant.

Payment for the purpose of the second limb includes "payment in kind" i.e. carrying out remedial works, as here, which can be quantified as a sum of money.

At that point, the two-year limitation period starts running. Support for Lord Leggatt's interpretation is derived from s1(2) Civil Liability (Contribution) Act 1978, which provides that a defendant is entitled to recover a contribution provided they were liable in respect of the damage in question "immediately before he made or was ordered or agreed to make the payment in respect of which the contribution is sought" (emphasis added).

Analysis

 The judgment reveals that a seven-judge panel had been convened specifically to consider overruling Pirelli, but the point fell away. The Court indicated that it would re-consider the issue if another case on all fours with the decision came before it; however, the obiter analysis concluded that Pirelli probably represented Parliament's intentions as it had the opportunity to reverse the decision when drafting the Latent Damages Act, which may deter litigants from pursuing the point in future.

The decision is significant as it is one of only a handful dealing with the BSA since its implementation period between 2022 and 2024. As such, it will be avidly read by construction lawyers, insurers, brokers and professional consultants since, if nothing else, it gives an insight into the approach the Court is likely to take to fire safety issues.  And it's no surprise that the Court has taken the baton from Parliament, as it did in Triathlon Homes LLP v Stratford Village Development Partnership and Others [2024] UKFTT 26 (PC), to ensure that those responsible for defects pay to remedy them. At the other end of the civil justice system, the First Tier Tribunal in Triathlon held that there was a hierarchy or cascade of liability: "Parliament has decided that, irrespective of fault, it is fair for those with the broadest shoulders to bear unprecedented financial burdens…".

However, it's not all bad news for professional consultants or their insurers, as the decision highlights the complex analysis involved in a common and straightforward-looking set of facts. The issues that the Supreme Court had to resolve were tightly defined, which meant that complex questions of contingent loss were not fully analysed in the judgment. Further, the alleged break in the chain of causation and BDW's alleged failure to mitigate did not feature in the judgment, so URS will live to fight another day on those.

Contribution claims are common in the sphere of professional negligence, so this clarity around time limits will be welcome by all professionals. The judgment serves as a sharp reminder to insurers, lawyers and professionals to review their files in which a contribution may be sought to ensure that the relevant time limit has not passed and/or that a standstill agreement is in place.

[1] Pirelli General Cable Works Ltd v Oscar Faber & Partners [1983] 2

[2] Admiralty Comrs v SS Amerika [1917] AC 38 ("SS Amerika"), per Lord Parker at p.42.