Building Safety Act
The first case?
Building Safety Act
The first case?
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.
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.