Ruling confirms Building Safety Act’s impact on retrospective defect claims

Julian Brooksbank of Pinsent Masons was commenting after the Court of Appeal dismissed an appeal by building designers that concerns claims relating to structural defects identified in two housing developments, in London and Leicester respectively.

Housing developer BDW Trading (BDW) had engaged construction engineering firm URS Corporation to design homes for the two developments. Building works for the London apartments were completed in or around March 2007 to February 2008, while the Leicester apartments were completed between February 2005 and October 2012. In the case of both developments, BDW sold the properties following practical completion and transferred its interests in them – by December 2008 and May 2015, respectively.

Following the Grenfell disaster, BDW conducted a review which identified structural design defects in respect of the London and Leicester developments. BDW subsequently incurred millions of pounds worth of costs in investigating the issues, carrying out temporary works, evacuating one apartment block in the London development, and carrying out permanent remedial works.

In March 2020, BDW raised professional negligence claims against URS before the High Court, seeking compensation for the losses it incurred. It was granted permission by the High Court in autumn 2022 to amend its claims against URS to add claims under the Defective Premises Act 1972 (DPA) and under the Civil Liability (Contribution) Act 1978 (CL(C)A). This meant that claims under the DPA that would previously have been time-barred could be raised by BDW against URS because by the point BDW made the amended claims, new limitation provisions under the Building Safety Act 2022 (BSA) had taken effect. Further, the permission meant that a claim under the CL(C)A could be brought notwithstanding the fact that there had been no actual claims by third parties against BDW.

The BSA amends the limitation period in which a potential claimant can bring a claim under the DPA from six years from completion of a dwelling, to either a 30-year limitation period for dwellings completed before 28 June 2022, or 15 years for dwellings completed after 28 June 2022.

URS challenged BDW’s right to bring the High Court’s decision to allow the amended claims before the Court of Appeal. In support of its case, URS argued that BDW could not rely on the extended limitation periods in the BSA to bring a claim under the DPA because the BSA did not apply to parties involved in ongoing court proceedings, and that because there had been no claim by a third party against BDW, no claim for a contribution had arisen.

The Court of Appeal considered, however, that BDW could legitimately amend its claims to take advantage of the retrospective extension of the limitation periods under the BSA, and that there was nothing in the wording of section 1(1) of the CL(C)A to suggest that the making or intimation of a claim was a condition precedent to the bringing of a claim in contribution.

The Court of Appeal confirmed that the longer limitation periods provided for in the BSA in respect of claims made under the DPA are considered to “have always been in force”, in line with the wording used in section 135(s) of the BSA itself. The only exception to this provided for in section 135(6) of the Act, it said, which relates to claims settled or finally determined by a court or arbitration before the new limitation provisions in the BSA took effect.

The Court of Appeal further considered the scope of the duty that applies under the DPA.

The DPA imposes a duty on a person taking on work for or in connection with the provision of a dwelling to see that the work which he takes on is done in a workmanlike or, as the case may be, professional manner, with proper materials and so that as regards that work the dwelling will be fit for habitation when completed.

The Court of Appeal ruled that URS owed BDW the duty stipulated under the DPA. It rejected the suggestion that URS’ duty only extended to the individual purchasers of the properties in the respective developments. The duty owed under the DPA can be owed to companies and commercial organisations, and not just individual purchasers, it held.

Brooksbank said: “This court ruling on the application of the new limitation rules under the Building Safety Act 2022 in particular has been much anticipated. It is now clear that certain claims which had expired due to limitation are now firmly back in play.”

“Those responsible for the provision of dwellings should be in no doubt that the new limitation rules do have retrospective effect – even in circumstances where proceedings have already commenced on other grounds,” he said.

“The decision may lead to increased claims under the DPA and under the Civil Liability (Contribution) Act 1978 in relation to existing buildings where pre-BSA 2022 limitation rules excluded recovery. Those parties might consider making enquiries to identify possible areas of risk in historic projects outside of the normal contractual limitation periods so that appropriate steps can be taken – for example by making some appropriate contingency for those risks, checking whether insurance policies might respond, if at all, and planning what resources and finances might be needed to respond to such potential claims,” he said.

Lucy O’Dwyer, also of Pinsent Masons, said the ruling also has implications for developers that have signed the developer remediation contract, which converts an industry pledge to address historic failings in building safety post-Grenfell.

“The circumstances in this case – where defects were identified in one development and prompted a proactive review of BDW’s whole portfolio of properties despite the fact the company had not received claims – is analogous to similar exercises developers subject to the developer remediation contract may be undertaking in respect of fire safety assessments and potential remediation regardless of the existence of claims. In this regard, for signatories to the building safety pledge, this will be a welcome decision and will give some comfort around the prospects of securing third party recoveries where developers have proactively remediated buildings due to their obligations to the government but without actually having received a claim,” she said.