The relevance of voluntariness when considering loss in negligence after BDW v URS

In its anxiously awaited decision in URS Corporation Ltd v BDW [2025] UKSC 21, the Supreme Court considered issues arising from the ongoing challenge of remediating unsafe buildings following the Grenfell Tower tragedy and the passing of the Building Safety Act 2022.  This article considers the issue of loss in negligence, the first ground of appeal tested in the Supreme Court.

The facts of the case

After the Grenfell Tower fire, developers – including BDW – were encouraged to investigate their previous work on high rise buildings for and remediate defects that risked safety.

BDW was the developer and freehold owner of two high rise buildings in Leicester, which in 2019, were discovered to have significant structural issues, risking collapse. By the time of the discovery, however, BDW had sold all its proprietary interests in the buildings. URS, a structural engineering company, had performed the design of the buildings under its professional services contract with BDW.

In 2020 and 2021, BDW carried out remedial works on the developments, even though there had been no claim made against it in respect of the structural defects.  BDW’s declared reason for doing so was that the defects presented a risk to the occupants, and more, a disaster could cause serious damage BDW’s reputation.

In March 2020, BDW claimed against URS in negligence. On the enactment of the Building Safety Act 2022, and the extension of limitation under the Defective Premises Act 1972, BDW suddenly had a viable claim for breach of statutory duty, and sought (and was permitted) to amend the claim to include it. This will be considered in a further article by Gatehouse Chambers’ Construction Team.

Notwithstanding that, the claim in the tort of negligence continued, and raised thorny issues of the scope of duty in negligence, remoteness, causation and mitigation.

The preliminary issue and the appeals

It was common ground that URS had assumed a duty to BDW under its professional services contract. But URS did not accept liability for BDW’s losses, as claimed at first instance under the heads of: (i) repair costs; (ii) investigation costs; (iii) alternative accommodation costs; and (iv) loss under the heading of “reputational damage losses”.  URS said that because BDW was not under a legal liability to carry out the remedial works, these losses were really incurred to protect its reputation. For that reason, URS said, these losses were not in scope of its duty.

In a trial of a preliminary issue, URS’s argument was rejected by Mr Justice Fraser (as he then was): BDW had a duty to repair, and only that which was truly attributable to “reputational damage” was out of URS’s scope of duty. The more traditional losses – repairs, investigation and accommodation – were in URS’s scope of duty and were not too remote to be recovered.

URS appealed the decision as to the scope of duty and remoteness, but BDW did not, so the issue as to the recoverability of reputational damage was taken no further. The Court of Appeal upheld the High Court as to the scope of duty and remoteness of loss.

The voluntariness principle in the Supreme Court

The issue took on a new nuance in the Supreme Court. The parties agreed that URS had assumed responsibility to BDW by way of its professional services contract, such that URS would take reasonable care in providing structural designs. The parties agreed that that duty extended to lability for pure economic loss.

URS did not focus on the heads of loss, instead arguing that the losses BDW claimed were voluntarily incurred and therefore unrecoverable as a matter of principle. URS put forward two reasons for this: first, at the time BDW carried out the repairs, it had no proprietary interest in the buildings; secondly, it had no legal obligation to remediate them. No claims had been issued against it, and any claims would have been time barred at that time.

In the courts below, URS had not relied on the principle of voluntariness and so the point had not been fully considered.  In the Court of Appeal, Coulson LJ rejected, briefly, URS’s argument that BDW was under no obligation to third parties because, as a matter of fact, at the time that BDW sold their various interests in the flats and buildings, it would have been liable in contract, tort or statutory duty by the Defective Premises Act 1977.  Further, although BDW might have been able to rely on a limitation defence, it was not obliged to do so.  As Coulson LJ neatly said:

“As a matter of law, the possible absence in 2019 of an obligation on the part of BDW to carry out such works is irrelevant to BDW’s ability to recover those costs as damages.” (at [53]).

Although not expressly stated in the Supreme Court, it was this reasoning and this finding that underpinned URS’s appeal.

Is there a voluntariness principle?

The Supreme Court held that there is no general principle that a party that suffered loss by it voluntary acts was unable to recover for them

The court carefully considered the four cases that URS submitted as evidencing the contrary. Three of the cases were explicable by the bar on recovery for pure economic loss:

• Admiralty Comrs v SS Amerika [1917] AC 38 concerned a steamship which collided with a submarine, killing almost all on board. The Admiralty Commissioners made gratuitous payments to the families of the deceased. It was held that the steamship’s owners were not liable for these payments. The Supreme Court in BDW v URS explained this result through an analysis of pure economic loss: the payments were made following deaths, and in any event they were not directly consequent on the damage to the submarine. Either way, the payments amounted to pure economic loss, for which there is no general duty. Further, some of the discussion in the judgment relied on language more obviously relevant to concepts of mitigation or legal causation.
• Esso Petroleum Co Ltd v Hall Russell & Co Ltd (The Esso Bernicia) [1989] AC 643 concerned an oil spill because of damage to a tanker caused by defective tugs. Esso paid compensation for oil pollution under a voluntary scheme to which it belonged. But Esso could not recover for those payments from the tugs’ owners. Again, the Supreme Court analysed the result through the prism of pure economic loss: while the payments to compensate for oil pollution may have been because of a voluntary scheme, they were certainly unrecoverable as pure economic loss.

• Hambro Life Assurance plc v White Young & Partners (1987) 38 BLR 16, in which a fund chose to remediate some of its investment properties despite having no legal responsibilty to do so. The court rejected the fund’s claim against the local authority that had approved the plans for the defective properties and whose building control officers had approved them. This was on the basis that the Anns v Merton principle was still operative, and so the local authority owed no duty of care to the fund (later overturned by Murphy v Brentwood). But in any event, this was pure economic loss, and would be unrecoverable.

The fourth case was slightly different:

• In Anglian Water Services Ltd v Crabshaw Robbins & Co Ltd [2001] BLR 173, the defendant contractors severed gas mains. Anglian paid householders whose supply had been affected and local authorities who had provided emergency services. These payments were held to be unrecoverable. Unlike the three cases above, here the parties had a contract, so the analysis of loss being purely economic could not explain the result. Instead, the Supreme Court in BDW v URS analysed this case as a matter of remoteness, a fact-specific matter. The court said that this case could not amount to authority for any general principle that voluntary payments are not recoverable in law.

Consequently, the Supreme Court held that, since there was no general principle that losses voluntarily incurred fell outside of a professional’s scope of duty, it was held that, in this case, BDW’s losses were not outside of its scope of duty

The relevance of voluntariness – causation and mitigation

Although the Supreme Court held that there was no general principle of voluntariness, it noted there was a strong argument that voluntariness would still be relevant to a consideration of legal causation or mitigation. Consequently, it is not irrelevant.

Indeed, before URS’s counsel had even got into the meat of his submissions during the hearing of the Appeal, there was a discussion concerning whether the principle of voluntariness was relevant to scope of duty or to remoteness or to causation or to mitigation and what could or could not be argued on the appeal.  This theme was returned to on a number of occasions throughout the hearing, perhaps indicating the Supreme Court’s position before its judgment had been issued.

Ultimately, the Supreme Court held that the more obvious role for any principle of voluntariness is in considering whether the chain of causation from breach of duty to loss has been broken by the claimant’s own voluntary conduct or whether, subsequent to the cause of action, the claimant had failed in its so-called “duty” to mitigate its loss.  This was a factual enquiry which was outside of the scope of the Appeal.

Consequently, URS is not, yet, liable to BDW for the losses claimed.  It can still argue that the losses voluntarily incurred by BDW were not caused by URS’s breach but, instead either there was a break in the chain of causation or BDW failed to mitigate its losses by incurring costs it need not have incurred.

We consider such arguments are likely to be extremely difficult for URS to maintain given the legal principles applicable to such issues and the firm indications given by the Supreme Court in this case that BDW did not, in fact, act voluntarily. As to the legal principles, the Supreme Court quoted the well known passage from Lord MacMillan’s judgment in Banco de Portugal v Waterlow & Sons Ltd [1932] AC 452 (at page 506):

“Where the sufferer from a breach of contract finds himself in consequence of that breach placed in a position of embarrassment the measures which he may be driven to adopt in order to extricate himself ought not to be weighed in nice scales at the instance of the party whose breach of contract has occasioned the difficulty. It is often easy after an emergency has passed to criticize the steps which have been taken to meet it, but such criticism does not come well from those who have themselves created the emergency. The law is satisfied if the party placed in a difficult situation by reason of the breach of a duty owed to him has acted reasonably in the adoption of remedial measures, and he will not be held disentitled to recover the cost of such measures  merely because the party in breach can suggest that other measures less burdensome to him might have been taken.”

The Supreme Court has endorsed that the position of embarrassment of a claiming party and the difficulties faced by that party are relevant considerations to the reasonableness of the actions of the claiming party.

In relation to mitigation, the Supreme Court stated that the enquiry is whether the claimant could have avoided its loss by taking reasonable action or whether expenses or other additional losses incurred, increasing its loss, were reasonably incurred. This was described as a fact-specific enquiry that would have to await trial.

Despite having no need to consider this issue given its findings on scope of duty and its recognition that a further trial was required, the Supreme Court found that three features of the assumed facts indicated that BDW was not acting truly voluntarily in remediating the defective buildings.

• First, the buildings were at risk of collapse, which would cause serious injury or worse. In such a circumstance BDW would not have a limitation defence.
• Secondly, in most cases (and certainly here) a limitation defence bars remedy; it does not extinguish liability.
• Thirdly, even though reputational damage was not recoverable as a head of loss, it was still relevant to whether an action was truly voluntary. The general public interest, including moral pressure, was relevant to whether BDW can have acted truly voluntarily. We return to this issue below.

If, as the court found, BDW was not acting truly voluntarily, then it seems only likely that there will be a trial on these issues if any of the assumed facts are wrong.  If (as they appear) they are accurate, the Supreme Court has given a clear indication that it does not consider BDW acted voluntarily.  In these circumstances, an argument that there has been a break in the chain of causation or that BDW failed to mitigate its loss looks extremely difficult.

Discussion

What strikes us is the dearth of law on the principal of voluntariness. Whilst, on first blush, it appears attractive – why should a professional be taken to have assumed liability for losses which a claimant has chosen to incur, rather than had any obligation to do so – there was little authority to support this assertion.  URS relied on only four cases for the lynchpin of its appeal, and the Supreme Court itself could only find one reference to the principle in commentary from 2010, and even this stated voluntariness to be relevant to causation.

The lack of authority may be because it is unusual for someone to “voluntarily” incur losses, but, even when they arguably did, the outcome of those limited cases is more readily explained by more developed law on assumption of responsibility for pure economic loss or by remoteness. In the tortious cases the court considered, there could be only one outcome following that analysis: there was no general duty for pure economic loss. The one case outside that analysis – Anglian Waters – was explicable by remoteness, and this was a matter of fact. Following BDW v URS, it is still open to argue that, in a contractual relationship involving assumption of responsibility, voluntary payments should not be recoverable by reason of remoteness, but it may be a rare case which can establish remoteness as a matter of fact.

Although the court held that there is no general principle that voluntary losses are outside a party’s scope of duty, voluntariness is still relevant to an analysis of causation and mitigation.  Even had the Supreme Court not given its clear indication as to its opinion on whether or not BDW acted voluntarily, the argument appears difficult to run.  URS’s primary contention throughout the various hearings was that BDW’s primary motivation in carrying out the remedial works was to protect its reputation.  However, where, as here, there was a risk to the safety of the occupants of the properties which BDW remedied, that seems a difficult argument to make out.  This was not BDW’s error, even if it could have been held legally liable.  It was URS’s error.  Further, BDW did not otherwise benefit from carrying out the remedial works; it had no proprietary interest in the properties.

However, if URS wishes to maintain this case (and it will obviously have more information than we do as to the decision-making process of BDW) then there will have to be a trial of those issues to determine factual causation and whether BDW could have mitigated its loss.  The Supreme Court’s strong indication that BDW did not act voluntarily may mean such a trial is unlikely.

What will be interesting, if such a trial does take place, is how mitigation is argued.  Here, URS’s case will not be to identify a cheaper alternative remedial scheme.  It will, essentially, be suggesting no remedial works should have been carried out at all because BDW had no obligation to do so.  Similarly to the arguments on causation, given the indications from the Supreme Court that BDW did not act voluntarily, we are sceptical that such arguments will be successful.

In other cases, however, a court may have to grapple with the issue of the relevance of damage to reputation.  Fraser J held that damage to BDW’s reputation was not within URS’s scope of duty.  However, damage to BDW’s reputation is relevant to whether or not BDW acted voluntarily (and, presumably, reasonably).  It is difficult to square the circle on that analysis.  Might it encourage another claimant to take the point further, given the indications of the Supreme Court as to the relevance of damage to a claimant’s reputation?  Or, is the answer that whilst URS is not liable for any loss to BDW’s reputation, that does not mean that, when assessing whether BDW acted reasonably when faced with the difficulties created by URS’s scope of duty, a court is not permitted to consider damage to BDW’s reputation.

Stepping back, it is also undoubtedly the case that policy has influenced this case, for understandable reasons. It can hardly be in the public interest to discourage entities from taking steps that secure the safety of buildings and the people that occupy them. Despite the arguments raised by URS, a court considering the wider impact was likely to find in favour of the party that had acted responsibly and in the interests of public safety, and suffered a loss because of it, particularly in the current political and economic climate.

Article by Catherine Piercy KC and Emma Hynes.