URS v BDW – Limitation, Pirelli, and the Reach of Section 135 BSA 2022

URS v BDW – Limitation, Pirelli, and the Reach of Section 135 BSA 2022

Overview

1. This Article is part of a series, each focussing on a different aspect of the Supreme Court’s judgment in URS Corporation Ltd v BDW Trading Ltd [2025] UKSC 21. A couple of weeks ago, Catherine Piercy KC and Emma Hynes discussed the Supreme Court’s treatment of loss in negligence. In this Article, we consider the various limitation points that fell to be considered within the judgment. There are two key issues (i) what did the Court say about the long-standing albatross Pirelli and (ii) what is the impact of Section 135 of the Building Safety Act 2022 (the “BSA”).
2. As we all know, in the aftermath of the Grenfell Tower tragedy, the Government instituted several measures aimed at encouraging developers to carry out investigations to assess the safety of medium and high-rise developments for which they had been or were responsible, and to remediate any safety defects they discovered. Chief amongst these measures was the enactment of the BSA.
3. In this case, BDW was the developer of two high-rise residential developments and URS was appointed by BDW to provide structural design services in connection with these developments. After construction was complete, BDW sold its proprietary interest in these developments to residential purchasers and to third-party management companies.
4. In 2019, BDW discovered design defects in both developments. Between 2020-2021, BDW carried out remedial works to the developments, in circumstances where no claim arising out of the defects had been brought against it. It is important to note that, at the time at which BDW carried out the remedial works to the developments, which it had sold to third parties, any action which might have been brought by third parties (whether under the Defective Premises Act 1972 (the “DPA”) or in contract) would have been time barred under the Limitation Act 1980.
5. BDW issued proceedings against URS in the tort of negligence in March 2020 (its own claims in contract and under the DPA at that point being statute barred) and sought to recover the costs of carrying out those remedial works as damages from URS. The parties, in the first instance, proceeded to a trial of two preliminary issues: (a) whether the scope of URS’ duties extended to the alleged losses and (b) whether the alleged losses were recoverable in principle as a matter of law in the tort of negligence, with judgment being handed down on 22 October 2021 ([2021] EWHC 2796 (TCC)).
6. On 28 June 2022, Section 135 of the BSA came into force, retrospectively extending the limitation period for accrued claims under Section 1 of the DPA from six years to 30 years. BDW made an application to amend its case to allow it to bring a new claim against URS under the DPA, as well as a new claim against URS under the Civil Liability (Contribution) Act 1978.
7. Both the decision on the preliminary issues and the application to amend at first instance were appealed on various bases to the Court of Appeal (Coulson LJ), which dismissed both appeals ([2023] EWCA Civ 772). The Court of Appeal’s decision was again appealed and the Supreme Court granted permission on four grounds. The focus of this article is on the decision the Court made concerning limitation.

Section 135 of the BSA

8. URS’s primary position before the Supreme Court (changing the substance of its arguments before the Court of Appeal) was that Section 135 of the BSA did not apply to issues that were collateral or incidental to the singular issue of whether a claim under the DPA was now within limitation and that it did not re-write history (i.e. that matters of historic fact remained unaffected). BDW’s position was that Section 135 of the BSA states on its face that, in general and unqualified terms, it was to be treated “as always having been in force” and that BDW was to be treated as having been under a liability to homeowners (or indeed anyone else to whom a liability was owed), at the time at which it remediated the defects in the developments.
9. Those were the competing arguments that underscored the Supreme Court’s consideration of the question of whether the retrospectivity of Section 135 of the BSA was relevant to claims in negligence or contribution, which were themselves dependent on the time limit under the DPA. The Majority began by interpreting Section 135 of the BSA holding that:

9.1. As a matter of language, Section 135(3) of the BSA is not restricted to actions under Section 1 of the DPA and can apply equally to actions “dependent on Section 1” in negligence or for contribution, rather than being brought under Section 1 (para. [99]).

9.2. This was supported by the titular wording to Section 135(1) which provided a “special time limit” for “certain actions in respect of damage or defects in relation to buildings” and was broad enough to capture an action in negligence or contribution which was dependent on a time limit under Section 1 of the DPA (para. [100]), where, for example, it might otherwise be contended that no claim in tort could succeed because there is a rule of law that the repair costs are irrecoverable as voluntarily incurred, or that there was no liability for the same damage, because the DPA claim was time-barred.

9.3. Considering the purpose of Section 135(3) and the BSA in general, it was clear that there was no reason to restrict the application of that section to actions brought only under Section 1 of the DPA (paras. [102]-[111]). In particular, the Court emphasised that the purpose of the BSA was to hold those responsible for building safety defects accountable and that this may assist funding remedial works.

10. The Majority was clear that any statutory provision which applies retrospectively, such as Section 135 of the BSA, re-writes history in the sense that a legal state of affairs is deemed to be different to how it was at an earlier time. However, it stated that it did not “change any historical fact” or “alter a person’s subjective state of mind” (para. [120]).
11. Therefore, the Court’s view was that history (in respect of the legal state of affairs) could be “re-written” where there is a downstream negligence claim to recover repair costs, or a similar contribution claim “and it is contended that there is a rule of law that the repair costs are recoverable as voluntarily incurred, or that there was no liability for the same damage, because the DPA was time-barred”. That decision is clearly in line with the decision made by the Court on the other Grounds of Appeal, so that the fact that a claim may have been out of time at some previous point would not prevent wrongdoers being held liable as Parliament had intended.
12. However, the fact that the DPA was not in fact in force within the now extended limitation period (until the coming into force of the BSA) was a matter that could still be relevant to issues of legal causation or mitigation. In other words, those facts could still be relevant to a determination of how much, if not whether, recovery could be made. The question on the facts of the case remained whether at the time BDW carried out the remedial works, it would have reasonably understood that it had a liability to homeowners but that it was unenforceable if it chose to rely on a limitation defence (para. [121]).
13. In reaching its decision, the Supreme Court was keen to ensure that the BSA sat comfortably within the existing legal landscape and that the ability of homeowners and others with standing under the DPA was not compromised, but rather was supported to the full extent possible, whilst at the same time ensuring defendants are not prevented from pointing to the factual landscape they were operating in at any relevant time to ensure that recovery does not come at any cost.

Pirelli General Cable Works Ltd v Oscar Faber & Partners [1983] 2 AC 1 (“Pirelli”)

14. In the Court of Appeal, URS had challenged the approach to accrual of a cause of action for pure economic loss in negligence set out in Pirelli. Coulson LJ decided that BDW had an accrued cause of action at the latest at the date of practical completion (prior to when it sold the developments) and that, in any event, accrual could still be preserved under the Latent Damage Act 1986 (the “LDA”), provided that the relevant provisions of the LDA were met.
15. The Supreme Court heard submissions from both parties on a number of bases, where there was a degree of ambivalence about the question of whether Pirelli should be overturned, or indeed, whether it could be on this occasion. It was acknowledged in some of those arguments that Pirelli was presently binding authority and should remain so unless and until the issue came more squarely before the Court, whilst there were other arguments that the Court was, in theory, free to depart from Pirelli if it so wished. Therefore, although neither party actively sought that Pirelli be overturned, both parties’ submissions indicated that they considered that Pirelli ought to go because it was a decision decided on a false basis.
16. On appeal, the Supreme Court did not take the opportunity to overrule Pirelli and considered it was inappropriate to do so in light of its findings on Ground 1 (para. [71]). Instead, the Supreme Court confined itself to making the following points:

16.1. Pirelli was decided on a false premise that cracks in a building constitute physical damage rather than pure economic loss in negligence (para. [74]). In other words, physical damage is not required to complete a cause of action in tort. The claim to repair the cracks in the building in Pirelli must be seen as pure economic loss – not one for physical damage (e.g. it is not the sort of physical damage that occurs when a lorry crashes into a building).

16.2. Although Pirelli was decided on a false premise, that does not mean that it was wrong in holding that a cause of action in the tort of negligence accrues when the relevant “damage” occurs and not when that damage is discovered or could reasonably have been discovered (para. [75]). It is perfectly possible for pure economic loss to be latent.

16.3. As the Court said “notwithstanding all that”, there are strong arguments – mainly from having reviewed various pre-2000 authorities from other jurisdictions, as well as some pre-1991 academic texts – in favour of the conclusion that there can only be an actual loss once pure economic loss has been discovered or could reasonably have been discovered.

16.4. However, as the law stands that would lead to an illogical result, taking into account the wording of the LDA (para. [76]), which clearly prescribes the expiry of limitation as occurring three years after the date of discoverability. If the date of accrual and the date of discoverability are aligned, then that would mean that the usual six-year limitation period would apply, contrary to the provisions of the LDA. That illogical result would in the Court’s view undermine the legislative solution to Pirelli that the LDA constitutes.

17. Even though they are not technically binding, the comments provide an insight into the way in which the Supreme Court might decide matters, if it were given the opportunity to make a decision as to whether to overrule Pirelli on a ratio decidendi Obviously, whilst the LDA remains in force, the current illogical position may not be fully resolved, and resolution may require Parliament to grapple with the problem and legislate accordingly.
18. For now, Coulson LJ’s position – as set out in the Court of Appeal Judgment –is good law; namely, that accrual of a cause of action in negligence, where pure economic loss is concerned, is the date of practical completion at the latest, although the LDA might come to one’s aid if damage could not reasonably have been discovered before that date.

Article by Helena White and Miguel Henderson