Construction professional negligence claim provides useful guidance on scope of duties and recovery of losses

Posted: 21/12/2021

In BDW Trading Limited v URS Corporation Limited [2021] EWHC 2796 (TCC), the court had to grapple with difficult questions of scope of duty and the accrual of a cause of action in tort in an engineer’s professional negligence claim. In doing so, it has provided some useful guidance for those bringing and facing such claims.

Facts of the case

BDW Trading Ltd was the owner and developer of residential buildings completed in 2005. As part of the project to construct the buildings, BDW engaged URS Corporation Ltd as its structural engineer. BDW is bringing a claim in tort against URS alleging that its engineering design was negligent causing serious structural defects with the buildings, some of which present a health and safety risk. These faults were only discovered in 2019 and BDW says it will suffer a significant loss because of them. This includes the costs of, and associated with, remedying the health and safety defects, as well as ‘reputation damage’ losses.

URS argues that, even if it was negligent and caused the defects, it cannot be liable to BDW for the losses claimed as a matter of law. This is because, by the time the structural flaws were discovered in 2019, BDW no longer owned the buildings, and it could have raised a full limitation defence to any claims by the current owners against it. In effect, and in these circumstances, URS argues that BDW has never suffered any loss so as to allow a claim in tort, or, alternatively, has only suffered a voluntarily assumed loss in order to avoid reputational damage to its business.

URS therefore asked the court to determine, as a preliminary issue and based on some assumed facts, that the losses claimed were: (a) outside the scope of duty URS owed to BDW; (b) irrecoverable in principle in tort; and (c) as a sub-set of (b): too remote to be recoverable, and that BDW’s actions broke the chain of causation and/or amount to a failure to mitigate its loss.

Court’s decision

Ultimately, the court largely disagreed with URS’ contention that, as a matter of law, BDW’s losses were irrecoverable from URS in a professional negligence claim. In doing so, the judgment raises several points of general importance.

Firstly, in determining whether the losses claimed were recoverable in principle in tort, the court had to address the difficult question of when BDW’s cause of action accrued. URS argued that this was not until the discovery of the defects in 2019, at which point BDW no longer had any proprietary interest in the buildings and therefore, on URS’s case, it never actually acquired a proper cause of action.

However, the court disagreed. Having considered the long line of relevant authorities, going back to the 1983 House of Lords decision in Pirelli v Faber, the court held that the cause of action accrued no later than the date of practical completion. This is because BDW suffered measurable loss when the buildings were construed in accordance with the (assumed) negligent design, such that the cause of action cannot be later than practical completion. The court confirmed that the date of knowledge of latent defects is irrelevant to the accrual of the cause of action in tort (although, it is of course relevant to any attempt to extend the limitation period under s14A of the Limitation Act 1980). 

Secondly, the court held that, by seeking to characterise all of BDW’s losses as reputational losses and thus irrecoverable, URS had confused the type of loss claimed with BDW’s motivation for incurring it. To the extent BDW was claiming for costs of, and associated with, remediating defects, the court held that these were not reputational losses, but rather conventional heads of loss in a claim of this nature. While BDW was also claiming for reputational damage losses, this type of loss was separate to, and distinct from, the conventional heads of loss. The court made it very clear that when answering the preliminary issue, the correct analysis was to address these two categories separately.

Thirdly, when considering whether these categories of loss were outside the scope of URS’s duty of care to BDW, the correct approach is to follow the recent Supreme Court decision in Manchester Building Society v Grant Thornton [2021] UKSC 20, with this decision being as relevant to a construction negligence claim as to other forms of negligence. As such, and in terms of scope of duty, this focusses on the question of whether the loss claimed falls within the risk of harm to the claimant, against which the law imposes on the defendant a duty to take care. The court then held that the answer to this question differs between the two separate categories of loss claimed by BDW.

In terms of the reputational damage losses, URS, or any structural engineering designer generally, is not under a duty to prevent this type of loss. Damage to the reputation of a developer client is not a harm against which an engineer has a duty to take care. This would be an unwarranted extension of an engineer’s scope of duty and potentially extraordinarily wide in its breadth.

However, the category of conventional losses, including the economic loss of investigation, and temporary and permanent remedial works costs, are within the type of harm against which an engineer should take care and within its scope of duty. In the same vein, the court held that these conventional heads of loss were not too remote to be irrecoverable as a matter of law, whereas the reputational damage losses were.

Finally, while the court reached these conclusions on the law, it was not prepared to decide questions of factual causation or mitigation of loss at this preliminary issue stage. These are very fact sensitive issues and will have to await the full trial. As such, it appears the door is still open for URS to try arguing that BDW’s own decisions and actions provide causation/failure to mitigate defences in respect of the conventional losses, albeit as part of a wider consideration of all relevant facts at trial.

This article has been co-written with Emma Crompton, trainee solicitor in the construction and infrastructure team. 

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