Design Liability Might Be Wider Than You Think | Comment

The Technology and Construction Court has determined a set of preliminary issues in BDW Trading v. URS Corporation. This is a claim by BDW Trading – which owns Barratt Homes, David Wilson Homes and Barratt London – against engineering firm URS Corporation (and another) for defects resulting from allegedly negligent design.

BDW had appointed URS to provide the structural designs for several residential properties it developed and owned. Investigations – carried out by the homebuilder after Grenfell once the work was completed – revealed serious structural flaws in several of the buildings, which are now said to be inadequate.

Although it no longer owns the buildings, BDW felt that as a responsible developer it had to ensure that the properties were secure. As this meant that BDW would incur considerable expense to carry out repair work, it initiated legal proceedings to recover these losses from URS.

Factual background

In 2019, BDW undertook investigations into a variety of buildings that used the same combustible cladding that had caused the Grenfell Tower fire two years earlier. While repairing the cladding, he noticed cracks in the structural slab of Citiscape, a 95-flat high-rise building in Croydon. Upon investigation, it was discovered that the structural integrity of the slab was deficient; indeed, the problem was so severe that it prompted an evacuation of the block and repair work to stabilize it.

This has caused BDW to conduct a thorough review of the structural condition of a number of other properties. In one of the blocks – Ross Apartments in London’s Capital East Development – the faults were considered so serious that an evacuation was also required. In other cases, temporary shoring was used, followed by permanent works to remedy structural defects.

The case

Malpractice cases like this tend to proceed contractually due to a breach, which makes them simpler because the legal thresholds are often clearer.

However, in many cases of latent defects, the contractual limitation period, which is usually six or 12 years, has expired, giving rise to numerous lawsuits in tort – an act of civil fault which results in injuries, damages or losses – due to the existence of a long judgment of 15 years from the cause of action accrued.

The court said that the defendant’s liability to BDW was not conditional and that a designer was potentially liable to a developer once he had prepared a negligent design, without obliging a third party to sue.

The issues to be determined by the court were: whether the extent of the defendant’s obligations extended to the losses claimed by BDW, whether the losses were recoverable at law in tort, and whether there were any defenses that the defendant could successfully deploy.

Economic and reputational damage

The court said BDW’s losses fell into two main categories: damage to reputation and economic losses, namely investigative work and repair of defects caused by negligent design.

Applying guidance from an earlier Supreme Court decision, Justice Fraser found that the defendant did not owe BDW a duty of care to avoid damage to its reputation. If the court were to take this step, it would create practical difficulties and may have impaired an adviser’s ability to obtain professional indemnity insurance.

The field of fire protection and coating is already a high-risk market for insurance – if the court were to add nebulous reputational loss as a risk, premiums would rise further and some areas of work could become difficult to ensure. However, the judge concluded that the defendant’s duties extended to other losses, such as investigation and repair costs.

The defendant qualified all reputational losses, stating that BDW only incurred the cost of repair work to avoid damage to its reputation. However, the court found that this was incorrect

An interesting factor in this case is that the defendant qualified all reputational losses, stating that BDW only incurred the cost of repair work to avoid damage to its reputation. However, the court concluded that this analysis was incorrect and risked confusing the type of loss suffered by BDW with its motivation to carry out the repair work. The cost of carrying out the repair work was a conventional loss, which was recoverable, and should not be confused with the head of reputational loss, which was not.

Limitation Defense

The defendant argued that BDW could have avoided the cost of the repair work because the homebuilder had a defense against the owners or tenants of the building and carried out the work when it did not. was not required to do so.

The court said that the defendant’s liability to BDW was not contingent and that a designer was potentially liable to a developer once he had prepared a negligent design, without requiring a third party to sue.

This is perhaps an example of the courts seeking to give developers as much leeway as possible to do the right thing by spending money to solve serious construction problems by helping to ensure that ‘they can recover from the guilty professionals responsible for the design.

Look forward

The case proceeded on the basis of alleged facts and, in his judgment, Judge Fraser noted that while he could pass judgment on these, the judgment could become “entirely academic” – citing a case 1980, which warned that “preliminary points of law are too often treacherous shortcuts”.

Preliminary points of law may seem very appealing at first, but when you delve into the specifics, they often don’t settle the substantive points of the case, so it’s understandable that Judge Fraser flagged this warning.

However, the guidelines applied by the court, particularly regarding how complex issues of tort liability should be applied to negligent design claims, will no doubt be helpful to parties involved in claims against consultants on projects. of construction.

While loss of reputation was considered a count of irrecoverable loss for valid practical reasons, developers can take comfort in the fact that the court seems keen to back those who do the right thing. Moreover, doing the right thing goes a long way in preserving reputation in any event.

Kate Onions is a Partner and Head of Construction Litigation at Shakespeare Martineau

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