Professional negligence – Liability – Loss – Respondent developer alleging appellant structural engineer negligent in carrying out structural design work – Appellant arguing alleged cause of action accrued outside limitation period – Court determining preliminary issues in favour of respondent – Respondent obtaining permission to amend pleadings – Appellant appealing against both decisions – Whether courts erring in law – Appeals dismissed
The respondent was a developer. The appellant carried on business as structural engineers. Between about 2005 and 2012, the respondent engaged the appellant to carry out structural design work for the blocks of flats they were building.
In late 2019, the respondent noticed signs of structural defects. That discovery led to a review of the structural condition of other blocks for which the appellant had provided engineering designs. The respondent said that the same or similar defects were discovered which were also due to the appellant’s negligent design.
The respondent brought a claim against the appellant in negligence. The appellant argued that any cause of action in tort accrued to the respondent in 2019, when it discovered that the design was allegedly defective. Because by then the respondent no longer had a proprietary interest in the buildings, had no obligation to rectify the defects and no liability to third parties because of limitation, the cause of action accrued when no loss could have been suffered by the respondent.
The court decided, as preliminary issues, that the scope of the appellant’s duty of care extended to the alleged losses which were in principle recoverable. The respondent’s cause of action accrued no later than the date of practical completion of each block: [2021] EWHC 2796 (TCC). The appellant appealed against that decision.
After the judgment, the Building Safety Act 2022 came into force which increased the limitation periods for claims under the Defective Premises Act 1972. The respondent was granted permission to amend its pleadings to take advantage of the longer limitation periods and add claims under the 1972 Act and the Civil Liability (Contribution) Act 1978: [2022] EWHC 2966 (TCC). The appellant appealed.
Held: The appeals were dismissed.
(1) The duty of the appellant towards the respondent was a standard duty imposed on a design professional which was co-existent with that professional’s contractual obligations. The risk of harm was that, in breach of the professional’s duty, the design of the buildings would contain structural defects which would have to be subsequently remedied. For the purposes of the preliminary issues, it was assumed that the design was not only defective but dangerous, requiring multi-million-pound remedial works and, in one block, the evacuation of the residents. In such circumstances, it was impossible to conclude that the losses were somehow outside the scope of the appellant’s duty.
The court was not persuaded that the decision of the Supreme Court in Manchester Building Society v Grant Thornton UK LLP [2021] UKSC 20; [2021] EGLR 34 had any direct application to a case such as the present. The six-stage checklist set out in that decision was designed to provide a useful way of analysing whether an alleged duty of care properly correlated to the harm claimed. It was primarily designed to analyse duties of care alleged to arise in novel situations which had not previously been considered by the courts, or where the type of loss claimed was unusual or stretched the usual boundaries imposed by the law. The checklist was not primarily intended to be applied by rote to the standard duties of care, such as those owed by structural engineers to their employers, where the damage claimed was the consequences of the errors in the structural design.
However, if the useful checklist was applied in the present case, the judge properly worked his way through the relevant questions and arrived at incontrovertible answers.
(2) Contrary to the appellant’s argument, the respondent’s claims were not claims for reputational damage, but conventional claims for damages measured by reference to the cost of remedial works and the judge was right to so find. As a matter of law, the possible absence in 2019 of an obligation on the part of the respondent to carry out such works was irrelevant to its ability to recover those costs as damages.
The law of England and Wales was that, in a case where there was physical damage, the claimant’s cause of action accrued when that physical damage occurred. That was regardless of the claimant’s knowledge of the physical damage or its discoverability. If there was an inherent design defect which did not cause physical damage, the cause of action accrued on completion of the building: Pirelli General Cable Works Ltd v Oscar Faber & Partners [1983] 2 AC 1, Murphy v Brentwood District Council [1991] 1 AC 398; [1990] EGCS 105 and New Islington and Hackney Housing Association Ltd v Pollard Thomas & Edwards Ltd [2001] PNLR 20 considered.
(3) The respondent’s cause of action against the appellant arose, at the latest, when the individual buildings that comprised the two developments were practically completed. At that point, the defective and dangerous structural design had been irrevocably incorporated into the buildings as built. At that moment, the respondent had suffered actionable damage because those buildings were structurally deficient. It was a damaged asset and its cause of action in tort was complete. Therefore, the appellant’s submission that the respondent’s cause of action in tort against the appellant did not accrue until they discovered the defects in the structural design in 2019 was rejected. There was no authority in English law that supported such a proposition: Axa Insurance Ltd v Akther & Derby & Ors [2009] EWCA Civ 1166; [2010] 1 WLR 1662 and Co-Operative Group Ltd v Birse Developments Ltd [2014] EWHC 530 (TCC); [2014] PNLR 21 considered.
The judge was right to find that the cause of action accrued, at the latest, on practical completion. That was at a time when the developments were owned by the respondent, and so there was no reason in law not to conclude that they had a completed cause of action in tort against the appellant at that stage.
(4) The amendments to the 1972 Act, made by section 135(3) of the 2022 Act, and therefore the longer limitation periods, were to be treated as always having been in force. Since 1972, there was never a time when those extended periods did not apply. Parliament plainly intended that the extended limitation periods would have retrospective effect. Although there was an exception to that addressing claims which had been finally determined or settled (section135(6)), there was no exception relating to the rights of parties involved in ongoing litigation.
Fiona Parkin KC, Rónán Hanna and Christopher Reid (instructed by CMS Cameron McKenna Nabarro Olswang LLP) appeared for the appellant; Simon Hargreaves KC and David Sheard (instructed by Osborne Clarke LLP) appeared for the respondent.
Eileen O’Grady, barrister
Click here to read a transcript of URS Corporation Ltd v BDW Trading Ltd
