From: Neil Foster <neil.foster@newcastle.edu.au>

Sent: Thursday 29 May 2025 01:31

To: obligations

Subject: ODG: UKSC on duty of care, economic loss, voluntariness

Dear Colleagues;

As I haven't seen any other comment on the decision so far, I thought I would note the UK Supreme Court decision in URS Corporation Ltd v BDW Trading Ltd [2025] UKSC 21 (21 May 2025). There are some tricky issues involved under specific statutory provisions involving liability of builders and developers for defective buildings (interestingly similar, but not the same, to some issues considered by the High Court of Australia last year in Pafburn Pty Limited v The Owners - Strata Plan No 84674 [2024] HCA 49 (11 December 2024)). But here I just want to note briefly the common law negligence issues.

The background to the litigation was the dreadful Grenfell Tower fire in London, blamed in part on defective building practices. The respondents here, BDW, are property developers, and they had engaged URS to build some properties which BDW then sold on to purchasers. The majority sum up the issues here:

7. Amongst other facts that were assumed at first instance, and are not in dispute for the purposes of this appeal, the Developments had various defects as a result of URS's failure to exercise reasonable skill and care in the provision of its design services; and that failure was a breach of URS's common law duty of care in tort, which was concurrent with, and arising out of, the obligations assumed by URS under its contracts with BDW. Furthermore, the existence of certain of the defects presented a health and safety risk.

8. In 2020 and 2021, BDW carried out repairs/remedial works (we shall throughout use those terms interchangeably) to the Developments, although no claim against BDW arising out of the defects had been intimated by any third-party owner or occupier of the Developments. Nevertheless, BDW says that it considered that the defects, if left unremedied, presented a danger to occupants and risked serious damage to BDW's reputation in the market. The losses claimed by BDW from URS relate to the costs of executing those remedial works, together with associated costs.

The claim for damages in negligence by BDW against URS related to payments for remediation that BDW had made, but in circumstances where, at the time, they could not have been sued by the purchasers for the cost of these measures (due to the then-applicable limitation provisions.) URS argued that these 'voluntary' payments were outside the scope of their duty of care, and hence were not recoverable.

The Supreme Court in a 7-member decision (Lords Lloyd-Jones, Briggs, Sales, Hamblen, Leggatt, Burrows & Richards) agreed that there was an arguable claim in negligence which should proceed to trial. They held that there was no bright line bar to the claim based on the 'voluntary' nature of the remediation expenditure. The main judgment was written by Lord Hamblen and Lord Burrows; Lord Leggatt gave a concurring judgment with an extended discussion of how the statutory contribution provisions worked here.

The duty of care owed by URS was identified as a duty relating to 'pure economic loss', but it was accepted as an exception to the usual exclusion of such claims on the basis that the contract between the two parties amounted to an 'assumption of responsibility'- see [27]. (Their Lordships noted in passing the recent HCA decision on economic loss in Mallonland Pty Ltd v Advanta Seeds Pty Ltd [2024] HCA 25; (2024) 98 ALJR- there the High Court also accepted this as a category where such claims would be allowed. Those interested in this case can see my recent note on it: 'Duty of care in negligence in relation to pure economic loss' (2025) 41(1) Professional Negligence 42-48.)

Once the duty was accepted then it seemed clear that the duty would cover costs incurred by having to cover remediation costs needed by purchasers of the properties. The judges ruled that the question of whether these voluntary payments could be recovered was in fact not a 'duty' issue but rather either an issue of causation or (which was basically the same, according to some comments) mitigation. Both these matters were 'fact dependent' and should be resolved by the trial judge rather than leading to the claims being dismissed at an early stage. The majority noted:

55. 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 has failed in its so-called 'duty' to mitigate its loss. In other words, there is a strong argument that voluntariness most naturally falls to be considered within the concepts of legal causation or mitigation rather than scope of duty and remoteness.

Hence the issues would be whether the action of BDW in making these payments was 'caused by' (or 'materially contributed to' by) the breaches of their duty by URS. Both the plurality and Lord Leggatt accepted that the trial judge could take into account BDW's desire not to damage their commercial reputation by failing to fund the remediation- see majority at [65], Lord Leggatt at [191]. This is an interesting point. The trial judge had ruled that reputational damage was not a separate head of damages which BDW could claim; but as Lord Leggatt points out, this did not prevent a finding of fact that the prospect of reputational damage had been a significant factor causing BDW to undertake the remediation.

191 ... The claimant's response to a predicament created by the defendant's breach of duty may quite reasonably and in the ordinary course of business be influenced by factors which are not capable of quantification or which, even if they could be quantified, would - if incurred - not represent recoverable losses ... Another such factor, as shown by the Banco de Portugal and James Finlay cases, is the prospect of serious damage to the claimant's reputation. It is nothing to the point that in those cases the claimant could not have recovered damages for reputational harm from the defendant if the claimant had not responded to the defendant s wrongdoing in the way that it did.

This seems correct. I am not sure about the overall decision but I think on balance it is probably right. Harm can be legally caused by a defendant's negligence if is not too 'remote', which usually means 'a foreseeable type of harm'. The response to these events by the plaintiff, even though not legally required, seems to fall within that category.

Regards

Neil

NEIL FOSTER

Associate Professor, School of Law and Justice

College of Human and Social Futures,

 The University of Newcastle
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