Damages for Remedial Expenditure Actionable by Non-Owner Developer Against Negligent Designer

While care need be taken in referring to UK decisions without regard to Australian jurisprudence, instructive still is the decision of the UK Supreme Court in URS Corporation Ltd v BDW Trading Ltd [2025] UKSC 21 (21 May 2025). The case concerned an interlocutory appeal brought in a post-Grenfell Tower case where the plaintiff developer (“BDW”) sued the defendant design consultant (“URS”), in the tort of negligence, for remedial costs it incurred in respect of residential towers in London designed and constructed – as Grenfell Tower was – with flammable cladding. The character of the claim, from a legal perspective, was pure economic loss. At the time of the Grenfell Tower fire, and thereby at the time of incurring the subsequent remedial expenditure, BDW had sold, and thereby no longer enjoyed any proprietary interest in, the subject residential towers. Further, the limitation period for it to be sued as a developer of the towers had expired. Nonetheless the Court of Appeal of England and Wales, and subsequently the UK Supreme Court, dismissed an appeal by URS contending the claim ought be struck out on the footing that the expenditure was incurred by BDW voluntarily, and thereby beyond the scope of the tortious duty of care owed by URS to BDW. The principal judgments in the case were delivered by Lord Hamblen and Lord Burrows, with whom Lord Lloyd-Jones, Lord Briggs, Lord Sales and Lord Richards agreed. This case note refers only to the first ground argued in the Supreme Court, there being other grounds which turn directly on the content of remedial legislation enacted in this litigious space. Their lordships wrote:

1. Introduction

1. On 14 June 2017 a fire broke out at Grenfell Tower in London leading to the tragic death of 72 residents of the 24-storey tower block. It later transpired that the main reason why the fire engulfed Grenfell Tower so quickly was the use of unsafe cladding around the outside of the building, which did not comply with relevant building regulations.
2. Investigations carried out following the fire led to the discovery that a number of high-rise residential buildings across the country were subject to serious safety defects. Aside from unsafe cladding, other issues were identified, including other fire safety concerns, such as lack of compartmentation and flammable balconies, and serious structural defects that gave rise to risks of buildings (or parts of buildings) collapsing.
3. The Government encouraged developers to investigate medium or high-rise developments for which they were responsible and to carry out any necessary remedial work for safety defects discovered. In 2022 this encouragement was reinforced by legal responsibilities imposed on developers and contractors under the Building Safety Act 2022 (the “BSA”).
4. The respondent (“BDW”) is a major developer. Its brand names include well-known developers such as Barratt Homes and David Wilson Homes. The appellant (“URS”) provides consultant engineering services. A number of BDW’s medium or high-rise flat developments were based on URS’s structural designs.
5. During its post-Grenfell investigations, in late 2019, BDW discovered design defects in two sets of multiple high-rise residential building developments (known as “Capital East” and “Freemens Meadow”, together “the Developments”).
6. BDW was the developer of the Developments. URS was appointed by BDW to provide structural design services in connection with the Developments. Initially, BDW was the freehold owner of Freemens Meadow and, on the assumed facts, had a proprietary interest in Capital East at the time it was constructed. In each case, long leases of flats were sold to residential purchasers, any interest which BDW had in the structure and common parts was ultimately transferred to third-party management companies, and all of BDW’s remaining proprietary interests were sold for full value.
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.
9. At the time that those repair costs were incurred, BDW no longer had any proprietary interest in the Developments and any action brought by third parties to enforce obligations owed to them by BDW (whether under the Defective Premises Act 1972 (the “DPA”) or in contract for breach of collateral warranties) in relation to defects would have been time barred under the Limitation Act 1980.
10. In March 2020 BDW issued proceedings against URS in the tort of negligence. It was made clear, by BDW’s Reply to URS’s Defence, that BDW was making no claim for breach of contract.
11. On 4 June 2021 O’Farrell J ordered the trial of preliminary issues, on assumed facts, as to whether the scope of URS’s duties extended to the alleged losses and whether the alleged losses were recoverable in principle as a matter of law in the tort of negligence. URS also applied to strike out the claim against it.
12. The preliminary issue trial was heard by Fraser J on 5, 6 and 7 October 2021. On 22 October 2021 judgment was handed down ([2021] EWHC 2796 (TCC)) determining that: (i) the scope of URS’s duty extended to the losses claimed by BDW, save in relation to those which concerned “reputational damage”; (ii) BDW’s alleged losses were all recoverable in principle, save for the claims for “reputational damage”; (iii) the losses were in the contemplation of the parties at the time of entering into the appointments and were not too remote; and (iv) issues of legal causation (ie whether BDW’s actions had broken the chain of causation so that BDW had caused its own losses) and whether BDW had failed to mitigate its loss were fact dependent and could only be determined at trial. Consequential orders were made in relation to the strike out application.
13. Section 135 of the BSA (which inserted section 4B into the Limitation Act 1980) came into force on 28 June 2022 and retrospectively extended the limitation period for accrued claims under section 1 of the DPA from six years to 30 years. On the same day BDW issued an application to amend its case in reliance on section 135 of the BSA.
14. The amendments sought: (i) to delete the previously pleaded admissions that at the time that the defects were discovered and the repairs undertaken any liability which BDW had to any third party was time-barred, and to introduce instead the allegation that, by reason of section 135 of the BSA, BDW’s liability to such third parties under the DPA was not time-barred at the time of the repairs; (ii) to bring a new claim against URS under the DPA on the basis that such a claim would not now be time barred; and (iii) to bring a new claim against URS for contribution under the Civil Liability (Contribution) Act 1978 (“the Contribution Act”) on the basis that both parties were under in-time liabilities for the same damage under the DPA at the time that BDW undertook the relevant repairs. The amendments were opposed by URS but permission to make them was granted by Adrian Williamson KC sitting as a deputy High Court judge: [2022] EWHC 2966 (TCC) HT-2020-000084 (14 December 2022).
15. The decisions of Fraser J and Adrian Williamson KC were appealed. The appeals were heard together by the Court of Appeal (King, Asplin and Coulson LJJ) on 25, 26 and 27 April 2023. By a judgment handed down on 3 July 2023 (Coulson LJ giving the leading judgment), the Court of Appeal dismissed the appeals: [2023] EWCA Civ 772.
16. The Supreme Court granted permission to appeal on 5 December 2023 on four grounds, which give rise to the following issues:

Ground 1: In relation to BDW’s claim in the tort of negligence against URS, has BDW suffered actionable and recoverable damage or is the damage outside the scope of the duty of care and/or too remote because it was voluntarily incurred (disregarding the possible impact of section 135 of the BSA)? If the answer to that question is that the damage is outside the scope of the duty of care or is too remote, did BDW in any event already have an accrued cause of action in the tort of negligence at the time it sold the Developments?

Ground 2: Does section 135 of the BSA apply in the present circumstances and, if so, what is its effect?

Ground 3: Did URS owe a duty to BDW under section 1(1)(a) of the DPA and, if so, are BDW’s alleged losses of a type which are recoverable for breach of that duty?

Ground 4: Is BDW entitled to bring a claim against URS pursuant to section 1 of the Contribution Act notwithstanding that there has been no judgment or settlement between BDW and any third party and no third party has ever asserted any claim against BDW?

17. These grounds of appeal raise some important legal issues. These include: whether voluntarily incurred losses are irrecoverable as a matter of law (Ground 1); whether the retrospective extension, by section 135 of the BSA, of the limitation period for claims under section 1 of the DPA has relevance to a claim in the tort of negligence or for contribution under the Contribution Act (Ground 2); whether developers are owed duties under section 1 of the DPA (Ground 3); and the circumstances in which a cause of action accrues under the Contribution Act (Ground 4).

…

3. Ground 1: In relation to BDW’s claim in the tort of negligence against URS, has BDW suffered actionable and recoverable damage or is the damage outside the scope of the duty of care and/or too remote because it was voluntarily incurred (disregarding the possible impact of section 135 of the BSA)? If the answer to that question is that the damage is outside the scope of the duty of care or is too remote, did BDW in any event already have an accrued cause of action in the tort of negligence at the time it sold the Developments?

(1) Pure economic loss, scope of duty and remoteness

27. It is important to explain at the outset that BDW’s claim in the tort of negligence concerns pure economic loss. In order for the claimant to establish the cause of action in the tort of negligence, the relevant “damage” is not physical damage to the building but is rather the pure economic loss of having a defective building which has a lower value than it should have had and/or requires repair: see Murphy v Brentwood District Council [1991] 1 AC 398 (“Murphy v Brentwood”) (overruling Anns v Merton London Borough Council [1978] AC 728 (“Anns v Merton”)). In general, there is no duty of care owed in the tort of negligence not to cause another person pure economic loss: see, eg, Cattle v Stockton Waterworks Co (1875) LR 10 QB 453; Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd [1973] QB 27; Armstead v Royal & Sun Alliance Insurance Co Ltd [2024] UKSC 6; [2025] AC 406, para 20; and the recent decision of the High Court of Australia in Mallonland Pty Ltd v Advanta Seeds Pty Ltd [2024] HCA 25; (2024) 98 ALJR 956. But there are exceptions. The main exception is where there is an assumption of responsibility by the defendant to the claimant: see Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465; Henderson v Merrett Syndicates Ltd [1995] 2 AC 145. As both parties accepted, that exception applies in this case. There was an assumption of responsibility by URS to BDW, undertaken through the contract for professional services between them, that URS would take reasonable care in providing structural designs to BDW such that buildings constructed on the basis of those designs would not be defective thereby causing BDW pure economic loss.
28. On the assumed facts, it is also not in dispute that URS was in breach of that duty of care owed to BDW in respect of those structural designs (ie the designs had been negligently produced by URS); and that BDW incurred repair costs in respect of the Developments that were factually caused by that breach of duty (applying the standard “but for” test for factual causation).
29. URS therefore accepts that, had BDW carried out repairs to the Developments before selling them (ie at a time when it still had a proprietary interest in them), the cost of repairs incurred by BDW would have been pure economic loss that was recoverable by BDW in the tort of negligence. But URS submitted that, because the repairs were carried out by BDW on the Developments that no longer belonged to it and without any enforceable legal obligation to do so (because, it is argued, BDW had a limitation defence to any claim against it by homeowners whether under the DPA or for breach of a contractual collateral warranty), the loss suffered was outside the scope of the duty of care and/or was too remote. More specifically, URS argued that there is what it labels a “voluntariness principle” that provides a bright-line rule of law explaining why the loss in this case was outside the scope of the duty and/or was too remote.
30. Counsel for URS neatly encapsulated its submissions in its written case on this appeal as follows (at paras 48-49):

“[T]he losses claimed in this case are the costs related to remedial works undertaken: (i) after BDW had ceased to have any proprietary interest in the developments; and (ii) in the absence of any enforceable obligation to undertake such repairs. Losses of that type are not recoverable as they:

(1) Fell outside the scope of the duty assumed by URS, not being of a type and not representing the fruition of a risk that it was URS’s duty to guard against; and

(2) Were not within URS’s contemplation as a serious possibility at the time the contract was made and for which URS assumed responsibility and therefore were too remote.”

31. Before examining the cases relied on by URS for the voluntariness principle, it is helpful to consider the standard application to the assumed facts of the law on scope of duty and remoteness on the initial premise that there is no such voluntariness principle.
32. Looking first at scope of duty (or what has sometimes been referred to as the “SAAMCO principle” following the leading case of South Australia Asset Management Corpn v York Montague Ltd [1997] AC 191), it was explained in Manchester Building Society v Grant Thornton UK LLP [2021] UKSC 20; [2022] AC 783 and Meadows v Khan [2021] UKSC 21; [2022] AC 852 that, as a limiting principle separate from remoteness, the scope of duty enquiry essentially depends on the purpose of the duty. Focussing on that, it is clear that the purpose of URS’s duty of care was to guard BDW against the very type of loss – the repair costs to the Developments – that BDW has incurred. Therefore, absent the application of a voluntariness principle, the loss here was within the scope of URS’s duty of care (as the Court of Appeal decided: see para 21 above).
33. As regards remoteness, in a tort of negligence claim resting on a contractual assumption of responsibility, it is now clear that the appropriate remoteness test is what has sometimes been referred to as the “contract test”: see Wellesley Partners LLP v Withers LLP [2015] EWCA Civ 1146; [2016] Ch 529. Originating in Hadley v Baxendale (1854) 9 Exch 341, and clarified in cases such as Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528; Koufos v C Czarnikow Ltd (The Heron II) [1969] 1 AC 350 and Brown v KMR Services Ltd [1995] 4 All ER 598, this is a stricter test than what is sometimes called the “tort test” laid down in Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Ltd (The Wagon Mound) [1961] AC 388. Applying that stricter remoteness test, the question to be asked is whether the type of loss suffered was reasonably contemplated by the defendant at the time of the assumption of responsibility (ie here at the time the contract was made) as a serious possibility. Applying that remoteness test to the assumed facts, it must have been reasonably contemplated by URS as a serious possibility at the time of the assumption of responsibility that BDW would suffer the type of loss – the repair costs – that BDW has incurred. Therefore, absent the application of a voluntariness principle, the loss here was not too remote (as Fraser J decided, see para 12 above: remoteness, as distinct from scope of duty, was not focussed on in the Court of Appeal).

(2) A voluntariness principle?

34. The question therefore becomes, is there a voluntariness principle and, if so, on the assumed facts, would it alter the decisions that one would otherwise reach on scope of duty and remoteness?
35. It is helpful first to consider a hypothetical example. A passer-by, who enjoys DIY, notices that solar panels on a newly-built but empty house have become loose and potentially dangerous. He phones the builders and the owner to inform them of the danger but they fail to act. The passer-by returns a week later and carries out the necessary repairs having bought the necessary materials to do so. He then demands payment of the cost of the repair from the builders. It is accepted that the solar panels were not properly affixed because of the negligence of the builders. If the passer-by were to bring a claim against the builders in the tort of negligence for the pure economic loss (ie the repair cost incurred), it is clear that there would be no such liability. That is most obviously because, as there was no assumption of responsibility by the builders to the passer-by, there would be no duty of care owed to the passer-by by the builders not to cause pure economic loss. It may be that the passer-by’s voluntariness would be another reason for there being no liability but the important point is that there would be no need to rely on any principle of voluntariness to explain that result. We also put to one side the separate question as to whether the passer-by might conceivably have a claim in the law of unjust enrichment against the owner (or perhaps the builders) for necessitous intervention: see, eg, Goff and Jones, The Law of Unjust Enrichment, 10th ed (2022), Chapter 18; Graham Virgo, The Principles of the Law of Restitution, 4th ed (2024), Chapter 12.
36. However, on the assumed facts, in contrast to that hypothetical example, it is not in dispute that, based on the assumption of responsibility, there was a breach of the duty of care owed by URS to BDW not to cause BDW pure economic loss. The question at issue is whether, despite there being a duty of care owed and breached, there is a voluntariness principle that applies, through the concepts of scope of duty or remoteness, to rule out recovery for the cost of repair incurred by BDW.

(3) The four cases relied on by URS

37. In support of there being such a voluntariness principle, URS relied on four cases.
38. In Admiralty Comrs v SS Amerika [1917] AC 38 (“SS Amerika”), one of His Majesty’s submarines was negligently run into and sunk by the defendants’ steamship. All but one of the submarine crew were drowned. The claimant Commissioners included within the loss for which they were seeking damages, assessed by the Admiralty Registrar, the capitalised amount of the pensions that they had paid out to the dependants of the deceased men.
39. The House of Lords, sitting as a panel of three, denied that claim for two reasons. First, it was for a loss to the claimants consequent on another’s death. Applying the long-standing rule of the common law, laid down in Baker v Bolton (1808) 1 Camp 493, there could be no recovery for losses caused by the death of another person. Secondly, in any event, the loss was too remote. The payments were compassionate payments which the Admiralty was not legally bound to pay. In the words of Lord Parker at p 42:

“[T]he items of damage which the appellants desire to be allowed are too remote. … No person aggrieved by an injury is by common law entitled to increase his claim for damage by any voluntary act; on the contrary, it is his duty, if he reasonably can, to abstain from any act by which the damage could be in any way increased.”

40. Lord Sumner expressed the position as follows at pp 60-61:

“In the present case the sums claimed were paid to widows and other dependants of the drowned men under Admiralty Regulations … which expressly declare that these are compassionate payments, and granted of grace and not of right, both in kind and in degree. True that in such cases they are always made, and most properly made, but none the less the money claimed was lost to the Exchequer directly because the Crown through its officers was pleased to pay it. The collision was the causa sine qua non; the consequent drowning of the men was the occasion of the bounty; but the causa causans of the payment was the voluntary act of the Crown. Had the present action been brought upon a contract it might well be the case that these payments would have been within the contemplation of the contracting parties, but they are not the natural consequences of the tort which is sued for.”

41. There are two points to note about this decision at this stage.

(i) The Commissioners were essentially recovering damages for physical damage to their property (ie the loss of the submarine). The payments to the dependants of the deceased men were not consequent, or at least not directly consequent, on that physical damage. On the contrary, they flowed from the death of the crew. A principal reason why one cannot recover in the tort of negligence for loss consequent on another person’s death is that that constitutes pure economic loss and there is, in general, no duty of care owed not to cause pure economic loss. Fatal Accidents Act legislation was first introduced in 1846 (popularly known as Lord Campbell’s Act) to depart from Baker v Bolton but, even applying the present Fatal Accidents Act 1976, the Commissioners would have no statutory cause of action because it is only dependants of the deceased who have such a claim.

(ii) Although Lord Parker said that the loss was too remote, when his Lordship came to discuss the voluntary nature of the payment, he relied on language that is most obviously relevant to the concepts of mitigation or legal causation. Similarly, Lord Sumner used the language of legal causation as well as remoteness.

42. In Esso Petroleum Co Ltd v Hall Russell & Co Ltd (The Esso Bernicia) [1989] AC 643, Esso’s oil tanker was damaged in an accident caused by a defect in the tugs that were towing her into an oil terminal in Scotland. Oil escaped from the damaged tanker and polluted the coastline. In a negligence action against the tugs’ shipbuilders, Esso recovered damages for the damage to its tanker and for the loss of its oil. In addition, they claimed damages for the sums they had paid out in respect of the oil pollution to the Shetland Islands Council (representing, in particular, crofters) under the Tanker Owners Voluntary Agreement concerning Liability for Oil Pollution (“TOVALOP”). The House of Lords held that those sums were irrecoverable because they constituted pure economic loss; and pure economic loss cannot (normally) be recovered in the tort of negligence.
43. Lord Jauncey (with whom Lords Keith, Brandon, and Templeman agreed) said the following at pp 677-678:

“Esso chose to enter into and remain a party to TOVALOP for what were no doubt sound policy and commercial reasons but under no compulsitor of law so to do. They agreed voluntarily to indemnify persons affected by oil spillage. They were under no general duty in law to the crofters and as far as they were concerned the payments which they received were entirely gratuitous. … TOVALOP is and remains a gratuitous contract of indemnity notwithstanding that the event which gave rise to the payments thereunder was damage to the Bernicia. Esso cannot pray in aid the latter event to convert their claim to repayment of sums paid under that indemnity into a claim for economic loss resulting directly from the damage.”

44. Lord Goff (with whom Lord Templeman agreed) made pellucidly clear that the loss comprising the sums paid out under the TOVALOP was irrecoverable pure economic loss because it did not truly flow from the physical damage to Esso’s ship. He said at pp 664-665:

“Esso cannot claim the sums paid by it under TOVALOP as financial loss attributable to the physical damage to the ship caused by Hall Russell’s alleged negligence. The damage to the ship did no more than trigger off the event which led to the pollution in respect of which Esso became bound under the terms of TOVALOP to make the payments which are the subject matter of its claim. In truth, Esso’s claim to damages falls under two separate heads—(1) damages in respect of the physical damage to the tanker, and any financial loss (eg loss of use) flowing from such physical damage; and (2) damages in respect of the sums paid out by Esso under TOVALOP. But … damages of the type claimed under the second head are irrecoverable in negligence, as has been established for over 100 years, ever since the decision of your Lordships’ House in Simpson & Co v Thomson (1877) 3 App Cas 279.”

45. Therefore, as in SS Amerika, the relevant loss in question was pure economic loss. This was because it was not consequent on, or at least not directly consequent on, the damage to the tanker. Simpson & Co v Thomson, referred to by Lord Goff, was a House of Lords (Scotland) decision denying recovery for negligently caused pure economic loss. While it is true that the sums paid out under the TOVALOP were voluntary, their classification as pure economic loss appears to have been crucial in explaining why they were irrecoverable in the tort of negligence.
46. In Anglian Water Services Ltd v Crawshaw Robbins & Co Ltd [2001] BLR 173 (“Anglian Water”) the claimant, Anglian Water Services Ltd (“Anglian”), had engaged Crawshaw Robbins & Co Ltd (“Crawshaw Robbins”) to carry out the work of replacing old water main pipes with modern ones. In doing so, Crawshaw Robbins’s sub-contractor negligently drilled through an existing water main, a gas main and an electricity cable. The consequence was that 20,000 people in Corby were affected, to varying degrees, by loss of gas supplies. Anglian made payments, inter alia, to those householders whose gas supplies had been affected (without there being any physical damage to their gas appliances) and to local authorities who had provided emergency services. In an action for breach of contract and in the tort of negligence against Crawshaw Robbins, Anglian claimed damages for the payments it had made to the householders and to the local authorities. It was held by Stanley Burnton J at paras 80, 113, 156, 158 and 174, that, whether in contract or tort, Anglian could not recover from Crawshaw Robbins for those payments to third parties because, however commendable Anglian’s actions had been in making those payments, they were voluntarily paid (ie Anglian had no legal liability to the householders or the local authorities).
47. In further explaining why there was no recovery for the voluntary payments, Stanley Burnton J made two points. First, in respect of the tort of negligence claim he relied (at para 113) on The Esso Bernicia. However, as has been explained, in respect of the tort of negligence, the loss in The Esso Bernicia was irrecoverable pure economic loss. Yet in Anglian Water, where there was a contract between the claimant and defendant that gave rise to an assumption of responsibility, the fact that the loss was pure economic loss would not have rendered it irrecoverable.
48. Secondly, as regards the contract claim, the judge said the following at para 80:

“In my judgment, Anglian is not entitled to recover as damages for breach of contract sums voluntarily paid to third parties. Such payments are not normally within the contemplation of the parties… . There is no evidence in this case that when the Contract was entered into the risk of liability for such damages was accepted by Crawshaw Robbins.”

49. This is most naturally interpreted as saying that the payments were here too remote. But it is important to note that the judge was not saying that that will always be so just because the payments were voluntary. Rather by his reference to what is “normally” contemplated by the parties and there being “no evidence in this case” he was indicating that the determination of the remoteness question was fact-specific.
50. Finally, we were referred to Hambro Life Assurance plc v White Young & Partners (1987) 38 BLR 16 (“Hambro”). The claimant, as an investment, had acquired industrial warehouse units which were subject to existing 25-year leases. The claimant discovered serious structural damage in the units and, although having no legal duty to do so under the leases, the claimant carried out repairs to the units. It then brought proceedings in the tort of negligence against, amongst others, the defendant local authority (Salisbury DC) who had approved the plans and whose building inspectors had inspected the premises. It was an agreed fact that the defendant had been negligent. However, on a preliminary issue the Court of Appeal, upholding the trial judge, held that no duty of care was owed in tort by the defendant to the claimant.
51. Two reasons for the decision were given. One was that there was no duty of care owed to the claimant under Anns v Merton (which, at the time, bound the Court of Appeal) because the claimant was merely the owner and had never occupied the premises so that it was under no risk to health or safety. A second reason was that the claimant had no legal liability to carry out the repairs but had done so “from enlightened self-interest in the preservation of their investment” (p 24). In respect of at least some of the units the damage was such that the lessees had a legal repairing obligation but the trial judge had found that the claimant, as lessor, had acted reasonably in carrying out the repairs and not enforcing that repairing liability of the lessees.
52. Again, this is a case where the loss in question was pure economic loss. Viewed in the light of the subsequent overruling of Anns v Merton by Murphy v Brentwood, the most straightforward explanation for the decision is that there was no duty of care owed to the claimant by the defendant local authority in respect of what was, on a correct analysis, pure economic loss. In any event, even applying the old law laid down in Anns v Merton, the decision shows that no duty of care was owed by the local authority to the claimant because it was not an occupier. The voluntariness of the repair was not essential to the decision and, in any event, the voluntariness was not expressly explained as being an aspect of remoteness or scope of duty.
53. Drawing together the threads of these four cases, we do not consider that they establish a principle of voluntariness that operates as a bright line rule of law rendering loss too remote or outside the scope of the duty of care in the tort of negligence. In the two House of Lords cases the payments that were voluntarily paid to third parties constituted pure economic loss, rather than loss (directly) consequent on damage to the claimants’ property, and there was no duty of care owed for that reason. Similarly, in Hambro there was no duty of care owed because, on the correct analysis that is now to be applied after Murphy v Brentwood, the repair costs were pure economic loss. In so far as other reasoning (ie other than the loss being pure economic loss) was relied on, legal causation and mitigation featured as prominently in the speeches in SS Amerika as remoteness (as we discuss further at paras 55-61 below). Certainly, those cases do not establish that the voluntariness of the payments meant that, as a rule of law, the loss was outside the scope of the duty of care or too remote.
54. That leaves Anglian Water where there were concurrent contractual and tortious claims so that, although not adverted to by Stanley Burnton J, a duty of care in the tort of negligence was owed (by reason of the assumption of responsibility) as regards the pure economic loss comprising the voluntary payments made to third parties. But while seeing the issue through the lens of remoteness, Stanley Burnton J indicated that whether the loss, comprising the voluntary payments, was or was not too remote was fact-specific. He was not saying that there was a rule of law denying recovery just because the payments were voluntary.

(4) Legal causation and mitigation

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.
56. This is borne out by some of the language used by Lord Parker and Lord Sumner in their speeches in SS Amerika: see paras 39-40 above. It is also supported by the only textbook treatment that we have found that links together the first three of the above cases: in Andrew Tettenborn and David Wilby, The Law of Damages, 2nd ed (2010) at para 7.52 those three cases are considered as an aspect of legal causation. SS Amerika is discussed under the heading of “Damages increased by claimant’s act” in Clerk and Lindsell on Torts, 24th ed (2023) at para 26.11 and the footnote at the start of that paragraph says that: “In this situation, the courts are just as likely to use the language of causation as they are mitigation.” See also Tettenborn and Wilby’s discussion, at para 3.50 and footnote 3, of the failure of claims for “voluntary” payments in settlement of bad claims which, they write, rests “[p]resumably on the basis that a voluntary payment of a bad claim breaks any chain of causation between the wrong and the payment” (and see, in support of this, for example, General Feeds Inc Panama v Slobodna Plovidba Yugoslavia (The Krapan J) [1999] 1 Lloyd’s Rep 688). Personal injury cases on “voluntary” rescue, such as Haynes v Harwood [1935] 1 KB 146, also focus on legal causation.
57. In addition, there are other cases where voluntariness appears to have been considered primarily as an aspect of mitigation so that expenses (or other additional losses) were held to be recoverable provided reasonably (even if voluntarily) incurred: see, for example, Holden Ltd v Bostock & Co Ltd (1902) 18 TLR 317; and Banco de Portugal v Waterlow & Sons Ltd [1932] AC 452 (both contract cases).
58. In the former case, the defendants had sold sugar to the claimants for brewing beer. The sugar contained arsenic. In an attempt to prevent any loss of business, the claimants issued notices advertising that they had changed their brewing materials. In an action against the defendants for breach of contract, the claimants were awarded, inter alia, the £50 cost of the notices because that was a reasonable step to take to minimise any possible loss of business.
59. In the latter case, the defendants contracted to print banknotes for the claimant Portuguese bank. In breach of contract, they delivered a large number of the banknotes to a criminal, who circulated them in Portugal. On discovering this, the bank withdrew the issue of notes. It then undertook to exchange all the “bad” notes for good notes. In defending an action for breach of contract against them, the defendants argued that, while they were liable for the cost of printing the new notes, they were not liable for the bank’s additional loss in choosing to exchange the bad notes for good notes (not least where the bank could not properly distinguish good notes from bad). The House of Lords, by a 3-2 majority, held that the defendants were liable for that additional loss. While the defendants argued that that loss was irrecoverable because it was voluntarily incurred, the majority held that it was recoverable because it was not too remote and was reasonably incurred so as to maintain the bank’s commercial reputation and public confidence in the bank. The minority did not disagree with the majority’s analysis of the law but differed as to whether, on the facts, the bank really did suffer a loss in exchanging good notes for bad. None of their Lordships accepted that, just because the loss might be said to have been voluntarily incurred, it was irrecoverable. In a passage that has often been cited in respect of the law on mitigation, Lord Macmillan in the majority said the following at p 506:

“Where the sufferer from a breach of contract finds himself in consequence of that breach placed in a position of embarrassment the measures which he may be driven to adopt in order to extricate himself ought not to be weighed in nice scales at the instance of the party whose breach of contract has occasioned the difficulty. It is often easy after an emergency has passed to criticize the steps which have been taken to meet it, but such criticism does not come well from those who have themselves created the emergency. The law is satisfied if the party placed in a difficult situation by reason of the breach of a duty owed to him has acted reasonably in the adoption of remedial measures, and he will not be held disentitled to recover the cost of such measures merely because the party in breach can suggest that other measures less burdensome to him might have been taken.”

60. The problem for URS as regards mitigation is that reasonableness is indisputably of central importance. The enquiry in respect of mitigation is whether the claimant could have avoided its loss by taking reasonable action or whether expenses (or other additional losses) incurred, increasing its loss, were reasonably incurred. That is clearly a fact-specific enquiry that would have to await trial. The reasonableness of the claimant’s conduct may also be of importance in determining legal causation and, even if not, it would appear that a fact-specific enquiry would be needed in order to decide whether the “chain of causation” between breach of duty and loss has been broken. In respect of neither concept can it be said that voluntariness constitutes a rule of law to the effect that there has been no legal causation or there has been a failure to mitigate.
61. Fraser J (at paras 9 and 123) specifically laid down that matters of legal causation and mitigation would need to go to trial (see para 12 above). That ruling was not appealed. In line with this, URS has put those concepts to one side and has focussed, instead, on scope of duty and remoteness. But as we have said (see para 53 above), the case law does not support the submission that there is a bright line rule of law that voluntarily incurred loss is outside the scope of the duty of care or too remote.

(5) Features of the present case on the assumed facts

62. In any event (and disregarding the effect of section 135 of the BSA), it is strongly arguable that three features of the assumed facts indicate that BDW was not, in a true sense, acting voluntarily in paying for the repairs to be carried out. These three features, taken together, also serve to distinguish this case from the four cases relied on by URS (examined in paras 37-54 above) albeit that the third feature was present in one or more of those cases.
63. First, if BDW did nothing to effect the repairs, there was a risk that the defects in the Developments would cause personal injury to, or the death of, homeowners for which BDW might be legally liable under the DPA or in contract (for breach of collateral warranties). Such claims would not be time-barred because, by reason of sections 11 and 12 of the Limitation Act 1980, the three-year limitation period for personal injury and death (whatever the cause of action) runs from discovery or discoverability of the injury or death (as an alternative to running from accrual of the cause of action). In any event, section 33 of the Limitation Act 1980 confers a discretion on a court to disapply the primary limitation period so as to allow a claim for personal injury or death to go ahead.
64. Secondly, BDW had a legal liability to the homeowners under the DPA or in contract to incur the cost of repairs. Even though, at the time the repairs were carried out, the claims by the homeowners would have been unenforceable because time-barred (disregarding the possible impact of section 135 of the BSA) it is well-established that, subject to rare exceptions that do not here apply, limitation bars the remedy and does not extinguish the right: see, eg, Royal Norwegian Government v Constant & Constant and Calcutta Marine Engineering Co Ltd [1960] 2 Lloyd’s Rep 431, 442.
65. Thirdly, there would be potential reputational damage to BDW if BDW did nothing once it knew of the danger to homeowners. It was therefore in BDW’s commercial interest to effect the repairs. The fact that it was decided by Fraser J that BDW could not recover damages for “reputational damage” (see para 12 above) is essentially irrelevant in considering whether loss of reputation was a factor in making its actions not truly voluntary. Closely linked to this is that there was a general public interest, which included moral pressure on BDW, in BDW effecting the repairs so as to avoid danger to homeowners.
66. There is therefore a strong case for contending that BDW was, in any event on the assumed facts, not exercising a sufficiently full and free choice so as to be regarded as acting voluntarily in effecting the repairs. In other words, BDW had no realistic alternative. The three features indicate that BDW was not, in any true sense, acting voluntarily. While the third of those features may have been present in one or more of the four cases relied on by BDW, none of those cases shares all three features.

(6) Conclusion on Ground 1

67. Our conclusion, therefore, is that (irrespective of the possible impact of section 135 of the BSA which is to be considered under Ground 2) the appeal on Ground 1 fails. There is no rule of law which meant that the carrying out of the repairs by BDW rendered the repair costs outside the scope of the duty of care owed or too remote.

(7) A note on underlying policy

68. The remoteness test and its application ultimately reflect the underlying policy of the common law as to where it is appropriate for a line to be drawn protecting the defendant against excessive liability, thereby ensuring that the defendant is not held liable for all loss factually caused by the defendant’s breach of duty however far removed in time and space. Similarly, in deciding on the scope of the duty of care, the law’s focus on the purpose of the duty reflects the underlying policy of achieving a fair and reasonable allocation of the risk of the loss that has occurred as between the parties.
69. The conclusion we have reached as to the correct legal position is consistent with those underlying policies. On the assumed facts of this case, it is entirely appropriate for the negligent defendant (URS) to be held liable to the claimant (BDW) for the repair costs BDW has incurred because they were the obvious consequence of URS failing to perform its services with the professional skill and care required. It is fair and reasonable that the risk of that loss should be borne by URS and not BDW. Moreover, the policy of the law favours incentivising a claimant in BDW’s position to carry out the repairs so as to ensure that any danger to homeowners is removed.

…

(8) Accrual of the cause of action: the Pirelli issue

70. Did BDW in any event already have an accrued cause of action in the tort of negligence at the time it sold the Developments (this is the issue raised in the second sentence of Ground 1)? According to Coulson LJ in the Court of Appeal, BDW’s cause of action in the tort of negligence had already accrued, at the latest at the date of practical completion (see para 22 above), and could not have been lost by the subsequent sale of the Developments.
71. Given our rejection of URS’s submissions on the voluntariness principle, and our consequent dismissal of URS’s appeal on Ground 1, this issue falls away. Nevertheless, both parties accepted that, in so far as it was relevant to consider when the cause of action in the tort of negligence accrued, one possible approach that this court might take would be to overrule Pirelli. Indeed, that possibility is the reason that a seven-person panel was convened to hear this appeal.
72. Given that whatever we say on Pirelli will be obiter dicta, it would be inappropriate for us to consider using the 1966 Practice Statement, [1966] 1 WLR 1234, to overrule that decision. As it turned out, we heard relatively limited submissions on the Pirelli issue and we were not asked to consider the full potential consequences of such an overruling.
73. We therefore confine ourselves to making the following three points.
74. First, it is clear that Pirelli was decided on the false premise that cracks in a building constitute physical damage rather than pure economic loss for the purposes of the tort of negligence. Where there has been negligent design, building or inspection, cracks appear in a building because the building is, and has been, defective and not because there has been damage to an otherwise non-defective building (analogous to, let us say, the physical damage where a lorry crashes into a building). That the relevant “damage” is pure economic loss, not physical damage, was made clear by the overruling of Anns v Merton by Murphy v Brentwood.
75. Secondly, that false premise does not necessitate that Pirelli was wrong in reasoning that the 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 (which we can refer to as the date of “discoverability”). It is possible to have a concept of latent pure economic loss even though that loss could not at the time of accrual have been reasonably discovered. That that is possible is supported by, for example, the reasoning of Coulson LJ in this case adopting the decision of Dyson J in New Islington (see para 22 above). It is also consistent with a number of cases on professional negligence outside the building context where a cause of action in the tort of negligence for pure economic loss has been held to accrue prior to the date of discoverability: see, eg, Forster v Outred & Co [1982] 1 WLR 86; Law Society v Sephton & Co [2006] UKHL 22; [2006] 2 AC 543; Axa Insurance Ltd v Akther & Darby [2009] EWCA Civ 1166; [2010] 1 WLR 1662; and, although not concerning limitation, but rather the date from which interest should be awarded, Nykredit Mortgage Bank plc v Edward Erdman Group Ltd (No 2) [1997] 1 WLR 1627.
76. Thirdly, and notwithstanding what we have so far said on this issue, in the context of pure economic loss there are strong arguments of principle for accepting that there can only be an actual loss once the pure economic loss has been discovered or could reasonably have been discovered. That this is so is borne out by the reasoning of judges in several of the highest courts in common law jurisdictions, including the Privy Council: see, eg, Kamloops v Nielsen [1984] 2 SCR 2, 40 (Canada); Sutherland Shire Council v Heyman (1985) 157 CLR 424, 505 (Australia); Invercargill City Council v Hamlin [1996] AC 624 (New Zealand); and the dissenting judgments of Bokhary PJ and Lord Nicholls in Bank of East Asia Ltd v Tsien Wui Marble Factory Ltd [2000] 1 HKLRD 268 (Hong Kong). See also the views of several academics including Stephen Todd, “Latent Defects in Property and the Limitation Act: A Defence of the ‘Discoverability’ Test” (1983) 10 NZULR 311; Nicholas Mullany, “Limitation of actions – where are we now?” [1993] LMCLQ 34, 43-44. Cf Ewan McKendrick, “Pirelli re-examined” (1991) Legal Studies 326. However, in considering whether that would now be an appropriate approach to adopt in this jurisdiction, the Latent Damage Act 1986 (the “LDA”) would need to be taken into account. Following the recommendations of the Law Reform Committee, 24th Report, Latent Damage (Cmnd 9390) (1984), the legislature intervened to reform the law in the light of what were seen to be the unfair consequences for claimants of the decision in Pirelli whereby they might lose their cause of action before they knew, or could reasonably have known, of its existence. By sections 1 and 2 of the LDA, inserting sections 14A and 14B into the Limitation Act 1980, a claimant has six years from accrual of the cause of action or three years from the date of discoverability, whichever expires later, to commence an action in the tort of negligence for damage including pure economic loss (but not personal injury which has long had its own regime). This is subject to a long-stop of 15 years running from the date of the negligent act or omission (ie the breach of duty). If the accrual of the cause of action was to be fixed at the date of discoverability, this might undermine the legislative solution to this problem. In other words, the legislation was based on the assumption that the accrual of the cause of action in the tort of negligence is at a different date from the date of discoverability. The effect of the date of discoverability being the date of accrual would be to give claimants six years from the date of discoverability rather than the three years that was considered sufficient by the legislature in the LDA.
77. It can therefore be seen that the question as to whether to develop the common law on the tort of negligence in the context of defective buildings, so as to move to the cause of action accruing at the date of discoverability, raises difficult issues. Their resolution must await a case where what is said will be ratio decidendi and where, accordingly, this court has the benefit of full submissions on that question.

(emphasis added)

A link to the full decision is here.