Scope of duty and recovery of losses

A structural engineering designer is not under any duty to avoid or prevent damage to the reputation of a developer.

In the recent preliminary hearing of BDW Trading Limited v URS Corporation Limited [2021] EWHC 2796 (TCC), the Court outlined the scope of duty owed to the developer and the types of recoverable losses available.

In the case, BDW Trading Limited ("BDW") as owner and developer brought a claim in tort against URS Corporation Limited ("URS") claiming negligent design that caused serious structural defects, some of which presented serious health and safety risks.  BDW claimed significant loss as a result of this negligence claiming for costs of remedial work as well as reputational losses. 

The argument put forward by URS was that as the structural flaws were discovered in 2019 (the buildings having been built in 2005), even if URS was negligent and caused the defects, it cannot be liable to BDW for the losses claimed as a matter of law due to the fact that BDW no longer owned the buildings when the defects were discovered.  It also argued that BDW did not mitigate their losses and could have raised a full limitation defence to any claims by the current owners against it.

The existence of the defects, their severity and causation were all assumed and not in contention.  The hearing focused on two main questions (i) did the scope of URS' duties extend to the alleged losses? And (ii) could BDW's alleged losses be recovered in principle as a matter of law in tort? 

Following Manchester Building Society v Grant Thornton [2021] UKSC 20 the court stated that the question was one of whether the loss claimed fell within the risk of harm to the claimant, against which the law imposes a duty on the defendant to take care (It should be noted that the court held that the answer differs between the two separate categories of loss.)

The court held that 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 reputation). The court found that to do so would be an unwarranted extension of an engineer’s scope of duty and one that could potentially be extraordinarily wide in its breadth.  The court further highlighted concerns regarding the potential impact upon obtaining insurance owing to the difficulties in quantification and the uncertainties of potential future losses.  However, the category of conventional losses, including the economic loss of investigation, and temporary and permanent remedial works costs, could be included within the type of harm against which an engineer should take care and therefore was within URS' scope of duty.  The court also confirmed that these conventional heads of loss were not too remote to be irrecoverable as a matter of law.

The Court was not prepared to decide questions of factual causation or mitigation of loss at this stage leaving these fact sensitive issues for full trial where It is likely that URS will try to argue that BDW’s own decisions and actions including their alleged failure to mitigate its losses contributed to their conventional losses.