Building contract – Terms — Unfair Contract Terms Act 1977 — First defendant contractor entering contract to design and build warehouse — Claimant company acquiring interest in property and beneficiary of warranty by second defendant ground works sub-contractor – Dispute arising in respect of work carried out — Preliminary issues arising — Whether provisions regarding limitation and notice of complaint being incorporated into sub-contract between first defendant contractor and second defendant sub-contractor – Whether limitation and notice provisions satisfying requirement of reasonableness within section 3(2) of the Unfair Contract Terms Act 1977 – Preliminary issues determined
The first defendant company was a contractor engaged to design and build a warehouse in Erith, Kent. The second defendant was a ground works sub-contractor. The claimant acquired an interest in the property and was the beneficiary of a warranty given by the second defendant. The first defendant entered into a sub-contract with the second defendant to carry out ground treatment works at the site at which the warehouse was to be built. Clause 12 of the second defendant’s standard terms and conditions concerned a warranty, limitation of liability and notice of complaint. Clause 12(d) required the notification of any claim to be made in writing within 28 days of any defect becoming apparent or of an event to be “so notified within one calendar year” of the date of completion of the works. When the sub-tenant in occupation of the warehouse complained of settlement of the slab beneath the production area, the claimant brought a claim against the defendants in respect of the work carried out.
A number of preliminary issues arose for determination: (i) whether clause 12(d) had been incorporated into the sub-contract between the first and second defendants, in particular, by a handwritten reference at clause 14 of the first defendant’s standard terms; (ii) whether a hand written amendment to clause 15 of the first defendant’s standard terms (concerning an indemnity) had been added by the second defendant after both parties had executed the subcontract order; (ii) if clause 12(d) had been so incorporated, whether the term was subject to the provisions of the Unfair Contract Terms Act 1977 and, if it was, whether the term satisfied the test of reasonableness in section 3 of the 1977 Act; and (iii) whether, in circumstances where there had been no notification of any claim within one calendar year of completion of the works, clause 12(d) provided a defence to any claim brought by the first defendant or the claimant.
Held: The preliminary issue was determined.
(1) Clause 15 of the first defendant’s terms and conditions was essentially an indemnity clause (albeit coupled with an obligation to insure). It was not concerned with any other type of remedy. By contrast, clause 12(d) of the second defendant’s terms and conditions applied to any type of claim, whether in contract or tort, and whatever the remedy. The hand written amendment to clause 15 had not been added by the second defendant after both parties had executed the sub-contract order. Clause 12(d) of the second defendant’s standard terms had not been incorporated into the sub-contract orders by the handwritten reference at clause 14 of the first defendant’s standard terms: Yuanda (UK) Co Ltd v WW Gear Construction Ltd [2010] EWHC 720 (TCC); [2010] PLSCS 152 considered.
(2) If clause 12(d) had been incorporated, the sub-contract order would have been on the second defendant’s written standard terms of business for the purposes of section 3(1) of the 1977 Act, but clause 12(d) would not have satisfied the requirement of reasonableness for the purposes of section 3(2): Stewart Gill Ltd v Horatio Myer & Co Ltd [1992] 1 QB 600 applied.
(3) In circumstances where there had been no notification of any claim within one calendar year of completion of the works, clause 12(d) did not provide a defence to any claim brought by the first defendant. Nor did it provide a defence to a claim brought by the claimant because by the terms of the warranty, the claimant could be no better off than the first defendant. The right to an indemnity given to the first defendant by clause 15 had no limitation on the time in which a claim had to be made. The only time limits on the first defendant’s right to claim such an indemnity were those imposed by the statutory provisions relating to limitation.
Marcus Taverner QC and Calum Lamont (instructed by Wragge Lawrence Graham LLP) appeared for the claimant; Sean Brannigan QC (instructed by Weightmans LLP) appeared for the first defendant; Justin Mort QC (instructed by Kennedys Law LLP) appeared for the second defendant.
Eileen O’Grady, barrister
