Building contract – Breach of contract – Collateral warranty – Time limit – Claimant lessee claiming damages in respect of breach of collateral warranty for works carried out on stadium – Defendant contractor applying to strike out claim as out of time – Whether claim being time-barred – Application granted
The first defendant was the freehold owner of the Liberty Stadium in Swansea. The claimant was the leasehold owner and operator of the stadium. The first defendant engaged the second defendant contractor to carry out the design and construction of the stadium. The contract was on the JCT Standard Form of Building Contract with Contractor’s Design 1998 edition (incorporating amendments 1 to 4), subject to bespoke amendments by the parties. On 1 April 2005, pursuant to clause 16.1 of the contract, the first defendant wrote to the second defendant stating that the works had achieved practical completion on 31 March 2005. It then granted a 50-year lease of the stadium to the claimant which contained a tenant’s repairing covenant. At about the same time, all three parties entered into an undated collateral warranty, executed as a deed, in respect of the works.
On 4 April 2017, the claimant issued the claim form, seeking damages of approximately £1.3m against the defendants in respect of alleged defects in the stadium. The pleaded case against the second defendant was that: (i) the design and construction of the concourse flooring, and the supply, construction and painting of the steelwork were defective (the original construction claims); and (ii) it had failed to identify and rectify the defects pursuant to its obligations under clause 16 of the building contract (the clause 16 claims). The claimant pleaded that the defects were caused by breaches of the building contract by the second defendant which constituted breaches of the collateral warranty by the second defendant.
The second defendant applied for summary judgment on the basis that the claims against it were time-barred because any cause of action under the collateral warranty in respect of the original construction claims accrued on 31 March 2005, the date of practical completion. The claimant argued that the collateral warranty did not have retrospective effect and practical completion had not been achieved by 31 March 2005 because the works were incomplete and defective at that date.
Held: The application was granted.
(1) A contract or a deed could take effect retrospectively. Whether or not a clause in a contract was capable of having retrospective effect depended on the express or implied intention of the parties. Where it was clear that the parties intended a deed to have retrospective effect, full effect should be given to that common intention even if it had not been expressed in words. In the present case, the words used in the collateral warranty and the factual matrix indicated that the parties intended the warranty to have retrospective effect. The purpose of the collateral warranty was to provide a direct right of action by the claimant against the second defendant in respect of its obligations under the building contract to which the claimant was not a party. Such purpose was served by a warranty that gave the claimant the same rights against the second defendant that it would have had if there had been privity of contract but did not require any extension of those rights. The recitals to the collateral warranty explained the interest of the claimant, as tenant, in the works carried out by the second defendant. Such interest was to ensure that the second defendant performed its contractual obligations as required by the underlying building contract. Clause 1, containing the direct warranties given by the second defendant to the claimant, specifically referred to the past and future performance by the second defendant of its obligations under the building contract. When read together with article 10, which did not contain any time limitation on a written request which would trigger the second defendant’s obligation to execute a collateral warranty in favour of a first tenant, it indicated that the collateral warranty was intended to cover the full scope of the contractual works regardless of when it was executed. The proviso to clause 1 expressly limited the liability of the second defendant to the liability it would have had if the claimant had been named as joint employer under the building contract. That was the clearest indication that the parties intended the claimant to be in the same position vis-à-vis the second defendant as the employer was under the building contract. The commercial purpose served by that provision was that it gave the parties clarity and certainty as to the extent of any liability in respect of the works, including the period of limitation. The second defendant’s liability to the claimant was deemed to be coterminous with its liability to the first defendant under the building contract. Any breach of contract created by the collateral warranty would be regarded as actionable from the original date on which the breach occurred even though the relevant facts occurred prior to the effective date of the collateral warranty: Trollope & Colls Ltd (t/a Nuclear Civil Constructions) v Atomic Power Constructions Ltd [1963] 1 WLR 333, Northern & Shell plc v John Laing Construction Ltd [2003] EWCA Civ 1035 and Westminster City Council v Clifford Culpin & Partners (1987) Con LR 117 followed.
(2) A cause of action for breach of a construction contract accrued when the contractor was in breach of its express or implied obligations under the contract. Where, as in this case, there was an obligation to carry out and complete the works, the cause of action for a failure to complete the works in accordance with the contract accrued at the date of practical completion. In the present case, the letter from the first defendant’s agent was unchallenged and clearly stated that the works had reached practical completion in accordance with clause 16 on 31 March 2005. That was not of itself sufficient to establish conclusively that practical completion had been achieved on that date. However, clause 16 provided that a statement by the employer that practical completion had been achieved on a certain date meant that practical completion was deemed, for the purposes of the contract, to have taken place on that date, even if there were outstanding or defective works. Therefore, practical completion was deemed to have been achieved on 31 March 2005 and any breach of the warranty in respect of the original construction claims had to have occurred by that date. Since the proceedings were not issued until April 2017, those claims were time-barred: Oxford Architects Partnership v Cheltenham Ladies College [2006] EWHC 3156 (TCC) applied. Tameside Metropolitan Borough Council v Barlow Securities Group Services Ltd [2001] EWCA Civ 1 followed.
(3) The original construction claims were bound to fail because they were time-barred and there was no other compelling reason why they should go to trial. Accordingly, the second defendant was entitled to summary judgment.
Justin Mort QC and Tom Owen (instructed by DJM Solicitors) appeared for the claimant; Paul Darling QC (instructed by Reynolds Porter Chamberlain LLP) appeared for the second defendant.
Eileen O’Grady, barrister
