Background
This case concerned a contractor that had been engaged to design and construct a football stadium. On 1 April 2005 (April Fool's day!) the employer wrote stating that the works had reached practical completion the previous day. It then granted a 50 year lease to the claimant which contained tenant repair covenants. In April 2017 the claimant issued proceedings seeking damages from the employer and contractor for alleged defects in the stadium. There were two pleaded claims:
- That the design and construction of the flooring and steelworks were defective; and
- That the contractor had failed to rectify those defects in breach of its obligations under the design and build contract and collateral warranty provided to the tenant claimant which had been entered into after practical completion but not dated.
The contractor submitted the claims were time barred because any right to make a claim under the collateral warranties accrued on the date of practical completion, being 31 March 2005. However the claimant argued that the collateral warranty did not have retrospective effect and practical completion was not achieved by 31 March 2005 because the works were incomplete and defective at that date.
Court judgment
The court held that whether or not the collateral warranty could have retrospective effect depended on the express or implied intentions of the parties. In this case there was no express commencement or expiry date, no express date on which any right to take legal action was deemed to have occurred or an express limitation period. It contained a promise to hold PI insurance for 12 years from practical completion and express reference to the warrantor's liability for the same period, but neither of these was determinative.
It was decided that the language and matrix was indicative of the parties' intention for it to have retrospective effect. Its purpose was to give the claimant a direct right of action against the contractor in respect of their obligations under the building contract and indicated it intended to cover the full scope of the works. Additionally, the equivalent rights clause in the collateral warranty limited the contractor's liability to that which it would have had if the claimant had been named as joint employer under the building contract. This indicated that the parties intended the contractor's liability to the claimant to be coterminous with its liability to the employer under the contract.
Furthermore the letter from employer's agent stating practical completion was reached was unchallenged. Whilst it is not conclusive evidence that practical completion had been reached, clause 16 of the contract provided that a statement from the employer that practical completion has been reached was deemed to for the purposes of the contract to mean it had been, even if there were outstanding or defective works. This meant practical completion was reached on 31 March 2005 and the claim was time barred. There was no other reason why it should go to trial and therefore summary judgement was granted.
Conclusion
This case acts as a warning that a warranty may act retrospectively to cover pre-existing breaches if there is no express term in the warranty to state when liability under the warranty starts or ends. It also reinforces the fact that liability under a building contract continues until PC:
"A cause of action for breach of a construction contract accrued when the contractor was in breach of its express or implied obligations thereunder. Where the contractor was obliged to carry out and complete the works, the cause of action for a failure to complete in accordance with the contract accrued at the date of practical completion".
This decision suggests that if parties want to try and extend the limitation period they must do so expressly and clearly. It is rare though that a warrantor would accept this.
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