Author: Gillian Birkby
A limitation clause, which prevented claims being brought more than one year after practical completion or performance of the services, was sufficient to strike out an employer’s claim under a building contract.
Inframatrix wanted to build a camera factory and Dean was the specialist roofing and cladding contractor. Their contract contained the following limitation clause:
“17.4 No action or proceedings under or in respect of this Agreement shall be brought against the Contractor after:
(a) the expiry of 1 year from the date of Practical Completion of the Services or;
(b) where such date does not occur, the expiry of 1 year from the date the Contractor last performed Services in relation to the Project.”
Dean carried out the work on site between November and December 2008. Inframatrix’s engineer carried out a visual inspection and sent Dean an e-mail noting that the workmanship was of poor quality and identifying several defects. On 9 February 2009, following further works by Dean, its quantity surveyor responded, asserting that the building was complete and had been accepted by Inframatrix’s engineer.
On 2 October 2009, Inframatrix’s solicitor sent Dean a letter enclosing a report, alleging that the workmanship had not been carried out to a reasonable standard, and claiming remedial costs and loss of profits. In a final attempt to resolve the matter a meeting took place between the parties on 31 March 2010, more than one year after practical completion. There was some acceptance that works were required and Dean agreed to provide a report. The subsequent report contained a few relatively minor admissions and an offer to return to site to carry out some further investigative work and remedial work if necessary. Inframatrix did not accept the offer.
Nine months later, on 29 December 2010, Inframatrix issued proceedings. Dean contended that the claim was barred by the provisions of clause 17.4. One year had passed since the date of practical completion of the services, or if practical completion of the services had not occurred clause 17.4(b) applied and it last performed the services in February 2009 when it completed the snagging items. The judge accepted Dean’s arguments. Inframatrix’s issue of proceedings in December 2010 was more than ten months out of time.
Inframatrix went to the Court of Appeal and again argued that practical completion of the services had not occurred. It suggested that practical completion in clause 17.4(a) meant practical completion of the project. That was rejected as “hopeless” as clause 17.4 referred to practical completion of the services, not of the project. Inframatrix also tried to rely on the Alghussein case, that contractual provisions will so far as possible not be construed to give a party the benefit of its own wrongdoing. However, the context of that case was very different and concerned entitlement to a lease. This case was in relation to a limitation clause, applicable only to Dean where it was alleged that Dean was in breach of contract. If Dean could not rely on it, it had no effect.
The Court of Appeal held that clause 17.4 was intended to provide an easily ascertainable limitation period for a claim against the defendant. The question to be asked was: “Is the claimant entitled to bring proceedings?” If there had been practical completion of the services, the claimant had one year from its date to bring proceedings. If not, it had one year from the date when the defendant last provided the services. Inframatrix argued that the meeting and inspection in March 2010 was performance of the services. However, it was held that what took place in March 2010 were without prejudice discussions and steps to seek to avoid litigation; such actions could not be contractual services. Accordingly, Dean last performed the services under the agreement in February 2009 and the proceedings were barred by clause 17.4.
The case provides a useful reminder to employers and landlords that contractual limitation clauses are enforced by the courts. Dean had negotiated a clause restricting the employer’s rights to claim against it, which in this case paid off.
Gillian Birkby, Head of Construction, Fladgate LLP