Bloomberg LP v Sandberg (a firm) and others [16.10.15]

Technology and Construction Court holds that a contractor could be joined to proceedings so that the Defendants could pursue a contribution claim against it, even though the Claimant’s direct claim against the contractor was time barred.

Implications

This decision is interesting as it indicates that the wording of a warranty given by the contractor to the Claimant (which is commonly found in construction contracts) was insufficient to prevent contribution claims arising under the Civil Liability (Contribution) Act 1978 (the 1978 Act).

It is important that warranties are clear and unambiguous in order to prevent the provider of a warranty becoming liable through the back door. That door remains open, given Mr Justice Fraser’s comments regarding use of clear wording. This is increasingly important given the influx of recovery claims and parties continuing to progress down the contractual chain to seek a contribution towards damages.

However, what is unclear from this judgment is whether specific wording restricting liability would be upheld. A more practical way to limit liability under the 1978 Act might be to insist on net contribution clauses so that parties are only liable for damages to the extent that they are culpable for the damage caused. This would protect both policyholders and insurers alike.

Background

Malling Pre-Cast Ltd (the contractor) was retained to undertake cladding works at the Claimant’s London offices. Practical completion was achieved on 29 August 2000. A year later, two cladding tiles fell from the building and substantial remedial works were necessary.

The Claimant subsequently commenced proceedings against the contractor. However, this claim could not proceed as it was time-barred by clause 6 of a warranty given by the contractor directly to the Claimant in respect of the works. This provided that:

"… no proceedings shall be commenced against the Contractor after the expiry of twelve years from the date of issue of the last written statement by the Client that practical completion of the Project has been achieved under the Contract.”

However, the Claimant had also issued claims against two engineering companies, Sandberg and Buro Happold Ltd, which carried out pre-construction investigative works and provided a condition survey of the building.

Sandberg then joined the contractor under Part 20 of the Civil Procedure Rules. It claimed a contribution under s.1(1) of the 1978 Act on the basis that, if Sandberg was found to be liable to the Claimant, the contractor was liable to the Claimant in respect of the same damage.

The contractor applied to strike out the Part 20 proceedings, or alternatively obtain summary judgment, on the basis that the contribution claim was barred by clause 6 of the warranty.

Decision

FraserJ held that the contribution claim was not barred by clause 6, for the following reasons:

  • He rejected the contractor’s argument that the reference to “no proceedings” in clause 6 meant no proceedings could be brought by any party. The wording was clear and, in this context, the warranty could only mean proceedings by the Claimant.
  • He considered whether the effect of clause 6 was to extinguish the right on which the claim against the contractor was based and the consequent effect of s.1(3) of the 1978 Act. This provides that a contribution claim is possible even if the third party has ceased to be liable in respect of the damage in question "unless he ceased to be liable by virtue of the expiry of a period of limitation or prescription which extinguished the right on which the claim against him in respect of the damage was based".
  • He held that clause 6 only acted as a procedural bar to any claim by the Claimant rather than extinguishing an underlying substantive right. Accordingly, the Contractor could not rely on section 1(3).
  • The overall effect of the contractor’s argument would be that parties could effectively “contract out” of the 1978 Act, which was put in place to benefit third parties. Fraser J was not convinced that this was possible. If it were, very clear wording would be needed, so clause 6 did not go far enough.