EWHC 2192 (TCC)
Back on 1 April 2005, Gardiner & Theobald, the Employer’s Agent, sent the following letter to Interserve (the Second Defendant), who had been acting (pursuant to a contract signed as a deed on 17 June 2004) as contractor at the Liberty Stadium, Swansea:
“…we are writing in accordance with Clause 16.1 of the Conditions of Contract, to inform you that the Works have reached Practical Completion as at 31 March 2005. As you are aware there are still some works to complete and defects to be made good and we will be issuing a schedule next week.”
Following this, in about April 2005 the Claimant (who own and operate the stadium for Swansea City FC), the First Defendant (the freehold owner of the stadium) and Interserve entered into an undated collateral warranty. The Completion of Making Good Defects was achieved on 14 April 2011. On 14 June 2012 a settlement was agreed in respect of the sums due under the final account.
On 4 April 2017 a claim was issued seeking £1.3million in respect of alleged defects in the concourse flooring and steelwork. Interserve said that the claims were time barred because the claim was commenced more than 12 years after 31 March 2005, the date of practical completion. Clause 16.1 (as amended) of the JCT Standard Form of Building Contract with Contractor’s Design 1998 states:
“When in the reasonable opinion of the Employer the Works have reached Practical Completion and the Contractor has complied with clause 6A.5.1 or has complied sufficiently with clause 6A.5.2, whichever clause is applicable, the Employer shall give the Contractor a written statement to that effect, which statement shall not be unreasonably delayed or withheld, and Practical Completion of the Works shall be deemed for all the purposes of this Contract to have taken place on the day named in such statement.”
Here, the Collateral Warranty did not contain an express commencement or expiry date; nor did it contain an express term as to the date on which any cause of action for breach would be deemed to have occurred. There was no express limitation period in respect of claims. However Mrs Justice O’Farrell concluded that the words used in the Collateral Warranty and the factual matrix indicated that:
“ the clear intention of the parties was that the Collateral Warranty should have retrospective effect. 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.”
As to practical completion, the Judge said:
“It is well-established law that a cause of action for breach of a construction contract accrues when the contractor is in breach of its express or implied obligations under the contract. Where, as in this case, there is 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 accrues at the date of practical completion.”
Interserve said that the effect of the 1 April 2005 letter was that practical completion occurred on 31 March 2005. The Claimant said that Interserve was still on site working and there were patent defects in the works. Further, the letter of 1 April 2005 contained express reference to outstanding works and defects. An extensive snagging list issued in March 2005 identified the nature and extent of the patent defects in the works.
Of course, the G&T letter was strong evidence that practical completion occurred on 31 March 2005. The letter was sent by the Employer’s Agent and contained a clear statement that the works had reached practical completion in accordance with clause 16.1. There was no evidence that the statement was challenged or that the parties did not operate the relevant contract provisions on the basis that practical completion had been achieved.
Interserve submitted that under clause 16 the effect of the written statement by the employer was that practical completion was deemed to have occurred on 31 March 2005. Clause 16 provided that completion would be achieved: “When in the reasonable opinion of the Employer the Works have reached Practical Completion and the Contractor has complied with … clause 6A.5.2…” The date of practical completion was not based on an objective ascertainment of the state of the works, or the provision of the health and safety information, but on the reasonable opinion of the employer as to those matters. The building contract did not require a third party to certify completion of the works and did not stipulate any formalities in respect of the written statement.
Clause 16 continued that where such statement had been given: “Practical Completion of the Works shall be deemed for all the purposes of this Contract to have taken place on the day named in such statement.” The effect of this deeming provision was that the parties agreed that the works would be practically complete, even if there were outstanding or defective works. The existence of any defects or outstanding works, including information required under clause 6A.5.1, would not prevent the operation of clause 16. Where, as here, the employer issued a notice that practical completion had been achieved, practical completion was deemed to have been achieved. Regardless of the physical state of the works at 31 March 2005, or any ongoing works carried out by Interserve, they were deemed to be complete on that date. Clause 16.1 expressly provided that practical completion was deemed to have occurred: “for all the purposes of this Contract”.
It therefore followed that any breach of the Collateral Warranty must have occurred by 31 March 2005. The proceedings were issued on 4 April 2017. Therefore, those claims were statute-barred.