The Court of Appeal recently held in Inframatrix Investments v Dean Construction that without prejudice negotiations, including site meetings, did not amount to the performance of services under a contract, which meant a claim was barred by a contractual limitation clause. The case illustrates the importance of carefully checking contractual limitation clauses at the earliest opportunity.
In July 2008 Inframatrix Investments (the "Claimant") and Dean Construction (the "Defendant") entered into a contract (the "Agreement") to perform construction work (the "Services"), which contained the following clause (the "Limitation Clause"):
"No action or proceedings under or in respect of this Agreement shall be brought against the [Defendant] after:
- the expiry of 1 year from the date of Practical Completion of the Services or;
- where such date does not occur, the expiry of 1 year from the date the [Defendant] last performed Services in relation to the Project."
The phrase "Practical Completion" was not defined, and the Agreement contained no provision that completion be certified.
The Defendant carried out the work in November and December 2008 and shortly afterwards the Claimant expressed concerns about the work. Some additional works were carried out in February 2009 but the parties ultimately fell out. After some months without resolution, the Claimant sent a letter to the Defendant marked "Without Prejudice", making specific allegations about problems with the work, which was followed up in October with a letter sent in accordance with the Pre-Action Protocol. The Defendant responded in February 2010 offering to carry out limited remedial works. Though a meeting at the site took place in March 2010, ultimately the Claimant did not allow the Defendant to carry out remedial works.
In December 2010 proceedings were issued. At the hearing the judge decided that the Limitation Clause applied. The issue was therefore whether the Defendant had provided the Services less than one year before the bringing of the claim. The Defendant claimed that it last performed Services in February 2009, and that since the claim was brought in December 2010 the Claimant was out of time. The Claimant argued that the meeting in March 2010 constituted performance of Services.
The Judge rejected the Claimant's argument and granted summary judgment in favour of the Defendant. He held that the meeting and offer to carry out remedial work was part of without prejudice negotiations conducted in accordance with the Pre-Action Protocol, and were not performance of Services under the Agreement.
The Claimant appealed to the Court of Appeal, arguing that the principle of construction (that contractual provisions will so far as possible not be construed to give a party the benefit of its own wrong) in Alghussen Establishment v Eton College (1988) (the "Principle") applied, but Stanley Burnton LJ rejected this argument. If the Principle was applied to this case, the party in breach of contract would not be able to rely on the Limitation Clause. Since the Limitation Clause was only relevant where there had been a breach of contract by the Defendant, the Principle would deprive the Limitation Clause of any effect. Stanley Burnton LJ also agreed with the first instance judge that the without prejudice meeting and site visit were not Services under the Agreement, and so the Court of Appeal unanimously rejected the Claimant's appeal against summary judgment.
This decision serves as a reminder of the importance of observing contractual limitation clauses, even when pursuing alternative means of dispute resolution