Inframatrix Investments Ltd v Dean Construction Ltd [25.07.11]

Parties must adhere to bespoke contractual limitation periods or risk losing their right to pursue a claim - Inframatrix Investments Ltd v Dean Construction Ltd. Dean Construction Ltd (DCL) applied to strike out a claim by Inframatrix Investments Ltd (IIL) for damages arising out of alleged defective workmanship conducted by DCL in November and December 2008. Snagging works were completed in February 2009. The allegations were initially made in July and October 2009. DCL attended the site on 31 March 2010, following which it offered to investigate the allegations with a view to conducting remedial works if necessary. This offer was rejected by IIL and proceedings were issued in December 2010.

DCL counterclaimed for its outstanding fees and applied for strike out relying on the one year limitation period in its contract with IIL in respect of claims against the contractor.

IIL's argument was three-fold:

  1. The limitation period was not engaged, as there was no defined date for “Practical Completion of Services” as stated in the contract and, in any event, the alleged defects were so great that the work was not substantively complete so as to invoke the clause.
  2. If time had started to run, then proceedings were issued in time, as DCL had effectively “last performed services” in March 2010 when it attended the site meeting.
  3. DCL had waived its rights to rely on the limitation clause due to its conduct in the intervening period.  

Decision

The Technology and Construction Court found in favour of DCL in respect of the strike out application and held:

  1. Where there is no certificate of practical completion of services, then the 12 month contractual limitation period commences after the last performance of services by the contractor.
  2. DCL last performed services for this purpose in February 2009 when it completed the snagging works. The site visit in March 2010 and subsequent offer were part of without prejudice negotiations to avoid litigation in accordance with the Pre-Action Protocol and were not performance of services under the contract.
  3. The “relevant” waiver to consider in this case is waiver by estoppel (as opposed to waiver by election). By merely involving itself in without prejudice negotiations, DCL’s conduct did not amount to a representation that it would not rely on the contractual limitation clause. Liability was always in dispute and the limitation point was raised by DCL at an early stage prior to filing its defence.  

With regard to DCL’s counterclaim, the Judge did not consider that the contractual limitation clause operated to prevent IIL from raising the allegations of defective workmanship by way of a set off to DCL’s claim for moneys due, notwithstanding more than 12 months had passed since DCL had last performed services under the contract.

Comment

This case is a timely reminder that, subject to reasonableness, commercial parties can agree and subsequently rely on shorter contractual limitation periods should they wish to do so. There is no substitute for knowing the content of your own contract.

It is also a useful lesson about when a party has waived its right to rely on a contractual provision. In this case, it was argued that there had been waiver by estoppel. In other words, that DCL had made statements, or acted in such a way, that had unequivocally lead IIL to believe that DCL would not insist on the one year limitation period in the contract, and that IIL had relied on that. IIL lost that argument.

There is another form of waiver, waiver by election, which occurs when one party that has alternative but inconsistent rights, chooses one of them and, in doing so, is taken to have abandoned the other. Importantly, there is no need to show that there has been reliance by the other party to found a waiver by election but, in this case, there was no contractual right inconsistent with the limitation provision, and IIL were unable to raise it in their defence to the strike out application.