The recent judgment in Lendlease Construction (Europe) Ltd v Aecom Ltd * is the latest chapter in the long running dispute concerning the construction of a new oncology centre in Leeds. Lendlease was appointed as design and build contractor and in turn appointed Aecom to design the mechanical and electrical services (the Consultancy Agreement). Lendlease also appointed Rotary Yorkshire Ltd as installation sub-contractor for mechanical, electrical and plumbing services.
In this claim, Lendlease sought to recover from Aecom losses caused by alleged breaches of the Consultancy Agreement. Many of the alleged defects related to:
- Plant Room 2, the central electrical and mechanical hub for the new Oncology Centre; and
- Revision 19 to the Fire Strategy (Rev 19).
In part, Lendlease’s case was that Aecom should have warned Lendlease that the configuration of Plant Room 2 in Rev 19 was not compliant with good practice, nor with the applicable standards.
Lendlease accepted that it was unable to pursue claims in tort (as the relevant limitation period had expired) – the only obligations substantively considered in the judgment therefore were those governed by contract. The judgment covers many issues, but here, we focus on limitation and the extent of Aecom’s contractual obligations.
Aecom’s primary limitation defence was that the Consultancy Agreement operated as a contract but not as a deed, with the consequence that the limitation period was 6 years (rather than 12 years), meaning that Lendlease’s entire claim was statute barred.
Various issues arose relating to the execution of the Consultancy Agreement by Aecom, including the fact that no company seal had been affixed to the Consultancy Agreement by Aecom, and that neither of the 2 individuals who signed the Consultancy Agreement was a statutory director or company secretary.
The terms of the Consultancy Agreement itself provided for a 12 year limitation period from practical completion. However Mr Justice Eyre held that this merely created a long-stop date for limitation purposes. It did not extend the “period in which claims which would otherwise be statute-barred could be brought”. Accordingly, if the Consultancy Agreement was a simple contract instead of a deed, the statutory limitation period of 6 years would apply to bar any contract claim long-before the long-stop date.
When examining the form of execution, it is well established that, where a person has been held out as having a particular position/authority to execute a document, an estoppel can arise preventing the company from later denying that the person has that position/authority. Mr Justice Eyre concluded that both the holding out and the necessary reliance upon it by BDW were present in this case, noting in the process the “central factor is the artificiality of Aecom’s position”. Those who signed for Aecom were purporting to execute the document as a deed and were held out as having the authority to do so. Consequently, it was not open to Aecom to contend that the Consultancy Agreement was not a deed.
This meant that the applicable limitation period was 12 years (not 6) from the accrual of the cause of action, namely the date of breach. Any claim would be statute-barred save to the extent that it is founded on a cause of action accruing on or after 30 May 2007.
There were certain key dates in relation to when the alleged causes of action accrued (addressed further below):
- Aecom’s design was provided to Lendlease in July 2005;
- the construction of Plant Room 2 was completed before the end of August 2006;
- Rev 19 was dated 19 November 2007;
- Practical Completion of the whole project was on 14 December 2007.
Scope of Aecom’s design duties
A further issue that arose related to the parameters of Aecom’s obligations under the Consultancy Agreement when commenting on drawings produced by Rotary. Mr Justice Eyre held that whilst Aecom did not assume an author’s responsibility for the document, when commenting upon it Aecom did have a duty to exercise reasonable care and skill in respect of such comments. It was not possible therefore “to draw a bright line distinction between the production of the design … and the implementation of that design with Aecom having responsibility for the former but not the latter”.
It was argued on behalf of Lendlease that:
“AECOM was required to do the detailed design of the substation and its configuration, to make itself familiar with what was being installed in the substation to ensure that it was compliant with Applicable Standards and to review and validate that it was compliant or if not to advise and warn Lendlease. AECOM’s obligations were continuing ones right up to Practical Completion.”
Aecom’s position was that:
“there was no continuing duty to warn or advise and that any cause of action against Aecom accrued when it handed over its design to Lendlease for construction in July 2005 alternatively when construction of Plant Room 2 began in June 2006”.
Determination is based on terms of the contract
The determination of this issue will always be based on the terms of the specific contract – here, the Consultancy Agreement. Mr Justice Eyre stated as follows: “Aecom was not a pure designer and it had obligations and responsibilities which continued after the provision of its design. However, it was not in the position of an architect …. responsible both for design and for overseeing the construction as a whole”; specifically, on this project, it was the architect (and not Aecom) that was the Lead Designer.
Certain conclusions could be drawn from the terms of the Consultancy Agreement. Aecom’s duties did not simply end with the provision of the design in July 2005. Aecom did not however have an express or implied obligation to oversee/review the work of others to ensure that there was compliance with the applicable standards, with a view to providing Lendlease with unsolicited advice on such points.
Even if Aecom had a duty to review its own design before the completion of the construction, that duty would only have arisen when there was a good reason to review - any cause of action for breach of such a duty would therefore have accrued by the end of August 2006 and was so out of time in any event.
In considering the allegations, Mr Justice Eyre reviewed key case law including the decisions of:
- Mr Justice Dyson in New Islington & Hackney Housing Association Ltd v Pollard Thomas & Edwards Ltd  who stated that “in the absence of an express term or express instructions, [an architect] is not under a duty specifically to review the design of the foundations, unless something occurs to make it necessary, or at least prudent, for a reasonably competent architect to do so”;
- Mr Justice Ramsay In Oxford Architects Partnership v Cheltenham Ladies College , who considered that there may be a continuing duty to review the design where the appointment of the architect included services during the period of construction; there was a continuing duty in that case where the appointment included administration of the building contract and oversight of the work being done. This was described by Mr Justice Eyre as “the New Islington duty to review when there is a good reason such as would prompt a reasonably competent professional of the relevant discipline to engage in a review”.
Mr Justice Eyre held that, after August 2006 at the latest, Aecom had no duty “to review the Plant Room design or construction nor to warn Lendlease as to non-compliance with [applicable standards] unless the circumstances leading to the compilation of Rev 19 brought such a duty into being”.
Rev 19 was produced by Aecom in November 2007 ie well over a year after construction of Plant Room 2 had been completed.
Aecom’s fire engineering expert witness “accepted that a reasonably competent fire engineer exercising due care and skill should have advised that Rev 19 was not compliant with [the applicable] requirements”. However, as Lendlease’s claim was now advanced on the basis of a contractual breach only (rather than a tortious breach of duty), the next consideration for the TCC was whether Aecom had a contractual obligation to advise or warn in November 2007.
The Judge concluded that Aecom had (reluctantly) produced Rev 19 under instructions from Lendlease to revise the drawings and the Fire Strategy, so as to accord with the as built configuration of Plant Room 2. Aecom was not asked to provide advice and the reservations it expressed were overridden by Lendlease and met with the response that the manner of installation had been approved by Leeds Building Control.
The Judge found that in the factual circumstances appertaining in October/November 2007, the Consultancy Agreement did not require Aecom to advise on the compliance of Plant Room 2, nor to warn that the installation was non-compliant.
As to other evidence, if Aecom was in breach of its contractual duty to exercise reasonable skill and care in relation to an instruction to Rotary in August 2006, the cause of action for such breach accrued in August 2006 and was therefore statute-barred.
This judgment is a clear reminder of some significant areas of risk:
- whilst the unwary may assume that a long-stop date for claims in a contract operates to extend the limitation period, this is not necessarily the case – depending on the terms of the contract, time can expire under the Limitation Act 1980 well before the date specified in the contract;
- care must be taken to ensure that the rules on the proper execution of deeds are followed with the right people executing contracts in the right way - in specific cases however, the common sense application of the rules on estoppel can overcome technical breaches where the parties executing are being held out as having the authority of the company to sign; this was particularly the case here where the errors of execution were by Aecom and it was Aecom that was now (unsuccessfully) arguing that such errors operated to make the Consultancy Agreement a simple contract with a 6 year limitation period rather than a deed, with 12 years;
- for consultants on any construction project, the exact limits of their professional obligations may be unclear where various other specialist consultants and contractors are involved and the lines of responsibility for any task between professional disciplines are blurred;
- where limitation is in issue, identifying a continuing duty can certainly assist a claimant but establishing the scope of that duty and whether it has been breached remains a challenge.