It’s all good, right?

Howes Percival LLP

10th May 2019

In a decision by the Technology and Construction Court (TCC) a tenant has had their claim against a contractor for failure to identify and rectify defects dismissed.

Swansea Stadium Management Company Ltd V City and County Of Swansea and another [2019] EWHC 989 was latest chapter of litigation between the parties and Interserve Construction relating to the construction and operation of the Liberty Stadium in Swansea. SSMC’s previous claim against Interserve in respect of latent defects in the design and construction of the works had failed as proceedings had been bought after expiry of the limitation period (12 years from Practical Completion). So instead in this case SSMC claimed on the basis of Interserve’s failure to identify and rectify defects within the defect liability period pursuant to its obligations under the (amended) JCT contract.

However the TCC held that despite the tenant having a good claim for breach of contract, the issuing of the Notice of Completion of Making Good Defects meant the claim could no longer be pursed. In the judgement, the court said the effect of such notice was:

“to deem ‘for all purposes’ of the building contract that the parties had reached completion of the discrete and more limited obligation to make good defects in accordance with the contractual machinery”

In other words, regardless of whether in fact there were defects that had not be rectified, the issuing of the Notice of Completion of Making Good was conclusive evidence that they had been. The court did confirm the principle that issuing such Notice did not deprive an employer the right to bring a claim for defective work generally, but such a claim would need to be bought under the main contract terms (i.e. failure to complete the works in accordance with the contract). This didn’t help SSMC however as it was precisely this manner of claim they had previously bought, and which had been dismissed for being ‘out of time’.

The decision in this case highlights a few important practical points:

  1. The risk of certifying Practical Completion when there are still a number of outstanding works to be completed/defects to be dealt with. Despite best practice being to ensure all works are fully compliant before issuing the PC certificate, in reality, commercial pressures to achieve completion will sometimes take precedence and clients will accept buildings with a number of obvious defects that could take years to resolve. The limitation period for claims relating to a failure to complete the works in accordance with the contract accrues at PC, so as was the case with SSMC, a client could find themselves too late to bring a claim.
  2. The importance of ensuring that all defects notified to the contractor before or during the defects liability period have actually been remedied before issuing the Notice of Making Good.
  3. Understanding the effect of amending a standard form contract. In this case, the standard JCT terms had been changed to put the obligation of identifying defects on the contractor, rather than, as is usual, the Employer/Contract Administrator. As such, SSMC had less control over ensuring all defects were picked up.

For more information on this case, its practical implications, or any other construction related matters, please get in touch with our expert team.

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