A timely lesson: limitation defences for design professionals
The Grenfell disaster took place on 14 June 2017 and consequently has led to a significant amount of litigation between developers, contractors and professionals.
With limitation providing a valuable line of defence for defendants and the amendments to the Defective Premises Act having yet to be confirmed by parliament, it may be a good time to revisit some of the pertinent case law in relation to the expiry of limitation periods for breach of contract. Following the recent government intervention, we expect cladding claims to be pursued more determinedly by developers in the coming year.
As most students and junior lawyers will know, a cause of action for breach of contract accrues from the date of the breach. Unlike tortious claims, damage is not a prerequisite. Pursuant to section 5 of the Limitation Act 1980, an action founded on a simple contract must be brought within six years of accrual of the cause of action. A contract executed as a deed provides for a longer 12 year limitation period.
Design and build contractors
Following the judgment of Her Honour Mrs Justice O’Farrell in Swansea Stadium Management Company Limited-v Interserve Construction Limited , the position for contractors is well-established. Applying the Court of Appeal judgment in Tameside MBC v Barlow , O’Farrell J held that a cause of action would generally accrue at practical completion. This obligation arises from the duty in most standard form or bespoke contracts to “carry out and complete the works”, which was held to mean that any breach would bite at the handover of the project.
Importantly, the accrual of a cause of action may be earlier for professionals. In The Oxford University Partnership v Cheltenham Ladies College “Cheltenham Ladies” , His Honour Justice Ramsay held that, subject to the terms of the professional’s retainer, a cause of action for a negligently produced design may crystallise on varying dates. However, this did not create a continuing duty to review the design up to practical completion.
Ramsay J stated:
In my judgment, the duty does not require the Architect to review any particular aspect of the design that he has already completed unless he has good reason for so doing. What is a good reason must be determined objectively, and the standard is set by reference to what a reasonably competent Architect would do in the circumstances.
It is plausible that the accrual of an cause of action for a negligent design will be before practical completion.
Many standard form professional appointments include a ‘limitation bar’, which provides that proceedings may not be commenced after a stated period of time. Generally, this is six or 12 years to align with the requirement to hold professional indemnity insurance. This provides a long-stop date in respect of the issue of proceedings. Helpfully for professionals, as per Ramsay J in Cheltenham Ladies, it does not stop a professional relying on a defence that would arise under the Limitation Act prior to the expiry of the ‘limitation bar’.
With many cladding designs having been prepared between 2008 and 2015, limitation periods may become a key part of any professional’s strategy for defending a contractual claim by a developer or contractor. It is important to remember that the judgment in Cheltenham Ladies may provide a valuable tactical advantage in terms of assessing limitation deadlines, at least until more is known about the Building Safety Bill and the proposed amendments to the Defective Premises Act 1972.