Articles from the Silver Shemmings Ash Team on contractual matters, recent case law changes and items of interest in the construction and property world
October 8, 2018 | Silver Shemmings
Claims arising from construction projects often require consideration of the law of limitation. An employer, for example, could have a really strong claim against a contractor for defects, but if the claim is out of time, the employer will be unable to pursue any cause of action. It is therefore very important that parties are aware of limitation periods. Limitation periods dictate a period of time within which a party must bring a claim.
Why should there be an end as to when a party must bring a claim about?
1. Defendants should be protected against claims being made on them after a long period of time, during which they may have lost evidence available to them to rebut those claims;
2. Claimants should institute proceedings without delay; and
3. Defendants should be in a position to know that, after a given period of time, an incident which might have led to a claim against them is finally closed.
What is the period of time within which a party must bring a claim about?
The period of time within which a party must bring a claim under a contract varies depending on whether the contract is executed under seal or under hand. Contracts that are executed under seal are commonly known as deeds those not executed under seal are executed under hand are referred to as ‘simple contracts’. Subject to section 5 of the Limitation Act 1980, any right of action founded on a simple contract “shall not be brought after the expiration of six years from the date on which the cause of action accrued”. Pursuant to section 8 of the Limitation Act 1980, any right of action founded on a specialty (executed as a deed) “shall not be brought after the expiration of twelve years from the date on which the cause of action accrued”.
There are four requirements that must be met for a valid deed:
• A deed must be in writing.
• It must be clear from the face of the instrument that it is intended to take effect as a deed.
• The instrument must be validly executed as a deed by the person making it or, as the case may be, by one or more parties to it.
• A deed must be delivered.
The difference between the Defects Liability Period and the statutory limitation period should be noted. The Defects Liability Period is the period provided by the contract whereby the contractor will be responsible for any defects which arise during this period and is given the right to rectify. The period typically runs from 12 to 24 months after practical completion of the Works. However, the end of such Defects Liability Period does not mean that the contractor is released from all liability as the statutory limitation period may still be running and he may remain liable but is not given a contractual right to rectify.
What happens if the party’s claim is time barred?
If a claim is instigated but it is out of time, the defending party will advance the defence pleading of limitation, and the claimant will then have the burden of adducing the necessary level of evidence to demonstrate that the right of action was within the relevant limitation period.
The date of accrual
As stated above, for rights of action founded on a simple contract or under a deed, the date on which the cause of action accrued is when the time begins to run for the purposes of limitation.
For claims in contract, the accrual of the cause of action is the date of the breach of the contract and not when the resulting damage is suffered.
Applying the above principle, in construction contracts, any cause of action in contract in respect of defective work accrues when the contractor is in breach of his express or implied obligation under the contract, and not from the time when the defect is discovered, or damage occurs. This means that in a construction contract claim, time is usually calculated from the date that the project achieved practical completion in that the contractor is asserting that he has completed the Works.
Subject to section 29(5) of the Limitation Act 1980, where the defendant acknowledges its debt or other liquidated pecuniary claim, or makes any payment against such claim, the right is treated as having accrued on the date of the acknowledgment or part payment.
Where the claim is for negligence, the time limit is six years from the date on which the cause of action accrued, which will be the date when the damage occurred. However, in claims for negligence, the Latent Damage Act 1986 allowed the possibility of a claim to be brought outside the 6 year limitation period if the damage was not discovered within the limitation period. This would therefore apply to latent defects, which are not discoverable during the course of ordinary and reasonable examination by a reasonable person skilled in building, but which manifests itself after a period of time. For such damages, the claimant has a 3 year period from either the date of knowledge of the loss or the date when it ought reasonably to have known of its loss to bring about the claim, subject to a 15-year long-stop date from the date of the defendant’s negligent act or omission.
Time will stop running for a particular cause of action, when the claimant’s claim form has been received by the court. This is useful when the end of the limitation period is near, but the parties have entered into settlement discussions, as the court proceedings that the claimant has issued can be put on hold.
Swansea Stadium Management Company Ltd v City & County of Swansea & Anr  EWHC 2192 (TCC)
The recent ruling in this case illustrates the application of limitation periods. In this case a claim was issued on 4 April 2017 seeking £1.3 million in respect of alleged defects in the concourse flooring and steelwork of the Liberty Stadium in Swansea. However, it was held that the claim was time barred because the claim was commenced more than 12 years after the date of practical completion.
As to practical completion, the Judge said:
“It is well-established law that a cause of action for breach of a construction contract accrues when the contractor is in breach of its express or implied obligations under the contract. Where, as in this case, there is an obligation to carry out and complete the works, the cause of action for a failure to complete the works in accordance with the contract accrues at the date of practical completion.”
The outcome of this case provides an important reminder of complying with limitation periods—the claimant was only a few days late in commencing proceedings, but the claim was held to be time-barred.
Author Richard Silver is Senior Partner at Silver Shemmings Ash. He is multi qualified as a Barrister, Solicitor & Chartered Quantity Surveyor with over 30 years of experience in the Construction Industry
Aside from his work globally as a legal advisor, his main focus is dispute resolution, encompassing the Construction, Building, Rail & Civil Engineering sectors. Having acted as Arbitrator, Adjudicator, Mediator, Lead Representative and Expert Witness on quantum, programme & planning he is widely experienced, as Lead Representative & Advocate, in all forms of Dispute Resolution
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