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Limitation Act and Defective Structures

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LIMITATION ACT AND DEFECTIVE STRUCTURES: PARTIES BEWARE OF THE TIME BARS AND ATTRIBUTIBILITY OF KNOWLEDGE!  

Vinci Construction UK Ltd v (1) Eastwood and Partners Ltd (2) Snowden Seamless Floors Ltd v GHW Consulting Engineers Ltd [2023] EWHC 1899 (TCC) 

This judgment re-applies Justice Coulson’s definition of “accrual” set out in the recent case of URS Corporation Ltd v BDW Trading Ltd [2023] EWCA Civ 772 which sets out the right to take action in relation to construction defects.  It also provides a comprehensive commentary on the application of Section 2 and Section 14A of the Limitation Act 1980 when considering whether a claim may be statute barred and looks at how knowledge will attribute.  

Key Take Aways 

This case:  

  • Indicates how Courts will approach a question of law regarding the date of accrual for the cause of action for physical damage, and economic loss under the law of tort for negligence;    
  • Confirms that the Courts support the principles defined by Justice Coulson LJ in his decision in URS Corporation Ltd v BDW Trading Ltd [2023] EWCA Civ 772;  
  • Highlights the importance of time bars and limitations in statute; and 
  • Sets out the minute difference between a contract executed as deed and a simple contract. 

 

Stephen McKenna and Nouman Qadir of Quigg Golden analyse the judgment in Vinci Construction UK Ltd v (1) Eastwood and Partners Ltd (2) Snowden Seamless Floors Ltd v GHW Consulting Engineers Ltd [2023] EWHC 1899 (TCC) (“Vinci v Eastwood”) and highlight a key point in the law regarding accrual of cause of action in the tort of negligence for economic loss considering limitation. 

 

Background Facts 

The Parties 

Bear with us, as this is a little confusing… 

In April 2012, Princes Limited (“Princes”) appointed Vinci Construction UK Limited (“Vinci”) as a design and build contractor to carry out works at its warehouse and distribution facility at Weaverthorpe Road, Bradford.  The contract between the parties took the form of NEC3 Engineering Contract 2005 (with amendments 2006) Option A.  The contract was executed as a deed. 

Also, in April 2012 Vinci appointed Eastwood and Partners (Consulting Engineers) Limited (“Eastwood”) to provide civil and structural engineering services.  This contract was executed as a deed.  

Vinci also hired Snowden Seamless Floors Ltd (“Snowden”) in April 2013 to design, supply, and instal the structural reinforceable concrete slabs for the works.  This engagement too was executed as a deed. 

Also, in April 2013 Snowden engaged GHW Consulting Engineers Ltd (“GHW”) to carry out the design of the in situ reinforced concrete internal floor slabs along with all calculations and drawings.  This contract was NOT executed as a deed. 

The Works evolved to require an “overlay slab” which was intended to limit the breaking and replacement of an existing floor slab. 

Defects 

During September 2013 various defects appeared within the floor including cracks / damages to sawn edges / holes in the slab and other concrete damages.  None of the remedial schemes carried out proved to be effective and eventually, Princes had to replace the flooring. 

Adjudication: Princes -v- Vinci 

In 2019 the first adjudication was commenced by Princes against Vinci.  Princes’ position was that the “overlay slab” was unsuitable and needed to be replaced by a new slab.  The adjudicator decided in favour of Princes, and held that Vinci breached the contract by providing an inadequate design, resulting in defects. 

In a second adjudication between the parties, (April 2021), damages were awarded to Princes due to Vinci’s breach of contract, and the adjudicator also decided that Vinci had to pay Princes the cost of carrying out the remedial works. 

Snowden, GHW, and Standstill Agreements  

On or around 10 September 2020, a pre-action protocol letter was served by Vinci to Snowden that laid out Vinci’s intentions to bring a claim against Snowden.  This led to Snowden pursuing a claim against GHW as the specialist floor designer for the overlay slab. 

The parties entered into standstill agreements (on two occasions: May 2021, and October 2021) to suspend any limitation periods, hence extending the limitation for a period of around 12 months.   

The High Court: Technology and Construction Court (TCC) 

On 9 February 2022, proceedings were commenced against Snowden and Eastwood by Vinci.  Vinci sought damages of £2.5 million in relation to the adjudicator’s decisions. Per paragraph 17 of the decision, the basis of the claim against the defendants was: 

“… the design concept of an unbonded non-structural overlay slab, at a thickness of 100mm and without mirroring the joints in the overlay slab to the joints in the existing slab, was inadequate to support the loading requirements of the Low Bay Warehouse and the heavy trafficking to which it would be subject. It is pleaded that the defective design placed Vinci in breach of its contract with Princes and it became liable for the adjudication awards, fees and costs.” 

On 8 April 2022, a further (Additional Claim) was served by Snowden on GHW that sought indemnity and/or contribution from GHW in relation to the claim by Vinci and/or Eastwood.  The allegation presented in Part 20 Particular of the Claim included: 

“… 

i) adopted the design concept of an unbonded non-structural overlay slab which: (a) did not provide adequate support for loads; (b) was not thick enough; (c) was unsuitable for heavy warehouse traffic; and (d) was not in accordance with industry guidance; 

ii) failed to consider the loading requirements or the performance of the overlay slab, and the preparatory work to the existing slab; 

iii) adopted and constructed a design in which the joints of the existing slab were not mirrored in the overlay slab;  

iv) failed to warn of the ‘inherent weaknesses in the design’; and  

v) failed to warn of the potential effects of omitting the 25mm sand layer.” 

GHW provided its defence on or around 20 June 2022.  It denied any liability and raised limitation issues based on Limitation Act 1980.  GHW further requested the Court: 

a) For a reverse summary judgment against Snowden’s Additional Claim arguing that Snowden’s claim is statute barred and does not have any real prospect of success; and 

b) To strike out Snowden’s claim for contribution under Civil Liability (Contribution) Act 1978 on the basis that no valid action is disclosed by the Additional Particulars of Claim against GHW. 

THE KEY ISSUES 

The key issues to be decided by the Court were: 

a) What would be the impact of the decision by Justice Coulson LJ in URS Corporation Ltd v BDW Trading Ltd [2023] EWCA Civ 772 on the issue in hand? 

b) Is Snowden’s claim statute barred under Section 2 or Section 14A of the Limitation Act 1980? 

c) Is the Additional Claim by Snowden eligible for the summary judgment pursuant to CPR 24.2? 

d) Can the contributory claim be dismissed based on a lack of valid cause of action? 

 

A. URS Corporation Ltd v BDW Trading Ltd [2023] EWCA Civ 772 

During the hearing of this case, the Court of Appeal handed down its judgment in URS v BDW  in which Justice Coulson LJ addressed a key point of law regarding the “date of accrual” of the cause of action in tort law, in this case against designers of a defective building.  The main question before the Court was whether the cause of action accrued when: 

a) the building was completed in accordance with the defective design; or  

b) the structural defects of the buildings were discovered by the developers. 

Justice Coulson decided that Justice Fraser J was right in his decision in a previous case between the parties, BDW Trading Ltd v URS Corporation Ltd [2021] EWHC 2796 (TCC) regarding the cause of action accruing on practical completion.  

The decision in Vinci v Eastwood, in paragraph 42, provides a list of legal principles that were utilised by Justice Coulson in his decision: 

“… the legal principles that are applicable in this case can be summarised as follows: 

i)  A claim in tort based on negligence is incomplete without proof of damage. There are two kinds of loss which are recognised as actionable damage for the tort of negligence, namely, physical damage and economic loss: Rothwell v Chemical & Insulating Co Limited [2007] UKHL 39 per Lord Hoffmann at [7]; Co-Op v Birse (above) per Stuart-Smith J at [17]; URS v BDW at [68].  

ii) In a case where there is physical damage, the current state of the law is that the claimant’s cause of action accrues when that physical damage occurs, regardless of the claimant’s knowledge of the physical damage or its discoverability: Cartledge v Joplin [1963] AC 758; Pirelli (above) per Lord Fraser at pp.16F-18G; Ketteman (above) per Lord Keith at p.205G; Abbott (above) per Tuckey LJ at [19]-[20]; URS v BDW at [83].  

iii) In a case where there is economic loss, the claimant’s cause of action accrues when the claimant relies on negligent advice or services to its detriment, including incurring a liability (unless such liability is purely contingent, in which case it is not actionable damage until there is measurable loss): Forster v Outred (above) per Dunn LJ at p.99F; Knapp v Ecclesiastical Insurance Group plc [1998] PNLR 172 (CA); Law Society v Sephton [2006] UKHL 22; Axa Insurance Limited v Akther & Derby [2009] EWCA Civ 1166 per Arden LJ at [30]-[33]; Co-Op v Birse (above) per Stuart-Smith J at [43]-[55]; URS v BDW at [102].  

iv) In a case where the claimant relies on negligent advice or services and, as a result, the structure contains an inherent design defect which does not immediately cause physical damage, the claimant’s cause of action accrues at the latest on completion of the structure, at which point the claimant has a defective asset and suffers economic loss, regardless of its knowledge of the latent damage: Murphy v Brentwood District Council [1991] 1 AC 398 per Lord Keith at p.466E-F; Lord Bridge at p.475; New Islington and Hackney Housing Association Ltd v Pollard Thomas & Edwards Ltd [2001] PNLR 20 per Dyson J at [38]-[43]; URS v BDW at [88]. 

V) Pirelli remains good law in cases concerning physical damage but, in the light of the above authorities that an inherent design defect in a structure can give rise to pure economic loss, it may require careful consideration: URS v BDW at [114-116].” 

Coulson’s decision sets out the current position at law in relation to the date of accrual of a cause of action.  From this, we see that it depends upon the proper characterisation of loss, where: 

a) Physical damage– the cause of action will be the date on which damage occurred; and 

b) Economic loss– the date of accrual of the cause of action would be date of completion. 

B) Section 2 and Section 14A of the Limitation Act 1980

Section 2 of the Limitation Act 1980 sets out that no action founded on tort could be brought against a party after the expiration of six years from the date on which the cause of action accrued. 

Section 14A of the Limitation Act states that: 

“… (1) This section applies to any action for damages for negligence, other than one to which section 11 of this Act applies, where the starting date for reckoning the period of limitation under subsection (4)(b) below falls after the date on which the cause of action accrued.  

(2) Section 2 of this Act shall not apply to an action to which this section applies.  

(3) An action to which this section applies shall not be brought after the expiration of the period applicable in accordance with subsection (4) below.  

(4) That period is either— (a) six years from the date on which the cause of action accrued; or (b) three years from the starting date as defined by subsection (5) below, if that period expires later than the period mentioned in paragraph (a) above.  

(5) For the purposes of this section, the starting date for reckoning the period of limitation under subsection (4)(b) above is the earliest date on which the plaintiff or any person in whom the cause of action was vested before him first had both the knowledge required for bringing an action for damages in respect of the relevant damage and a right to bring such an action. 

(6) In subsection (5) above “the knowledge required for bringing an action for damages in respect of the relevant damage” means knowledge both—  

(a) of the material facts about the damage in respect of which damages are claimed; and 

(b) of the other facts relevant to the current action mentioned in subsection (8) below. 

(7) For the purposes of subsection (6)(a) above, the material facts about the damage are such facts about the damage as would lead a reasonable person who had suffered such damage to consider it sufficiently serious to justify his instituting proceedings for damages against a defendant who did not dispute liability and was able to satisfy a judgment.  

(8) The other facts referred to in subsection (6)(b) above are— 

(a) that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence; and  

(b) the identity of the defendant; and  

(c) if it is alleged that the act or omission was that of a person other than the defendant, the identity of that person and the additional facts supporting the bringing of an action against the defendant.   …” 

In its defence, GHW contested that the claims against it are time-barred in accordance with the Limitation Act 1980.  It further expressed that GHW was engaged to design the overlay slab in May 2013 and the construction by Snowden was completed in July 2013, but the Claim Form was issued on 8 April 2022 meaning that it was outside the limitation period of six years. 

GHW further argued that damage developed around September 2013, and it was brought to Snowden’s knowledge when it was asked to comment on it and that “claims against GHW are time-barred” under the Limitation Act 1980.  

Snowden disagreed with GWH’s position and stated that knowledge was not acquired (as according to Section 14A of the Limitation Act 1980) until it received a letter from Vinci on 25 May 2018 considering the contribution of the design in the failure of the overlay slab. 

Snowden further relied on the case of Pirelli General Cable Works Limited v Oscar Faber & Partners [1983] 2 AC 1 (HL) in which House of Lords decided that “a building owner’s cause of action against his consulting engineer for negligent design accrued for limitation purposes when physical damage to the building first occurred”.  This case was supported by the decisions in Ketteman v Hansel Properties Limited [1987] AC 189 (HL) and by the Court of Appeal in Abbott v Will Gannon and Smith Limited [2005] EWCA Civ 198 (CA). 

Here, at para 42, Mrs. Justice O’Farrell stated in relation the Limitation Act 1980: 

“ Despite Ms Lee’s valiant attempt to persuade me that the date of damage should await further expert evidence, it is clear from the documents before the court that physical damage occurred to the Low Bay Warehouse floor more than six years prior to the material date of 7 May 2021.”  

The Court decided that the claim of Snowden against GHW for breach of contract was time-barred and must be struck out. 

At para 59 the TCC looked to the decision in Haward v Fawcetts [2006] 1 WLR 682 (HL) per Lord Nicholls for defining the “degree of knowledge of attribution required under section 14A”.  It states the following principles: 

 “[9] Thus, as to the degree of certainty required, Lord Donaldson of Lymington MR gave valuable guidance in Halford v Brookes [1991] 1 WLR 428, 443. He noted that knowledge does not mean knowing for certain and beyond possibility of contradiction. It means knowing with sufficient confidence to justify embarking on the preliminaries to the issue of a writ, such as submitting a claim to the proposed defendant, taking advice, and collecting evidence: “Suspicion, particularly if it is vague and unsupported, will indeed not be enough, but reasonable belief will normally suffice.” In other words, the claimant must know enough for it to be reasonable to begin to investigate further.  

[10] … it is not necessary for the claimant to have knowledge sufficient to enable his legal advisers to draft a fully and comprehensively particularised statement of claim … what was required was knowledge of the essence of the act or omission to which the injury was attributable: Nash v Eli Lilly & Co [1993] 1 WLR 782, 799 … 

 [11] … The statutory provisions do not require merely knowledge of the acts or omissions alleged to constitute negligence. They require knowledge that the damage was “attributable” in whole or in part to those acts or omissions. Consistently with the underlying statutory purpose, “attributable” has been interpreted by the courts to mean a real possibility, and not a fanciful one, a possible cause of the damage as opposed to a probable one: see Nash v Eli Lilly & Co [1993] 1 WLR 782, 797-798. Thus, paraphrasing, time does not begin to run against a claimant until he knows there is a real possibility his damage was caused by the act or omission in question.” [QG Emphasis] 

Summary Judgement  

On or around 6 March 2023, GHW issued an application for summary judgment.  In paragraphs 26 and 27 of the decision Justice O’Farrell provided the summary judgment test: 

“26. CPR 24.2 provides that: “The court may give summary judgment against a claimant … on the whole of a claim or on a particular issue if –  

(a) it considers that – 

(i) that claimant has no real prospect of succeeding on the claim or issue; … and 

(b) there is no other compelling reason why the case or issue should be disposed of at a trial.”  

  1. The principles to be applied on such applications are well-established and can be summarised as follows:

i) The court must consider whether the claimant has a “realistic” as opposed to a “fanciful” prospect of success: Swain v Hillman [2001] 1 All ER 91.  

 ii) A “realistic” claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8].  

iii) Where the applicant has adduced credible evidence in support of the central issue that is said to justify summary judgment, the respondent comes under an evidential burden to prove that its claim has a reasonable prospect of success: Sainsbury’s Supermarkets Limited v Condek Holdings Limited and Others [2014] EWHC 2016 (TCC) at [13].  

 iv) However, in reaching its conclusion the court must not conduct a “mini-trial”: Three Rivers District Council v Governor and Company of the Bank of England (No 3) [2003] 2 AC 1 at [95]; Okpabi v Royal Dutch Shell [2021] UKSC 3 at [110].  

v) The court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550; Okpabi at [127]-[128].  

 vi)  The court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63.  

vii) If the court is satisfied that it has before it all the evidence necessary for the proper determination of a short point of law or construction and the parties have had an adequate opportunity to address the question in argument, it should grasp the nettle and decide it. It is not enough to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725 at [11]-[14]; Easyair Ltd (t/a Openair) v Opal Telecom Ltd [2009] EWHC 339 (Ch) at [15].” 

While further commenting on the attributability of damages based on Section 14A of the Limitation Act, Mrs Justice O’Farrell further held at paragraph 72 that It was not sufficient for GHW to show that material damage occurred more than three years prior to 7 May 2021; but that GHW had to show that Snowden was aware (or should have been aware), that the damage was attributable (in whole or in part), to defective design.  She noted that the essence of the complaint pleaded against it by Vinci (which Snowden sought to pass on to GHW) could not be concluded without “conducting a mini trial” and that such an approach would be “contrary to the principles applicable on an application for summary judgment. 

These reasons led Justice O’ Farrel to reject GHW’s application for summary judgment because Snowden had a “real (as opposed to fanciful)” chance of winning its claim of negligence.  

Conclusion  

The case highlights the importance of knowledge and timing for those either defending or bringing a claim for defective structures.  It confirms and reapplies the guidance set out by Justice Coulson LJ in the recent case of URS Corporation Ltd v BDW Trading Ltd [2023] EWCA Civ 772 regarding the definition of “accrual” under common law.  

O’Farrell J looked to the attributability of knowledge falling under Section 14A of the Limitation Act and held that the burden of proof lies upon the claimant to prove that legal proceedings commence within three years of the requisite ‘knowledge’. 

Another point to note is of the difference between the contract being signed as a deed and a simple contract.  Given the agreement between GHW and Snowden was executed as a simple contract, if it had been executed as a deed, then the issue of limitation may have led to a radically different outcome.  

While dealing with the expiration period Section 14A of the Limitation Act 1980 states that the affected party has the right to bring an action in “(b) three years from the starting date” from the earliest date on which the party with the vested cause of action acquired the required knowledge of bringing an action for damages.  It implies that if the contract between GHW and Snowden was signed as a deed then Snowden would have had 15 years to bring this claim: 12 years of deed + 3 years of attribution of knowledge clause.  

The case highlights the importance of keeping an eye on limitation periods and to be mindful of statutory time bars.  

Quigg Golden are experts in construction disputes, adjudication, and public procurement in the United Kingdom and Ireland.  If you need any assistance in a construction claim, adjudication, or other construction dispute, feel free to contact Quigg Golden directly here.  

The Vinci Construction UK Ltd v (1) Eastwood and Partners Ltd (2) Snowden Seamless Floors Ltd v GHW Consulting Engineers Ltd [2023] EWHC 1899 (TCC) decision can be found here. 

Limitation Act & Defective Structures: Parties Beware of the Time Bars and Attributibility of Knowledge!
Stephen McKenna, Senior Associate

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