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Limitation and collateral warranties: Swansea Stadium Management Company Ltd v City & County of Swansea & Interserve Construction Limited [2018] EWHC 2192 (TCC)

This judgment arose out of the Second Defendant’s application for summary judgment on part of the claim and is part of larger ongoing litigation due to be heard at the end of October 2018.

The Claimant is the leaseholder of the Liberty Stadium in Swansea, owned by the First Defendant and built by the Second Defendant. The Claimant claimed for alleged defects in the stadium namely: paint delamination and associated corrosion of exposed steel; and inadequate resistance for foot traffic of the surface of some floors causing visitors to slip and fall. In addition the Claimant averred that these breaches were breaches of the Building Contract and, as a result were breaches of the collateral warranty.

The Second Defendant applied for summary judgment or strike out of part of the claim as it was time barred due under the Limitation Act 1980.

While applying established principles, the judgment of O’Farrell J provides useful guidance in how a Court will interpret a Collateral Warranty in light of the Building Contract and the factual matrix of the case.

The parties had entered into a Collateral Warranty in 2005 which contained a number of clauses regarding the Second Defendant’s duties and liabilities for the works in relation to the Claimant.

Of particular importance to the issue was the date of practical completion (said by the Second Defendant to be 31 March 2005, the claim having been issued 4 April 2017) and whether the collateral warranty was retrospective and so took effect from the date of practical completion or not.

The Collateral Warranty did not contain any express commencement or expiry date or an express limitation period. Nor did it contain an express term as to the date on which any cause of action for breach was deemed to have occurred. It did, however provide an express limitation in respect of the Guarantor’s liability by reference to the expiry of 12 years from practical completion. In addition, there was a provision that the Guarantor was to maintain professional indemnity insurance for a period of at least 12 years from the date of practical completion.

The judge found that because the collateral warranty was intended to provide a direct right of action by the Claimant against the Second Defendant in respect of its obligations under the original building contract, effectively giving the Claimant privity of contract as if a joint employer under the contract with the First Defendant, it was the intention of the parties for the warranty to run from the date of practical completion. This meant that any breach of the Collateral Warranty must have occurred by 31 March 2005.

As a result, the Second Defendant’s liability to the Claimant was coterminous with its liability to the First Defendant under the Building Contract and so any breach of contract created by the Collateral Warranty would be actionable from the original date on which the breach occurred even though the relevant facts occurred prior to the effective date of the Collateral Warranty.

The judge found that the claim against the Second Defendant under the Collateral Warranty had no real prospect of success as it was statute-barred under the Limitation Act and there was no other compelling reason for trial of these matters. The effect of this skirmish in the context of the greater litigation will remain to be seen as the trial date approaches and the Second Defendant continues to be a party. 

Will Skjøtt / 11th Sep 2018


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