Reed Smith Client Alerts

Swansea Council contracted with Interserve for a new stadium (the Liberty Stadium) for Swansea’s football and rugby teams. That project, and in particular the defects in the works, generated a number of disputes. In the latest case concerning the stadium it has been made clear that, while notices of completion of making good defects are an important milestone in the completion of a contractor’s obligations under a building contract – often allowing the release of any final retention monies to the contractor – those notices do not signify the end of the contractor’s liability and certainly do not release the contractor from its obligations to build in accordance with the contract specification.

Auteurs: Richard A. Ceeney Siobhan Hayes Elinor Crowther

Background

In Swansea Stadium Management v. City and County of Swansea and Interserve, the Technology and Construction Court (TCC) had to consider the consequence of defects in the construction of the Liberty Stadium, which caused slippage on wet concrete floors and the early failure of the painted surface of steelwork. Practical completion was certified on 31 March 2005 and the defects liability period (DLP) ran for 12 months thereafter. After practical completion, the stadium was leased to Swansea Stadium Management Company (the Tenant) on a long lease.

The Tenant had a collateral warranty from the main contractor, Interserve. After attempts to settle, the Tenant started a claim against both the Council (the Employer) and Interserve on the basis that the original building works were defective and in breach of the building contract specification. The judge in that case struck out these claims because they were brought after the expiry of the contractual limitation period. The limitation period for the claim under the collateral warranty, which, like the building contract, was executed as a deed, was 12 years from practical completion and this date had been missed by just four days.

Interserve’s liability to the Tenant under the collateral warranty, which was executed at the earliest in April 2005 (after the building contract), was coterminous with its direct contractual liability to the Council under the building contract. As is often the case, the collateral warranty contained a clause which provided that the contractor shall have no greater liability under the collateral warranty than it would have had if the Tenant had been named as joint employer with the Employer under the contract. Liability for defects in the original works would not therefore run for longer than 12 years after practical completion.

In its next set of proceedings, the Tenant therefore fell back on two secondary claims, which might avoid the consequences of the expiry of the limitation period. One of those claims was that Interserve was in breach of obligations under the building contract, which arose after practical completion, to identify and make good flooring and paintwork defects during the DLP.

It is important to note that, notwithstanding the known and subsisting problems with the concrete floor and paint, on 26 May 2011 (more than five years after the expiry of the DLP) the Employer’s agent issued Interserve a notice of completion of making good defects recording that the defects required to be made good had been made good as of 14 April 2011.