A note of caution in relation to contractual limitation clauses. The Court of Appeal was required to consider such a clause in Inframatrix Investments Limited v Dean Construction Limited . The clause in question stated:
“No action or proceedings under or in respect of this Agreement shall be brought against the Contractor after:
(a) the expiry of 1 year from the date of Practical Completion of the Services or;
(b) where such date does not occur, the expiry of 1 year from the date the Contractor last performed Services in relation to the Project.”
Dean Construction Limited (“DCL”) had been engaged by Inframatrix Investments Limited to undertake roofing and cladding work during the construction of a camera factory by Inframatrix.
DCL carried out work on site between November and December 2008. In January 2009 Inframatrix’s engineer carried out an inspection of the cladding work following which he sent an email to DCL highlighting various defects. DCL performed some snagging works during February 2009 and then maintained that its works were complete. Over the course of the following months solicitors became involved. DCL chased payment and Inframatrix refused to pay until the allegedly defective works were resolved. Inframatrix claimed that the remedial costs for the defective works were between £105,000 and £113,000 and sought those remedial costs together with damages for lost profits, valued at £150,000 and continuing at £50-£80,000 per month. DCL continued to deny any liability for the allegedly defective works.
Following various exchanges of correspondence a letter was sent by DCL in accordance with the Pre-action Protocol for Construction and Engineering Disputes at the beginning of October 2009 following which an onsite meeting took place. DCL subsequently prepared a report in April 2010 which included a few relatively minor admissions and an offer to return to site to carry out some further investigative work and remedial work, if necessary. The report was provided “on a strictly without prejudice basis at present…”
Following further exchanges between the parties, the dispute could still not be resolved and court proceedings were issued by Inframatrix on 29 December 2010. DCL defended the proceedings on the basis that it had last performed work in February 2009 and the proceedings were therefore time-barred in accordance with the clause referred to above.
Inframatrix’s main argument was that the onsite meeting, inspection and production of the report by DCL were all services under the contract and therefore time did not start to run for the purposes of the limitation clause until much later so that the proceedings were issued in time.
DCL had maintained throughout that its actions following February 2009 were without prejudice to its position. This meant that Inframatrix was precluded from asserting that the activities were being undertaken pursuant to the contract and so they were not “services”. The subsequent waiver of the without prejudice privilege as part of the proceedings did not convert a non-contractual act into contractual performance.
As more than a year had gone by since DCL had last performed services the Court of Appeal (upholding the decision of the judge at first instance) agreed with DCL that the limitation clause applied and the proceedings were time-barred.
The case therefore serves as a stark reminder of the dangers of failing to adhere to a contractual limitation clause. This is something parties particularly need to be aware of in construction contracts where following the steps required by the Pre-Action Protocol can take a number of months.
The following may be obvious but are worth repeating in light of the possible consequences of getting it wrong:
- When a potential dispute arises check contracts carefully for clauses which vary the usual statutory limitation period and diarise where appropriate.
- If time is running out before expiry of the period in the clause then considering seeking your opponent’s agreement to an extension of the contractual limitation period. Alternatively, consider issuing proceedings and then seek a stay of those proceedings to allow any pre-action protocol steps to be concluded.
- If in doubt as to when a limitation period might start to run, choose the shortest period and ensure that any proceedings are issued before that period expires. As above, if necessary make an application to court for a stay of those proceedings to allow any settlement discussions or pre-action protocol steps to be completed.
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.