Académique Documents
Professionnel Documents
Culture Documents
November 2009
1 Senior Associate at the London office of White & Case LLP and a member of the UK Society of Construction Law.
2 Section 5 of the Act.
3 See New Islington & Hackney Housing Association v Pollard Thomas & Edwards [2001] BLR 74.
4 Section 2 of the Act.
5 Section 8 of the Act.
6 See for example Oxford Architects Partnership v Cheltenham Ladies College [2006] EWHC 3156.
Liability after take-over: the English position
with equal bargaining power. However, the modified limitation ii. that the damage was attributable to the act or omission
period may be deemed unreasonable under the Unfair Contract which is alleged to constitute negligence; and
Terms Act 1977 if the period appears unfair, the contract parties
iii. the identity of the defendant,10
are of unequal bargaining power and the dominant party insisted
on the unreasonable period. subject to an overall long-stop period of 15 years from the date
Where a limitation period is about to expire, a party may: of the defendant’s negligent act or omission to which the damage
is attributable.11
i. commence legal proceedings straightaway, even if it does not
have the full facts to support its case. As a minimum, the party The issue of the defendant’s knowledge in (b) above has been the
must be able to formulate its claim properly according to the subject of various case law and the English courts have held that
procedural rules of the English courts. If the party wishes to add constructive knowledge as well as actual knowledge is relevant.
a new claim to its pleading subsequently (even after expiry of In Haward v Fawcetts (a firm) [2006] UKHL 9, the House of Lords
the limitation period), it will generally have to show that the new (England’s highest court) held that the 3 year period starts to run
claim arises out of the same facts or substantially the same from the time the claimant had knowledge of the ‘factual essence’
facts as the existing claim; 7 or of the alleged negligent acts or omissions, namely the material
facts supporting the substance of the claimant’s case and that
ii. enter into a ‘standstill agreement’ to temporarily suspend the
running of the limitation period. The agreement of the other there was a real possibility that the damage was caused by such
party is required in this case. acts or omissions. The claimant did not need to be certain or show
conclusively that the defendant’s acts or omissions had caused
In relation to residential property, the Defective Premises Act 1972 the losses alleged. Haward involved a case on negligent financial
provides that a developer or contractor doing work in connection advice and a recent construction case is Harris Springs Ltd v
with the provision of a dwelling owes a duty of care to any person Howes [2007] EWHC 327, which applied Haward and found that
acquiring an interest in the dwelling to ensure the work is done the owner was not time barred from making a claim for latent
in a workmanlike or professional manner with proper materials so defects against its engineers.
that the dwelling will be fit for habitation.8 A claimant has 6 years
from the time the dwelling was completed to bring an action It is important to note that the limitation periods for latent defects
for a breach of the duty. If further work to rectify the completed as above apply only to actions for negligence in tort, and not to
dwelling was done, the 6 years shall run from the time the further contractual claims. In practice, parties often attempt to negotiate
work was finished.9 liability for latent defects in their contracts.
2. How are hidden or latent defects 2.1. Does it make a difference if prior to take-over
dealt with? or during take-over, the employer was assisted by
professionals (like an architect or civil engineer)?
A party may bring an action in tort for negligence in relation to
If the contract is a ‘construct-only’ contract, the contractor will
latent defects on the later of:
generally not be liable for a defect in design, whether before,
a. 6 years from the date the cause of action accrued, which is during or after take-over. As between the employer and the
the date the damage or loss is suffered; or contractor, the responsibility for a design defect lies with
the employer. As between the employer and its professional
b. 3 years from the date the party knows or ought to consultants (eg. architect or civil engineer), the responsibility
have known: lies with the consultant who bears the risk of the design. The
i. the material facts about the damage or loss suffered; employer will look to the relevant consultant for relief and the
considerations mentioned in paragraph 1 above apply.
If the contract is a design and build contract, the contractor will If the defect is a latent defect discovered after take-over, the
generally be responsible for a defect in design and construction. position as discussed in paragraph 2.1(b) applies.
In principle, there should be no difference to a contractor’s liability
for any defects in the works prior to, during or after take-over 4. How long can the employer take action
even if the employer was assisted by professional consultants against the contractor after take-over?
(eg. architect or civil engineer) who carry out inspection of the
works prior to issue of the take-over certificate. This question has been addressed in paragraphs 1 and 2.1 above.
A defendant who wishes to seek a contribution from anyone 5. Is the liability limited to a certain amount?
else who is liable to the claimant for the same damage (such as If so, describe how.
a sub-contractor), must bring the contribution claim within 2 years
from the date the defendant is held liable under a judgment, or There is no statutory limitation of a party’s liability under
the date on which the amount of damages payable to the claimant English law. A party claiming damages still needs to prove the
is agreed.12 quantum of its loss. Contracting parties frequently impose a
limitation of the contractor’s liability in construction contracts,
including caps for liquidated damages. If the liquidated damages
2.2. Does it make a difference if the employer himself is
provision in a contract is unenforceable (for example, because it
considered to be a professional?
is considered a penalty), the courts in England have found that
In principle, it should not make a difference if the employer is the contractor’s liability for general damages may be limited to
considered to be a professional if it is clear between the parties the cap on the liquidated damages payable agreed by the parties
as to who is responsible for the design and construction aspects in their contract.
of the project. However, the English courts may treat an employer
who is a qualified building professional differently from a lay 6. How do you compare the Dutch position?
person in relation to the knowledge required for a limitation period
to run. For example, an employer who is an experienced architect There are clear differences in the English position and the
could be more readily said to know, or ought to have known, of Dutch position as regards liability after take-over, the main ones
the material facts about the loss or damage suffered arising from a being that:
latent design defect compared to an ordinary lay person. Similarly, a. unlike Dutch law, there is no statutory provision in England
an employer who is an experienced engineer and who chooses an equivalent to the Dutch Uniform Administrative Conditions of
inferior material being fully aware of the risks involved is unlikely 1989 or the Uniform Administrative Conditions for Integrated
to get much sympathy from the court if the material subsequently Contracts 2005 whereby the contractor ceases to be liable for
fails to a greater extent than if better material were used. defective work on take-over, save for specified exceptions;
3. Does it make a difference to the liability of b. English law does not contain an express limitation of the
contractor’s maximum liability (10% of the contract price for
the design and build contractor if a defect design and construction work under Dutch law); and
was or could have been discovered (a) prior
c. the limitation periods for claims against the contractor under
to, or (b) at the time of take-over; or (c) after English law are different from the Dutch position.
take-over? If so, describe the difference.
There is benefit in regulating liability after take-over as in the Dutch
Generally, there is no difference to the liability of the design and position. This must be balanced against the right of the parties to
build contractor as stated in paragraphs 1 and 2 if the defect was enter into their own bargain as appropriate (such as limitations
discovered prior to or at the time of takeover, or after take-over. of liability). Statutory requirements prescribe a ‘one size fits all’
A defect discovered prior to or at the time of take-over will regime which may not always work. A halfway house between
be a patent defect. It may be a patent defect after take-over the Dutch and English positions may be to make statutory
if it falls outside the latent defect provisions discussed in requirements the default position where the parties do not
paragraph 2.1(b). In any of these cases, the limitation periods set expressly provide for liability after take-over in their contracts.
out in paragraph 1 apply.
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