Cheltenham Ladies’ College took exception to an architect and, relying on the contract, began proceedings. It lost: the reasons why, says Corinne McCarthy, should be a warning to others
Those involved in construction and development projects will be familiar with contractual provisions that seek to amend the period during which the parties to a contract may commence an action for breach.
Such provisions are typically found in construction and engineering-related contracts, consultants’ appointments and collateral warranties, where there is commonly a clause stating that the contractor/subcontractor/consultant is to have no liability under the contract for
claims started more than six years (if the contract is a simple one) or 12 years (if the contract is executed as a deed) after the date of practical completion. Until now this clause has been viewed as one of the more straightforward provisions, easily understood and accepted in contracts as representing the market norm.
This is the background to the contract brought before the court in the case of the Oxford Architects Partnership vs the Cheltenham Ladies’ College. In this case Cheltenham Ladies’ College employed Oxford Architects to provide architectural services for the building of a teaching block.
The architect was engaged on the terms of CE/95, the RIBA conditions of engagement for the appointment of an architect. Article five of these terms stated: “No action or proceedings for any breach of this agreement or arising out of or in connection with all or any of the services undertaken by the architect in or pursuant to this agreement, shall be commenced against the architect after the expiry of six years from completion of the architect’s services, or, where the services specific to building projects stages K-L are provided by the architect, from the date of practical completion of the project.”
Practical completion at the school took place on 25 November 1998. Defects were later found in the building, and the school claimed that they were caused by the architect’s breach of contract and negligence. There was also a further claim against the architect for failure to issue information and instructions in good time.
The school served an arbitration notice on the architect on 24 November 2004, exactly six years after practical completion.
The purpose of article five was to place a time limit on the period in which the school could begin claims. This was in addition to, and not in place of, the statutory defences available to the architect
The architect’s primary case was that the school’s claims were statute barred – meaning that it is no longer possible for the claimant to effect recovery for that claim against the alleged wrongdoer – by virtue of the Limitation Act 1980, which sets a time limit for contractual claims of six years from when the breach occurred, rather than when practical completion was certified. The arbitrator was not convinced by this argument and found against the architect. The architect appealed.
Mr Justice Ramsey upheld the architect’s appeal and agreed that the claims were time barred. His reason was that article five of the RIBA’s terms did not override the provisions of the Limitation Act 1980. To exclude such a statutory provision would require clear and express wording in the contract, which it did not.
This is the basis of the misunderstanding of many employers and the beneficiaries of collateral warranties such as purchasers and tenants who see the clause as giving them the right to commence proceedings for all claims within six or 12 years of practical completion (as the case may be) no matter when the cause of action accrued.
The purpose of article five was to place a contractual time limit on the period in which the school could begin claims against the architect. This was in addition to, and importantly not in place of, the statutory defences available to the architect under the Limitation Act 1980.
Employers and beneficiaries (and those advising them) should be aware that the other party will not only have the benefit of the statutory defences contained in the Limitation Act 1980 but also the benefit of the contractual limitation contained in such clauses as article five of CE/95 where they have been incorporated into the contract.
This case provides a timely reminder to drafters and negotiators that a clause such as article five is for the benefit of the contractor or consultant, not the employer or beneficiary.
Corinne McCarthy is a senior associate in the engineering and construction group of DLA Piper UK