Limitation periods: a timely reminder

by Rebecca Penney, Senior Associate

In the recent case of Vinci Construction UK Ltd v (1) Eastwood and Partners (Consulting Engineers) Ltd; (2) Snowden Seamless Floors Ltd v GHW Consulting Engineers Ltd [2023] EWHC 1899, the TCC considered an application for reverse summary judgment. 

In reaching its decision, the court considered the principles set out in the recent Court of Appeal case URS Corp Ltd v BDW Trading Ltd [2023] EWCA Civ 772,1 which determined a key point of law on the question of when a cause of action accrues in negligence for the purposes of limitation. As Rebecca Penney sets out, the decision in the Vinci case provides some useful guidance on when a cause of action accrues in circumstances where there has been physical damage vs economic loss, as well as some helpful commentary on the application of s.14A of the Limitation Act 1980 (the “Act”). This is particularly relevant to those who are bringing or defending claims against designers of allegedly defective structures.

Background

The claim relates to the design of a defective concrete warehouse slab. Princes Ltd, a well-known manufacturer of bottled drinks, employed Vinci Construction UK Ltd (“Vinci”) as its design and build contractor to refurbish and upgrade its warehouse and distribution facility in Bradford. 

As part of the contract works, Vinci was required to design and construct a new concrete slab for part of the warehouse known as the Low Bay Warehouse. 

Vinci engaged Eastwood and Partners (Consulting Engineers) Ltd (“Eastwood”) as its civil and structural engineer, and Snowden Seamless Floors Ltd (“Snowden”) to design, supply and install the concrete slabs. Both contracts were executed as deeds with a limitation period of 12 years. Snowden, in turn, engaged GHW Consulting Engineers Ltd (“GHW”) as its specialist slab designer; however, this contract was not executed as a deed and, therefore, the limitation period for the contract with GHW was only six years.

The concrete slab design was carried out in April, May and June 2013. The installation of the floor slab was completed on 9 July 2013 and handed over to Princes in early August 2013. By September 2013, the slab had begun to show signs of cracking and other defects/damage. Various attempts were made to repair the slab during the years that followed; however, none of the repairs were successful. In 2020, Princes made the decision to remove and replace the concrete floor slab in its entirety and, subsequently, brought two successful adjudication proceedings against Vinci, following which the adjudicator decided that Vinci was liable to pay £2.5 million to Princes for the cost of the remedial scheme plus various other ancillary costs. 

The application

On 9 February 2022, Vinci (the claimant) issued proceedings in the TCC against Eastwood (the first defendant) and Snowden (the second defendant) in respect of the sums paid pursuant to the adjudication decisions, plus the costs of defending the adjudications. Subsequently, Snowden made a Part 20 claim against GHW (the third party) on 8 April 2022, seeking an indemnity and/or contribution from GHW in respect of the claims brought by Vinci. Prior to that, on 18 January 2021, Snowden had issued a preliminary notice of claim against GHW, and the parties then entered into a standstill agreement on 7 May 2021 suspending time for the purposes of limitation for six months from the date of the agreement until 21 April 2022. 

The application for reverse summary judgment was brought by GHW on the basis that Snowden’s claims against it had no real prospect of success because: 

1. The contractual claims were time barred being more than six years from the date of breach; 
2. The negligence claims were time barred under s.2 of the Act being more than six years from the date on which the cause of action accrued; and
3. Any claim for latent defects under s.14A of the Act was also time barred being more than three years since Snowden had the requisite knowledge to bring a claim. 

During the submissions, Snowden accepted that its contractual claims were time barred but it opposed the application on the basis that its negligence claims were not time barred under either s.2 or s.14A of the Act. 

The Part 20 claim was served before the expiry of the standstill, and so it was agreed that, for limitation purposes, the claim was to be treated as having been issued on 7 May 2021. The central issue for the court to decide was whether Snowden’s claims in negligence were already time barred under either s.2 or s.14A of the Act by the time the Part 20 claim was issued on 7 May 2021.

To answer that question, the court had to consider when the cause of action accrued for the purposes of Snowden’s claims. 

Decision

In reaching her decision, O’Farrell J referred to the recent Court of Appeal decision in URS v BDW. This case is perhaps better known in the context of the Building Safety Act; however, the judgment also contains helpful commentary about when the date of accrual of a cause of action in negligence arises against designers of defective buildings in circumstances where the defect caused no immediate physical damage. 

O’Farrell J reviewed the legal principles recited in the URS decision and concluded that to ascertain when the cause of action accrues under s.2 of the Act, it is important to properly characterise the type of loss suffered. If the loss is characterised as physical damage, the cause of action accrues on the date of the damage. However, if the loss is characterised as economic loss, the cause of action accrues by the date of practical completion of the works. 

In this case, Snowden’s claims were found to be time barred under s.2 because: 

1. In the case of economic loss, the date of completion of the works was more than six years before the claim was issued; and
2. It was clear on the basis of the evidence before the Court that material physical damage had occurred by March/April 2015 at the latest and this was more than six years before the claim was issued. 

The court then went on to consider the operation of s.14A of the Act (this being the only claim of Snowden’s that was not time barred). The court confirmed that where s.14A applies, it displaces s.2 and provides for a potentially longer limitation period in respect of latent defects, being three years from the date of the knowledge required to bring a claim for the damage. 

The court confirmed that, in this situation, the onus is on the claimant (in this case, Snowden) to prove that it first had the knowledge required for bringing its claim within a period of three years prior to the issue of its claim.2

O’Farrell J reviewed the relevant legal principles3 about the degree of knowledge required:

1. It is not necessary for the claimant to have sufficient knowledge to draft a full claim, but what is required is knowledge of the essence of the act of omission to which the damage can be attributed. 
2. It is not enough for the claimant to have knowledge that the acts or omissions constituted negligence; the claimant must also have sufficient knowledge that the damage was attributable to those acts or omissions.
3. Attribution in that context means a real possibility that the damage can be attributed to the negligent act or omission and not a fanciful one. 

O’Farrell J decided that, in this case, it was not possible to reach a view on the extent of Snowden’s knowledge without conducting a mini trial on the documents and such an approach would be contrary to the principles relevant to the determination of an application for summary judgment. Snowden had a real (rather than a fanciful) chance of succeeding in its claim under s.14A and that the proper forum for determination of those issues would be at trial. 

Why does it matter?

This case highlights the importance of ensuring that contracts are “back-to-back” in respect of limitation. In other words, if a main contract has been signed as a deed, any subcontract or sub-subcontracts should also be signed as a deed to allow any claims to be passed down the chain and to avoid the situation where a subcontractor has a possible limitation defence to a claim passed down from the employer. It is also prudent to obtain appropriate warranties from any subcontractors or sub-subcontractors and to ensure that these are also executed as deeds where appropriate.

It also highlights the need for contractors and subcontractors to think about limitation and any potential standstill agreements as soon as possible. As is clear from this case, a claim under s.14A is not necessarily straightforward and it is possible that the parties will have to go to trial to have the issue of limitation determined which only serves to increase the cost involved.

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• 1. See Lucinda Robinson’s article, “Feeling the force: the impact of the BSA on downstream claims”, for more details.
• 2. Paragraph 57 applying the principles in Nash v Eli Lilly [1993] 4 All ER 383 per Purchas LJ at p.396.
• 3. As summarised in Howard v Fawcetts [2006] 1 WLR 682 (HL) per Lord Nicholls.