Rectification of identified defects and conclusive evidence

In Swansea Stadium Management Company v (1) City & County of Swansea and (2) Interserve Construction [2019] EWHC 989 (TCC), the court confirmed that the effect of the issue of a Notice of Completion of Making Good Defects is that the defects identified under the defects rectification contractual machinery are deemed to have been made good.

However, this deeming provision does not mean that the works comply with the building contract, and claims for damages in relation to defects for breach of the core obligations of the building contract are still able to be made.

Facts

This case was about defects at the Liberty Stadium in Swansea constructed by the contractor, Interserve, for Swansea City Council in 2005. Swansea Stadium Management Company (SSMC) is the leasehold owner and operator of the stadium and had the benefit of collateral warranties from Interserve.

SSMC brought proceedings alleging flooring and paintwork defects – but that claim was struck out because the claim was brought 4 days after the expiry of the limitation period.

In the latest proceedings, SSMC tried again – this time alleging that:

• Interserve was in breach of its obligations under clause 16 of the building contract – the defects liability provisions (and by extension was in breach of its collateral warranty to SSMC)
• Swansea City Council was in breach of its obligations under a 2006 deed to take all reasonable steps to enforce its own rights under the building contract in respect of the flooring and paintwork defects.

Both claims were dismissed.

Effect of Notice of Completion of Making Good

This claim was brought under an amended clause 16 of the 1998 JCT Standard Form Building Contract with contractor's design.

The contractor's liability to make good defects applied to defects appearing in the defects liability period (31 March 2005 to 31 March 2006) due to any failure to comply with its obligations under the building contract.

The Notice of Completion of Making Good Defects was issued on 26 May 2011.

The relevant provision in clause 16.4 of the contract provided that the effect of such a notice was that "completion of making good defects shall be deemed for all purposes … to have taken place on the day named in such notice".

The court held that the effect of this deeming provision was that the Notice of Completion of Making Good Defects was conclusive evidence that the limited obligations to make good defects under the contractual mechanism in clause 16 had been made good.

However, the court was keen to point out that the deeming provision was not conclusive in relation to defects under the contract as a whole and that claims against a contractor for defective works under the core obligations under the building contract would still be able to be made.

In this case, the claim under the core conditions to design the works with reasonable skill and care and to carry out and complete the works in accordance with the specification was out of time, and had previously been struck out.

The claim against Interserve under the defects liability provisions also failed because of the issue of the Notice of Completion of Making Good Defects. Given that Interserve's liability to SSMC under the collateral warranty was coterminous with its liability to Swansea City Council under the building contract, the court concluded that SSMC's claims under the collateral warranty also failed.

Equally, as Swansea City Council could not seek to enforce the defects liability provisions once the Notice of Completion of Making Good Defects had been issued, it followed that the Council could not be in breach of its obligations to enforce such rights under the 2006 deed after 26 May 2011.

Comment

Although this decision concerned clause 16 of the JCT 1998 Standard Form Building Contract with Contractor's Design, clause 2.36 of the JCT 2016 Design and Build Contract contains similar deeming provision regarding making good defects.

This decision confirms that in the absence of any express wording to the contrary, the effect of the defects provisions is to impose a liability and give a right to make good defects; and that the issue of a Notice of Completion of Making Good confirms that defects under those defects provisions have been made good, but does not exclude a claim for damages in respect of breaches of contract more generally.