In Swansea Stadium Management Company Ltd v City & County of Swansea & Anor, the court provided some useful guidance as to when claims made under collateral warranties are time barred. This case concerned alleged defects at the new Swansea City Football Club stadium. In particular, the court considered the effect of the “no greater liability” provisions in the collateral warranty given by the contractor.
Background
Construction of the Liberty Football Stadium in Swansea was completed in 2005, with practical completion being achieved on 31 March. The stadium is owned by the local council but was managed by Swansea Stadium Management Company Ltd (SSMC), the claimant.
SSMC had the benefit of a collateral warranty from the contractor which was dated after practical completion had been achieved. On 4 April 2017 (i.e. 12 years and 4 days after practical completion), SSMC commenced proceedings against the contractor and the local council alleging defective works.
The contractor raised a limitation defence and sought summary judgment on the basis that although the collateral warranty was dated after practical completion had been achieved, on a proper construction it had retrospective effect. Therefore, the contractor argued, its liability could not be greater than that imposed by the underlying building contract, under which the 12-year limitation period ran from practical completion.
The collateral warranty contained the fairly standard clause which states: “Provided that the Contractor shall have no greater liability under this Agreement than it would have had if [SSMC] had been named as joint employer with the Employer under the Contract".
Decision
The Judge held that the no greater liability clause was the clearest indication of the parties’ intention that SSMC should be in the same position in relation to any claim against the contractor under the collateral warranty as the employer would be under the building contract.
In addition, the judge held that:
- The general purpose of the collateral warranty was to give SSMC the same rights of action against the contractor as the original employer under the building contract, but not to provide any extension of those rights
- There was no time limit on when the collateral warranty could be given so, even if it was provided after practical completion, it could only ever relate to the contractor’s liabilities under the building contract regardless of when the collateral warranty was executed
SSMC argued that practical completion had not actually been achieved on 31 March 2005. However, the judge rejected this, saying that regardless of the actual state of the works as of that date or any on-going works taking place after that date, practical completion was deemed to have been achieved under the express terms of the building contract.
Comment: The decision provides some welcome clarity to those both providing and relying on collateral warranties. However, depending on the express terms of the collateral warranty and/or the clear intention of the parties, it may still be possible for the limitation period under a collateral warranty to be longer than that in the underlying building contract. It therefore remains as important as ever to check the drafting carefully.
More on the case here.
