Management

Garry Winter's case notes

6 September 2011

Inframatrix Investments v Dean Construction

Technology and Construction Court, 25 July 2011

Inframatrix ("Infra") wanted to build a camera factory. Dean was the contractor for the cladding and roofing works. Infra’s solicitors drafted a formal contract, but Dean renegotiated the terms and the original 12-year limitation period was reduced to one year. The relevant term read:

“17.4 No action or proceedings under or in respect of this Agreement shall be brought against the Contractor after:

(a) The expiry of one year from the date of Practical Completion of the Services or;

(b) Where such date does not occur, the expiry of 1 year from the date the Contractor last performed Services in relation to the project.”

Dean carried out the works in November and December 2008. In January 2009, Infra’s engineer asked Dean to rectify defects in the work. Dean did so and on 9 February sent an email confirming completion of the repairs. Despite this, in May 2009, Infra’s solicitors wrote to Dean making references to snagging items and giving Dean two weeks to resolve them. Dean replied that it had completed the works and was seeking the outstanding money due.

In July, Infra’s solicitors wrote again to Dean detailing specific defects of leaks, vibration in high winds, general poor quality of work and failure of air leakage testing. Dean denied liability and reiterated that it had undertaken remedial works in January.

In October 2009, before issuing proceedings, Infra’s solicitors sent a letter in accordance with the pre-action protocol formally setting out Infra’s claims and highlighting the requirement that the parties meet on a without prejudice basis within 28 days. Informal correspondence between the parties’ solicitors continued but a formal response to Infra’s October letter was not made until 26 February 2010. Dean denied responsibility but said it was willing to attend site to identify any remedial work required.

A meeting was arranged in March 2010. Dean then issued a report to Infra in April offering to undertake further investigative remedial work, if necessary, on the provision that the outstanding sums be paid. Infra did not accept. Dean repeated the offer in December 2010 but said that this offer would lapse if proceedings were issued. Again, Infra did not accept and on 29 December 2010 Infra issued proceedings. Dean’s solicitors applied to strike out the claim on the basis that it was time barred, alleging that the year-long limitation period had expired.

Infra’s response to the limitation defence was threefold. First, it argued the limitation period had not begun to run. It said that no certificate had been issued in accordance with clause 17.4 (a) and in interpreting clause 17.4 (b) that only came into effect “where such date does not occur”. The judge dismissed this and held that the limitation period simply expired 12 months after Dean’s last performance of services.

Second, Infra argued that the period had not expired as Dean had performed services less than a year before proceedings were started. Infra’s assertion was that Dean’s inspection in March 2010 and its report in April including an offer to return was a service. The judge rejected this on the grounds that the protocol required the parties to meet, that the meeting was on a without prejudice basis and as such did not prejudice Dean’s rights.

Infra’s final point was that Dean, by its conduct, had waived its right to rely on the limitation clause. The conduct Infra referred to was the meeting and Dean’s failure to mention the limitation period during negotiations despite being aware of its right to rely on clause 17.4. The judge found that waiver by election was not applicable and that waiver by estoppel was not made out on the facts. He found that the without prejudice meeting and the offers did not amount to conduct that implied Dean would not rely on clause 17.4 or was unconscionable.

Garry Winter’s analysis

Many parties to contracts do not read them in detail to understand what they have agreed to. Dean did and negotiated and amended it, which paid off.

The case also highlights the value of “without prejudice” correspondence. If the correspondence is a genuine attempt to resolve the dispute and without prejudice then any offer will not prejudice that party’s open position.

It is possible for a party to waive its contractual rights; therefore care should be taken in response to any breach of contract. Waiver by election occurs where a party entitled to alternative but inconsistent rights elects one, abandoning the other. Waiver by estoppel occurs when a party clearly and unequivocally leads the other to believe that they will not insist upon their contractual rights and in response to this restraint the other party alters its position or acts upon this, as was alleged in this case.

Finally, this case shows the importance of ensuring proceedings are commenced in time.

Garry Winter is a senior consultant with Knowles, a Hill International company. Tel: 01962 842929

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