| Date | 24 March 1999 |
|
|
| Judgment | Pearce & High Limited -v- Mr and Mrs Baxter, CA 15 February 1999 |
|
|
| The Issue | Effect of notification provisions during defects liability periods. |
|
|
| Implication |
The employer's failure to comply with the notice requirements of defects liability provisions, whether by refusing to allow the contractor to carry out the repairs or by failing to give notice of the defects, limits the amount of damages which it is entitled to recover. |
printWhere a defect occurs following completion of building or engineering works due to a breach of contract by the contractor, and subject to any express terms to the contrary such as concerning a binding final certificate, an employer will be able to bring an action for damages against the contractor in respect of the defect. The damages recoverable will include consequential losses, together with the direct loss to the employer which may be assessed upon the cost of repairs by a third party, or in certain cases, the diminution in value of the property by reason of the defect. The employer's right to sue will generally continue from the date of completion to the date of expiry of the period of limitation. For general purposes this may be regarded as six years in the case of a "simple" contract, and twelve years for contracts executed as deeds. In parallel with these common law rights and remedies, construction contracts generally provide for a defects liability period variously of six, twelve or eighteen months from completion. It is a matter of common misunderstanding in the construction industry how these provisions operate together. It will generally always be a matter of interpretation of the contract whether the rights under the defects liability provisions are intended to displace the right to damages at common law altogether, or are intended to act concurrently. In the main however, and in the absence of an express provision to the contrary, the defects liability provisions are in addition to, and not in substitution for, the common law rights. The commercial justification for defects liability clauses is generally that repair work can be carried out more cheaply and efficiently by the original contractor rather than by another firm. Thus the contractor may not only be seen as having the obligation, but in many cases the right, to make good at his own cost any defects which appear within the defects liability period. These matters were recently examined in the Court of Appeal in the case of Pearce & High Limited-v-Baxter. Mr and Mrs Baxter had engaged Pearce & High as building contractors for alterations and extensions to their home in Oxfordshire. The works were carried out under the JCT Minor Works contract and following practical completion a dispute arose concerning payment of outstanding moneys alleged due by the contractor. Complex and lengthy legal tussles followed during which time it emerged that Mr and Mrs Baxter sought to defend the claim for moneys due on the basis of alleged defects in the works. It was acknowledged that neither Mr and Mrs Baxter nor their architect had notified these defects to the contractor within the defects liability period of six months from practical completion. The court therefore had to consider whether the Baxters were entitled to rely on such defects in their defence. The matter was first heard in the County Court where the Recorder held in favour of the contractor stating, "If a building owner does not notify defects within the defect liability period then……….the contractor having been denied the opportunity of returning to the building, cannot thereafter be sued in respect of patent defects which are not notified to him". I should emphasis at this point that this decision concerned patent defects; in other words these were defects which had become apparent during the notice period rather than having remained latent. If this judgment was held to be correct it would mean that if an employer failed to notify defects during the defects liability period, its right to damages in respect of the cost of repairs of those defects would be lost for all time. The Court of Appeal recognised that such a common law right could not be excluded except by clear express words or by a clear and strong implication from the express words used. Lord Justice Evans accepted that the giving of a notice with regard to defects should be regarded as a condition precedent to the employer's right to require compliance with the defects liability clause. This however did not impinge on an employer's common law right to recover damages for the contractor's breach. This would be reconciled by considering the assessment of damages which the employer would be entitled to recover. When an employer fails to notify and thus a contractor is denied the right to repair defects itself, the contractor will not be liable for the full cost of repairs carried out by third parties. Lord Justice Evans held that the employer could not recover more than the amount which it would have cost the contractor to remedy the defects. This result would be achieved either as a matter of the contractor's right to set off against the employer's damages, or more simply by reference to an employer's duty to mitigate its loss.
CJ-9912
|
|||
|
© Brewer Consulting |
|||
 |
|||