The Technology and Construction Court has made several important findings in its decision in Lendlease Construction (Europe) Limited v Aecom Limited [2023] EWHC 2620 (TCC) which will be of real interest to those in the construction industry and their insurers.
Various issues were placed before the Court, but this article focuses on the key limitation issues which emerge from the judgment and related findings in connection with the relevant standard of care.
Background
The Claimant ("Lendlease") argued that the Defendant ("Aecom") was in breach of its obligations under a contract to provide mechanical and electrical consultancy services in relation to the construction of a new Oncology Centre at St James's University Hospital in Leeds ("the Consultancy Agreement"). The case followed on from the earlier decision in St James Oncology SPC Ltd v Lendlease Construction (Europe) Ltd and Another [2022] EWHC 2504 (TCC), which had found Lendlease liable to pay substantial damages for fire safety defects. Lendlease sought recovery of its losses from Aecom.
Aecom's Limitation Defence
The Court had to consider the following issues raised by Aecom in its limitation defences:
- Whether the Consultancy Agreement was a simple contract or a deed;
- Whether the Consultancy Agreements limitation clause which provided for claims being raised for up to 12 years ousted any statutory 6 year period within the Limitation Act 1980 were the Consultancy Agreement found to be a simple contract;
- Whether significant aspects of Lendlease's claim were statute-barred regardless.
Simple contract or a deed?
The Consultancy Agreement had not been executed correctly as a deed by Aecom but the court held that Aecom had purported to execute it as a deed and that they were therefore estopped from contending otherwise.
12 year limitation period?
The court held that the 12 year period was in reality simply a long stop on when claims could be raised. It was not an attempt to contract out of statutory limitation.
Was Lendlease's claim statute-barred?
The court found it was for Lendlease, having raised the action, to establish that its claim was not statute-barred by proving the date on which the event or cause of action giving rise to the claim first accrued.
Notwithstanding the Court's finding that a 12 year period was applicable because of the treatment of deeds, the Court found that all alleged defect claims were statute barred.
The court held that the cause of action for any claim in negligence based on defective design accrues when the negligence first causes damage. This will be when the "relevant defective design [is] incorporated into the building" and when "…the contractor builds in accordance with that drawing" (in accordance with Cameron Taylor Consulting Ltd v BDW Trading Ltd [2022] EWCA Civ 31). What mattered in any question of negligence was not the defective design but what happened to that design after it was drawn.
However, the court went on to reassert that the cause of action for a breach of contract accrues on the date of the breach. Therefore, a contractual cause of action for defective design will accrue when the design is handed to the contractor for construction. This would be the case even if construction was not completed until substantially later.
Standard of Care
The case also touched on whether Aecom had contracted to exercise reasonable skill and care or whether they had undertaken to achieve specified criteria that Lendlease was itself subject to under its arrangements with the St James Project Company – in effect strict liability.
The Court held the Consultancy Agreement did contain prescribed specific criteria but went on to find that this criteria was "setting the context in which the question of what is required in order to perform with reasonable care, skill, and diligence is to be addressed". It followed that Lendlease had not faithfully stepped down all their relevant design obligations to Aecom.
Notwithstanding that, the court found that any failure by Aecom to comply with relevant regulations and the requirements of Health Technical Memorandum would have been, absent a compelling explanation to the contrary, a failure to exercise reasonable care, skill, and diligence.
Practical Implications
The case provides clarity on the date of accrual for design cases and highlights the differing treatment for claims under contract and in negligence. The discussion and the court's treatment of the arguments in connection with the execution of deeds and the contractual limitation clauses is consistent with earlier authorities but nevertheless interesting. Finally, it strikes us that the court's treatment of the specific design criteria placed in Aecom's appointment and the finding that, on the facts, this did not impose obligations beyond the usual professional standard of care wording in the appointment will be something which designers and their insurers will welcome.
