Northern & Shell Plc v John Laing Construction Ltd.

A contractual deed may take retrospective effect where that is the parties’ express or implied common intention. A prior contractual relationship is not an essential prerequisite. Where retrospectivity is implied, it must be necessary for business efficacy, conform with the parties’ true intention and reflect what both would have accepted as a matter of course.

A clause which determines when a deed takes effect must be clear and unambiguous if, on the facts, it also operates as a time bar. A collateral warranty may extend beyond the underlying obligation. Its duration and the accrual of claims nevertheless depend on the proper construction of the particular deed in its contractual setting.

The claimant occupied an office building as successor in title to the original long leaseholder. The defendant contractor had executed a deed warranting compliance with the underlying building contract. Although executed after practical completion, clause 5 stated that the deed would come into effect on the day following the certificate of practical completion.

His Honour Judge Thornton QC granted the contractor summary judgment and dismissed the action as statute barred. He held that clause 5 gave the deed retrospective effect, so the 12-year limitation period had expired before proceedings began.

The claimant appealed. The central question was whether its cause of action accrued when the deed was executed or on the earlier date fixed by clause 5.

1. Appeal dismissed unanimously. Nelson J delivered the judgment, with which Hale and Judge LJJ agreed. Clause 5 clearly fixed the effective date of the deed as the day following the certificate of practical completion. The deed therefore operated retrospectively despite having been executed several months later, and the claims were statute barred.

2. Clause 5 was not itself a limitation clause. Nevertheless, because its operation on the facts produced a time bar, it had to be clear and unambiguous. That requirement was satisfied. The relevant date was certain, ascertainable from the project records and discoverable by successors or assignees.

3. The parties’ objective intention appeared from the deed as a whole. It was common ground that the deed had originally been intended for execution before practical completion. Leaving clause 5 unamended when the deed was executed later was consistent with preserving its specified effective date. There was no basis for treating the clause as an error or reducing it to a restriction upon claims concerning pre-completion delay or cured defects.

4. The building contract formed an integral part of the deed’s factual and contractual setting. It required warranties under seal but provided that they should impose no greater undertaking than the building contract. Retrospective operation allowed the warranty holder to claim for breaches from practical completion while giving both parties certainty and aligning the limitation period with the underlying obligations.

5. Whether a contract or deed can operate retrospectively depends upon the parties’ express or implied intention. A pre-existing contractual relationship is not legally essential. If implication is required, the term must be necessary for business efficacy, conform with the parties’ true intention and be one both would have accepted as a matter of course. Those requirements were met here.

6. A collateral warranty may in principle begin later than, or continue beyond, the underlying obligation. The present deed created no such dissonance. Its fresh promises were compatible with the effective date expressly fixed by clause 5.

1. Court of Appeal (Civil Division): The claimant’s appeal was dismissed unanimously. The court upheld the summary judgment and dismissal of the action as statute barred.

2. Queen’s Bench Division, Technology and Construction Court: His Honour Judge Thornton QC granted the contractor’s application for summary judgment on 4 October 2002. He held that the deed operated from the date fixed by clause 5 and that the 12-year limitation period had expired.