Northern & Shell Plc v John Laing Construction Ltd.

The Court of Appeal dismissed the appellant's challenge to the Technology and Construction Court judge's summary judgment. The court held that clause 5 of the Deed of Warranty unambiguously fixed the date when the deed "comes into effect" as the day after the issue of the Certificate of Practical Completion and that the parties intended the deed to take effect from that date. Because the warranty was under seal and the limitation period was twelve years, causes of action accrued the day after practical completion and the claim, brought later, was statute barred.

The court relied on the contractual wording and the factual matrix, in particular the building contract (clause 45.1.3), to find that the deed was intended to operate in step with the underlying building contract; business efficacy supported giving clause 5 retrospective effect. The appellant's alternative characterisation of the deed as a simple, standalone "fresh promise" made on signature was rejected. The court also held that a prior contractual relationship is not a prerequisite to implying retrospectivity where intention and business efficacy justify it.

Background and parties. The dispute concerned defective external works (cladding, coping and weatherproofing) at an office block. John Laing Construction Limited was the contractor under a JCT building contract with the developer. Stockley Academy Limited (later succeeded by Northern & Shell plc) acquired a long lease and a Deed of Warranty under seal from the contractor dated 16 January 1990. The Deed of Warranty purported to covenant that the contractor had complied and would comply with the building contract; clause 5 stated the deed "shall come into effect on the day following the date of issue of the Certificate of Practical Completion." Practical completion for the relevant external works occurred in August 1989.

Procedural posture. This was an appeal from His Honour Judge Thornton QC (Technology and Construction Court), who on 4 October 2002 granted summary judgment for the defendant and held the claimant's action to be statute barred. The Court of Appeal heard the appeal on 16 July 2003.

Nature of the claim. The claimant sought to rely on the Deed of Warranty to sue for breach in respect of defective construction. The central relief in issue below was damages for breach of the warranty deed (and thus, derivatively, for breaches of the building contract).

Issues framed. (i) Whether the cause of action under the Deed of Warranty accrued on the date the deed was signed (16 January 1990) or on the date specified in clause 5 (the day after the Certificate of Practical Completion, i.e. 26 August 1989). (ii) Whether clause 5 had retrospective effect or whether the deed created a fresh promise effective only on signature. (iii) Whether implication of retrospectivity required a pre-existing relationship or other necessity.

Reasoning and findings. The court found clause 5 to be clear and unambiguous: the deed was to take effect the day after the issue of the Certificate of Practical Completion. The parties had evidently intended the deed to be signed before practical completion so that the obligations would operate from practical completion; the fact that signature in fact occurred later did not alter that common intention. The building contract (clause 45.1.3) informed the factual matrix and supported the view that the warranty was to mirror the contractual obligations under the building contract. The court held that intention to give retrospective effect may be established expressly or by necessary implication from the surrounding circumstances and business efficacy; a pre-existing contractual relationship is not a strict prerequisite. The appellant's argument that the deed furnished a new, standalone promise enforceable only from signature was rejected as inconsistent with the deed's wording and context. Because causes of action accrued from the practical completion date, the twelve-year limitation period had elapsed before the claimant commenced proceedings and summary judgment for the defendant was correct.

Wider comments. The court observed that retrospectivity depends on the parties' intention and that implication requires business efficacy and conformity with parties' reasonable expectations; prior relationship may make retrospectivity easier to infer but is not essential.

The appeal is dismissed. The Court of Appeal held that clause 5 of the Deed of Warranty unambiguously fixed the date the deed came into effect as the day after the Certificate of Practical Completion, that the parties intended the deed to operate from that date (so that obligations and causes of action crystallised from practical completion), and therefore the twelve-year limitation period had expired before proceedings were issued. The judge's grant of summary judgment for the defendant was upheld.

Appeal from Queen's Bench Division, Technology and Construction Court (His Honour Judge Anthony Thornton QC), judgment below dated 4 October 2002 (summary judgment for the defendant on limitation grounds); appealed to Court of Appeal, neutral citation [2003] EWCA Civ 1035, judgment on 16 July 2003.