Larkfleet Ltd v Allison Homes Eastern Ltd

A contractual reference to a 10-year NHBC warranty does not ordinarily create a limitation period. Its meaning depends on the language of the clause and the NHBC scheme to which it refers. A clause requiring a contractor to accept responsibility for defects and related expense creates a contractual assumption of responsibility for claims made under that scheme. The cause of action arises when the contractor refuses to accept responsibility or fails to do so within a reasonable time after being asked. The clause does not, without sufficiently clear words, alter limitation periods for tort claims or shorten the time available under the Limitation Act 1980.

The claimant, a property developer, contracted with Swallow Homes Ltd to design and build residential properties. An amended clause provided that the claimant would register the site with the NHBC and that the contractor would accept responsibility for defects and expense arising during the 10-year NHBC warranty period. Swallow’s business and contractual responsibilities were later acquired by the defendant.

Foundation defects emerged and homeowners made successful claims under the NHBC scheme. The claimant sought to recover from the defendant in contract and tort. The defendant argued that the claims were time-barred and that clause 2.5.5 operated as a 10-year limitation provision. The court determined the contractual construction issues as preliminary issues, but declined to determine disputed factual questions concerning tort limitation.

1. Preliminary issues. A preliminary issue should ordinarily concern a question of law determined on agreed or assumed facts. The court declined to make binding findings on disputed dates of damage or knowledge without oral evidence. The approach in McLoughlin v Jones [2002] QB 1312 was applied.
2. Construction. Applying the principles stated in Arnold v Britton [2015] UKSC 36, the court construed clause 2.5.5 by reference to its language, contractual context, commercial purpose and the operation of the NHBC scheme. The clause dealt with responsibility for defects under that scheme, rather than merely repeating the contractor’s ordinary obligations under the building contract.
3. The 10-year reference identified the period during which NHBC cover was available. It was not a limitation period. The clause created a contractual assumption of responsibility by the contractor for the claimant’s responsibilities to the NHBC, including remediation and related expenses. It was not an indemnity, but it did not need to be one to impose those obligations.
4. The clause contained one cause of action, not separate causes of action for defects and expense. That cause accrued when the defendant refused to accept responsibility or, alternatively, failed to accept responsibility within a reasonable time after being asked. On the material before the court, the relevant period began no earlier than the claimant’s request of 24 May 2011 and included the defendant’s refusal dated 3 September 2013.
5. The clause did not refer to tort claims and lacked sufficiently clear words to alter or reduce the limitation periods otherwise applicable to them. Issue 1 was answered by reference to refusal or unreasonable failure to accept responsibility; Issue 2 was answered on the basis that there was one cause of action; and Issue 3 was answered no.