Swansea Stadium Management Company Ltd v City & County of Swansea & Anor

A contractual notice deeming defects to have been made good may conclusively end the contractual defects-liability machinery without conclusively determining compliance with the contractor’s core obligations. Claims for defective design, construction or remedial work may therefore remain available under those core obligations.

An obligation to take all reasonable steps to enforce contractual rights requires a context-sensitive assessment. It does not require an employer to litigate or adjudicate where expert evidence is needed, the beneficiary has pursued a non-litigious course, or the employer has no loss and the beneficiary has a direct claim.

A latent defect must satisfy the contractual definition at the specified date. The defect, rather than its later consequences, must have existed and not been visible then.

The claimant operated the Liberty Stadium under a lease from the first defendant, which had employed the second defendant to design and build it. The claimant held collateral warranties from the contractor and an agreement under which the Council undertook to take all reasonable steps to enforce its building-contract rights.

The claimant alleged defective concourse flooring and defective paintwork. Its original construction claims had been struck out as time-barred: [2018] EWHC 2192 (TCC). The remaining claims concerned the contractor’s obligations under the defects-liability provisions and the Council’s obligations under the 2006 agreement. The central issues were the effect of the Notice of Completion of Making Good Defects, the 2012 settlement agreement, the existence of latent defects, and whether the Council had taken all reasonable steps.

1. Claims against Interserve. Clauses 16.2 and 16.3 imposed specific obligations to identify defects appearing during the Defects Liability Period and to make them good. They did not create a general liability for all construction defects. The claimant had identified no qualifying instruction under clause 16.3 and no final schedule of defects containing defects that remained unremedied.
2. The Notice of Completion of Making Good Defects under clause 16.4 deemed completion of the discrete machinery in clauses 16.2 and 16.3 for all purposes of the building contract. It therefore barred claims under that machinery after the notice. It was not conclusive evidence of compliance with the core obligations to design and construct the works in accordance with the contract. The claimant’s collateral-warranty claim was coterminous with the contractor’s liability to the Council and failed accordingly.
3. Flooring. The flooring was a defect under the lease because it had inadequate wet slip resistance, existed at the lease commencement date, was not visible then, and resulted from defective design, workmanship or materials. The Council nevertheless took all reasonable steps before the remedial works, and it was reasonable to settle the flooring issue in 2012 by reference to likely shot-blasting costs rather than the more expensive resin system involving betterment. The claim was dismissed.
4. Paintwork. Defective preparation or application of on-site repairs could constitute a latent defect if the defect existed and was not visible on 22 April 2005. Visible unrepaired damage and visible repair failures did not qualify. The evidence did not identify which defects satisfied the contractual definition or correlate them with snagging-list items. The claim therefore failed for want of proof.
5. The Council’s obligation to take all reasonable steps did not require it to issue proceedings or commence adjudication contrary to the claimant’s stated preference for negotiation and its intention to pursue the contractor directly. The claimant failed to prove breach. The claims against both defendants were dismissed. Quantum and the Council’s contribution or indemnity claim therefore did not arise.

The judgment describes earlier first-instance decisions by O’Farrell J. The original construction claims were struck out as time-barred in [2018] EWHC 2192 (TCC). An application concerning the latent-defect issue was dismissed in [2018] EWHC 2210 (TCC).