Collateral Warranty Signed Later Than Practical Completion Had Retrospective Effect

In Swansea Stadium Management Company Ltd v. City & County of Swansea and Interserve Construction Ltd [2018] EWHC 2192, the contractor argued that the tenant's claim under an undated collateral warranty had been issued outside the statutory limitation period and was unenforceable. The parties' disagreed about the effective start date of the warranty which was important as this was the date on which the cause of action arose and from which the limitation period was calculated. The issue was resolved by the Technology and Construction Court (TCC) which held that the warranty had retrospective effect to the date of practical completion (PC) despite having been signed later than PC. This meant the tenant's claim had indeed been issued outside the limitation period. The claim was therefore unenforceable and was struck out.

What happened in Swansea?

The City and County of Swansea (Swansea) had appointed Interserve Construction Limited (Interserve) under a JCT Standard Form of Building Contract with Contractor's Design, 1998 edition, (the Contract) to design and construct the Liberty Stadium.

Interserve entered into an undated collateral warranty (the Warranty) with the prospective tenant of the Stadium, Swansea Stadium Management Company Ltd (the Management Company), who were to manage the ground for Swansea City Football Club. The Employer's Agent issued notice under clause 16.1 of the Contract that PC had been reached as at 31 March 2005, at the same time as flagging up that there were still works to complete and defects to be made good.

In April 2005, Swansea granted a 50-year lease to the Management Company but Making Good Defects under the Contract was not achieved until May 2011. Defects were found in the stadium and, on 4 April 2017, the Management Company issued a claim seeking damages from Swansea and Interserve alleging defective construction and design in breach of the Contract and the Warranty.

Interserve applied to strike out the claim arguing that: the Management Company's claims had no real prospect of succeeding because they were barred by limitation under the Limitation Act 1980; the Warranty, which it had executed as a deed in April 2005, had retrospective effect to the date of PC (31 March 2005); and, therefore, the Management Company's claims were time-barred having been issued out of the limitation period of 12 years from the cause of action arising (on PC).

The Management Company disagreed, alleging that: the Warranty had...