A recent decision of the High Court in Belfast has highlighted the difficulties which can face property owners who bring claims in respect of construction defects many years after their property was built. The case relates to the Victoria Square development of 91 residential apartments where the claims against the building contractors and designers involved have been struck out.
While there were a number of issues raised in the action, this article examines the case from the perspective of a building contractor who is facing a claim in respect of allegedly defective construction work some years after the work was completed. Tughans Michael McCord acted for building contractor Farrans in the proceedings.
The Facts
Victoria Square is a well-known shopping centre in Belfast which comprises retail units and 91 residential apartments. It was developed by a company called Multi who employed BDP as designers to design the scheme and Farrans and Gilbert Ash as building contractors to build it. The development was completed in March 2008. Thereafter, Multi sold its interest in the development with the residential portion of the scheme being sold to management companies. It is alleged that in February 2019, a structural column in one of the apartments failed. Consequently, all the apartments were evacuated and have remained empty ever since. The apartment owners then commenced legal proceedings in April 2020 against the designers, building contractors and other defendants including the management companies. Strike out applications were brought by a number of the defendants, including the contractors, on the basis they could not have any legal liability.
The Law
i) Breach of Contract
In many cases concerning defective building works there will be a claim against the contractor for breach of contract. However, this can only apply if there is privity of contract between the claimant and the contractor. In this case there was no claim for breach of contract by the apartment owners, nor could there be, because they had no contractual relationship with the contractors.
ii) Defective Premises (NI) Order 1975
Instead, the apartment owners brought a claim under the Defective Premises Order which provides the owner of a dwelling with a statutory right of action against a contractor in respect of building defects which render the dwelling “unfit for habitation”. However, the problem here is that under the Limitation (NI) Order 1989, claims for breach of statutory duty must be brought within 6 years of the date upon which the cause of action accrued; and under the Defective Premises Order any cause of action against the contractor accrues at the time of practical completion. In this case, practical completion had occurred in March 2008. As proceedings were not commenced until 2020 this was outside the relevant limitation period.
To try to get around this problem, the apartment owners sought to advance two arguments. Firstly, that there had been an attempt to repair the damaged column at some point and therefore time for limitation purposes should run, not from the date of completion in March 2008, but from the date of the repair. Secondly, Article 71 (1) (b) of the Limitation Order provides for the postponement of a relevant limitation period where there has been “deliberate concealment” meaning, they argued, time should start running from when the defect was discovered in February 2019.
iii) Tort
There was, in addition, a claim by the apartment owners in tort in that they asserted the builders had been negligent in the way in which the building had been built. The problem here, as any law student will know, is that a claimant cannot recover in tort for what is known as “pure economic loss”. This follows a decision of the House of Lords in Murphy v Brentwood [1991] which decided, in effect, that a builder who is not in a contractual relationship with a claimant can have a liability in tort, but only to the extent his negligence causes damage to property other than the property itself. In other words, if a defectively-built property falls down, injuring someone or causing damage to other property, there will be a liability in respect of such damage or injury caused. However, there will be no liability in respect of the repair to the defectively-built property itself. One of the reasons for this appears to have been a policy consideration. The Court in Murphy felt that if Parliament has specifically legislated for repairs to defective property in the Defective Premises Order, it was not for the Courts to further expand the law of negligence into this area.
The apartment owners tried to get around this problem by arguing what is sometimes called the “complex structures theory” namely that the Victoria Square development was a complex building comprising more than one structure and that the column which had failed in one part of the property had caused damage to “other” property, i.e. the remainder of the residential development.
The Decision
As this was a strike out application, the Court was not required to hear detailed evidence about the alleged defects – the defendants all denied that they had any liability for the defects. Nonetheless, the Court was required to take the claimants cases at their height based upon their pleadings. It was for the defendants seeking the strike out to persuade the Court that the claims were “unarguable” or “incontestably bad” on the basis of the pleaded case.
In this respect, Huddleston J concluded that the claim under the Defective Premises Order was time barred. Completion occurred in March 2008, and proceedings were not commenced within 6 years. The claim in respect of a repair to the column was vague, but fundamentally the case of Sportcity Management v Countryside Properties [2020] established that even then, time would only start to run afresh in respect of the defective repair itself and not the original building work. Likewise, the claim for concealment was too vague to meet the legal test.
The tort claim failed too as it was a claim for pure economic loss. The complex structure theory did not apply, primarily because it would be artificial to treat the Victoria Square building as anything other than a single structure. Accordingly, the apartment owners’ claims against the contractors were struck out.
Commentary
This case highlights the importance of bringing claims within time under the current law. Parliament has decided that contractors who build buildings should not have an indeterminate exposure to the bringing of claims in respect of allegedly defective work. The relevant time limit is generally 6 years, but can be 12 years where there is a breach of contract claim and where the contract is under seal. There was and could be no breach of contract claim in the Victoria Square case and this will often be the case where a developer who has made building contracts has subsequently sold its interest in an apartment development to management companies.
It should be noted that, following the Grenfell Tower tragedy, the UK Parliament has extended the limitation period under the English equivalent of the Defective Premises Order to 30 years under the Building Safety Act 2022. This will increase the exposure for contractors building residential developments in England in terms of limitation periods. It is not known whether the NI Executive will pass similar legislation here. Interestingly, the apartment owners at Victoria Square sought a stay in respect of the Order of Huddleston J for a period of 6 months to see whether the NI Executive might extend the limitation period through similar Northern Irish legislation. However, the Court refused a stay on the basis that the Court must decide cases on the law as at stands, without pre-empting what legislation may or may not be passed in Parliament at some indeterminate time in the future.
A full copy of the Judgment of Huddleston J can be found here.
While great care has been taken in the preparation of the content of this article, it does not purport to be a comprehensive statement of the relevant law and full professional advice should be taken before any action is taken in reliance on any item covered.
