TCC judgment on limitation and continuing duties for consultants

The Technology and Construction Court (TCC) has handed down an important judgment on various issues in the recent case of Lendlease Construction (Europe) Limited v AECOM Limited [2023] EWHC 2620 (TCC). This article explores the key findings which concern limitation issues, the execution of deeds and the maintained standard duty of care.

Background facts

This case follows the judgment in St James Oncology SPC v Lendlease Construction (Europe) Ltd and Another [2022] EWHC 2504 (TCC) which found Lendlease, as the main contractor for the design and construction of a new Oncology Centre at St James’ University Hospital in Leeds, liable to pay the employer damages for mechanical, engineering and fire safety defects in the works.

In turn, Lendlease sought to recover some of its losses from its mechanical and electric consultant, Aecom Limited (Aecom). Lendlease argued that Aecom should be held liable to Lendlease for an indemnity or contribution as the defects were in Aecom’s work.

Issues

The Court primarily dealt with the following questions:

Limitation

1. Whether or not the consultancy agreement between Lendlease and Aecom was a deed or simple contract.
2. If the contract was not a deed, whether the limitation clause which enabled claims to be issued for up to 12 years took precedence over the statutory six-year limitation period for simple contracts.
3. Whether Lendlease’s claims were statute barred.

Continuing duties

Whether Aecom was under a continuing duty in relation to its designs after it had completed its services.

Decision

Limitation valid deed: Aecom had not executed the deed using one of the valid methods of execution. The conclusion drawn was that the two signatories had signed in the wrong place, but the judgment found that Aecom had intended to execute the agreement as a deed and had relied upon the document taking effect as a deed. There was also an issue that neither signatory was a statutory board director, although, the judge concluded there was no argument that they were “on a frolic of their own” in binding Aecom. Both were sufficiently senior in the business, and the judge concluded that they were estopped by representation from arguing that they did not have the power to bind Aecom. The applicable limitation period was 12 years because the parties had intended the agreement to take effect as a deed.

Limitation clause: Lendlease contended that even if the agreement was a simple contract, the clause in the agreement providing a 12-year limitation period meant that the parties had contracted out of the statutory six-year limitation period for simple contracts. The Court had already determined that the agreement took effect as a deed with a 12-year limitation period, but Eyre J commented that the 12-year limitation period stated in the agreement was a long stop in regard to when claims could be issued, not a means to contract out of the statutory limitation.

Statute barred: The Court re-affirmed the principles that, in a contractual claim, a cause of action for defective design accrues on the date of breach, whereas in negligence the cause of action accrues when the negligence first causes damage.

The Court held that the alleged defect claims were statute barred as 12 years had passed since both the date of breach of contract and the date of first damage.

However, in order to determine when the cause of action had accrued, it was necessary to consider Aecom’s continuing duties under the agreement.

Continuing duties

The Court considered the scope of Aecom’s duties and whether professional consultants have a continuing duty to advise or warn or review matters. The judgment noted the decision in Oxford Architects but concluded that the determination in each case is to be based on the terms of the contract in question.

In paragraph 168 of the judgment Eyre J highlighted: “Where the contractual obligation is solely that of providing a design the contract is unlikely to be interpreted as imposing an obligation on the designer to review the design after it has been supplied. Where there are duties going beyond the provision of a design there can be a contractual obligation to review design. The extent to which the duties go beyond the provision of a design and the nature of the further duties will be highly relevant factors in considering whether there is a duty to review”.

In relation to Aecom’s duties, Eyre J therefore looked to the schedule of services in the agreement, which referred to matters going beyond the preparation and handing over of Aecom’s design and envisaged some continuing involvement thereafter, but not insofar as a continuing duty to review arose.

Eyre J held that Aecom did not have any duty to review its design or to undertake coordination or its other related tasks after the construction was completed.

One interesting point is that the duty owed by Lendlease (which mirrored that owed to the Trust under the Project Agreement) was an absolute obligation to achieve compliance with applicable standards – here this was the Health Technical Memoranda (HTM) in respect of fire safety. Aecom’s contractual standard was to exercise all reasonable skill and care to achieve the HTM standards, but the judgment held that despite this lower contractual standard the failure of the design of the works to achieve the HTM requirements amounted to negligence. This is a point worth noting given other ongoing litigation involving private finance initiative (PFI) contracts where this position is not unusual.

Practical implications

Overall, the judgment highlights the importance of considering limitation issues at the outset of a matter and provides affirmation of a number of key principles relating to when a cause of action accrues.

It also suggests that in certain situations the courts will adopt an equitable approach in relation to limitation periods where deeds have not been executed validly.

Continuing duties must be considered on a case-by-case basis, but key considerations will include the agreed scope of services as well as the consultants’ action and any relevant circumstances that arose during their involvement.

This article was co-authored by paralegal, Madihah Shah.