Background

Crosslands Properties Limited (Crosslands) was the owner of a multi-storey car park located in Dunfermline that was renovated in 2002. Apcoa Parking (UK) Limited (Apcoa) was the occupier of the car park. The multi-storey car park was in disrepair after the waterproof coating on the top deck had failed and the concrete had broken down in several locations. The cost of the repairs to the car park was estimated to be between £500,000 and £700,000.

Crosslands and Apcoa entered into an agreement prior to the erection of the multi-storey car park in which Apcoa would enter into a 25 year tenancy as occupier of the car park following satisfactory completion. In ensuring the works were carried out to an appropriate standard, an independent project manager was appointed to issue the practical completion certificate and the defects certificate.  Before Crosslands could be discharged of its liability under the agreement, it had to fulfil further obligations which were:

  • Give notice to Apcoa of any inspection by the project manager prior to the issue of the defects certificate (clause 5) and
  • Deliver collateral warranties from the main contractor and members of the professional team to Apcoa prior to the date of entry (clause 2.5 and 9.1)”.

Within clause 5, there were two key sub-clauses. One of which, sub-clause 5.2.1, stated that Apcoa was entitled to attend the final inspection and raise any issues regarding additional work that had to be done to any defective work, and the other, sub-clause 5.2.2, added that Crosslands was under an obligation to make good any defects presented by Apcoa.  Clause 5.4 of the agreement gave the project manager power to issue a certificate “when in its professional judgement it is appropriate to do so”.

Clause 9.3 of the agreement was an exclusion and read as follows:

subject to [Crosslands] implementing its obligations under Clauses 2.5 and 9.1 … [it] shall have no liability whatsoever and howsoever arising under this Agreement after the issue of the [defects] certificate … under the Building Contract in relation to the Works save in connection with any claim or proceedings commenced prior to that date”.

Crosslands could only rely on the above clause when they had delivered both the collateral warranties and defects certificate to Apcoa. Only then would Crosslands be free of its obligations and any liability under the Agreement in respect of any new claims.

A dispute arose between Crosslands and Apcoa as to who was liable for the cost of repairing the defects in the multi-storey car park. The key issue turned on whether Crosslands could depend on the exclusion clause in the agreement in circumstances where it had not fulfilled its other obligations.

Crosslands’ case as to why it was not liable for the cost of repairing the defects in the car park was that it had fulfilled its strict contractual obligations under clause 9.3 of the agreement, insofar as it had provided Apcoa with the collateral warranties on 30 September 2008 and issued the defects certificate to Apcoa on 15 June 2012. Furthermore, Crosslands argued that the project manager was given total autonomy to determine whether the works were satisfactorily complete, independent of Apcoa being at the final inspection or not.  As such, it was immaterial whether Apcoa had the chance to inspect the final works before the certificate was issued as the decision ultimately lay with the project manager.

Apcoa argued that clause 9.3 was not intended to provide Crosslands with a safeguard against failing to fulfil its obligations under the agreement; in particular, there had been no final inspection and Apcoa has not received the defects certificate (they only received this after they had issued proceedings in 2015). Somewhat damagingly, Crosslands admitted that no final inspection meeting was recorded as ever having taken place.

Decision

The Court found in favour of Apcoa.

Crosslands’ failure to comply with the requirements under the agreement (namely clause 5), prevented Crosslands from being able to rely on the exclusion clause. Lord Woolman stated that the tipping point of liability between the parties was the issuing of the defects certificate in accordance with the agreement.

In coming to this conclusion, the Court sought to determine the intention of the parties when the agreement was formed. The Court cited the case of Arnold v Britton [2015] in which, “they inferred the intention of the parties at the time of the agreement from the contract as a whole”.  It was apparent that the parties’ aim at the time of contract formation had been for Apcoa to be given the opportunity to inspect the works prior to completion.  As such, Lord Woolman decided that under sub-clause 5.2.1, “Apcoa was entitled to participate in the certification process”.

Lord Woolman did not consider clause 5.2.1 to be an optional process which Crosslands could chose to ignore. Instead he decided that both parties had to comply with this aspect of the agreement as he“would be slow to hold in the circumstances that it [Apcoa] could be deprived of its right to raise an action in respect of the works against Crosslands”, and that as a result, Crosslands would benefit from an unfulfilled obligation.

By failing to fulfil its obligations under clause 5 (i.e. by not validly issuing the defects certificate), Crosslands’ liability was not discharged.

Implications

The decision provides useful guidance on how exclusion clauses interact with other provisions in a contract and in particular, demonstrates the critical importance of complying with all aspects of the contract that are caught by the exclusion clause.

This case serves as a timely reminder to pay attention to all the clauses of an agreement, as opposed to merely considering individual clauses in isolation. More importantly, if there are express procedures to be complied with under an agreement, then strict adherence to those clauses may be needed before any other remedy or right will apply.

For more information about this case, please contact Justin Mendelle on 020 7061 5948 or mail email hidden; JavaScript is required

This article is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published.