Some Topical Issues In Construction Law

Author:Mr Stephen O'Sullivan
Profession:Stephen O'Sullivan, Barrister

Construction litigation is complex. Not only are lawyers heavily reliant on expert reports but there are legal defences that will be raised which must be overcome before those reports even become relevant. Firstly, it might be argued that the claim is statute barred. Proceedings are often issued after 6 years of the building works having been completed or the certificate of compliance from the architect having been signed. Therefore the issue of latent defects arises. Secondly, the defence might be raised that there is no liability for economic loss in the law of negligence. If that defence is successful and the plaintiff has no contract with that defendant, the case will not succeed. Thirdly, some defendants might be insured and other defendants might not. The insured defendants might argue they are not concurrent wrongdoers with the other defendants and seek to prove they are only liable for a portion of the damage that ensued. Lastly, even where a plaintiff succeeds in getting a judgement against the defendant, in the current environment defendant may not be a mark for damages. The question arises whether the plaintiff can pursue that defendant's insurance policy. The Statute of Limitations In a tort claim or a breach of contract claim outside of personal injury, the time limit is generally 6 years from the date the cause of action accrued and there is no extension for date of knowledge. In the (English) Latent Damage Act 1986 the limitation period is amended by providing for an alternative 3 year limit running from the date of knowledge in the case of latent damage but no such amendment has been made here. No similar provision exists in Irish law other than for claims for personal injury or product liability. In Irish Equine Foundation Ltd. v. Robinson [1999] 2 IR 442 the plaintiff's claim for negligence and breach of contract against an architect and engineer for a defective roof was struck out as being outside the limitation period. The court held that time ran from when the roof was constructed on the basis that if the plaintiff had used an expert to inspect it on completion the defects would have been discovered, even though water only leaked through 4 years after completion. In Pirelli General Cable Works v. Faber  [1983] 2 AC 1 the plaintiff sued for negligent design of a factory chimney which was built in 1969. Cracks developed in 1970, which cracks could not have been discovered with reasonable diligence until 1972 and were not in fact discovered until 1977. The court held that time ran from 1970 when the damage came into existence and not the date when damage could with reasonable diligence have been discovered or when the damage was discovered. In Hegarty v. Flanagan Brothers Ballymore Ltd. (Unreported High Court (Birmingham J) 31/5/13) the court applied Murphy v. McInerney Construction Ltd. (Unreported High Court (Dunne J) 22/10/08) to find that the time limit in negligence ran from the date when the damage manifested itself and not on the date when the damage was discovered. In that case the claim against the engineer was held to be statute barred when the engineer had given a certificate of compliance of planning permission in respect of the foundations in 2000 and was not joined to proceedings until 2012. The plaintiff argued that she was unaware that the engineer had issued a certificate until it was furnished through discovery by another defendant in 2012. It is not clear from the judgement how the court concluded that the damage had manifested itself more than six years before 2012 other than that the plaintiff had said that in January 2002 she noticed cracks on the walls of the property and assumed they were settlement cracks. In summary, it is arguable that time runs from when the damage occurred or when an expert could have concluded that the building was defective, whichever is earlier. Liability in tort for economic loss The principal obstacle here is the difficulty in recovering economic loss as part of a negligence claim (other than a negligent misstatement claim). This legal issue is very relevant where it is sought to sue the architect when there is no contract between the architect and the plaintiff as would normally be the case. The issue is also relevant where the principal contractor has gone into liquidation and there is no insurance policy worth pursuing under section 62 of the Civil Liability Act 1961. In those circumstances an attempt might be made to sue the subcontractor in tort where the subcontractor is insured. The following points seem relevant:- a. There is authority that a builder can be liable in tort for dangerous defects which might cause personal injury or damage to property. Colgan v. Connelly (Unreported High Court (McMahon J) 29/2/80). b. There is authority that a builder can be sued in tort for non-dangerous defects insofar as they cause damage to other parts of the property. Murphy v. Brentwood 1991 1 AC 398. c. As the vexed question of whether you can claim for non-dangerous defects in tort, i.e. defects in quality, the law is uncertain. Junior Books v. Veitchi Company Limited 1983 1 AC 520  found that you could claim for this but it was overruled in a number of subsequent English cases. The Irish High Court applied Junior Books v. Veitchi Company Limited in Ward v. McMaster [1985] IR 29 and the latter case has been much commented on but has not been overruled in later cases in this jurisdiction. Whether the builder and the architect or engineer can be held to be concurrent wrongdoers Under section 11 of the Civil Liability Act 1961, where two or more persons responsible to a third person for the same damage, they can help be held to be concurrent wrongdoers. The effect of this is that if a court splits liability for negligence say 80% against the builder and say 20% against the architect, the architect could be liable for 100% of the damages although he could recover 80% from the builder. The problem is that if the builder is not a mark and has no insurance, the architect may never recover this money. This is often a real problem for the insurer since the architect's insurance often has run off cover (ie. the insurance policy will pay out in respect of the claim made in 2013 for negligence that occurred in say 2007 even if at the date of the initiation of the claim or the date of adjudication there was no valid and subsisting insurance policy in existence) and builders insurance often doesn't. The courts have adopted a wide interpretation of section 11 at times. In Lynch v. Beale (Unreported High Court J 23/11/74) the court found that the builder and the architect were concurrent wrongdoers even though the allegation against the builder related to inadequate foundations and the allegation against the architect related to inadequate design of the first floor, given that the damage caused to the third party was the same, namely the collapse of the building. Section 62 of the Civil Liability Act 1961 The effect of this is that monies payable under a policy of insurance are ring-fenced and do not form part of the assets of the bankrupt or of the company in liquidation. There are two important pre-requisites for the section to apply - monies must be payable to be the insured under the policy and there must be a valid claim against the insured. In McCarron v. Modern Timber Homes Ltd.  (Unreported High Court (Kearns P) 3rd December 2012) the court held that liability needs to be established and quantum needs to be assessed as against the insured before the insurer can be sued under this section. The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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