The main issue between the parties concerned whether the Developer could rely on the exclusion of liability clause in circumstances where it had not complied with other obligations, particularly the duty to have a final inspection at which the tenant would have had an opportunity to make representations before the issue of the certificate of making good defects under the building contract.
What happened in this case?
Apcoa (the tenant) operate a multi-storey car park build at Kingsgate Shopping Centre in Dunfermline and the Developer was the developer of that car park. The parties had entered into a development and lease agreement.
The key terms of the agreement provided that:-
- The Developer had to give Apcoa at least 10 working days’ notice that the project manager intended to carry out the final inspection of the works;
- Apcoa was entitled to attend the final inspection on site and to make representations about any additional works to be carried out or any defective works to be remedied before the final certificate was properly issued; and
- The Developer was obliged to make good all defects and have regard to all written representations made by Apcoa.
The development agreement also contained the commonly found developer cut off or exclusion of liability clause - which said that, subject to it delivering the collateral warranties, it would have no liability under the building contract after the issue of the certificate of making good of defects.
The collateral warranties were delivered in 2008 and the certificate of making good of defects was issued in 2012. It appears, however, that there was no final inspection before the issue of the certificate of making good of defects and therefore, there was no opportunity for Apcoa to make representations about any additional works to be carried out or any defective works to be remedied.
Subsequently, the waterproof coating on the top deck of the car park failed - resulting in water ingress to the floors below. The cost of remedying the damage was between £500,000 - 700,000. Each party took the view that the other was the one liable to do the work and bear the cost.
The Court's decision
The court decided that the fact that the exclusion of liability clause did not expressly make it subject to the Developer complying with its other related obligations was not the key issue.
Instead the court focussed on the clear intent of the parties as expressed in the inspection clause - and interpreted the contract to the effect that the exclusion of liability clause would only apply if the Developer complied with its other relevant obligations. To have decided otherwise the court said would have produced an extraordinary result where the developer could benefit from the exclusion of liability without fulfilling the contractual scheme.
As the Developer had not complied with its obligations relative to the inspection before the issue of the certificate of making good defects, the certificate had not been validly issued and therefore the exclusion of liability clause had not been triggered.
The case serves as a timely reminder for all parties, not just developers, to have regard to all terms of a development agreement/agreement for lease, rather than simply looking at individual terms in isolation - and if there are specific procedures/processes to be followed under the agreement, then strict adherence to those might be required before other remedies or rights or exclusions will apply.
If you would like to discuss these issues further, please contact us.
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