Patently Obvious?

Friday 06 June 2014

A Final Certificate in a contractor’s hand should mean, in theory, one less project to worry about. In most cases it does. But, unfortunately for some, many an old project can come back (subject to the Statute of Limitations 1957) and haunt them in the guise of a latent defect. Whether the contractor is liable for a defect or not may depend on whether it is patent or latent. Clause 35(j) of the RIAI “yellow” contract (2012 Edition) clearly states that the “Final Certificate shall be conclusive in any proceedings…that the Works have been properly carried out…” save inter alia where “ any defect (including any omission) in the Works or any part thereof which reasonable inspection or examination at any reasonable time during the carrying out of the Works or before the issue of the Final Certificate would not have disclosed”. On first reading Clause 35(k) it appears to conflict with Clause 35(j) but it is felt the former applies only to interim certificates. In a nutshell, the Final Certificate acts as an evidential bar in proceedings with regard to patent defects save where there has been fraudulent concealment. Latent defects are a different matter. The contractor will continue, subject to the Statute of Limitations 1957, to be responsible for latent defects long after the project has been completed. The English case, Baxall Securities Limited and Anr-v-SWP and Ors, is useful in that the court examined the difference between a patent and latent defect. The case related to the construction of light industrial units in Manchester, which flooded after rainfall causing serious damage to the Claimant’s goods. The Claimant sued the architects for the negligent design of the roof gutter system and failing to ensure that the detailed design of the sub-contractor had sufficient capacity to cope with the expected rainfall in the area. The court found the main cause of the flooding was due to the absence of overflows, which they held was a patent defect which “should have been unearthed”. Additionally, the court held that a latent defect is a concealed flaw- a flaw is the actual defect in the workmanship or design, not the danger presented by the defect. In order to be latent it must be a defect, which would not be discovered following the nature of inspection that a defendant might reasonably anticipate the article would be subjected to. In the commercial context a defect is not latent if it is reasonably discoverable by a claimant with the benefit of such skilled third party advice as he might be expected to retain.