This judgment is very interesting and principled for anyone who is either trying to remedy a defect, or to anyone who has a defect that has been tried to be remedied. The principle concerns the extent to which the contractor's remediation attempt in isolation can be perceived as an acknowledgement within the meaning of Section 14 of the Statute of Limitations, and if so, how far the recognition extends.
In this case, the contractor had tried in vain to remedy a deficiency at a newly erected apartment building. It was water-borne heat and the shortage was related to the heating system in the apartments. The contractor assumed that the problems were due to errors in the zoning and operation of the plant.
After the limitation period of three years had expired (counted from the takeover), an expert revealed that the problems were not due to the conditions the contractor had tried to remedy, but that the heating loops had not been insulated in the floor partitions. The consequence was that the underfloor heating did not go up to the floor of the upper floor, but down to the ceiling above the apartment below. In other words, it got too cold on one floor, and too hot on the other floor. Common to all apartments became problematic heat management.
Following its review of a number of judicial source factors on which former judges of the Supreme Court stood centrally, the Supreme Court summarised with the following:
If the contractor has undertaken and/or initiated defect remediation, it may be regarded as an acknowledgement under the statute of limitations section 14, but not necessarily. “The decisive factor will be whether it can be ascertained from the course of action that the debtor has positively and fairly clearly acknowledged the obligation in question.” In other words, an overall assessment of a range of circumstances is required to conclude.
In some cases, the nature and extent of the deficiency may be unclear, but this does not prevent a recognition from being considered to exist. However, the fact that such conditions are unresolved may speak against understanding the entrepreneur's course of action as a realization. In that regard, the Supreme Court highlighted that contractors have a duty to rectify even if they disagree (“jumping duty”).
Finally, the Supreme Court concluded that it is one thing to seek redress of defects, but quite another is to recognize that one is liable for any claim for compensation that a defect may lead to.
In this case, inadequate heat management was not due to the conditions the contractor sought to remedy, but a deliberate choice to drop insulation in the floor partitions. Efforts to remedy this will naturally be substantially more extensive than the remedial experiments with heat management and operation.
After an assessment of the parties' dialogue, agreement documents and other points of the case, the Supreme Court concluded that the contractor had not acknowledged any liability for defects in its course of action. The statute of limitations for the damages claim had not been interrupted by the contractor's remediation attempt.
For both builders and contractors, it is therefore important to observe the limitation period when you have defects that take time to rectify. Care should be taken to either take the necessary legal action or arrange an agreement extending the limitation period for all possible claims the individual circumstances may lead to.
