Some Thoughts on Claims for Latent Defects
By Mervyn Simon & Neil Kirby
Wordsworth’s words “[t]he rain fell in floods; But now the sun is rising, calm and bright”, summarise the heavy rains experienced over the past two years. Now in the light of the sun, many building owners have discovered defects in their buildings which have only become manifest after many years. By their very nature these defects fall into the category of latent defects. The problems which have arisen range from destabilised foundations to rising damp. The questions we will endeavour to answer are whether an owner has a claim for such latent defects, albeit that they have become manifest after many years, and also against whom such a claim may be made.
A number of scenarios arise: the present building owner may be a first-time owner whose building had been built by a contractor and which would have been supervised and designed by an architect, both of whom the owner had employed for this purpose. Alternatively, the owner could have purchased a building from a seller. A quantity surveyor, an engineer and even a geotechnical engineer may have also been employed as part of the professional team.
A patent defect is one which is discoverable by “such an inspection as would be made in the exercise of ordinary care and prudence.” (Black’s Law Dictionary). A latent defect is a defect which “is not discoverable by reasonable examination and only emerging in use” (The Oxford Companion to Law, 1980 edition).
The reason for labelling such defects as latent is that they were not discoverable at the time of the conclusion of the contract, or after an inspection by the architect (if appointed) prior to the issue of a final certificate of completion. Although the defects described in this article may become apparent as a result of heavy rains, we should point out that the principles discussed below are applicable to any latent defect.
Situations exist where the written contract between the parties is silent on the question of latent defects and indeed there are situations where the building may have been built without a formal contract, and the work performed on a quotation or order.
Certain standard contracts in current use deal specifically with the question of latent defects. We will deal with two examples. Before dealing with such examples it is important to note, as stated above, that in many instances the building work will have been completed many years ago. Our enquiry will accordingly oblige us to deal with the law of prescription.
The General Conditions of Contract for Works of Civil Engineering Construction Sixth edition (1990) (“GCC 1990”) provides in clause 55(3) that the contractor’s liability for latent defects should continue beyond the date of the Final Approval Certificate but the employer shall have no claim against the contractor arising out of any latent defect which manifests itself later than 10 years after the issue of the Final Certificate in terms of clause 55(3). The clause states that the provisions of the Prescription Act 68 of 1969, as amended, (“the Act”) shall apply in respect of any latent defect manifesting itself during the said period of 10years.
Hyman in his book Engineering Construction Contracts, Butterworths 1992 contends that:
“The effect of the limit imposed in sub-clause (3) on the Employer’s right to claim in respect of latent defects is that –
- if the defect manifests itself more than ten years after the issue of the Final Approval Certificate the Employer will have no claim;
- if the defect manifests itself during the period of ten years, the Employer has, in terms of the Prescription Act and subject to provisions of that Act suspending the running of prescription in certain circumstances, three further years in which to institute action on the basis of the latent defect.”
The Joint Building Contract Committee Principal Building Agreement June 1991 (“JBCC”) in clauses 25.5 and 25.6 as read with the definition clause specifically provides for the contractor’s liability for latent defects. The contractor’s liability for such latent defects begins on the date of commencement of the construction period and terminates 5years from the date of the certificate of final completion.
The Act was amended in 1984. The amendment to the Act has effectively removed the distinction between contractual and delictual claims with regard to the prescriptive period, and now in our law, in the absence of a clause to the contrary, for example, stipulating a different period of prescription, a debt prescribes three years from the date when the claimant knew of the identity of the debtor and the facts from which the debt or claim arises. These two criteria will obviously differ in each particular instance depending on the facts and the parties involved.
It is submitted, although no clear authority exists, that save where the contract clearly limits liability for latent defects, any clause limiting liability would be restrictively interpreted to relate only to patent and not latent defects.
Against whom does an employer have a claim? Claims by the employer will lie against the contractor and the architect and the other members of the professional team in contract if they have breached their contractual obligations to the employer. In certain circumstances the employer may also have a delictual claim against members of the professional team, notwithstanding the fact that he does not have a contract with such parties.
The case of Tsimatakopoulos v Hemingway, Isaacs and Coetzee CC & Another 1993 (4) SA 428(C) is of interest in this regard. In this case the plaintiff (Tsimatakopoulos) instituted proceedings against the engineer for damages arising from the collapse of a retaining wall on the plaintiff’s property, which had to be replaced at a cost of R38 735,66. The plaintiff in this instance had purchased a house from the second defendant. The second defendant had engaged the services of the engineer to design the retaining wall. There was no contractual nexus between the plaintiff and the engineer. The learned judge quoted from English and American authority and after considering the South African authorities, he concluded –
“I am satisfied upon the agreed facts of this case that the defendant, in the position of a professional engineer, should have foreseen the likelihood of harm being caused to someone in the position of the plaintiff. He must have known that the wall would not remain stable, and that the property on which the wall was built might be sold to another person, and that his negligent act was likely to cause that person harm.”
A question often asked is “What protection does the purchaser of a property have who becomes aware of latent defects after he has purchased the property?” In particular does a purchaser have a claim against the seller of the property? Most deeds of sale have a clause that is commonly known as a ‘voetstoots’ clause. In most instances such a clause exonerates the seller from liability from latent defects in that the property is sold ‘voetstoots’ or, as is commonly described, ‘as it stands’. The definitive decision is that of the Appellate Division in Van der Merwe v Meads 1991 (2) SA 1 (A). This case makes it clear that a seller is only liable to a purchaser if the seller acted with full knowledge of the defects and he deliberately and fraudulently failed to disclose such defects to the purchaser. It will therefore readily be appreciated that it is only in rare instances that a purchaser will have a claim against a seller. The purchaser’s position can be enhanced by including in the contract a simple warranty by the seller that it knows of no defects that have not been disclosed in writing to the purchaser.However, depending on the circumstances, (and in a case such as Tsimatakopoulos), the purchaser may have a claim in delict against the architect and/or engineer if it can be shown that the defects, which have now become apparent, were as a result of their negligence or unlawful act or omission.