ISSUING CONTRIBUTION PROCEEDINGS WITHIN THE LIMITATION PERIOD: COURT OF APPEAL DECISION TODAY

A party  has two years to bring a claim for a contribution under the Civil Liability (Contribution) Act 1978. In The Chief Constable of Hampshire Constabulary -v- Southampton City Council [2014] EWCA Civ 1541 the Court of Appeal found that this period ran from the date of acceptance of a Part 36 offer not a subsequent court order.  This is a case that highlights the general rule in all limitation issues – assume that the period runs from the earliest date and issue promptly.

THE FACTS

The police force settled an asbestosis claim by a policeman (who had subsequently deceased).

  • On the 8th October 2010 the police made an offer to the claimant in that action to settle.
  • This offer was accepted on the 4th November 2010.
  • This acceptance was subsequently made a consent order by the court dated 15th December 2010.
  • The police issued proceedings for a contribution on the 3rd December 2012.

THE FINDINGS: DATE RAN FROM ACCEPTANCE NOT COURT ORDER

The question of limitation was heard as a preliminary issue.  The judge held that the date ran from the date of acceptance of the Part 36 offer and not the court order.

THE ARGUMENTS ON APPEAL

The Court of Appeal:

  • Rejected an argument that this case fell within 10 (3) of the  Limitation Act 1980.That section refers to a judgment given in court proceedings.  The Court held that earlier decisions that the relevant date is the date of settlement rather than the date of a consent order were good law.
  • Rejected an argument that, because costs still had to be assessed, then the “amount to be paid” had not been determined.

THE JUDGMENT

Jackson L.J. stated:-

  1. Mr Porter submits that the phrase in section 10 (4) of the 1980 Act “the amount to be paid” means the amount to be paid in respect of both costs and damages. Accordingly in the present case, if section 10 (4) is applicable, time did not start to run under that section until Berrymans and Simpson Millar agreed the amount of costs due to Mr Chegwidden, namely £140,000. They reached that agreement on or shortly before 15th September 2011. Therefore HC commenced the contribution proceedings well within the two year limitation period.
  2. In support of his argument Mr Porter relies upon Parkman Consulting Engineers (an unlimited company) v Cumbrian Industrials Ltd [2001] EWCA Civ 1621; 79 Con LR 112 and Mouchel Ltd v Van Oord (UK) (No 2) [2011] EWHC 1516 (TCC); 137 Con LR 105. I must therefore examine those authorities.
  3. In Parkman the principal defendant in an action settled the claimants’ claims for damages, interest and costs for £1.95 million. The Court of Appeal held that the defendant was entitled to bring contribution proceedings against its co-defendants in respect of the settlement sum, even though that sum included an element of costs. The Court of Appeal, comprising Henry LJ, Robert Walker LJ and Sir Anthony Evans gave a single judgment, stating at [123]:

“Our present view is that the 1978 Act enables the party claiming contribution to recover a contribution towards a payment made in respect of the injured party’s costs: but it is sufficient for the purposes of the present case that the judge was entitled to have regard to the whole of the settlement figure paid in respect of ‘all claims’. We would so hold.”

  1. In Mouchel Mouchel Ltd faced a claim by Kier Construction Ltd, which it settled for £517,500, inclusive of interest and costs. Mouchel then brought contribution proceedings against Van Oord (UK) Ltd under the 1978 Act. Ramsey J held that Mouchel was entitled to bring a contribution claim under the 1978 Act in respect of the costs as well as the damages which it had paid out to Kier.
  2. In both Parkman and Mouchel the settlement agreement with the claimant was for a single global sum, not expressly apportioned as between damages and costs. But that is not always the case. Very often both the damages figure and the costs figure are agreed; alternatively damages are agreed, with costs to be assessed by the court.
  3. Let me take a paradigm case in which D settles with C for £x damages and £y costs. D then claims a contribution against TP, whose negligence was one of the causes of the damage which C suffered. Under section 2 (1) of the 1978 Act D is entitled to claim a contribution from TP towards both the damages of £x and the costs of £y.
  4. In many cases, although both damages and costs are agreed between C and D, damages are agreed first and costs are agreed later. The present is such a case. In that situation when does time start to run under section 10 (4) of the 1980 Act?
  5. In my view section 10 (4) of the 1980 Act is focused upon the sum which D agrees to pay for the actual damage caused. It is not focused upon D’s ancillary liability for costs, even though that liability can be the subject to a contribution claim under the 1978 Act. I say this because of the opening words of the sub-section, in particular “makes or agrees to make any payment to one or more persons in compensation for that damage” (my underlining).
  6. The word “damage”, which appears four times in section 10, is in my view a reference to the actual damage which has been wrongfully caused to or inflicted upon C. C’s right to recover costs from D is not part of C’s “damage”. It is an ancillary entitlement, subject to the discretion of the court.
  7. The phrase the “amount to be paid” which appears in the latter half of section 10 (4) of the 1980 Act must be construed consistently with the opening words of that sub-section. In my view it means the amount to be paid in respect of the actual damage caused to C. It does not refer to or include the amount of costs which D must pay to C, even though those costs can be the subject of a contribution claim.
  8. This interpretation of section 10 (4) not only fits with the wording. It also makes good practical sense. There is quite often a long time lag before costs are agreed or assessed after the main settlement of C’s claim. C is entitled to commence contribution proceedings during that period. It would be bizarre if time did not start to run for limitation purposes until the possibly much later date when costs are quantified.
  9. For all these reasons I conclude that in the present case time started to run under section 10 (4) on 4th November 2010. That was the date when Mr Chegwidden accepted HC’s Part 36 offer of damages in the sum of £71,351.20 with costs to be agreed or assessed later.

SECTION 10 OF THE LIMITATION ACT 1980:

“(1) Where under section 1 of the Civil Liability (Contribution) Act 1978 any person becomes entitled to a right to recover contribution in respect of any damage from any other person, no action to recover contribution by virtue of that right shall be brought after the expiration of two years from the date on which that right accrued.”

(2) For the purposes of this section the date on which a right to recover contribution in respect of any damage accrues to any person (referred to below in this section as “the relevant date”) shall be ascertained as provided in sub-sections (3) and (4) below.

(3) If the person in question is held liable in respect of that damage —

(a) by a judgment given in any civil proceedings; or

(b) by an award made on any arbitration;

the relevant date shall be the date on which the judgment is given, or the date of the award (as the case may be).

For the purposes of this sub-section no account shall be taken of any judgment or award given or made on appeal in so far as it varies the amount of damages awarded against the person in question.

(4) If, in any case not within sub-section (3) above, the person in question makes or agrees to make any payment to one or more persons in compensation for that damage (whether he admits any liability in respect of the damage or not), the relevant date shall be the earliest date on which the amount to be paid by him is agreed between him (or his representative) and the person (or each of the persons, as the case may be) to whom the payment is to be made.”

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