Whether a Part 20 defendant had contracted out of a contribution claim with the claimant

http://www.bailii.org/ew/cases/EWHC/TCC/2015/2858.html

The defendant engineers to an action issued Part 20 proceedings against a contractor, seeking a contribution. The contractor had given the claimant tenant a warranty which provided, in relevant part, that "no proceedings shall be commenced against the contractor after the expiry of 12 years from the date of issue of the last written statement by the client that practical completion of the Project has been achieved". The contractor applied to have the Part 20 proceedings against it struck out and one of the issues in this case was whether "no proceedings shall be commenced against the contractor" meant proceedings by the claimant tenant only or could also include the contribution proceedings being brought by the defendant engineers.

The contractor argued that the purpose behind the provision was to ensure that no proceedings could be brought against it after a particular time. That argument was rejected by the judge who said that the clear meaning of the words "no proceedings" used in the warranty between the claimant and the contractor was that no proceedings could be brought by the claimant. No wider interpretation could be adopted. Accordingly, the defendant engineers could not be said to have no reasonable prospect of succeeding in their contribution claim. The judge also noted that, if the contractor's argument had been right, parties could effectively "contract out" of contribution claims even though the third parties were not a party to the agreement.

Section 1(3) of the Civil Liability (Contribution) Act 1978 provides that: "A person shall be liable to make contribution ….notwithstanding that he has ceased to be liable in respect of the damage in question since the time when the damage occurred, unless he ceased to be liable by virtue of the expiry of a period of limitation or prescription which extinguished the right on which the claim against him in respect of the damage was based".

Fraser J approved earlier caselaw to the effect that where liability has ceased (as opposed to never having existed in the first place), contribution is no longer available if the underlying legal right has been extinguished . However, contribution is still available where (as here) the legal right (of the claimant) cannot be enforced (because of a time bar defence) but has not been extinguished either. (There are, however, certain exceptional situations where the expiry of a limitation period does extinguish the legal right too eg a party cannot bring an action in conversion as the owner's right to the goods if the limitation period has expired).