The Civil Liability (Contribution) Act 1978 provides that any person liable in respect of any damage can recover contribution from any other person liable in respect of the same damage. Section 1(4) of the Act provides that "A person who has made or agreed to make any payment in bona fide settlement or compromise of any claim made against him in respect of any damage … shall be entitled to recover contribution in accordance with this section …"
Section 10(1) of the Limitation Act 1980 provides that no action to recover a contribution under the 1978 Act shall be brought after the expiry of a period of two years from the date on which such right accrued. The right to a contribution is treated, for the purpose of limitation, as accruing on the date of any judgment or award or "upon agreement to pay compensation in the case of a settlement" (s.10(4)). Section 10(4) provides that "If… 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."
The issue in this case was what is meant by an agreement to pay. The claimant contactor had settled with the property owner and then sought a contribution from the defendant designer, who argued that the contribution claim was now time-barred.
Prior caselaw has established that under section 10(4) there must be agreement as to the amount of the payment and not merely as to liability. Also, the court should seek to identify the "earliest date" of the underlying agreement and not the subsequent date when any consent order was sealed by the court or made by the arbitrator. The issue in this case was whether section 10(4) requires the parties to have entered into a binding agreement, or whether an agreement in principle, with the final details still to be worked through, is sufficient to make time start running under the section.
The judge held that a binding agreement is required: "Since there can only be one trigger event, it follows that time cannot start to run where the parties reach an unenforceable agreement as to payment. In such a case, the litigation or arbitration remains on foot and time will only start to run under section 10(4) from the date of the subsequent formal agreement or, if the matter cannot be agreed, under section 10(3) from the date of the judgment or award".
It is open to the parties to reach an immediately binding agreement as to the settlement payment, but leave for later agreement details as to payment terms or any liability for costs, in which case time will start to run from the date of the agreement as to the amount of the payment. Equally, it is open to the parties to agree that nothing is agreed until everything is agreed, and so time will not start to run until the date of the subsequent binding agreement (or, should agreement prove impossible, the judgment or award).
Here, binding terms as to the payment were only agreed upon the execution of the settlement agreement and accordingly these proceedings were not time barred.