In construction projects it is often the case that there are a number of parties involved. When something goes wrong, it is not always clear which party is responsible, indeed there may be a number of parties, such as the architect, the engineers and the contractor, who have contributed to the problem. This article considers what might happen where a claim is made against one of those parties and that party considers that others may be responsible.
An employer may choose to focus on one of the parties. This is because from an employer’s perspective it can be more straightforward to pursue just one party, especially if that party is insured and/or if the contracts provide for arbitration leaving the employer to issue separate arbitration proceedings against all the parties.
If a party finds itself carrying the can where other parties were culpable, what can it do?
This can leave consultants and contractors exposed to large claims, where they find themselves jointly and severally liable with parties that they did not themselves appoint, and whose performance they have little (if any) influence over.
The party left carrying the can is able to issue a “contribution” claim against any other of the other parties that contributed to the breach under the Civil Liability (Contribution) Act 1978 (“the Act”),
Section 1(1) of the Act provides that “any person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage(whether jointly with him or otherwise)”.
This all seems very straightforward, however it can give rise to a number of issues.
Firstly, when is a party “liable”?
The answer is easy if there is a judgment but what about where there has been a settlement?
Section 1 (4) deals with this:
“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 (including a payment into court which has been accepted) shall be entitled to recover contribution in accordance with this section without regard to whether or not he himself is or ever was liable in respect of the damage, provided, however, that he would have been liable assuming that the factual basis of the claim against him could be established.”
Second, the liability has to be in respect of the “same damage”. This was confirmed in the decision of the House of Lords in Royal Brompton Hospital NHS Trust v Hammond. There the employer sued its architects for negligently granting extensions of time under a building contract. The employer had already compromised an arbitration with the contractor on terms which included an indemnity by the employer against any claim by the architects. The architects claimed a contribution against the contractor. The claim was struck out because the damage for which it was alleged the architects were liable was not the same as that for which the contractor would be liable.
Third, the party from whom contribution is claimed must have been liable to the original claimant. In the case of Co-operative Retail Services Ltd. v Taylor Young Partnership the claimant and the third parties were the employer, main contractor and sub-contractors. The defendants were the architects and engineers. The claimant and third parties, but not the defendants, were all insured under an all risks insurance policy covering against loss or damage to the works by specified perils, including fire. The works were damaged by fire. The claimant alleged that the defendants had caused the fire by their negligence. The defendants sought to claim a contribution from the third parties. The claim failed because the third parties would not have been liable to the claimant under the contract for the employer’s uninsured losses: all the employer could do was require the third parties to carry out reinstatement works to be paid for out of the insurance.
If all of the above criteria are satisfied, a defendant will be able to pursue a contribution claim against a third party. But it must be alert to the time frame for bringing contribution proceedings. It has two years from the date of liability in which to bring the claim (see Section 10 of the Limitation Act 1980). It is worth noting that this timeframe applies regardless of whether the limitation period for the claimant to bring proceedings against the third party has expired.
The amount that can be recovered from one party can be limited by a net contribution clause