Court of Appeal confirms time for claiming contribution to damages runs from acceptance of Part 36 offer

The Court of Appeal has held that, where a claim was settled by acceptance of a Part 36 offer, the defendant's two-year limitation period for bringing a contribution claim ran from the date of acceptance, not from the date of subsequent consent orders embodying the settlement agreement and quantifying costs: The Chief Constable of Hampshire Constabulary v Southampton City Council [2014] EWCA Civ 1541.

Although there is some uncertainty as to whether the same would necessarily hold true if the consent order had been worded differently, or if the settlement had been reached outside the Part 36 machinery, the case gives a clear message for defendants who wish to claim a contribution toward an agreed damages payment: the claim should be issued (well) within two years of the earliest possible date on which a concluded agreement might be said to have arisen.

Background

Under section 10 of the Limitation Act 1980, a claim under the Civil Liability (Contribution) Act 1978 for a contribution in respect of any damage must be brought within two years from:

• the date of a judgment or award by which the person claiming the contribution was held liable in respect of that damage (section 10(3)); or otherwise
• the earliest date on which the amount to be paid was agreed (section 10(4).

In this case, the claimant constabulary issued proceedings against the defendant city council on 3 December 2012 for a contribution to damages paid in respect of a mesothelioma claim.

The underlying claim had been settled by acceptance of a Part 36 offer. The letter of acceptance was dated 4 November 2010. On 15 December 2010, at the request of the parties, the court made a consent order which referred to the parties having reached agreement and ordered that (i) all proceedings in the action be stayed except for the purposes of implementing the agreed terms set out in the schedule to the order (which essentially repeated the agreed terms); and (ii) the defendant pay the claimant's costs to be subject to detailed assessment if not agreed. Subsequently the amount of costs was agreed and a further consent order was made, on 15 September 2011, giving effect to that agreement.

Decision

The Court of Appeal held that the claim was time barred, as the two-year period began to run from the date of acceptance of the Part 36 offer. Jackson LJ gave the lead judgment, with which Patten and Lewison LJJ agreed.

• The court rejected the argument that the consent order of 15 December 2010 fell within section 10(3) of the Limitation Act 1980, as it was not a "judgment" by which the contribution claimant was "held liable". That was not surprising; where parties settle their litigation using CPR Part 36 it is unusual for there ever to be a judgment holding the defendant liable. Further, CPR 36.11 imposes an automatic stay on the proceedings from the moment of acceptance, subject to limited exceptions (such as the court's continuing power to deal with costs).
• The court also rejected the argument that "the amount to be paid" in section 10(4) meant the amount to be paid in respect of both damages and costs, so that time did not run until the later date on which the quantum of costs payable was agreed. Section 10(4) is focused on the sum agreed to be paid for the actual damage caused, not the ancillary liability for costs.

Comment

In its decision, the Court of Appeal left open whether there might be a "judgment" for the purposes of section 10(3) where a claim is settled outside the Part 36 machinery and judgment is later entered by consent for the amount of damages agreed in the settlement. Jackson LJ asked: "In that situation does the limitation period start under section 10(4) on the date of the settlement agreement and then re-start under section 10(3) on the date of the judgment?" But since the question did not arise in the present case, he did not answer it.

Of course, even where a claim is settled outside the Part 36 machinery, it is relatively unusual for judgment to be entered by consent (as opposent to the claim being stayed under a Tomlin order, or discontinued or dismissed once the settlement terms are complied with). This point is therefore likely to be more of academic than practical interest.

In any event, given the uncertainty, the only safe course is to bring contribution proceedings by the earlier date - ie within two years of the concluded settlement, whether under Part 36 or otherwise, and whether or not judgment is subsequently entered by consent.