England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM SOUTHAMPTON COUNTY COURT
DISTRICT JUDGE POWELL
2YN64361

		Royal Courts of Justice Strand, London, WC2A 2LL
		01/12/2014

Lord Justice Jackson :

1. This judgment is in seven parts, namely:

Part 1. Introduction	Paragraphs 2 to 8
Part 2. The facts	Paragraphs 9 to 15
Part 3. The contribution proceedings	Paragraphs 16 to 20
Part 4. The appeal to the Court of Appeal	Paragraphs 21 to 23
Part 5. Does this case fall within section 10 (3) or section 10 (4) of the Limitation Act 1980?	Paragraphs 24 to 34
Part 6. The construction of section 10 (4) of the Limitation Act 1980	Paragraphs 35 to 47
Part 7. Executive summary	Paragraphs 48 to 51

Part 1. Introduction
2. This is an appeal by the Hampshire Constabulary ("HC") against a decision that its claim against Southampton City Council ("the Council") under section 1 of the Civil Liability (Contribution) Act 1978 is statute barred. The issue in this appeal is when time starts to run in a contribution claim, where the original claim is settled by acceptance of a Part 36 offer, but there are subsequent consent orders embodying the settlement agreement and quantifying costs.
3. In this judgment I shall refer to the Compensation Recovery Unit as "CRU". I shall refer to the original claimant, Robert Chegwidden, as "Mr Chegwidden". I shall refer to Simpson Millar LLP, who were Mr Chegwidden's solicitors, as "Simpson Millar". I shall refer to Berrymans Lace Mawer, who were and are HC's solicitors, as "Berrymans". I shall refer to Zurich Insurance who are the Council's insurers, as "Zurich".
4. I shall refer to the Civil Liability (Contribution) Act 1978 as "the 1978 Act". Section 1 (1) of the 1978 Act provides:

"Subject to the following provisions of this section, 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)."

5. Section 2 (1) of the 1978 Act provides:

"Subject to sub-section (3) below, in any proceedings for contribution under section 1 above the amount of the contribution recoverable from any person shall be such as may be found by the court to be just and equitable having regard to the extent of that person's responsibility for the damage in question."

6. I shall refer to the Limitation Act 1980 as "the 1980 Act". Section 10 of the 1980 Act provides:

"(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."

7. I shall refer to the Civil Procedure Rules 1998, as amended, "CPR". CPR 36.11 provides:

"The effect of acceptance of a Part 36 offer

(1) If a Part 36 offer is accepted, the claim will be stayed.

….

(5) Any stay arising under this rule will not affect the power of the court –

(a) to enforce the terms of a Part 36 offer;

(b) to deal with any question of costs (including interest on costs) relating to the proceedings."

8. After these introductory remarks, I must now turn to the facts.
Part 2. The facts
9. Mr Chegwidden, now unfortunately deceased, was a police officer in the HC throughout his working life. For many years he was based at the Southampton Central Police Station ("the police station"). The police station was located in the north and west wings of the Southampton Civic Centre. The Council owned that building and let the north and west wings to HC under a tenancy at will.
10. After retirement Mr Chegwidden developed mesothelioma as a result of exposure to asbestos. On 15^th April 2010 he issued proceedings in the Queen's Bench Division of the High Court against HC alleging that negligently and in breach of statutory duty they had exposed him to asbestos. In due course HC, using the CPR Part 36 procedure, settled Mr Chegwidden's claim for £76,351.20 plus costs. Of that sum £35,000 was payable to Mr Chegwidden and £36,351.20 was payable to the CRU.
11. HC's settlement offer under CPR Part 36 was contained in Berrymans' letter to Simpson Millar dated 8^th October 2010. Mr Chegwidden's acceptance of that offer was contained in Simpson Millar's letter to Berrymans dated 4^th November 2010.
12. At the request of the parties the court subsequently made a consent order, which embodied the settlement previously agreed as well as other matters. I shall refer to this as "the consent order". The consent order was dated 15^th December 2010 and read as follows:

"UPON AGREEMENT having been reached between the parties for the settlement of the Claimant's claim in this action and by consent IT IS ORDERED:-

1. All proceedings in this action be stayed except for the purposes of implementing the agreed terms set out in the Schedule hereto with liberty to apply for such purpose.

2. The Defendant to pay the Claimant's costs of this action such costs to be agreed if possible and if not, to be subject to a detailed assessment by the court.

SCHEDULE

1. The Claimant do accept the sum of £71,351.20 (seventy one thousand three hundred and fifty one pounds and twenty pence) in full and final settlement of his claim arising from these proceedings.

2. The Defendant do pay to the Claimant's solicitors the sum of £35,000 (thirty five thousand pounds) within 14 days of the date of this Order.

3. The Defendant do pay to the Compensation Recovery Unit the sum of £36,351.20 (thirty six thousand pounds three hundred and fifty one pounds and twenty pence) within 14 days of this order.

4. The Claimant do return to the Defendant the original Police notebooks and any CID day books/notes and any material relating to criminal matters retained by him upon his retirement within 90 days of the date of this Order.

5. Upon payment of the foresaid sums and costs the Defendant be discharged from all further liabilities arising out of or in any way connected with the claim the subject matter of these proceedings."

13. As foreshadowed in paragraph 2 of the consent order, the solicitors in due course reached agreement on the amount of Mr Chegwidden's reasonable costs. On the 15^th September 2011 Master Campbell, a costs judge in the Senior Courts Costs Office, made an order giving effect to that agreement. I shall refer to Master Campbell's order as "the costs order". The costs order provided:

"AND UPON the parties agreeing terms that namely that the

1. The Claimant's cost of this action payable by the Defendant are agreed in the sum of £140,000 (inclusive of vat and interest, credit to be given for the sum of £75,000 paid on account)

2. The costs of the detailed assessment are agreed in the sum of £11,500 (inclusive of vat and interest)

IT IS ORDERED THAT

1. The balance of £76,500 be paid by the Defendant to the Claimant on or before 29 September 2011

2. Liberty to apply."

14. HC took the view that the Council bore some responsibility for Mr Chegwidden's injuries. On 6^th January 2012 Berrymans wrote to Zurich, asserting that the Council had negligently allowed asbestos lagging to be present in the police station, thus exposing police officers to the risks associated with asbestos dust and fibres. Accordingly Berrymans notified Zurich that HC claimed against the Council a contribution to (a) the damages and costs paid to Mr Chegwidden and (b) HC's costs incurred in defending Mr Chegwidden's claim.
15. Zurich rejected the claim notified by Berrymans. In those circumstances HC commenced contribution proceedings.
Part 3. The contribution proceedings
16. HC commenced contribution proceedings against the Council by a claim form issued in Northampton County Court on 3^rd December 2012. In the accompanying particulars of claim HC asserted that the Council had been negligent in failing either to remove or properly encapsulate the asbestos lagging in the police station. Accordingly HC claimed a contribution to the damages and costs paid to Mr Chegwidden and a contribution to HC's own costs in defending Mr Chegwidden's claim.
17. The Council served its defence on 2^nd May 2013. The Council denied that it had been aware of the presence of asbestos in the police station during the period when Mr Chegwidden had worked there. The Council denied all the allegations of negligence. The Council also asserted that HC's claim was barred under section 10 of the 1980 Act.
18. Very sensibly the court dealt with limitation as a preliminary issue. This turned on a pure question of law, the facts not being in dispute.
19. The preliminary issue trial took place before District Judge Powell ("the judge") in the Southampton County Court on 1^st October 2013. After hearing the rival submissions the judge concluded that this case fell within section 10 (4) rather than section 10 (3) of the 1980 Act. She held that there was a binding agreement between Mr Chegwidden and HC on 4^th November 2010, that being the date when the Part 36 offer was accepted. The judge held that the limitation period commenced on that date, not on 15^th December 2010 when the court made the consent order or on any later date. Accordingly the judge held that HC's claim against the Council was statute barred. She dismissed the action.
20. HC is aggrieved by the district judge's decision. According it appeals to the Court of Appeal.
Part 4. The appeal to the Court of Appeal
21. By an appellant's notice filed on 29^th October 2013 HC has appealed against the judge's order on two grounds. The first ground is that this case fell within section 10 (3) of the 1980 Act, not section 10 (4) as the judge held. The second ground is that if this case falls within section 10 (4), then the phrase "amount to be paid" in that sub-section embraces costs as well as damages. Accordingly the judge erred in holding that time started to run on 4^th November 2010. On that date the amount of damages due to Mr Chegwidden had been agreed, but not the amount of costs.
22. The appeal was argued on 30^th October 2014 by Mr Martin Porter QC for HC and Mr Glyn Edwards for the Council. I am grateful to both counsel for their excellent skeleton arguments and oral submissions.
23. I must now turn to the first issue, which is whether this case falls within section 10 (3) or section 10 (4) of the 1980 Act.
Part 5. Does this case fall within section 10 (3) or section 10 (4) of the Limitation Act 1980?
24. Mr Porter places heavy reliance on the opening words of section 10 (4) of the 1980 Act, namely "If, in any case not within sub-section (3) above". He submits that these words show that where there is overlap, sub-section (3) applies. Therefore in a case where the settlement is embodied in a consent order, he submits that sub-section (3) applies. Accordingly time starts to run on the date of the consent order. In this case therefore time started to run on 15^th December 2010. HC commenced contribution proceedings in less than two years after that date. Therefore the Council's limitation defence fails.
25. In order to make good that argument, Mr Porter submits that Knight v Rochdale Healthcare NHS Trust [2003] EWHC 1831 (QB); [2004] 1 WLR 371 was wrongly decided. In that case a clinical negligence claim against a surgeon was settled by agreement on 24^th October 2010. The settlement agreement was embodied in a consent order dated 8^th November 2010. The surgeon commenced contribution proceedings against the relevant health authority on 1^st November 2012. Crane J held that the surgeon's contribution claim was barred under the 1980 Act.
26. Mr Edwards for the Council contends that Knight was rightly decided and is a complete answer to the first ground. He also submits, taking up a point which arose during argument, that the consent order in this case was not a "judgment" within the meaning of section 10 (3) of the 1978 Act.
27. In my view, it is helpful to begin with an analysis of what actually happened in the present case against the background of the CPR. On 4^th November 2010 Mr Chegwidden accepted HC's Part 36 offer. By operation of rule 36.11 (1) Mr Chegwidden's proceedings were thereupon automatically stayed.
28. When the court subsequently made the consent order on 15^th December 2010, it was exercising its power under rule 36.11 (5) "to deal with any question of costs …. relating to the proceedings". The other provisions in the order were either mere repetition of the parties' existing rights and obligations or an agreement about Mr Chegwidden's police notebooks.
29. The question whether Mr Chegwidden should return his notebooks to HC was not an issue in the litigation. The agreement that Mr Chegwidden should return them within 90 days was a separate agreement which the parties wished, and the court permitted, to be added to the consent order.
30. In my view the consent order did not constitute a "judgment" by which HC was "held liable" in respect of Mr Chegwidden's injuries. Accordingly it did not fall within section 10 (3) of the 1978 Act. Nor did the later costs order constitute a "judgment" falling within section 10 (3). Indeed there never was a "judgment" which fell within section 10 (3). That is hardly surprising. The parties settled their litigation using the machinery provided by CPR Part 36. When parties settle using that machinery, it is unusual for there ever to be a "judgment" holding the defendant liable. One of the benefits for a defendant who settles is, at least in the normal run of cases, that he avoids any adverse judgment of the court. Furthermore rule 36.11 (1) imposes an automatic stay upon the proceedings, subject to limited exceptions, from the moment when the Part 36 offer has been accepted.
31. Turning to Knight, in my view the actual decision in that case was correct. I note that the Court of Appeal in Aer Lingus plc v Gildacroft Ltd [2006] EWCA Civ 4; [2006] 1 WLR 1173 cited Knight with apparent approval at [37]-[38]. Although I agree with the actual decision in Knight, I have some reservations about the reasoning of Crane J in paragraph 21. For present purposes it is not necessary to decide whether the reasoning in paragraph 21 is correct. The facts of Knight are not entirely clear. It appears that the settlement in Knight may not have been achieved through the mechanism of CPR Part 36. Also the form of the consent order in Knight is different from the consent order in our case.
32. An interesting question which counsel debated in argument was this. Suppose there is a concluded settlement agreement outside the Part 36 machinery. Subsequently the claimant obtains with the defendant's consent a judgment holding the defendant liable for the amount of damages agreed in the settlement. 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? This is a pertinent question, but it does not arise for decision in the present case. I shall therefore not address it.
33. I am quite satisfied that section 10 (3) of the 1980 Act has no application in this case. The judge was correct to proceed under section 10 (4). I therefore reject the first ground of appeal.
34. I must now turn to the second ground of appeal, which concerns the construction of section 10 (4).
Part 6. The construction of section 10 (4) of the Limitation Act 1980
35. 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 15^th September 2011. Therefore HC commenced the contribution proceedings well within the two year limitation period.
36. 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.
37. 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."

38. 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.
39. 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.
40. 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.
41. 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?
42. 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).
43. 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.
44. 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.
45. 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.
46. For all these reasons I conclude that in the present case time started to run under section 10 (4) on 4^th 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.
47. I therefore reject HC's second ground of appeal. HC's contribution claim is statute barred.
Part 7. Executive summary
48. Mr Chegwidden claimed damages for personal injury caused by HC's negligence and/or breach of statutory duty. He settled that claim on 4^th November 2010 by accepting HC's Part 36 offer of £71,351.20 damages plus costs to be assessed if not agreed. On 15^th December 2010 the court in the exercise of its powers under CPR rule 36.11 (5) made a consent order effectively recording the settlement and requiring HC to pay Mr Chegwidden's costs to be assessed in default of agreement.
49. On 15^th September 2011 the court made a consent order assessing Mr Chegwidden's costs in the sum of £140,000. On 3^rd December 2012 HC commenced contribution proceedings against the Council under the 1978 Act. District Judge Powell held that the contribution claim was statute barred and she dismissed the action. HC now appeals against the district judge's order.
50. In my view the district judge's order was correct. The limitation period specified in section 10 (1) of the 1980 Act is two years from the date on which HC's right to recover contribution accrued. By operation of section 10 (4) that start date was 4^th November 2010. HC issued its contribution proceedings more than two years after that date.
51. If my Lords agree, this appeal will be dismissed.

Lord Justice Patten:

52. I agree.

Lord Justice Lewison:

53. I also agree.