BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (QBD)
B e f o r e :
SITTING AS A DEPUTY HIGH COURT JUDGE
R.G. CARTER BUILDING LIMITED
|- and -
KIER BUSINESS SERVICES LIMITED
(formerly Mouchel Business Services Limited)
Miss Lynne McCafferty (instructed by Beale & Company Solicitors LLP) for the Defendant
Hearing date: 25 January 2018
Judgment handed down: 5 April 2018
Crown Copyright ©
MR EDWARD PEPPERALL QC:
5.1 Mr Steven Walker QC, counsel for Carter, contends that there was no agreement as to the remedial works until the parties to the arbitral proceedings signed a settlement agreement on 29 June 2015. Alternatively, the date of agreement was in any event later than 28 April 2015 since the parties were still negotiating the terms of their settlement throughout April. Accordingly, he submits, the two-year limitation period did not expire until after the standstill agreement and this claim is in time.
5.2 Miss Lynne McCafferty, counsel for Kier, argues that the remedial works were agreed by 16 April 2015, or at the latest by 27 April 2015. All that remained to be agreed thereafter were ancillary matters that did not prevent time from running. Therefore, she argues, the claim was already statute barred at the date of the standstill agreement.
"I confirm that my client is minded to pursue a settlement along the lines of the proposal discussed between our respective clients on 27 March 2015. Accordingly, my client's efforts are now focussed on the matter of the Heads of Terms documentation.
The initial feedback from the School is that they are also amenable to attempting the external works in an effort to solve the problem.
The School have confirmed that your client may undertake investigatory works between 2-4 May …
Accordingly, it seems sensible to agree a way forward that ensures that our respective clients have a sufficient opportunity to discuss and finalise the Heads of Terms … documentation."
"I confirm that my client is prepared to agree to a settlement in principle in accordance with the heads of terms agreed between our respective clients at their [without prejudice] meeting on 27 March 2015 and as recorded in the manuscript note attached subject to the detail of the Heads of Terms being agreed and the Council obtaining the full agreement of the School to the Heads of Terms.
You indicated that your client was willing to agree to a suspension of the arbitration until the end of May having regard to the above. My client agrees that is a sensible way forward to ensure efforts can be concentrated upon agreeing the Heads of Terms."
"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 …"
"If, in any case not within subsection (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."
20.1 As noted above, time for the bringing of a contribution claim runs from the date of the judgment or award where the matter is litigated or arbitrated: s.1o(3).
20.2 Cases in which the underlying dispute is settled fall under section 10(4) and not section 10(3). That remains the case notwithstanding that the parties' settlement is subsequently recorded in a court order: Knight v Rochdale Healthcare NHS Trust  EWHC 1831,  1 WLR 371 (Crane J); approved in Aer Lingus plc v Gildacroft Ltd  EWCA Civ 4,  1 WLR 1173, at - (Rix LJ) and Chief Constable of Hampshire Constabulary v Southampton City Council  EWCA Civ 1541, at  (Jackson LJ). Accordingly, the court should seek to identify the "earliest date" of the underlying agreement and not the subsequent date when the consent order was sealed by the court or made by the arbitrator.
20.3 In cases falling under section 10(3), time runs from the judgment or award which ascertains quantum and not merely an earlier judgment or award establishing liability for damages to be assessed: Aer Lingus, at .
20.4 So too, under section 10(4) there must be agreement as to the amount of the payment and not merely as to liability: Aer Lingus, at - and . Equally, time does not run from earlier agreement to pay an interim payment towards a potential liability, but from the date of agreement of the final sum to be paid: Spire Healthcare Limited v Brooke  EWHC 2828 (QB), at - (Morris J).
20.5 The agreement that must be identified is an agreement for payment for the actual damage caused. The running of time is not further delayed pending agreement of any ancillary liability for costs: Chief Constable of Hampshire Constabulary, at -.
20.6 While section 10(4) talks about payment, such term includes both monetary payment and payments in kind: per Judge Havery QC in Baker & Davies plc v Leslie Wilks Associates  EWHC 1179 (TCC), at . Accordingly, the agreement of remedial works is, for the purposes of subsection (4), an agreement for the payment of compensation.
"What happens where there is agreement on a settlement sum followed by a consent judgment for payment of that sum, as must often occur? Or a judgment for damages to be assessed followed by agreement on a settlement sum? Are such cases governed by subsection (3) or (4)? They cannot be governed by both: there can in logic be only one 'relevant date', and this is emphasised by the words which introduce subsection (4) – 'If in any case not within subsection (3) above …'
If subsection (3) requires only a judgment for damages to be assessed, then it must follow that, given such a judgment, subsection (4) never comes into play, for the case will already fall within subsection (3). If, however, subsection (3) requires a judgment for damages, then an agreement within subsection (4) could both follow a mere judgment for damages to be assessed and anticipate a consent judgment for the payment of the agreed sum: but it would be the agreement which comes first at a time when there is no judgment within subsection (3), and it would seem that the relevant date is fixed by subsection (4)."
22.1 She submitted that the language of section 10(4) does not suggest that a binding agreement is required. Parliament could, she argued, have chosen to state in terms that time ran from the date of any binding agreement or settlement agreement.
22.2 In this respect, the language of section 10(4) was to be contrasted with section 1(4) of the 1978 Act, which Miss McCafferty accepted requires a binding settlement or compromise.
22.3 The policy of the 1980 Act is to prevent the litigation of stale claims. Such consideration points therefore to time running from the earliest date, as indeed section 10(4) says in terms. There is a particular danger of stale contribution claims being brought many years after the original building works.
22.4 Miss McCafferty relied on the following passage in McGee on Limitation, (7th Ed.), at para. 15-024:
"Section 10(4) states quite clearly that time runs from the date on which the amount of compensation is agreed. In out-of-court settlements there may well be a number of other matters requiring to be agreed, such as date of payment, possibility of instalments and method of payment. However, none of these has any relevance. Agreement on them will not set time running but absence of agreement on them will not prevent it from running – it is only the amount of compensation that must be agreed."
22.5 By way of example, Miss McCafferty points out that time ran in Knight v Rochdale Healthcare NHS Trust  EWHC 1831,  1 WLR 371 from agreement as to the settlement sum even though there was as yet no agreement as to whether it would be paid as a lump sum or by way of a structured settlement.
22.6 Here, an agreement in principle that Carter would carry out remedial works was sufficient to make time run, even though there might not be a binding agreement until the details had been agreed.
23.1 The natural meaning of "agreed" in section 10(4) was that there should be a binding agreement in a contractual sense.
23.2 Secondly, His Honour Judge Havery QC held in Baker that time ran not from the agreement of a proposed settlement on a subject to contract basis but upon the execution of the subsequent settlement agreement.
23.3 Thirdly, upon Miss McCafferty's construction, time might begin to run under section 10(4) before the claim for contribution arose under section 1(4) of the 1978 Act.
24.1 Time would start to run under section 10(4) upon the agreement of non-binding terms of settlement.
24.2 Upon the talks subsequently breaking down, the litigation between the parties might be pursued. Does time keep running even though the agreement has broken down? Or is the running of time to be suspended? Or is the clock reset?
24.3 Thereafter, the case might be determined at trial. Does time now run afresh under section 10(3)?
24.4 Alternatively, the parties might finally agree binding terms of settlement at the door of the court. Does such agreement for the payment of compensation start the clock running again under section 10(4)?
26.1 the date of the judgment or award requiring a payment in cases where such issue is the subject of a judicial or arbitral determination; or
26.2 the date of the agreement to make the payment in a case where the issue is compromised.
"In a case where agreement to pay compensation had been made and then embodied in a consent order it was held that time ran from the making of the agreement and not from the later date when the consent order was made. Thus, there was no overlap between s.10(3) and s.10(4). Although it would have been possible for Parliament to provide that the making of the consent order re-set the clock, it had not in fact done so. However, it is likely that the court will want to see evidence of a finalised agreement rather than merely a preliminary agreement."
"(1) In order to determine whether a contract has been concluded in the course of correspondence, one must first look to the correspondence as a whole …
(2) Even if the parties have reached agreement on all the terms of the proposed contract, nevertheless they may intend that the contract shall not become binding until some further condition has been fulfilled. That is the ordinary 'subject to contract' case.
(3) Alternatively, they may intend that the contract shall not become binding until some further term or terms have been agreed …
(4) Conversely, the parties may intend to be bound forthwith even though there are further terms still to be agreed or some further formality to be fulfilled …
(5) If the parties fail to reach agreement on such further terms, the existing contract is not invalidated unless the failure to reach agreement on such further terms renders the contract as a whole unworkable or void for uncertainty.
(6) It is sometimes said that the parties must agree on the essential terms and that it is only matters of detail which can be left over. This may be misleading, since the word 'essential' in that context is ambiguous. If by 'essential' one means a term without which the contract cannot be enforced then the statement is true: the law cannot enforce an incomplete contract. If by 'essential' one means a term which the parties have agreed to be essential for the formation of a binding contract, then the statement is tautologous. If by 'essential' one means only a term which the court regards as important as opposed to a term which the court regards as less important or a matter of detail, the statement is untrue. It is for the parties to decide whether they wish to be bound and, if so, by what terms, whether important or unimportant. It is the parties who are, in the memorable phrase coined by the judge, 'the masters of their contractual fate.' Of course the more important the term is the less likely it is that the parties will have left it for future decision. But there is no legal obstacle which stands in way of the parties agreeing to be bound now while deferring important matters to be agreed later. It happens every day when parties enter into so-called 'heads of agreement'."
THE LIMITATION DEFENCE IN THIS CASE
36.1 In a payment in kind case, the "amount to be paid" means the scope of the remedial works. Accordingly, agreement as to the scope of the works is required. Agreement simply to carry out such remedial works as might subsequently be assessed or agreed is no more an agreement as to the "amount" of the settlement payment than an agreement to pay damages to be assessed or agreed.
36.2 I therefore reject Miss McCafferty's submission that there was firm agreement as to the amount of the payment before the parties had agreed the precise scope of the works. These were not matters of fine detail or mechanics, they were matters that went to the very question at the heart of section 10(4), namely the amount of the payment in kind.
36.3 I accept Mr Alflatt's evidence that the scope of the works had not been and could not be finalised until after the investigatory surveys and the subsequent technical meeting on 8 May 2015, and that in fact there were amendments to the scope of the works right up until 25 June 2015.
36.4 Accordingly, even if I am wrong as to the proper construction of section 10(4), there was not in any event agreement as to the amount of the compensation payment in this case until at least 25 June 2015.