Contribution proceedings: section 10—Limitation Act 1980 (R.G. Carter v Kier)

Contribution proceedings: section 10—Limitation Act 1980 (R.G. Carter v Kier)

The court held that the proper construction of section 10(4) of the Limitation Act 1980 (LA 1980) is that time starts to run from the date of a binding agreement as to the amount of the compensation payment. Anything short of a binding agreement is not sufficient to start time running. The court added that, even if a non-binding agreement was sufficient to make time run, an agreement ‘simply to carry out such remedial works as might subsequently be assessed or agreed’ would be insufficient to amount to an agreement on the amount to be paid for the purposes of LA 1980, s 10(4).

Written by Christopher Humby, senior associate at Quinn Emanuel Urquhart & Sullivan LLP.

R.G. Carter Building Ltd v Kier Business Services Ltd (formerly Mouchel Business Services Ltd) [2018] EWHC 729 (TCC)

What are the practical implications of this case?

It is important to approach LA 1980, s 10 on the basis that ss 10(3) and (4) are—upon their true construction, intended to be mutually exclusive. There can only be one trigger date to start time running under LA 1980, s 10, either: the date of the judgment or award requiring a payment in cases where this is the subject of a judicial or arbitral determination (LA 1980, s10(3)); or the date of the agreement to make the payment in a case where the issue is compromised (LA 1980, s 10(4)).

It was held that time runs under LA 1980, s 10(4) only once parties have entered into a binding agreement for the payment of compensation. Practitioners should be aware that anything short of a binding agreement is not sufficient to start time running.

This case additionally considered that, in a ‘payment in kind’ case, agreement as to the ‘amount to be paid’ means agreement on ‘the scope of the remedial works’. As such, an 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’. Practitioners should note that neither such ‘agreements’ would constitute a binding agreement for the purposes of LA 1980, s 10(4).

What was the background?

In 2001/2 the claimant building company, R.G. Carter Building Limited (R.G. Carter) , built a new school science block. The science block, designed by the defendant, Kier Building Services Limited (Kier), suffered problems with the ingress of water. The client, Lincolnshire County Council, brought arbitration proceedings against R.G. Carter and the arbitration was settled in 2015 on terms that R.G. Carter would carry out the remedial works at its own cost.

On 20 September 2017, R.G. Carter issued proceedings against Kier seeking an indemnity or contribution in respect of the cost of the settlement. Kier had made clear its intention to argue that the claim was statute barred and the court had approved the hearing of a preliminary issue on limitation prior to any defence by Kier having being filed.

R.G. Carter and Kier (the parties) had previously entered into a standstill agreement on 28 April 2017 (the standstill agreement). The court was accordingly asked to determine the preliminary issue of whether the contribution claim was statute barred as of the date of the standstill agreement.

Counsel for R.G. Carter contended that there was no agreement for the purposes of LA 1980, s 10(4) prior to the parties having signed a settlement agreement on 29 June 2015. Alternatively, the date of the agreement was in any event later than 28 April 2015, since the parties were still negotiating the terms of their settlement throughout April. Accordingly, R.G. Carter submitted that the two-year limitation period did not expire until after the standstill agreement, and its claim was therefore not statute barred, given the effect of that standstill agreement.

Counsel for Kier argued that the remedial works were agreed by 16 April 2015, or at the latest 27 April 2015. All that remained to be agreed thereafter were ancillary matters that did not prevent time from running. Therefore, Kier argued that the claim was already statute barred as of the date of the standstill agreement.

What did the court decide?

The issue in this case was whether time begins to run under s10(4) of LA 1980 only once parties have entered into a binding agreement for the payment of compensation, as R.G. Carter submitted, or whether something short of a binding agreement is sufficient to start time running, as Kier submitted.

The case makes clear that it is important to approach LA 1980, s 10 on the basis that ss 10(3) and (4) are, upon their true construction, intended to be mutually exclusive. There can only be one trigger date to start time running under s 10, either: the date of the judgment or award requiring a payment in cases where such issue is the subject of a judicial or arbitral determination (LA 1980, s 10(3)); or the date of the agreement to make the payment in a case where the issue is compromised (LA 1980, s 10(4)).

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 (such as an agreement in principle with the final details to be worked through). In such a case, the litigation or arbitration remains on foot and time will only start to run under LA 1980, s 10(4) from the date of the subsequent formal agreement or, if the matter cannot be agreed, under LA 1980, s 10(3) from the date of the judgment or award.

It was held that the proper construction of LA 1980, s 10(4) is that time starts to run from the date of a binding agreement as to the amount of the compensation payment. The court rejected Kier’s argument that LA 1980, s 10(4) does not require the parties to have entered into a binding agreement. The contribution claim was therefore brought in time and Kier’s limitation defence failed.

In any event, the court considered that even if a non-binding agreement was sufficient to make time run, there had not been an agreement as to the ‘payment’ to be made until after 28 April 2015 on the facts of this case. In a payment in kind case, agreement as to the ‘amount to be paid’ means agreement on ‘the scope of the remedial works’. The court added that an 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’.

Case details

  • Court: Queen's Bench Division (Technology and Construction Court)
  • Judge: Edward Pepperall QC (sitting as a Deputy High Court Judge)
  • Date of judgment: 5 April 2018

Christopher Humby is a senior associate at Quinn Emanuel Urquhart & Sullivan LLP, and a member of LexisPSL’s Case Analysis Expert Panel. Suitable candidates are welcome to apply to become members of the panel. Please contact caseanalysis@lexisnexis.co.uk.

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