The judgment in a recent asbestos case could have dramatic benefits for firms in the construction industry - if the courts choose to apply its logic to them
In a shock judgment the highest court in the land has overturned the previous law of joint and several liability and ordered that damages be based on a fair share of the blame. Consultants and contractors have been celebrating through the night. Meanwhile, the decision is causing consternation among construction clients. “Madness!” is all we could get out of one West End developer as he boarded his helicopter and headed off to La Manga for the weekend on Wednesday evening.
This has not happened. But it might.
Joint and several liability
Construction disputes often involve more than one party that is at fault. Under the law of joint and several liability, any one of them who can be shown to have breached its obligations can be held responsible for all the damages suffered. It can normally seek a contribution from each of the others, based on their share of the blame, but it is its responsibility to chase them, and if any has gone bust it will be out of pocket.
Net contribution clauses
A clause can be written into a contract that reverses this position. The parties agree that the contractor or consultant should be liable only for a fair share of the loss suffered based on its responsibility for the problem.
These clauses are increasingly demanded by contractors, consultants and their insurers, particularly when they are being asked to extend their liability to persons other than their client through collateral warranties or third-party rights. Clients, funders and end-users do not like them. Why should they agree to a lesser benefit than the general law would give them? After all, it is not their fault if one of the contractors has become insolvent.
Much time and money is invested (or wasted) arguing about whether net contribution clauses should be included in contracts and exactly what they should say.
A revolution in the House of Lords?
The case of Barker vs Corus (UK) is not about construction and it is not about contract law. But it does introduce for the first time the concept of proportionate damages when more than one person might be at fault.
The victim of an asbestos-related illness was claiming damages. He had been exposed to asbestos when working for two employers, and when self-employed. It could not be proven where he inhaled the asbestos that caused his illness, but somewhere along the line he had certainly done so.
The court applied a previous case about asbestos-related illnesses and found that each employer could be liable for damages even where it was not possible to prove it had caused the illness. One of the employers had become insolvent so the remaining party was facing the whole of the damages under the rule of joint and several liability.
For the first time the House of Lords ordered that the remaining employer should only pay a proportion of the damages. They said the court should calculate damages based on the extent to which the remaining employer had contributed to the exposure of the claimant to the risk of asbestos.
Back in the world of construction
Having made up this law, what is to stop the judges applying the same test in construction disputes? Consultants and contractors will argue that the same proportionate approach should apply to them. No need for a net contribution clause if the court will only order that each party pay a fair share.
As I say, this might happen. But it would be a massive step beyond the Barker case.
Patrick Holmes is a partner in Macfarlanes