A groundbreaking case has cut the two years for bringing contribution proceedings to recover damages. Not even Aer Lingus can move that fast …
would you bring contribution proceedings against a third party before damages were assessed against you in the main action? Presumably you would at least like the option of knowing where you stand first. That’s plain common sense. Yet the law of the land might well force you to do just that.
Contribution proceedings come into play when, as an original defendant, you are sued by X, but you believe that Y is wholly or partly responsible for the damage in question. So you take contribution proceedings against Y for its share.
Now here’s the catch. While your claimant may have had up to 12 years to present its claim against you, the Limitation Act 1980 only gives you two years to pull your case together against the third party. Two years can pass in a flash.
Worse still, there is now a further limitation pithole to look out for. Aer Lingus can verify this, because it fell straight into it on 24 June. Its case was not a construction one but, appertaining to joint liability, the principles are of particular relevance to the construction industry.
Mr Smyth was working for Aer Lingus when a lift, supplied and installed by Sentinal Lifts, malfunctioned and injured his wrist. In May 2001 he obtained judgment on liability in proceedings against Aer Lingus, with damages to be assessed later. Those damages were assessed by agreement in October 2003 at £490,000 plus costs.
In February 2004 Aer Lingus brought a claim in contribution against Sentinel Lifts and the main contractor, Gildacroft, which responded that the two-year limitation period had expired since the date of judgment on Aer Lingus’ liability.
Aer Lingus, not entirely unreasonably, pointed out that the damages were not assessed until October 2003 and it was only then that it knew what it needed to claim in contribution. So, it argued, the two-year limitation period must surely run from then. Regardless of those arguments, the judge determined that it ran from the date that the claimant knew that it had a liability under the original action, whatever that liability might be.
To add to Aer Lingus’ pain, it seems the decision turned on just one letter and not even one of the postal kind. It was the letter “s”.
As the law stands, it is possible that some contribution proceedings may be commenced unnecessarily
Section 1 of the Civil Liability (Contribution) Act 1978 provides that a party “may recover contribution from any person liable in respect of the same damage” as itself.
But “damage” here was interpreted as the harm done, and not “damages” – the monetary figure put on that harm. Hence, the conclusion that the relevant date was the date on judgment of liability.
The decision is the first on the question and is probably technically correct. However, it strikes me as rather harsh. It is only reasonable that the original defendant would want to know the extent of its liability before deciding whether to pursue another.
A two-year limitation period is tight, but to cut into that further seems positively draconian.
True to say a claimant will usually have a fair idea of the loss suffered by the original claimant, but that can be a different figure from the damages awarded. Many factors can come into play here; whether all the losses were reasonably foreseeable, or contemplated by the parties. Could punitive damages be awarded – rare, but possible – or mere token damages? It’s true, too, that assessment of damages in the second action can be similarly delayed or dealt with as an indemnity, but that is very far from ideal.
As the law stands, it is possible that some contribution proceedings may be commenced unnecessarily, and abandoned once the assessment of damages is made. This cannot be in the interests of the litigant, or of the judicial system as a whole.
The Limitation Bill proposes an extension of the limitation period from two years to three in these circumstances, which would certainly alleviate any potential injustices, but would still not alter the trigger date. In the light of Aer Lingus’ experience, perhaps this is a point worth revisiting?
Melinda Parisotti is an in-house barrister at Wren Managers, which manages a professional indemnity mutual for architects