A breath of fresh Aer
6 March 2006
At the heart of many professional indemnity disputes, especially those involving lawyers, are claims for contribution. Often these will be against other professionals – accountants, surveyors, bankers or other lawyers – and, for obvious reasons, most will end up being settled quietly behind closed doors.
But contribution claims are at the sharp end of professional indemnity, even if they often do not reach the law reports. Contribution disputes, along with contributory negligence claims, are a subject of major importance, particularly where a professional's liability still cannot be capped, such as in audit work and litigation. In these areas, professionals are haunted by the risk of catastrophic claims and insurers fear payouts based on principles of joint and several liability, which can vastly exceed the insured's fair share of responsibility for the underlying loss. Statutory protection, possibly in the form of proportionate liability, may come, but is certainly not here yet.
When reported cases on contribution do come along they catch the eye of professional liability lawyers. The principles involved are usually transferable between professions, as was the case with the 'same damage' cases culminating in the House of Lords' decision in the construction case of Royal Brompton Hospital NHS Trust v Hammond & Ors (2002), where the professional involved was an architect.
Following hot on the heels of a 2005 case that raised fresh questions about the factors a court can call upon in apportioning liability between joint tortfeasors, there has been another case of significant practical importance.
In Aer Lingus v Gildacroft and Sentinel Lifts (2006), the Court of Appeal was faced with a point that had not been answered before. Contribution claims are the creature of statute and it is well known that they have their own special limitation regime governed by Section 10 of the Limitation Act 1980, namely "two years from the date on which the right [of contribution] accrued". In the case of a contribution claim that follows the settlement of the underlying liability to the third party, the position is clear enough - the two years run from the date when the amount to be paid to the claimant is agreed. But what if the underlying claim leads to judgment and the judgment, as often happens, is for damages to be assessed? That was the problem in Aer Lingus, where the claimant trapped his hand in a malfunctioning lift at Heathrow Airport.
The lift had been supplied to Aer Lingus by independent contractors. On 9 May 2001, judgment was entered against Aer Lingus for damages to be assessed and on 3 October 2003 the claimant's judgment was quantified at £490,000 plus costs. This was a large enough sum to prompt Aer Lingus to turn its attention to the contractors, against whom they issued proceedings on 4 February 2004.
The contractors told Aer Lingus that they were too late because, under Section 10 (3) of the 1980 act, the two-year window of opportunity runs from the "date on which the judgment is given" and well over two years had passed since the liability judgment. This must have come as a shock to Aer Lingus and its solicitors who thought that they had two years from the judgment on 3 October 2003, when the damages had been quantified.
If the contractors were right, then there were serious problems, not just for Aer Lingus in this case but for numerous solicitors who had made the same assumption in other cases - at best, they would have less time than they had anticipated to bring contribution negotiations to a head or to issue proceedings and, at worst, they would face negligence claims themselves for depriving their clients of valuable rights of contribution.
At first sight the answer might appear obvious: surely the two years should not run until liability has been converted into a quantified money judgment? However, Mr Justice Simon disagreed. He agreed with the contractors argument, that the law does not favour delay, and once a liability judgment has been awarded it is not unreasonable to expect a defendant to take steps to secure any contribution claim within the next two years.
The outcome of Aer Lingus's appeal was, therefore, eagerly awaited and when it was handed down in January this year it was a relief to the legal profession that the Court of Appeal found in favour of Aer Lingus. Lord Justice Rix concluded that although there was force in the contractors' policy argument, in his opinion the judgment described in Section 10(3) "is a judgment which ascertains the quantum, and not merely the existence, of the tortfeasor's liability".
If the Aer Lingus decision means that we know where we stand on limitation, the same cannot be said of the case of Brian Warwicker Partnership v HOK International Ltd (2005), which concerned what factors the court may take into account in apportioning liability between joint tortfeasors. The dispute was between engineers and architects over responsibility for an unintended wind tunnel at the O2 Centre in North London.
Section 2(1) of the Civil Liability (Contribution) Act 1978 states: "The amount of contribution recoverable from any person shall be such as may be found by the court to be just and equitable having regard to that person's responsibility for the damage in question." It is well established that this test involves a combination of the 'causative potency' and the 'blameworthiness' of each party's fault. It might be thought that these factors must be approached in the context of strict legal causation by limiting relevant factors to those that have directly caused the third party's loss. Not so, said the Court of Appeal in Warwicker - acts and omissions that have in no way contributed to the underlying loss can nevertheless be taken into account in apportioning responsibility in contribution claims.
Lady Justice Arden was at pains to point out that non-causative factors must be given less weight than causative ones and that there must be a limit on the matters the court should take into account to avoid contribution trials becoming unworkably long and costly. However, in practice it may be harder to draw the line. In Warwicker the Court of Appeal approved another recent contribution case, Re-Source America International v Platt Site Services and Barkin Construction (2004), in which in allocating responsibility, the judge had taken into account the conduct of one of the parties in terms of the way in which it had conducted its defence, even though that conduct post-dated the fire damage that had given rise to the original cause of action.
As things stand, therefore, the just and equitable test of Section 2(1) of the 1978 act includes non-causative factors, such as the way in which the parties have behaved in the context of the dispute and their attempts to resolve it. This issue fades away or becomes a feature of contribution cases in the future, but for the time being both parties and their solicitors would be well advised to be on their best behaviour.
Neil Jamieson is a partner at Barlow Lyde & Gilbert