House of Lords
|Session 2001- 02
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|Judgments - Royal Brompton Hospital National Health Service Trust v. Hammond and Others (Appellants) and Taylor Woodrow Construction (Holdings) Limited (Respondents)
HOUSE OF LORDS
Lord Bingham of Cornhill Lord Mackay of Clashfern Lord Steyn Lord Hope of Craighead Lord Rodger of Earlsferry
OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT
IN THE CAUSE
ROYAL BROMPTON HOSPITAL NATIONAL HEALTH SERVICE TRUST
HAMMOND AND OTHERS
TAYLOR WOODROW CONSTRUCTION (HOLDINGS) LIMITED
ON 25 APRIL 2002
 UKHL 14
LORD BINGHAM OF CORNHILL
1. Section 1(1) of the Civil Liability (Contribution) Act 1978 provides:
This appeal turns on the interpretation of the six words I have emphasised and their application to the facts of this case. I am indebted to my noble and learned friend Lord Steyn for his account of the factual, contractual and legislative background to the case, which I adopt and need not repeat.
2. The law has for many centuries recognised the existence of situations in which, if B is called upon to discharge a legal obligation owed to A, fairness demands that B should be entitled to claim a contribution from other parties subject with him to that obligation. Thus a rule first developed to cover parties to a common maritime adventure was over time extended to cover co-sureties, co-trustees, co-contractors, partners, co-insurers, co-mortgagors, co-directors and co-owners (see Goff & Jones, The Law of Restitution, 5th ed, (1998) pp 394, 399, 409, 413, 415, 421, 424, 425 and 427). The common link between all these situations was the obvious justice of requiring that a common liability should be shared between those liable.
3. The advent of the motor car however highlighted a situation in which B, if called upon to discharge a liability to A, could not seek any contribution from others also subject to the same liability to A. The old rule in Merryweather v Nixan (1799) 8 TR 186 forbade claims for contribution or indemnity between joint tortfeasors and a more recent decision in The Koursk  P 140 showed that even where independent acts of negligence by different parties resulted in one injury and gave rise to a cause of action against each party there could be no contribution between them. The Law Revision Committee in its Third Interim Report (Cmd 4637) of July 1934 addressed this problem. In paragraph 7 of its report the committee said:
The committee included the following among its recommendations:
Effect was given to these recommendations in section 6(1)(c) of the Law Reform (Married Women and Tortfeasors) Act 1935 which provided:
4. The Law Revision Committee's Third Interim Report and section 6(1)(c) were directed only to the liability, as between each other, of those who had committed tortious acts, whether jointly or concurrently. This limited field of application came in time to be recognised as a weakness, for section 6(1)(c) did not apply to wrongdoers other than tortfeasors and did not apply if only one of the wrongdoers was a tortfeasor. This was one of the weaknesses addressed by the Law Commission in its Report on Contribution (Law Com No 79) published in March 1977. A number of recommendations were made with the main aim of widening the jurisdiction given to the courts by the 1935 Act (paragraph 81) and specific recommendations were made:
In the draft bill appended to its report the Law Commission proposed a subsection (in clause 3(1)) which differed from section 1(1) of the 1978 Act quoted at the outset of this opinion only in its reference to the time when the damage occurred, a reference which has been omitted in the subsection as enacted. The words which I have emphasised at the outset were included in the Law Commission draft. Section 1(1) of the 1978 Act is supplemented by section 6(1):
This differs more obviously, at least in wording, from the interpretation clause proposed by the Law Commission:
5. It is plain beyond argument that one important object of the 1978 Act was to widen the classes of person between whom claims for contribution would lie and to enlarge the hitherto restricted category of causes of action capable of giving rise to such a claim. It is, however, as I understand, a constant theme of the law of contribution from the beginning that B's claim to share with others his liability to A rests upon the fact that they (whether equally with B or not) are subject to a common liability to A. I find nothing in section 6(1)(c) of the 1935 Act or in section 1(1) of the 1978 Act, or in the reports which preceded those Acts, which in any way weakens that requirement. Indeed both sections, by using the words "in respect of the same damage", emphasise the need for one loss to be apportioned among those liable.
6. When any claim for contribution falls to be decided the following questions in my opinion arise:
At the striking-out stage the questions must be recast to reflect the rule that it is arguability and not liability which then falls for decision, but their essential thrust is the same. I do not think it matters greatly whether, in phrasing these questions, one speaks (as the 1978 Act does) of "damage" or of "loss" or "harm", provided it is borne in mind that "damage" does not mean "damages" (as pointed out by Roch LJ in Birse Construction Ltd v Haiste Ltd  1WLR 675, at p 682) and that B's right to contribution by C depends on the damage, loss or harm for which B is liable to A corresponding (even if in part only) with the damage, loss or harm for which C is liable to A. This seems to me to accord with the underlying equity of the situation: it is obviously fair that C contributes to B a fair share of what both B and C owe in law to A, but obviously unfair that C should contribute to B any share of what B may owe in law to A but C does not.
7. Approached in this way, the claim made by the Architect against the Contractor must in my opinion fail in principle. It so happens that the Employer and the Contractor have resolved their mutual claims and counterclaims in arbitration whereas the Employer seeks redress against the Architect in the High Court. But for purposes of contribution the parties' rights must be the same as if the Employer had sued both the Contractor and the Architect in the High Court and they had exchanged contribution notices. The question would then be whether the Employer was advancing a claim for damage, loss or harm for which both the Contractor and the Architect were liable, in which case (if the claim were established) the court would have to apportion the common liability between the two parties responsible, or whether the Employer was advancing separate claims for damage, loss or harm for which the Contractor and the Architect were independently liable, in which case (if the claims were established) the court would have to assess the sum for which each party was liable but could not apportion a single liability between the two. It would seem to me clear that any liability the Employer might prove against the Contractor and the Architect would be independent and not common. The Employer's claim against the Contractor would be based on the Contractor's delay in performing the contract and the disruption caused by the delay, and the Employer's damage would be the increased cost it incurred, the sums it overpaid and the liquidated damages to which it was entitled. Its claim against the Architect, based on negligent advice and certification, would not lead to the same damage because it could not be suggested that the Architect's negligence had led to any delay in performing the contract.
8. For the reasons given by Lord Steyn, and also for these reasons, I conclude that Judge Hicks QC and the Court of Appeal made correct decisions and I would dismiss this appeal.
LORD MACKAY OF CLASHFERN
9. I have had the advantage of reading in draft the speeches prepared by my noble and learned friends Lord Bingham of Cornhill and Lord Steyn. I agree that this appeal should be dismissed for the reasons they have given.
10. In a tripartite relationship under a building contract between an employer, a contractor and an architect a question of the correct interpretation of section 1(1) of the Civil Liability (Contribution) Act 1978 arises. Subject to its other provisions section 1 provides:
The issue centres on the meaning of the words "in respect of the same damage" read in the context of the language and purpose of the 1978 Act. Having ascertained the meaning of the operative words of section 1 the application of the statute requires a close examination of the nature of claims by the employer against the contractor and the architect respectively in order to decide whether they are "in respect of the same damage".
I. The History of the Contract.
11. By a contract incorporating the articles of agreement and other conditions of the JCT Standard Form of Building Contract 1980 Edition, Local Authorities with Quantities, with Amendment No. 1 of 1984, the Royal Brompton Hospital National Health Service Trust (the Employer) employed Taylor Woodrow Construction Ltd (the Contractor) as the main contractor in the development and construction of phase 1 of new hospital premises in Sydney Street, Chelsea (the works). Watkins Gray International (UK), and two named architects, acted as architects under the contract. Collectively, I will call them "the Architect". This is a well-known standard form of contract, which is readily available to interested parties, and it is therefore unnecessary to set out its provisions verbatim: Keating on Building Contracts, 7th ed, (2001), p 591 et seq.
12. The contract between the Employer and the Contractor was not dated but it came into effect on about 2 March 1987 when the Contractor took possession of the site. The contract fixed the date for the completion of the works as 23 July 1989. Under clause 24 of the contract the Contractor had to pay or allow the Employer liquidated and ascertained damages at the rate of £47,000 per week if the Contractor failed to complete the works by the completion date. In the event practical completion was certified 43 weeks and 2 days later than the contractual completion date. The Contractor made numerous applications on a variety of grounds for extensions of time under clause 25 of the contract and for the payment of loss and expense for prolongation and disruption under clause 26 of the contract, for variations and other matters. The Architect granted extensions of time totalling 43 weeks, 2 days, ie up to the date on which practical completion was certified ie on 22 May 1990. The effect of this was to relieve the Contractor of its obligation to pay or allow liquidated and ascertained damages for any of the delay. The Contractor claimed for loss and expense amounting to some £22m. The Architect certified as due and the Employer paid some £5.2m of which about £2.3m related to prolongation and the balance to disruption.
II. The Proceedings.
13. The Contractor commenced arbitration proceedings, claiming a further £17.1m. The Employer disputed the claim and counter-claimed for a sum of some £6.6m. The Employer was able to make these claims notwithstanding the extensions of time granted by the Architect because by article 5.3 of the contract the arbitrator had power to open up, review and revise any certificate to determine all matters in dispute in the same manner as if no such certificate had been given. On 19 December 1995 the parties settled the arbitration on terms that the Employer paid to the Contractor some £6.2m and agreed to indemnify the Contractor against any claim for contribution made against the Contractor by, amongst others, the Architect.
14. On 21 January 1993 the Employer issued a writ against the Architect and others. Between 1993 and 1997 the action was by consent stayed. On 5 August 1997 the statement of claim was served. The Employer alleged that the Architect had been negligent. The relevant heads of claim are summarised in the agreed statement of facts and issues. Subject to minor alterations the relevant paragraphs read:
The Architect issued Part 20 proceedings to recover a contribution from the Contractor under the 1978 Act. In respect of section F (Hydrotite) the Architect alleged in the third party notice:
In respect of section G (extensions of time) the Architect alleged in the third party notice:
The Contractor applied to strike out the Part 20 claim. Given the indemnity given by the Employer to the Contractor in the settlement of the arbitration, the Contractor was represented by the same solicitors and counsel as the Employer.
III. The Decisions of Judge Hicks QC and the Court of Appeal.
15. Sitting in the Technology and Construction Court, Judge Hicks QC held that in respect of sections F and G, as described above, the Contractor was not liable in respect of the same damage as the Architect. He therefore struck out the third party notice of the Architect against the Contractor: Royal Brompton Hospital National Health Trust v Hammond  BLR 385. The Architect appealed to the Court of Appeal. By agreement the argument concentrated on the Architect's claim for a contribution in respect of the section G (extensions of time). It was assumed that if the Architect failed in the arguments on section G he must necessarily also to fail in his arguments on section F (Hydrotite). Dismissing the appeal Stuart-Smith LJ held that the Contractor's breach consisted in the failure to deliver the building on time whereas the damage caused by the Architect occurred at the time of the certification of extensions and was the impairment of the ability of the Employer to obtain financial recompense in full from the Contractor; and, accordingly, it was not a claim in respect of "the same damage": Royal Brompton Hospital National Health Service Trust v Hammond  Lloyd's Rep PN 643. Buxton LJ agreed. With some hesitation Ward LJ also agreed.
16. Since the Court of Appeal decision a trial has taken place of the Employer's claims against the Architect in respect of section G (extensions of time). The Architect was held to have been negligent in granting five weeks for laying Hydrotite on 24 November 1989. The issues on quantum still await decision. The trial in respect of section F (Hydrotite) has not yet taken place.
IV. The Issues.
17. On appeal to the House counsel for the Architect broadened his case by making submissions both on section F (Hydrotite) and section G (extensions of time). Both aspects arise for decision in the context of a striking-out application: the focus is therefore on the arguability of claims. The agreed statement of facts and issues formulates the issues as follows:
"In the [case] of Hydrotite (section F):
On the assumptions(i)
It will be convenient first to consider the position under section G (extensions of time) which was the subject-matter to which the judgments in the Court of Appeal were directed.
V. The Operation of the Contract.
18. It is necessary at the outset to describe in uncontroversial fashion how this standard form JCT contract operates. Drawing on a helpful summary in the Contractor's printed case, the position is as follows. The Contractor is obliged to proceed regularly and diligently with the works and to complete them by the completion date: clause 23.1. If he fails to do so, he is liable to pay or allow to the Employer a sum by way of liquidated and ascertained damages calculated at the agreed rate: clause 24. Those damages are either deducted from sums otherwise payable to the Contractor or the Employer may recover them "as a debt": clause 24.2.1.
19. If the works are delayed, or are likely to be delayed, beyond the completion date by a relevant event as defined by clause 25.4, the Contractor is entitled to an extension of time; if, on the Contractor's application, the Architect is satisfied that there has been a relevant event and that the completion of the works is likely to be delayed thereby beyond the completion date, he must give an extension of time by fixing such a later date as the completion date which he considers fair and reasonable: clause 25.3. Thus the effect of giving an extension of time is twofold. First, the Employer no longer has the right to take possession of the works on the original date for completion, but only on the later date fixed by the Architect. Secondly, the Contractor becomes relieved from any liability to pay liquidated damages in respect of the delay between the two dates. In addition, where the regular progress of the works is materially affected by one or more of the matters listed in clause 26.2 and the Contractor has thereby incurred loss and/or expense for which he would not be reimbursed under any other provision of the contract, the Contractor is entitled to have such loss and expense ascertained (by the Architect or quantity surveyor) and paid to him.
20. Each of the matters listed in clause 26.2. is also a relevant event under clause 25. Thus if an extension of time is given for one or more of those events, this will entitle the Contractor to recover any loss and expense under clause 26. In practice, when the Architect gives an extension of time because of a relevant event that entitles the Contractor to loss and expense, he will also ascertain (or instruct the quantity surveyor to ascertain) the amount of that loss and expense. The loss and expense so ascertained then becomes added to the contract sum: clauses 26.5 and 188.8.131.52. At the conclusion of the contract (before the expiry of the defects liability period) the Architect must issue a final certificate stating (1) the sum of the amounts already due by way of interim certificates and (2) the contract sum as adjusted in accordance with the contractual provisions. The balance representing the difference between these two sums becomes (subject to any further deductions authorised by the contract) a debt payable by the Employer to the Contractor, or vice versa, as the case may be: clause 30.8. The liability of either the Employer or the Contractor is to pay the balance.