Judgments - Royal Brompton Hospital National Health Service Trust v. Hammond and Others (Appellants) and Taylor Woodrow Construction (Holdings) Limited (Respondents)

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    21. The arbitration clause in the main contract gives the arbitrator power to "open up, review and revise any certificate, opinion, decision . . . and to determine all matters in dispute . . . as if no such certificate, opinion, decision . . . had been given" (article 5.3). If either the Employer or the Contractor is dissatisfied with the extension of time given by the Architect then, not later than 15 days after the issue of the final certificate, he may commence an arbitration against the other and seek an award setting aside the extension of time. If the Employer is successful in any arbitration, the final certificate (if already issued) will be subject to the terms of the award or any settlement so that any balance stated in it to be due by one party to the other will be adjusted accordingly. If, for example, the balance was nil, and the arbitrator sets aside the extension of time, then the balance will be adjusted so that a sum representing the amount of liquidated damages referable to the extension of time, and the associated loss and expense overpaid, will become due to the Employer as a debt: clauses 30.8 and 30.9. In any event, the liability of the Contractor will be the contractual liability to pay whatever balance is due, after all relevant matters have been taken into account.

VI. A Description of the Claims.

    22. The characterisation of the Employer's claim against the Contractor is straightforward. It is for the late delivery of the building. This is not a claim which the Employer has made against the Architect. Moreover, notionally it is not damage for which the Architect could be liable merely by reason of a negligent grant of an extension of time. It is conceivable that an Architect could negligently cause or contribute to the delay in completion of works, eg by condoning inadequate progress of the work or by failing to chivvy the Contractor. In such a case the Contractor and the Architect could be liable for the same damage. There are, however, no such allegations in the present case.

    23. The essence of the case against the Architect is the allegation that his breach of duty changed the Employer's contractual position detrimentally as against the Contractor. The Employer's case is that the Architect wrongly evaluated the Contractor's claim for an extension of time. It is alleged that by negligently giving an extension of time in respect of an unmeritorious claim by the Contractor, the Architect presented the Contractor with a defence to a previously straightforward claim by the Employer for breach of contract in respect of delay. The Employer lost the right under the contract to claim or deduct liquidated damages for the delayed delivery of the building. The Contractor committed no wrong by retaining the money until the extension of time had been set aside in an arbitration. The detrimental effect on the Employer's contractual position took place when the extension of time was negligently given. In such a case the Employer must go to arbitration in order to restore his position. He has the burden of proof in the arbitration and has to face the uncertain prospect of succeeding in what may perhaps be a complex arbitration. The Employer's bargaining position against the Contractor is weakened. A reasonable settlement with the Contractor may reflect this changed position: a case with a 100% prospect of success may become, for example, a case with only a 70% prospect of success.

    VII. Civil Liability (Contribution) Act 1978.

    24. The long title of the 1978 Act states that its purpose is "to make new provision for contribution between persons who are jointly or severally, or both jointly and severally, liable for the same damage and in certain other similar cases where two or more persons have paid or may be required to pay compensation for the same damage; and to amend the law relating to proceedings against persons jointly liable for the same debt or jointly or severally, or both jointly and severally, liable for the same damage".

    25. Section 1 creates the entitlement to contribution:

    "(1) Subject to the following provisions of this section, any person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with him or otherwise)."

For present purposes it is unnecessary to set out the remaining provisions of section 1. It is, however, necessary to read section 1(1) with the interpretation provision in section 6(1). It provides:

    "A person is liable in respect of any damage for the purposes of this Act if the person who suffered it (or anyone representing his estate or dependants) is entitled to recover compensation from him in respect of that damage (whatever the legal basis of his liability, whether tort, breach of contract, breach of trust or otherwise)."

The court's power of assessing contributions is contained in section 2. So far as it is material it provides:

    "(1) . . . in any proceedings for contribution under section 1 above the amount of the contribution recoverable from any person shall be such as may be found by the court to be just and equitable having regard to the extent of that person's responsibility for the damage in question.

    (2) . . . the court shall have power in any such proceedings to exempt any person from liability to make contribution, or to direct that the contribution to be recovered from any person shall amount to a complete indemnity."

VIII. The meaning of "the same damage".

    26. Counsel for the Architect reminded the House that the 1978 Act is a reforming measure. He argued that it ought to be given a broad and purposive interpretation so as to achieve the legislative intent. He said that the wide power of the court under section 2(1) and (2) to impose a "just and equitable" solution reinforces the appropriateness of such an approach. He cited dicta in two Court of Appeal decisions in favour of this approach. In Friends' Provident Life Office v Hillier Parker May & Rowden (a firm) [1997] QB 85 Auld LJ, with the agreement of the other members of the court, observed in respect of sections 1(1) and 6(1), at pp 102-103:

    "The contribution is as to 'compensation' recoverable against a person in respect of 'any damage suffered by another' 'whatever the legal basis of his liability, whether tort, breach of contract, breach of trust or otherwise'. It is difficult to imagine a broader formulation of an entitlement to contribution. It clearly spans a variety of causes of action, forms of damage in the sense of loss of some sort, and remedies, the last of which are gathered together under the umbrella of 'compensation'. The Act was clearly intended to be given a wide interpretation."

This passage was cited with approval in Hurstwood Developments Ltd v Motor & General & Andersley & Co Insurance Services Ltd [2001] EWCA Civ 1785 by Keene LJ, who, having set out the passage from the judgment of Auld LJ, went on to say, at para 19:

    "It is necessary, therefore, not to be over-influenced by the possibility of formulating the measure of damages or even the damage, for which one party is liable to the claimant, in different words from that which may be employed to define or describe that for which another party is liable. Since the cause of action against each of them may differ, a different formulation of the damage for which they are liable may be possible".

This observation was made with the agreement of the other members of the court. It will be necessary to return to these two decisions. At this stage I concentrate on the proposition that the 1978 Act ought to be given a broad interpretation. In large measure this statement is correct. This view can in particular be accepted to the extent that the 1978 Act extended the reach of the contribution principle to a wider range of cases "whatever the legal basis of . . . liability, whether tort, breach of contract, breach of trust or otherwise" (section 6(1)) and in the light of the comprehensive powers of the court under section 2(1) and (2).

    27. But this purposive and enlarged view of the reach of the statute does not assist on the central issue of construction before the House. The critical words are "liable in respect of the same damage." Section 1(1) refers to "damage" and not to "damages": see Birse Construction Ltd v Haiste Ltd [1996] 1 WLR 675, 682 per Roch LJ. It was common ground that the closest synonym of damage is harm. The focus is, however, on the composite expression "the same damage". As my noble and learned friend Lord Bingham of Cornhill has convincingly shown by an historical examination the notion of a common liability, and of sharing that common liability, lies at the root of the principle of contribution: see also Current Law Statutes Annotated (1978), "Background to the Act" at p 47. The legislative technique of limiting the contribution principle under the 1978 Act to the same damage was a considered policy decision. The context does not therefore justify an expansive interpretation of the words "the same damage" so as to mean substantially or materially similar damage. Such solutions could have been adopted but considerations of unfairness to parties who did not in truth cause or contribute to the same damage would have militated against them. Moreover, the adoption of such solutions would have led to uncertainty in the application of the law. That is the context of section 1(1) and the phrase "the same damage". It must be interpreted and applied on a correct evaluation and comparison of claims alleged to qualify for contribution under section 1(1). No glosses, extensive or restrictive, are warranted. The natural and ordinary meaning of "the same damage" is controlling.

    28. In Howkins & Harrison v Tyler (a firm) [2001] Lloyd's Rep PN 1, at p 4, para 17 of his judgment, Sir Richard Scott V-C (now Lord Scott of Foscote) suggested a test to be applied to determine the statutory criterion of "the same damage". With the agreement of Aldous and Sedley LJJ he observed:

    "Suppose that A and B are the two parties who are said each to be liable to C in respect of 'the same damage' that has been suffered by C. So C must have a right of action of some sort against A and a right of action of some sort against B. There are two questions that should then be asked. If A pays C a sum of money in satisfaction, or on account, of A's liability to C, will that sum operate to reduce or extinguish, depending upon the amount, B's liability to C? Secondly, if B pays C a sum of money in satisfaction or on account of B's liability to C, would that operate to reduce or extinguish A's liability to C? It seems to me that unless both of those questions can be given an affirmative answer, the case is not one to which the 1978 Act can be applied. If the payment by A or B to C does not pro tanto relieve the other of his obligations to C, there cannot, it seems to me, possibly be a case for contending that the non-paying party, whose liability to C remains un-reduced, will also have an obligation under section 1(1) to contribute to the payment made by the paying party."

If this test is regarded as a necessary threshold question for the purpose of identifying whether a claim for contribution is capable of being a claim to which the 1978 Act could apply, questions of contribution might become unnecessarily complex: see on this point Eastgate Group Ltd v Lindsey Morden Group Inc [2002] 1 WLR 642, 652, per Longmore LJ. It is best regarded as a practical test to be used in considering the very statutory question whether two claims under consideration are for "the same damage". Its usefulness may, however, vary depending on the circumstances of individual cases. Ultimately, the safest course is to apply the statutory test.

    29. Before the judge and in the Court of Appeal counsel for the Contractor deployed in support of his argument that the two claims were different a hypothetical case not covered by direct English precedent: see the judge's observations at [1999] LR 385, 390, para 29; and Stuart-Smith LJ's observations at [2000] Lloyd's Rep PN 643, 647, para 20. Since then a report of a Canadian decision on the point has become available. It is the decision of the Alberta Court of Appeal in Wallace v Litwiniuk (2001) 92 Alta LR (3rd) 249. In that case the plaintiff sustained injuries in a motor vehicle collision. She wanted to sue the driver of the other vehicle. Her lawyers allowed the claim to become time barred. She sued her lawyers. They issued a third party notice against the driver of the other car. Section 3(1) of the Canadian Tort - Feasors Act 1980 provides:

    "When damage is suffered by any person as a result of a tort, whether a crime or not,

    (a) . . .

    (b) . . .

    (c) any tort-feasor liable in respect of that damage may recover contribution from any other tort-feasor who is or would, if sued, have been liable in respect of the same damage, whether as a joint tort-feasor or otherwise, but no person is entitled to recover contribution under this section from any person entitled to be indemnified by him in respect of the liability regarding which the contribution is sought."
    (Emphasis added)

The court held, at p 257, paras 32-34:

    "The compensation which she [the plaintiff] presently seeks from the respondents [the lawyers] is not damages for her physical injuries, but damages for what she would have obtained had the original claim been brought. In both cases, she sought damages, but that is not to say she sought the same damage. The damage is different. . . .

      The pleadings in [the plaintiff's] statement of claim against [the lawyers] only superficially look as though she is claiming the same damages she would have claimed against the [the negligent driver]. This seeming similarity results from the usual method for calculating damages in a professional negligence claim where a lawyer failed to bring litigation which might otherwise have been pursued. Damages for the professional negligence are calculated by reference to the damages which would have been obtained in the original claim: Dugdale and Stanton, Professional Negligence (London: Butterworths, 1989) at pp 363-364.

      The distinct nature of the original claim and the professional negligence claim is recognised by the need to estimate the value of the original claim, and then discount for the costs of pursuing the original litigation, and allow for any chance that the original claim might not have succeeded."

Counsel for the Architect rightly conceded that this is a correct analysis which in a similar situation an English court would be bound to follow. He asserted that the present case is different, apparently on the basis that there is greater proximity between the two claims. This is, however, not a material distinction. The analogy of the Wallace case militates strongly against the claims in the present case being for "the same damage". A further analogy was put forward by counsel for the Contractor. He postulated a sale of the shares in a company. An accountant had negligently valued the shares at £7.5m. The vendor warranted that the shares were worth the price of £10m. In truth the shares were worth only £5m. The vendor was liable for damages in the sum of £5m. Counsel for the Contractor said that the accountant could only be liable to the extent of the common liability ie £2.5m. Counsel for the Architect accepted that this analysis is correct. Again, the Architect is in difficulties because the example demonstrates the unavailability of a right of contribution to the extent that there is no common liability. It points in the present case to the conclusion that the Architect is not liable for "the same damage" as the Contractor.

    30. Counsel for the Architect urged the House to eschew an overly analytical approach to the nature of the claims. He said that in the application of the statute a flexible and broad view should be adopted. But loyalty to the statutory criterion of "the same damage" demands legal analysis of claims. Moreover, counsel for the Architect rightly did not contest the legal characterisation of the claims set out in paragraphs 13 and 14 above in respect of section G (extensions of time). In my view the conclusion is inescapable that the claims are not for the same damage.

IX. Conclusions on section G (extensions of time).

    31. In agreement with the Court of Appeal I would hold that the criterion that the two claims must be for "the same damage" is not satisfied in respect of section G (extensions of time).

X. Section F (Hydrotite).

    32. As between the Employer and the Architect it has been held that the Contractor was contractually responsible for drying out the floor slabs. However, the Architect issued an instruction to lay Hydrotite. The effect of the instruction was to transfer the cost of the solution to the problem from the Contractor to the Employer. The pleaded case of the Employer against the Architect is that the Employer authorised the issue of the instruction on the negligent advice of the Architect. The damage or harm for which the Architect is liable is the change in the Employer's contractual position vis-a-vis the Contractor. This claim is fundamentally different from the Employer's claim against the Contractor in respect of the delay in completion of the building. On a correct analysis of the claims the Architect's argument does not satisfy the criterion that the claims must be for "the same damage".

XI. Earlier Decisions.

    33. It is necessary to refer to dicta in four earlier decisions. In Friends' Provident Life Office v Hillier Parker May & Rowden [1997] QB 85 to which I have already referred Auld LJ observed at p 102G-H:

    "In my judgment, despite the distinction between a claim for restitution and one for damages, each may be a claim for compensation for damage under sections 1(1) and 6(1) of the Act of 1978. The difference between asking for a particular sum of money back or for an equivalent sum of money for the damage suffered because of the withholding of it is immaterial in this statutory context, which is concerned with 'compensation' for 'damage'."

Goff & Jones, The Law of Restitution, 5th ed (1998), p 396, commented on this dictum:

    "To conclude that a restitutionary claim is one for 'damage suffered' cannot be justified in principle; nor is it, in our view, consistent with the natural meaning of the statutory language. A claim for restitution cannot be said to be a claim to recover compensation within the meaning of section 1(1)."

I am in respectful agreement with this criticism of the Friends' Provident case. To this extent it cannot be accepted as a correct statement of the law. Secondly, it is necessary to refer again to Hurstwood Developments Ltd v Motor & General & Andersley & Co Insurance Services Ltd [2001] EWCA Civ 1785. Relying on the observations in Friends' Provident the Court of Appeal held that the claim by an employer against a contractor for negligent site investigation services and a claim by the employer against insurance brokers for failure to insure against the contingency are claims for "the same damage", entitling the insurance brokers to claim a contribution against the contractor. The fact is, however, that the insurance brokers had no responsibility for the remedial work. In my view the extensive interpretation of section 1(1) adopted by the Court of Appeal led to a conclusion not warranted by the language of the statute. If my conclusions in respect of the claims under consideration in the present case are correct it follows that the Hurstwood case was wrongly decided.

    34. In two first instance decisions a difference of opinion on section 1(1) arose. In Bovis Construction Ltd v Commercial Union Assurance Co plc [2001] 1 Lloyd's Rep 416 the question arose whether a claim against a builder for defective work was "the same damage" under section 1(1) as an insurance company's liability under a policy of insurance. David Steel J held, at p 420, para 28:

    "Bovis was liable for the flood damage to Friendly House: CU was liable under a policy of insurance. It is a misconception to describe those as liabilities 'in respect of the same damage'. The damage inflicted by the builder was a defective building susceptible to flooding damage and consequential loss of rent. CU has not inflicted that damage: the only damage it could inflict would have been a refusal to pay on the policy (which in any event excluded consequential loss), thereby imposing financial loss. This is not the same damage: see Royal Brompton Hospital National Health Trust v Hammond [2000] Lloyd's Rep PN 643."

In a careful and detailed judgment in Bovis Lend Lease Ltd (formerly Bovis Construction Ltd) v Saillard Fuller & Partners (2001) 77 ConLR 134, 181-182, paras 128-130 Judge Anthony Thornton QC took a contrary view. It will be obvious that on this point I prefer the view of David Steel J. It is unnecessary, however, to examine the discussion by Judge Thornton QC of other matters.

XII. Disposal.

    35. For these reasons, as well as the reasons given by Lord Bingham of Cornhill, I would hold that the Architect's claims were rightly struck out and I would dismiss the appeal.

LORD HOPE OF CRAIGHEAD

My Lords,

    36. I have had the advantage of reading in draft the speeches of my noble and learned friends Lord Bingham of Cornhill and Lord Steyn. I agree with them and for the reasons which they have given I too would dismiss the appeal. I should like however to add a few observations of my own on the meaning and effect of sections 1(1) and 6(1) of the Civil Liability (Contribution) Act 1978.

    37. The purpose of the Act, as its long title indicates, was to make new provision for contribution between persons who are jointly or severally, or both jointly and severally, liable for the same damage, and in certain other similar cases where two or more persons have paid or may be required to pay compensation for the same damage. The word "contribution" is used where the cost of making good damage which has to be compensated is distributed equitably among a number of persons who are responsible in one way or another for causing the damage. The starting point for the exercise is the assumption that two or more persons have contributed, albeit in different ways, to the same wrong. The Act is concerned only with liability for damage, so the rules which apply to contribution between two or more persons who are liable for the same debts are not affected by it.

    38. As my noble and learned friend Lord Bingham of Cornhill has explained, the common law did not favour the remedy of relief between joint tortfeasors: Merryweather v Nixan (1799) 8 TR 186. The principle upon which the decision in that case was based appears to have been that a wrongdoer could not seek redress from another where he is presumed to have known that what he was doing was wrong: Adamson v Jarvis (1827) 4 Bing 66; Weld-Blundell v Stephens [1920] AC 956, 976 per Lord Dunedin. It is plain from the comments on it in Palmer v Wick and Pulteneytown Steam Shipping Co Ltd [1894] AC 318 by Lord Herschell LC, at p 324, Lord Watson, at p 333 and Lord Halsbury, at p 333 that the rule was not one which they regarded with much favour. That was a case where damages had been claimed by the widow of a man who was killed by the fall of part of the tackle when the cargo of a vessel was being discharged at Grangemouth. Both the shipowner and the stevedore had been found liable to the widow in damages and expenses. It was held that the shipowner was entitled to recover half of the damages and expenses from the stevedore, as the rule that there was no contribution between wrongdoers did not apply in Scotland. But, as Lord Herschell said, at p 324, it was too late for the decision in the Merryweather case to be questioned in England. It was not until the rule was removed by section 6 of the Law Reform (Married Women and Tortfeasors) Act 1935 that it became possible in this jurisdiction for the liability in damages to be distributed between joint or concurrent tortfeasors. Section 6(2) of that Act went one step further, as it enabled the liability to be apportioned equitably between them and not just equally. This reform was extended to Scotland by section 3 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1940.

    39. The 1978 Act extended these reforms still further so as to provide for relief by way of contribution between wrongdoers whatever the basis of their liability. The major innovation introduced by the Act is to be found in section 6(1), which provides:

    "A person is liable in respect of any damage for the purposes of this Act if the person who suffered it (or anyone representing his estate or dependants) is entitled to recover compensation from him in respect of that damage (whatever the legal basis of his liability, whether tort, breach of contract, breach of trust or otherwise)."

    40. This further reform was designed to close the gap in the law which had been identified by the Law Commission in its report of March 1977, Law of Contract, Report on Contribution (Law Com No 79). It affected all wrongdoers other than tortfeasors: see paras 5 -7. The Law Commission could see no policy reason for leaving this gap unfilled: para 33. The problem which it had in mind was illustrated in the Report by two simple examples. The first example was taken from McConnell v Lynch-Robinson [1957] NI 70. It assumes that an architect was employed to draw plans for and supervise the building of a new house, and that a builder was employed under a separate contract to undertake the work. The builder in breach of his contract failed to install the damp proof course properly, and the architect in breach of his contract failed to notice this error. The building owner sued the architect, who failed in his attempt to have the builder joined as a third party as the claim lay not in tort but in contract. Although the architect and the builder had both caused the same damage, there was no right to contribution as they were not liable in contract to the same demand: Deering v Earl of Winchelsea (1787) 2 Bos & Pul 270. The second example assumes that the house falls down due to the architect's breach of contract, and that this was due also to the fault of the local authority whose inspector negligently approved the work for the house. In this case the architect would have been disabled from obtaining a contribution from the local authority under section 6 of the 1935 Act, as his liability was for breach of contract while the liability of the local authority was as a tortfeasor. It was in order to close this gap that the Law Commission recommended in para 58 that "wrongdoers other than tortfeasors" should be brought within the ambit of contribution.

    41. This is the background against which section 1(1) of the 1978 Act should be understood. This subsection provides:

    "Subject to the following provisions of this section, any person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with him or otherwise)."

The words "any other person" must be read together with section 6(1). So the right to contribution applies whatever the legal basis of that other person's liability. The words "whether jointly with him or otherwise" extend the wording of section 6(1)(c) of the 1935 Act to all such persons. That subsection provided that any tortfeasor was entitled to recover a contribution from any other tortfeasor liable in respect of the same damage "whether as a joint tortfeasor or otherwise". Section 2 of the 1978 Act provides that in any proceedings for contribution under section 1 the amount of the contribution recoverable from any person shall be such as may be found by the court to be just and equitable "having regard to the extent of that person's responsibility for the damage in question."

 
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