UK: The Limitatation Period In Relation To Joint Costs Orders

What is the limitation period where one defendant pays the costs of an action and seeks contribution from other defendants in respect of the costs he has paid . A claim for contribution under s. 10 of The Limitation Act 1980 ("LA") must generally be brought within two years from the date on which the statutory right of action for contribution "in respect of any damage" accrues. But the statutory right of contribution under The Civil Liability (Contribution) Act 1978 ("CLCA") arises only if there is liability in respect of "any damage" suffered and if the case falls outside CLCA in the absence of contract, it is unclear whether the limitation period in a contribution claim in equity is by analogy with s.5 of LA 6 years or 2 years by analogy with s.10.of LA and whether the doctrine of laches applies. (Equity will normally apply time limits under LA by analogy: Companhia de Seguros Imperio v. Heath (REBX): The Times, July 20,2000 CA) . Moreover if CLCA applies statutory contribution recovered "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." Unless CLCA applies, the liability of each would be for an aliquot part.

I recently appeared in a case where the court on the trial of a preliminary issue had to decide these issues : Pemberton v. Drury & Hartley , Southend County Court where the facts were these. On 5 November 1996 a writ was issued in an action in the Chancery Division claiming an injunction restraining Company X from removing property from a development and an ex parte injunction was granted. On 13 November 1966 D1 , D2 and D3 were added as Defendants. On 28 February 1997 a motion for summary judgment was dealt with by way of a consent judgment and Company X, D1,D2 and D3. were ordered to pay the costs which were taxed on 1 October 1997 at £18,671.88 plus £875.26 interest. D1 applied to set aside the order and was granted stay on condition that he paid £21,000 into Court but on 2 December 1997 his application was dismissed and the money in Court was paid out to the Claimants in that action. Company X went into administrative receivership and on 24 February 2000 D1, who I will now call "the Claimant" issued an action against D2 and D3, Pemberton v. Drury & Hartley, claiming that they were each liable to him on a joint judgment liability in the Chancery action alleging that for the purposes of the claim that liability should be treated as equivalent to a joint contractual liability in implied contract, quasi-contract and/or restitution based on unjust enrichment, claiming a third of costs and interest against each of them.

By way of defence, D2 and D3 asserted that the action was an action for contribution and barred by s.10 (1) LA because more than two years had elapsed since the costs order sued on. Section 10 provides: "Where under section 1 of the Civil Liability (Contribution )Act 1978 any person becomes entitled to a right to recover contribution in respect of any damage from any other person, no action to recover contribution by virtue of that right shall be brought after the expiration of two years from the date on which that right accrued" ie 28 February 1997.

The Claimant contended that the claim was not barred by s.10 LA because s.10 applies only to claims for contribution under CLCA 1978. The Claimant said this was apparent from the wording of s.10 LA 1980 and said Halsbury’s Laws (Vol 28 para 912) emphasizes this. Section 1(1) of CLCA 1978 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)." Damage is defined in section 6(1) as follows: "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)."- emphasis mine. In Friends’ Provident Life Office v. Hillier Parker May & Rowden [1995] 4 All ER 260 ( a decision heavily criticized by Goff & Jones) Auld LJ was of the view that : "The contribution is as to "compensation" recoverable against a person in respect of any "damage" suffered by another" (s.1(1)) "whatever the legal basis of the liability, whether tort, breach of contract, breach of trust or otherwise " (s.6(1)). "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 Claimant said that the essence of the right under s.1 is compensation and this does not go so far as an award of costs which amounts to a judgment debt relying on Chitty 18-027-028 and Goff & Jones The Law of Restitution page 415. He also relied on Joint Obligations by Glanville Williams page 165 who says: "… the right of contribution exists although the right of the principal debtor has become statue- barred, or it is submitted) merged by judgment against one debtor….The right of contribution therefore, though quasi- contractual, does not depend on a present common obligation between the debtor who pays the debt and the debtor against whom..… contribution is sought." Accordingly the Claimant claimed that for the purposes of limitation, time ran from the payment of the joint debt, namely 12 November 1997 and the claim had been brought within six years provided by section 5 of LA 1980.

D2 and D3 relied on the following propositions of law. A director has an equitable right to contribution from a fellow director see Ramskill v. Edwards {1885) 31 ChD100,109.

That the Claimant was claiming equitable contribution on the costs order 28 February 1997 ,noting that the Claimant by claiming a third of the costs from D2 and D3 was claiming equitable relief because he was relying on the rule of equity that he can make solvent persons contribute rateably to the entire debt. Section 6(1) CLCA as explained by Auld LJ included a costs order. That s.7(3) CLCA says that "The right to recover contribution in accordance with section 1 above supersedes any right, other than an express contractual right, to recover contribution (as distinct from indemnity) otherwise than under this Act in corresponding circumstances ;but nothing in this Act shall affect- (a) any express or implied contractual or other right to indemnity…" The Claimant in reply said that the costs order gave rise to an implied contractual or other right to an indemnity which excluded CLCA statutory contribution.

What do the books say? Goff & Jones,The Law of Restitution 5^th Edition says at p. 852/3 says it is an open question whether s.10 LA applies or the analogy of s.5 when the limitation period is six years. The learned editors say "it may be more persuasive to hold that the doctrine of laches should apply". At page 424 it is suggested that the Court does have power to apportion loss between directors under the Civil Liability (Contribution ) Act. McGee, Limitation Periods, 3rd Edition para 15.019 which says that "in the comparatively rare contribution claim which is a claim for equitable damages, the two year period of s.10 will continue to apply".

The Judge agreed with the Defendants. The Judge said that the preamble refers to "joint liability for the same debt"and so does s.3 CLCA. That CLCA casts a very wide net and as Auld LJ in the Friends’ Provident case said it was "whatever the basis of liability. " Any claim the Claimant might have had was supersede by s. 7(3) CLCA . The limitation period was two years and the action was statute barred by s.10 LA.