RG Carter Building Ltd v Kier Business Services Ltd

For limitation purposes, a contribution claim arising from a settlement under section 10(4) of the Limitation Act 1980 is triggered by a binding agreement as to the amount of compensation. A non-binding agreement in principle, including one made subject to contract, is insufficient.

The parties may agree the compensation payment while leaving ancillary matters, such as payment terms or costs, for later agreement. The critical question is whether they intended to be bound as to the payment. Sections 10(3) and 10(4) are mutually exclusive and there can be only one limitation trigger. For payment in kind, such as remedial works, the scope of the works determines the amount of compensation.

The claimant had constructed a school science block which suffered water ingress. The school authority brought arbitration proceedings against it, and the dispute was ultimately settled by an agreement requiring remedial works.

The claimant then sought a contribution or indemnity from the defendant. The parties agreed a standstill arrangement and asked the court to determine whether the contribution claim was already statute barred under section 10 of the Limitation Act 1980.

The central issue was whether time began to run when the parties reached an agreement in principle during negotiations, or only when they entered into a binding agreement as to the compensation payment.

1. Claim in time. The limitation defence failed. The contribution proceedings were not statute barred on the relevant date.
2. Sections 10(3) and 10(4) of the Limitation Act 1980 are mutually exclusive. There can be only one trigger date: the judgment or award requiring payment where the matter is determined judicially or by arbitration, or the agreement to make the payment where the matter is compromised.
3. It follows that an unenforceable agreement as to payment cannot start time running. If negotiations break down, time runs under section 10(4) from the later binding settlement agreement or, if the matter proceeds to determination, under section 10(3) from the judgment or award.
4. Section 10(4) requires agreement as to the amount of the compensation payment. It does not require agreement on ancillary matters such as payment terms or costs. The parties may nevertheless agree that they will not be bound until all terms are agreed. Whether an agreement is immediately binding depends on the parties’ contractual intention, applying the principles in Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd’s Rep. 601.
5. In a payment-in-kind case, the amount of compensation is measured by the scope of the remedial works. Agreement to carry out works whose scope remains to be assessed or agreed is insufficient.
6. The April 2015 negotiations were expressly subject to contract. No binding agreement existed by 28 April 2015. Binding terms for the remedial works were agreed only when the settlement agreement was executed on 29 June 2015. Alternatively, the scope of the works was not agreed until at least after the technical meeting on 8 May and amendments continued until 25 June 2015.