Zurich Insurance Plc v Nightscene Ltd

Limitation runs from accrual of the particular contractual cause of action relied upon. A reimbursement clause may create a separate cause of action even where the underlying facts also support claims under other contractual provisions.

Where a contractual indemnity or guarantee covers liabilities arising over time, time may not begin to run until the relevant liability and the total amount payable have been established and ascertained. Where repair works and associated expenditure form a continuing programme, the final repair bill may be the relevant point of accrual. The limitation analysis depends on the proper construction of the agreement and guarantee.

Zurich operated a new-build home insurance scheme. Birmingham Property Developments Ltd agreed to reimburse Zurich for reasonable costs incurred where Zurich paid sums relating to the developer's obligations. Nightscene Ltd guaranteed the developer's obligations and liabilities.

After defects were discovered, Zurich paid for investigation and remedial works between 2008 and 2009. Zurich issued proceedings against Nightscene on 5 June 2015. The County Court held that the claim was not statute-barred and gave judgment for Zurich. Nightscene appealed on limitation, arguing that the cause of action accrued on an earlier breach or on Zurich's first payment.

1. The appeal was dismissed. The decision of HHJ Russen QC was correct.

2. Clause 4.16 of the Agreement created a separate cause of action in debt for reimbursement of repair costs. Although the same defects could also have supported claims under clauses 4.8, 4.14 and 4.15, Zurich was entitled to choose the contractual route by which to pursue reimbursement. The reasoning in Henry Boot Construction Ltd v Alstom Ltd [2005] 1 WLR 3850 supported treating the claims as distinct.

3. The obligation under clause 4.16 arose when Zurich had paid a sum and the reasonable associated costs could be identified. In the circumstances, the total costs of the repair programme could not be finalised until the works were complete and the final bill was known. A formal demand was not necessary to start time running against BPDL, but that issue did not affect the appeal.

4. Nightscene's obligation was a secondary obligation as surety, not an obligation as primary debtor. On the proper construction of the Guarantee, limitation did not begin until the liability and amount guaranteed had been established and ascertained. The court adopted the reasoning in Telfair Shipping Corporation v Inersea Carriers SA [1985] 1 WLR 553 and applied the approach concerning a final balance in Wright v New Zealand Farmers Cooperative Ltd [1939] AC 439.

5. The first payment in January 2008 did not trigger limitation for the whole claim. The wording of clause 4.16 and the reference in paragraph 1.1(a)(ii) of the Guarantee to sums which might become due supported accrual only when the final balance was ascertained. The claim was therefore brought in time.

• High Court (Queen's Bench Division): The appeal from the order of HHJ Russen QC dated 19 December 2017 was dismissed. The County Court judgment in favour of Zurich was upheld.