Blame v liability - a fair share

Imagine a situation, common enough, where an employer has suffered losses because his new building is defective. There is clear evidence that the contractor who built it has not performed as required by the building contract. There is also clear evidence that the architect has not come up to the standard required by his contract with the employer. Both are liable to the employer for damages for breach of contract, and the employer may choose to sue either of them for its entire loss.

What happens if the employer decides to pursue only one of the parties he is in contract with? It would surely the unfair if there were no means of apportioning blame between them. Indeed it would, but until 1978, the contract or architect in such a situation had no remedy against the other to recover some or all of any damages it had to pay to pay to the employer. There was no legal mechanism to allow contractually liable defendants responsible for the same damage to seek contributions from one another.

Happily, this was rectified by the Civil Liability (Contribution) Act 1978 which allowed tribunals to apportion responsibility for the same damage whatever the basis of the legal claim.

The operative provisions of the 1978 Act, Section 1(1) states:

… 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)

Hence, a Defendant sued in preference to other potential defendants may claim a contribution from another party, provided the liability is to the same Plaintiff and in respect of the same damage. A party not sued by the plaintiff who is the subject of a contribution claim by a defendant is known as a "third party" to the action.

The extent to which such a claim for contribution can be made was reviewed closely by the Court of Appeal just over a year ago in the case of Birse Construction v Haiste and Newton.⁽¹⁾

In the case Birse, the Plaintiff, was the contractor appointed by Anglian Water Authority for the design and construction of a reservoir. Haiste, the Defendant, were a firm of consulting engineers, retained by Birse to act in the preparation of the design of the project. Mr Newton, the Third Party to the action, was employed by Anglian and appointed by it as the Engineer to the contract with Birse. The reservoir proved to be defective. Birse brought a claim against Haiste. Haiste wished to claim a contribution from Mr Newton. The thrust of Haiste’s argument being that Mr Newton was, in some sense, responsible for the reservoir being defective by virtue of his liability to Anglian.

The essence of Haiste’s argument was that all the parties were involved in the same series of events and that if they could prove that Mr Newton was in some way to blame for the defects, then they would be entitled to a contribution from him. This argument was accepted by the Official Referee who held that "same damage" did not necessarily mean damage suffered by the same person. The decision caused consternation at the time as it potentially implicated a far wider class of contributor.

If it was correct, the case would be nigh on impossible to resolve: the Official Referee would have to assess Newton's degree of responsibility for Anglian's losses, when Anglian was not a party to the action. Such losses might not be the same as the losses Birse claimed from Haiste.

The Court of Appeal disagreed with the Official Referee. It held that the loss suffered by Anglian in not having a properly functioning reservoir, the loss sustained by Birse in having to construct a new reservoir, and the damages which Haiste may have to pay Birse, were not "the same damage" within Section 1(1) of the Act, even though each may have arisen from the same circumstances.
The Court of Appeal found that Mr Newton could not be liable on the basis that he might have been liable to Anglian. Anglian was not a relevant person for the purpose of the contribution proceedings.

This decision upholds the interpretation that "same damage" means damage suffered by the same person - namely, the plaintiff.

1. Birse Construction Ltd v Haiste Ltd CA [1996] 2 All ER 1