Newson v IMI : Delta - Underlying Limitation Cannot Defeat Contribution Claim

The Court of Appeal has ruled that Part 20 defendants are unable to defeat a Part 20 claim on the basis that the main action was time barred.

In Newson v IMI : Delta, the claimant and defendant (confidentially) settled a dispute; the defendant seeking a contribution to that settlement from a third party.

Whilst many defendants find themselves in the unsatisfactory position of proving its own liability as tortfeasor in order to entitle it to obtain contribution from a third party, in this case, the third party contended that it should not contribute to the settlement as the claimant's claim was out of time such that ipso facto the defendant should not have settled the dispute.  The Court of Appeal upheld the High Court's decision to reject the third party's argument (albeit on different grounds).

Limitation Act 1980

Both the defendant's and third party's defences alleged that the claimant's claim was time barred; the claimant responded that facts relevant to limitation had been deliberately concealed under s.32 of the Act.  The Court commented [§41] that pleading deliberate concealment is often (tactically) anticipatory of a limitation defence; it does not become part of the factual matrix of the case. 

Whilst a defendant may have a limitation (or other collateral) defence, in arriving at a bona fide settlement, the parties will have assessed the respective strengths and weaknesses of the case and accounted for commercial considerations bearing upon it.

If it is untested, the veracity of a limitation defence may be of little use to a third party.  Whether, however, a settlement was bona fide (e.g. collusive, corrupt, dishonest) may be a better argument [see 1977 Law Commission Report on Contribution, §56], but it was not applicable on the facts.

(It did not arise, but it is worth remembering that, in relation to the contribution claim, section 10(1) provides that where a person is entitled to recover a contribution from another person for any damage, that person has two years to commence that action from the date the right accrued - e.g. the date of settlement between claimant-defendant.  Here, proceedings were already issued.)

Civil Liability (Contribution) Act 1978

Section 1(4) provides that "A person who has made or agreed to make any payment in bona fide settlement or compromise of any claim made against him in respect of any damage...shall be entitled to recover contribution...without regard to whether or not he himself is or ever was liable in respect of the damage, provided, however, that he would have been liable assuming that the factual basis of the claim against him could be established"; and section 6(1) explains that "A person is liable in respect of any damage...if the person who suffered it...is entitled to recover compensation from him in respect of that damage (whatever the legal basis of his liability...".

In consideration of the interplay between the limitation and contributions Acts, Sir Colin Rimer stated the defendant's contribution test as follows [§59]:

"all that D1 needs to show is that such factual basis would have disclosed a reasonable cause of action against D1 such as to make him liable in law to C in respect of the damage. If he can do that, he will be entitled to succeed against D2."

The decision is not a total defeat for third parties: whilst limitation will not avail a third party on liability, it is an issue that could instead be deployed against a defendant in relation to quantum.

W.H. Newson Holding Limited et al. v (1) IMI plc (2) IMI Kynoch Limited : (1) Delta Limited (formerly Delta plc) (2) Delta Engineering Holdings Limited [2016] EWCA Civ 773 (27/07/2016) - Pinsent Mason for Defendants; Addleshaw Goddard for Part 20 Defendants.