Horatia House in Portsmouth had its cladding removed for fire safety after the Grenfell tragedy (Credit: Dreamstime)
The courts are currently chock-full of defective cladding cases. Guy Higginbottom looks at how contribution claims work
Since the Grenfell fire in 2017, more and more claims for replacing defective cladding are reaching the courts. Depending on the case, it is important to understand how contribution claims work.
In one current claim for cladding replacement, the main contractor has agreed with the client to replace defective cladding on a building for £2m but is now seeking to recoup the cost from the cladding subcontractor. In turn, the subcontractor is seeking a contribution from the novated architect under the Civil Liability (Contribution) Act 1978, alleging that the practice was negligent in specifying the cladding. The act provides that “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)”.
However, no claim under the act can be brought later than two years after the principal claim is resolved, by either a judgement of the court or an arbitrator’s award, or where the parties settle the dispute by agreeing the amount of compensation. The ‘compensation’ includes a party either paying a sum of money, or paying in kind, such as carrying out specific remedial works.
Contribution claims under the act
The case of RG Carter Building Ltd v Kier Business Services Ltd (formerly Mouchel Business Services Ltd) [2018] considered a similar situation where, instead of paying, the main contractor agreed to carry out remedial works, and subsequently sought a contribution from the designer. The court found that the two-year limitation started when the scope of remedial works was agreed.
This raises two practical points regarding contribution claims under the act.
Firstly, in cases where the principal claim has been decided or settled for a sum of money, it is important to have some detail of how the agreed sum was calculated, in order to apportion an appropriate amount to the party from whom the contribution is sought.
If there is no detail to the agreed sum, then the party seeking the contribution will often have to engage an expert to calculate its quantum. This can be expensive after the event and given the relative shortness of the limitation period (only two years as opposed to six or 12), limited time may restrict the accuracy of the expert’s assessment. The parties to the principal claim can agree a ‘round figure’, adjusting the quantum with a balancing figure, which can be a lump sum or calculated as a percentage addition or discount.
Secondly, in cases where the claim is settled by the defendant carrying out remedial work at its own cost, any contribution sought from a designer by a contractor is highly unlikely to be a physical one. Instead, the contractor will be seeking a financial contribution.
Urgent remedial works
Therefore, it is essential to price the agreed scope of remedial works for which the contribution is sought. In cases where the remedial works had to be undertaken urgently, either by necessity or under the terms of settlement, the party seeking the contribution should describe the circumstances under which the remedial work was procured. For example, if they had to be carried out quickly, then it is unlikely the contractor would have time to obtain competitive tenders.
It is in all parties’ interests that the contribution claim can be resolved as swiftly as possible. This is not always achievable, as the contributing party may challenge the extent of its liability or the quantum of the contribution being sought. The earlier that expert opinions can be obtained, for both liability and quantum, the better the parties and their legal advisors will be placed to raise and manage claims under the act.
Guy Higginbottom is an independent contract consultant
