There are many differences between the legal system in Scotland and in England and Wales (E&W). One such difference between the two jurisdictions is how contribution claims operate north and south of the border.

What follows is a comparison of the approaches in each jurisdiction when dealing with claims where there are joint-wrongdoers, and some advice on the practical implications of the differences that arise.

The “take home” message from this update is:

• If you want to settle a pursuer’s claim with a view to subsequently pursuing a joint-wrongdoer for a contribution towards the sums paid, agree settlement terms conditional on the basis that a “friendly” action will raised by the pursuer so that decree can be obtained against your insured as the “paying” party.
• Do not make payment of the agreed sums until after decree has passed.
• Be wary of relying on an assignation as a means to pursue a claim against another party.

The need for a decree

The most significant difference between the two jurisdictions when it comes to seeking a contribution from a joint-wrongdoer is that in Scotland, before a party can consider bringing contribution proceedings against another party, there must be a decree (judgment) against it. This decree needs to be granted against the party who wishes to subsequently seek a contribution before the sums in settlement have actually been paid to the pursuer. This is important as if the decree is issued after payment is made, then the party seeking a contribution will arguably not have been “found liable” for the sums paid.

The need for a decree applies even if a defender wishes to compromise a claim pre-litigation.

This is not the case in E&W, where the right to bring a contribution claim flows automatically from the fact that the defendant has settled the claimant’s claim in whatever way is agreed between the parties.

The reason for the difference lies in the legislation governing such claims in Scotland and E&W.

The Law Reform (Miscellaneous Provisions) (Scotland) Act 1940 provides in s3(2) that a person who wishes to seek a contribution must have been found liable, i.e. it is not enough simply to have compromised the claim; liability must be “found” against the defender. The only way of being “found liable” is by decree passing against the party.

By contrast, s1 of the Civil Liability (Contribution) Act 1978 in E&W provides that “any person liable” may recover a contribution from another. There is no need for a finding of liability against the party seeking a contribution. It is sufficient that the defendant settled the claimant’s claim.

The need for a “finding” of liability in Scotland can be seen in relevant case law. In National Coal Board v Thomson 1959 SC 353, a claim for contribution was sought after compromise of the claim. The Inner House said that the debt needed to be crystallised in order for a contribution to be sought under the 1940 Act.

The later case of Comex Houlder Diving Ltd v Colne Fishing Co Ltd 1987 SC (HL) 85 went to the House of Lords on the meaning of the words “found liable” in s3(2) of the 1940 Act. The House of Lords found that a decree which simply gave effect to an agreed settlement was sufficient to satisfy the requirements of s3(2) but made it clear that, in whatever form, there had to be a decree issued by a Scottish court.

Stop Press!

The need for a decree to pass in order to lay the foundation for contribution proceedings in Scotland was re-affirmed just before Christmas by Lord Braid in the Outer House when he gave the Opinion in Loretto Housing Association Ltd v Cruden Building and Renewals Ltd and Cameron & Ross Ltd; Sheila Bunton (formerly trading as John Arnott) and others (Third Parties) [2021] CSOH 127 on 21^st December 2021.

Loretto Housing Association Ltd (Loretto) sued Cruden Building and Renewals Ltd (Cruden) in respect of the cost of defective building works. Cruden denied liability and brought in Sheila Bunton (Bunton) as a third party on the basis she was the clerk of works. There were other third parties but only Bunton was substantively involved. Cruden agreed a settlement of £971,250 with Loretto just before proof in August 2021. Cruden was, as a result, assoilzied. However, Cruden wanted to recover a proportion of the settlement from Bunton. Cruden advanced its case on two bases:

1. Bunton might have been found liable had she been sued by Loretto and Cruden should recover an appropriate amount from her on this basis in terms of s3(2) referred to above; and/or
2. Cruden was entitled to recover pro rata from Bunton under its common law right of relief i.e. one third of the sum paid in settlement (on the basis there were in effect three defenders – Cruden, Cameron & Ross and Bunton).

The problem for Cruden here is probably already apparent. Could it continue to claim a right of relief following the granting of absolvitor in its favour? In other words, could absolvitor ever constitute the finding of liability required under s3(2) of the 1940 Act (see Thomson above)?

Bunton argued that Cruden could not avail itself of either a) or b) and the judge agreed. In relation to point a), the decision in Comex Houlden had relaxed the meaning of being “found liable” to some extent, but in no way could a decree of absolvitor ever be construed as a finding of liability. Section 3(2) of the 1940 Act provides that the party relying on it should have paid the sum for which it had been found liable. A decree of absolvitor contains no reference to any sum. How could it when, by its nature, it absolves the defender of any liability?

In relation to point b), whilst the existence of the common law right was not in dispute, defenders know that a decree must be obtained. The decision in Thomson (see above) might have been incorrectly decided, although Lord Braid was not that impressed by arguments to this effect, but it was binding on the court.

In short, a decree of absolvitor is not and will not be construed as a finding of liability such that a right of relief against another wrongdoer can be claimed in reliance on it.

The lesson from this case is that if, as a defender, you have or might have a chance to obtain a contribution from another party, you will need to obtain decree against you in whatever form is appropriate to preserve your rights.

Time limits

These are similar north and south of the border. In Scotland, under s8A(1) of the Prescription and Limitation (Scotland) Act 1973, the party seeking contribution has two years to raise proceedings from the date on which the right to recover became enforceable. It is probably safer to regard the date of the decree as the trigger date rather than the date payment is made, given that decree ought to pass before any sums are issued.

In E&W the position is similar: under s10 of the Limitation Act 1980 a claim for a contribution must be brought within two years from the date the right accrued.

Assignment

It is possible for a pursuer to assign his or her rights to another party so that the other party might stand in the shoes of the pursuer and pursue a claim against a third party.

In theory, this could provide a route to a valid claim even where there is no decree. However, in practice, it is fraught with problems.

The difficulty arises due to the fact that an assignee cannot obtain a greater right than the assignor and a claimant cannot receive compensation twice. As such, where an assignation is obtained by a joint-wrongdoer who has paid compensation to an injured party (as will invariably be the case when an insurer settles a claim and seeks an assignation), any party that is then pursued in terms of the assignation can argue that compensation has already been paid.

As payment of compensation would be a defence to a claim raised by the injured party, it is arguably also a defence to the claim raised by the assignee. Accordingly, unless the assignee has paid less than full compensation to the injured party (which is unlikely), it is likely to be argued that the assigned claim has effectively been extinguished by what has been paid.

In England and Wales, the position is simpler and easier to operate. A right to compensation for a personal injury caused by the negligence of another is a legal “chose (thing) in action” and is capable of assignment under s136 of the Law of Property Act 1925.

Hints and tips

• In Scotland, the only sure way to secure your rights to pursue a contribution claim is by having a decree pass against the paying wrongdoer.
• Our advice is that any extra-judicial offer be made conditional on the pursuer raising a “friendly action” against the insured in the amount agreed and then have decree pass against the insured in that sum before thereafter paying out the agreed sum.
• To be on the safe side, ensure that the decree is obtained before payment is made. If made after it is arguable that payment was not made in discharge of a constituted debt.
• As the court said in Comex, the decree must be obtained in a Scottish court. A judgment obtained in another jurisdiction will not be enough.
• Watch out for the time limit in both jurisdictions.
• Don’t rely on an assignation to lay the foundation for pursuing a claim against another wrongdoer.