Enviroco Ltd v Farstad Supply A/S
| Jurisdiction | England & Wales |
| Judge | Lord Phillips,LORD MANCE,LORD CLARKE,LORD RODGER,LORD HOPE |
| Judgment Date | 05 May 2010 |
| Neutral Citation | [2010] UKSC 18 |
| Date | 05 May 2010 |
| Docket Number | No 5 |
| Court | Supreme Court |
[2010] UKSC 18
Lord Phillips, President
Lord Hope, Deputy President
Lord Rodger
Lord Mance
Lord Clarke
and another
Appellant
Alistair Clark QC
Paul O'Brien
(Instructed by HBJ Gateley Wareing LLP)
Respondent
Robert Howie QC
Almira Delibegovic-Broome
(Instructed by Paull & Williamsons)
LORD CLARKE (with whom Lord Phillips agrees):
The assumed facts
On 7 July 2002 the oil rig supply vessel Far Service ('the vessel') was damaged by fire while berthed in Peterhead harbour. She was owned by the pursuer, Farstad Supply AS ('the owner'), and was under charter to the third party, Asco UK Limited ('Asco'). Asco had engaged the defender Enviroco Limited ('Enviroco') to clean out some of the tanks on board the vessel. Enviroco was carrying out the work. On Asco's instructions the master of the vessel started up the engines, preparatory to moving to another berth. At the same time an employee of Enviroco inadvertently opened a valve which released oil into the engine room near hot machinery. The oil ignited and caused the fire.
The claims
The owner sued Enviroco for damages in negligence. Enviroco denies liability but for the purposes of the appeal it is to be assumed that it is liable. Enviroco says that the fire was materially contributed to by the contributory negligence of both the owner and Asco. Those allegations are denied but for the purposes of the appeal it is to be assumed that Asco would be liable in negligence to the owner for the consequences of the fire but for any defence Asco might have under the terms of the charterparty.
Although there is a contract between Enviroco and Asco, the terms of that contract are not before the Court and, so far as I am aware, Enviroco has not alleged any breach of that contract against Asco. Enviroco's claim is solely for contribution. It says that, if it is liable to the owner, it is entitled to a contribution from Asco under section 3(2) of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1940 ('the 1940 Act'). If it is entitled to such a contribution, it is agreed that Asco will (at the least) be entitled to an indemnity from the owner under clause 33(5) of the charterparty. Asco has played no part in the debate at any stage. That is no doubt because, whatever the result, it will not ultimately be liable. It either has a defence to Enviroco's claim for contribution or it is entitled to an indemnity from the owner under the terms of the charterparty. The owner accepts that that is the case and has accordingly made the submissions which Asco would have made.
After a debate on the assumed facts, on 23 April 2008, the Lord Ordinary, Lord Hodge, held that Enviroco was not entitled to a contribution from Asco: see 2008 SLT 703. Enviroco enrolled a reclaiming motion and on 1 May 2009 an Extra Division allowed the reclaiming motion by a majority, comprising Lady Paton and Lord Carloway, with Lord Osborne dissenting: see 2009 SC 489. With the judicial score being two all, the owner appeals to this Court in order to restore the interlocutor of the Lord Ordinary.
The issues
As set out in the agreed Statement of Facts and Issues the issues in this appeal are these:
i) What is the meaning and effect of section 3(2) of the 1940 Act?
ii) In particular, can a defence provided by a pre-existing contract such as the charterparty be taken into account in determining whether a person "if sued, might also have been held liable" for the purposes of section 3(2)?
iii) If the answer to question ii) is yes, does clause 33(5) of the charterparty have the effect that Asco is not a person who, if sued, might also have been held liable to the appellants for the purposes of section 3(2)?
It is convenient to consider the first two questions together because they both involve the construction of the 1940 Act. It is common ground that at common law the position in Scotland (unlike in England) was that, where more than one wrongdoer was jointly and severally liable to pay damages in respect of any loss or damage, and where that wrongdoer had paid more than his pro rata share, each such wrongdoer was liable inter se to pay a pro rata share of the damages. Thus if there were two such wrongdoers, A and B, the contribution of each would be 50 per cent and, if A paid, say, 75 per cent of the damages, he was entitled to recover the 25 per cent excess from B. That was so, whether or not a claim had been made by the pursuer against B. The common law position is explained by Lord Keith of Kinkel in Comex Houlder Diving Ltd v Colne Fishing Co Ltd 1987 SC (HL) 85 at 120-1.
The 1940 Act was enacted to reform the common law position. Section 3 is entitled "Contribution among joint wrongdoers" and provides, so far as relevant, as follows:
"(1) Where in any action of damages in respect of loss or damage arising from any wrongful acts or negligent acts or omissions two or more persons are, in pursuance of the verdict of a jury or the judgment of a court found jointly and severally liable in damages or expenses, they shall be liable inter se to contribute to such damages or expenses in such proportions as the jury or the court, as the case may be, may deem just: Provided that nothing in this subsection shall affect the right of the person to whom such damages or expenses have been awarded to obtain a joint and several decree therefor against the persons so found liable.
(2) Where any person has paid any damages or expenses in which he has been found liable in any such action as aforesaid, he shall be entitled to recover from any other person who, if sued, might also have been held liable in respect of the loss or damage on which the action was founded, such contribution, if any, as the court may deem just.
(3) Nothing in this section shall –
….
(b) affect any contractual or other right of relief or indemnity or render enforceable any agreement or indemnity which could not have been enforced if this section had not been enacted."
The essential purpose of the section was to replace the common law pro rata rule with a flexible rule of apportionment according to the court's view of what was just. In the instant case the claim for contribution is made under section 3(2) but in my opinion section 3(2) must be construed in the context of the section as a whole and, in particular, subsection (1).
Subsection (1) deals with the case where the pursuer (here the owner) proceeds against two defenders in respect of loss or damage caused by both and a judgment is given against both, so that they are both "found jointly and severally liable in damages or expenses". This might have been the case here if the owner had sued both Enviroco and Asco and had obtained a decree against Enviroco and Asco in respect of loss and damage arising out of the fire. The effect of subsection (1) would then have been that Enviroco and Asco would have been liable to contribute to such damages and expenses in such proportions as the court deemed just.
It is important to appreciate that in such an action, in order for the owner to obtain a decree against Asco, it would have had to establish that Asco was liable to it in damages. That would have involved establishing that Asco was liable for damages for breach of duty, which in turn would have involved the court considering whether Asco had a defence under the charterparty. That is so whether the alleged duty was a contractual duty or a duty of care at common law. Although the Statement of Facts and Issues says that, for the purposes of this appeal, it is to be assumed that Asco would have been liable to the owner in negligence jointly and severally with Enviroco but for any defence arising from the terms of the charterparty, that assumption would not have carried the owner far enough. That is because the right to contribution under section 3(1) depends upon there being a decree that Enviroco and Asco were jointly and severally liable in damages and the owner could not have obtained such a decree against Asco if Asco had a contractual defence, whether the source of the alleged liability was in contract or delict. The relations between the owner and Asco were governed by the charterparty and I can see no basis upon which Asco could have been liable to the owner in negligence, and thus in delict without reference to the terms of the charterparty. The question in a case to which section 3(1) applied would be whether Asco had a defence under the charterparty to the owner's claim.
I turn to section 3(2). It applies to a claim for contribution by a person who has been held liable "in any such action as aforesaid". The reference to "any such action" is a reference to the action identified in subsection (1) and is thus a reference to an action by a pursuer against a defender "in respect of loss or damage arising from any wrongful acts or negligent acts or omissions" by the defender. If a defender, as such a wrongdoer, has been held liable to pay damages or expenses to a pursuer and if he pays the damages he has a right to recover such contribution, if any, as the court may deem just from "any other person who, if sued, might also have been held liable in respect of the loss or damage on which the action was founded".
As I see it, the subsection is specifically intended to deal with the position where there are two actions. In the first action a wrongdoer A is held liable in damages or expenses to the pursuer and A then pays the pursuer and begins a separate action against a second person B who, if sued in the first action, might have been held liable to the pursuer in the first action. However, no-one suggested that the subsection was limited to such a case. It was not suggested that the claim for contribution could not be made by third...
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