Niru Battery Manufacturing Company v Milestone Trading Ltd (No 2)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Clarke,the President,Lord Justice Sedley |
| Judgment Date | 28 April 2004 |
| Neutral Citation | [2004] EWCA Civ 487 |
| Docket Number | Case No: A3/2003/1167 |
| Court | Court of Appeal (Civil Division) |
| Date | 28 April 2004 |
[2004] EWCA Civ 487
The President
Lord Justice Clarke and
Lord Justice Sedley
Case No: A3/2003/1167
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERICAL COURT
Mr Justice Moore-Bick
Royal Courts of Justice
Strand,
London, WC2A 2LL
Mr Michael Bloch QC and Miss Tiffany Scott (instructed by Clyde & Co) for the Fourth Defendant/Appellant
Miss Geraldine Andrews QC and Miss Zoe O'Sullivan (instructed by Ashurst) for the Fifth Defendant/Respondent
Introduction
This is the second appeal which this constitution of the Court of Appeal has heard from decisions of Moore-Bick J in this action. In the first appeal, in judgments delivered on 23 October 2003, reference [2003] EWCA Civ 1446, we dismissed the appeals of both Credit Agricole Indosuez ("CAI") and SGS United Kingdom Limited ("SGS") against the order made by the judge on 17 July 2002 giving judgment against them. The judgment was in the sum of US5,712,762 together with interest and costs in favour of the claimants, Niru Battery Manufacturing company ("Niru") and Bank Sepah Iran ("Bank Sepah"), and was given jointly and severally against Mr Mahdavi, CAI and SGS, who were the third, fourth and fifth defendants respectively.
As indicated in paragraphs 2 and 3 of my judgment in the first appeal, the bases of the judge's judgment were as follows. Mr Mahdavi was held liable in the tort of deceit, as a constructive trustee of monies obtained from Bank Sepah by fraud and as an accessory to a breach of trust. The claim against CAI failed in the tort of deceit but succeeded in restitution on the basis that the circumstances in which it paid money away did not afford it a defence to the claimants' claim. The claim against SGS succeeded on the basis that it was in breach of a duty of care owed to the claimants. After judgment had been given, it was agreed between the parties, without argument before or determination by the judge, that judgment should be given both jointly and severally against CAI and SGS.
In the first appeal SGS appealed on the basis that the judge was wrong to hold that it owed a duty of care to Niru, that it was in breach of that duty and that the breach caused the loss. The appeal failed on all three grounds, with the result that the position remains that SGS was correctly held liable to the claimants in tort for damages for negligence. As to the position of CAI, Niru and SGS submitted that the judge was wrong to acquit CAI of deceit, while CAI submitted that, having acquitted CAI of dishonesty, he was wrong to hold that it was liable in restitution but should have held that it had a defence of change of position. We concluded that the judge was entitled to acquit CAI of dishonesty and deceit but that, given his conclusions as to the circumstances in which it paid the monies away on the instructions of Mr Mahdavi, he was correct to hold that CAI was liable in restitution. I shall return to the basis of our conclusions below.
This appeal arises out of the contribution proceedings between CAI and SGS, which themselves have a somewhat unusual history, as the judge himself explained in his judgment of 8 May 2003. It is that judgment which has given rise to this second appeal. CAI and SGS issued Part 20 proceedings against each other seeking contribution under section 1 of the Civil Liability (Contribution) Act 1978 ("the 1978 Act") . At the trial it was common ground between them that if they were both liable they could claim contribution from each other under section 1 of the 1978 Act, even though SGS might be liable in tort and CAI in restitution.
That was common ground because of the decision of this court in Friends' Provident Life Office v Hillier Parker May & Rowden [1997] QB 85 in which it was held that the 1978 Act enabled contribution to be claimed in such circumstances. Both CAI and SGS argued their cases on contribution at the trial on that basis, the argument being almost entirely directed to the relative responsibilities of SGS and CAI for the loss that Niru had suffered. Under section 2(1) of the 1978 Act the amount of contribution recoverable is to be such as may be found to be just and equitable having regard to the extent of the contributor's responsibility for the damage in question. The judge considered the relative extent of the responsibility of CAI and SGS and prepared a draft judgment in which he concluded that they were equally responsible. He included his conclusions in his principal judgment and distributed it to the parties in draft in the ordinary way.
However, before the judgment was formally handed down, the judge's attention was drawn to the decision of the House of Lords in Royal Brompton Hospital NHS Trust v Hammond [2002] UKHL 14, [2002] 1 WLR 1397, in which Lord Steyn, with whom the rest of their Lordships agreed, disapproved the part of the judgment in the Friends' Provident case that had underpinned the parties' approach to the question of contribution. The judge therefore delivered judgment in the main action and adjourned the Part 20 proceedings for further argument in order to allow the parties to consider and subsequently to address him on the effect of that decision.
Before a further hearing could be held there were what the judge called two further significant developments. The first was that the claimants had entered judgment against SGS and CAI jointly and severally pursuant to an order the terms of which were agreed between all parties to the action. The claimants had decided to look to SGS alone to satisfy the judgment and it had done so. The result was that by the time that the issues between SGS and CAI came to be argued before the judge SGS had paid the whole of the judgment, including a sum that he had ordered to be paid on account of the claimants' costs, and CAI had paid nothing. Also by then both parties had reflected on the implications of the Royal Brompton Hospital case in the light of these further events.
As a result SGS sought (and was granted) permission to amend its particulars of claim in the Part 20 proceedings to add to its existing claim for a contribution under section 1 of the 1978 Act claims for relief by way of subrogation, recoupment and contribution based on the satisfaction of the judgment. SGS now submitted that it was entitled to recover the whole of the amount which it had paid by way of subrogation and/or recoupment. It further submitted that section 1 of the 1978 Act applied notwithstanding anything said in the House of Lords in the Royal Brompton Hospital case and that it would be just and equitable for CAI to bear either the whole or the majority of the loss.
Mr Bloch QC submitted to the judge on behalf of CAI that neither the principles of subrogation nor those of recoupment assisted SGS and that he should follow the opinion expressed by Lord Steyn in the Royal Brompton Hospital case and hold that the 1978 Act has no application in a case of this kind. Alternatively he submitted (as I understand it) that the judge should apportion the loss equally between CAI and SGS as set out in his draft judgment.
The judge held that SGS was entitled to be subrogated to Niru's claim against CAI and that it was entitled to recover the whole of the amount it had paid to Niru in respect of its liability for principal and interest. He accordingly gave judgment for SGS against CAI in the total sum of US7,087,034.80. He further held that SGS was not entitled to recover by way of recoupment and, on contribution, that he should follow Lord Steyn and hold that the 1978 Act has no application as between those liable in damages and those liable in restitution.
This second appeal is brought by CAI pursuant to permission granted by the judge. Mr Bloch QC submits on behalf of CAI that the judge was wrong to hold that SGS is entitled to be subrogated to Niru's claim against CAI, although, if I understand him correctly, he submits that if that is wrong the court can and should hold that SGS is only subrogated so far as it is just and equitable in all the circumstances. Miss Andrews QC submits on behalf of SGS that the judge was right on subrogation but wrong on recoupment. She also submits if necessary that the judge was wrong to hold that the 1978 Act has no application as between SGS and CAI and that he should have awarded 100 per cent contribution in favour of SGS. She submits that the judge's view expressed in his draft judgment in this regard was wrong.
I should note in passing that the judge treated the orders for costs differently. He held that the principles of subrogation and recoupment had no application to costs because the liability to costs arose out of the proceedings themselves. He held that SGS was entitled to a contribution from CAI in respect of what it had paid in satisfaction of that part of the judgment and assessed the contribution at 50 per cent. Neither SGS nor CAI challenges that conclusion in this appeal, which is therefore concerned only with liability for principal and interest. In this regard it seems to me to be convenient first briefly to consider the facts then to consider subrogation, recoupment and contribution.
The facts
The facts were set out in great detail in the original judgment of the judge, [2002] EWHC (Comm) 705, and summarised in paragraphs 4 to 26 of my judgment in the...
To continue reading
Request your trial
-
Spencer Day v Tiuta International Ltd, and Another
...necessary to ensure that the claimant does not get more than he bargained for."; iv) dicta of Moore Bick J in Niru Battery Manufacturing Co v Milestone Trading Ltd (No 2) [2003] EW H C 1032, at paragraphs 32–37, where, when holding that the subrogated claimant did not need to join as a part......
-
Charter Plc v City Index Ltd (Gawler and Others, Part 20 defendants)
...On the second, he held himself bound by another decision of this court, Niru Battery Manufacturing v Milestone Trading (No 2) Ltd [2004] 2 Lloyd's Rep 319 (“Niru (No 2)”). Both questions are in issue in the appeal. 2 The relevant facts are as follows. Between February 2000 and August 2004 t......
-
Haugesund Kommune v Depfa ACS Bank
...litigation in the course of which SGS, having paid Niru's claim in full, sought to recover from CAI, Clarke LJ also said this, at [2004] 2 Lloyds Rep 319 at 327: “It does not seem to me to be appropriate to treat CAI and SGS as equally responsible. It is true that SGS was careless (and thus......
-
Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd
... ... from the appellant, AFSL, a finance company, which they had been led to expect, by a common ... a threat of legal action and recommenced trading with TCP. The second respondent, Bosch, agreed to ... 146 See Niru Battery Manufacturing Co v Milestone Trading Ltd ... ...