Niru Battery Manufacturing Company and Another v Milestone Trading Limtied and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Moore-Bick |
| Judgment Date | 08 May 2003 |
| Neutral Citation | [2003] EWHC 1032 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 08 May 2003 |
| Docket Number | Case No: 1999 Folio 910 |
[2003] EWHC 1032 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Moore-bick
Case No: 1999 Folio 910
Mr Michael Bloch QC and Miss Tiffany Scott (instructed by Clyde & Co) for the fourth defendants
Miss Geraldine Andrews QC (instructed by Ashurst Morris Crisp) for the fifth defendants
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version may be treated as authentic.
The Hon. Mr. Justice Moore-Bick
Background
These proceedings arise out of a claim brought by Niru Battery Manufacturing Company ("Niru") and Bank Sepah Iran against the defendants, all of whom were involved in one way or another in a contract for the sale by Milestone Trading Limited)"Milestone") to Niru of 10,000 metric tons of lead ingots made in February 1998. The circumstances giving rise to the claim are set out in detail in the judgment which I delivered in the main action on 11 th July 2002, [2002] EWHC 1425 (Comm), now reported at [2002] All ER (Comm) 705, and need not be repeated here. The brief summary that follows is sufficient to set the present proceedings in context.
The contract between Milestone and Niru provided for payment by letter of credit against presentation of (among other documents) FIATA multimodal transport bills of lading and an inspection certificate issued by the international inspection group, SGS. In due course a letter of credit was opened by Bank Sepah in favour of Milestone. Milestone was one of a group of companies known as the "Woralco" group controlled by the third defendant, Mr Mahdavi. It had no significant assets of any kind and was used by the Woralco group as a single purpose vehicle for entering into the contract with Niru.
In order to obtain the lead needed to perform its contract with Niru Milestone, acting through Mr Mahdavi, obtained financing from the fourth defendant, Crédit Agricole Indosuez ("CAI"), against the deposit of the warehouse warrants relating to the goods. The warrants, possession of which gave CAI complete control over the goods, were to be released to Milestone only on repayment of the advance. However, the letter of credit represented Milestone's only source of funds and it therefore became necessary for Mr Mahdavi to find a way in which documents could be presented for payment before the warrants had been released by the bank. That was achieved by enlisting the help of the second defendant, Maritime Freight Services Ltd ("Maritime"), which was prepared to issue a FIATA bill of lading stating that it had taken the goods in charge for carriage to Iran at a time when CAI still held the warrants and the goods themselves were still in the warehouse.
Most of the lead that Milestone intended to deliver was held in a warehouse at Gothenburg; the remainder, about 2,000 metric tons, was held in a different warehouse at Helsingborg. By the time Maritime issued its bill of lading the fifth defendant, SGS United Kingdom Ltd, acting on instructions from Milestone, had already inspected, sampled and tested the goods at Gothenburg. On being informed that Maritime had issued a bill of lading recording that it had taken the goods in charge for carriage to Iran, SGS issued an inspection certificate in which it certified, among other things, that the goods were marked with the name of Niru and that the quality, quantity and packing of the goods loaded complied with the contract. The certificate was inaccurate in two respects: the goods were not marked with Niru's name and had not been put under the control of Maritime, let alone loaded onto any form of transport. I held that SGS was negligent in issuing the certificate and therefore liable to Niru in tort.
The documents, including the bill of lading and the inspection certificate, were presented to Bank Sepah under the letter of credit through CAI. After some minor discrepancies had been corrected the documents were accepted by Bank Sepah, but it was unable to make payment because the authorities in Iran failed to make the necessary foreign currency available. The price of lead began to fall causing CAI to become concerned about the adequacy of its security and eventually it sold the goods to reimburse itself. Then, somewhat to everyone's surprise, finds were made available to enable Bank Sepah to honour the letter of credit and a sum of about US$5.8 million was remitted to CAI for payment to Milestone. The officer responsible for Milestone's account, Mr Francis, knew that the bank had sold the lead that was to have been delivered under the contract and had assumed that the transaction was dead. He was unsure, therefore, now to respond to the receipt of the funds, but having spoken to Mr Mahdavi he was persuaded to release them to another company in the Woralco group, Nikam Metal Finance Ltd ("Nikam"). Needless to say, there were subsequently lost. I held that CAI had been unjustly enriched by the receipt of the funds from Bank Sepah and that it could not rely on change of position as a defence to a claim in restitution because it had failed to act in good faith when dealing with the funds. I also held that, although the funds had been remitted by Bank Sepah, Niru was entitled in the circumstances of this case to recover against CAI in restitution.
The contribution proceedings
CAI and SGS issued Part 20 proceedings against each other seeking contribution under section 1 of the Civil Liability (Contribution) Act 1978. 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 Act even though SGS might be liable in tort and CAI in restitution. That is largely explained by the fact that the leading authority on the construction of section 1 at that time was Friends' Provident Life Office v Hillier Parker May & Rowden [1997] QB 85 in which the Court of Appeal had accepted that the Act enabled contribution to be claimed in those circumstances. As a result the argument in the Part 20 proceedings was almost entirely directed to the relative responsibilities of SGS and CAI for the loss that Niru had suffered.
After I had handed out my draft judgment, however, my 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. I therefore delivered judgment in the main action and adjourned the Part 20 proceedings for further argument in order to allow the parties to address me on the effect of that decision. Unfortunately, it was not possible to hear further argument on the contribution proceedings until the end of the year and by that time there had been two further significant developments. First 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. Secondly, the claimants had decided to look to SGS alone to satisfy the judgment and it had done so. As things now stand, therefore, SGS has paid the whole of the judgment, including the sum that I ordered to be paid on account of the claimants' costs, and CAI has paid nothing.
The decision in Royal Brompton Hospital and the satisfaction of the judgment caused SGS to give greater attention to the grounds on which it might seek to recover a contribution or indemnity from CAI. After hearing argument I gave SGS permission to amend is particulars of claim in the Part 20 proceedings to add claims for relief by way of subrogation, recoupment and contribution based on the satisfaction of the judgment to its existing claim for a contribution under section 1 of the 1978 Act.
The conduct of SGS
Before turning to the parties' submissions on the law it is necessary to say something more about the factual background against which they have to be considered. In my judgment in the main action I found that SGS had been negligent in issuing its certificate, but in the present proceedings Mr Block QC submitted that it was still open to me to find that SGS, in the person of Mr Carr, the manager of its Minerals Division, had acted fraudulently, or at least recklessly, in authoring its issue.
Although the amendment of the contribution proceedings may have caused CAI to examine SGS's conduct more critically than before, the fact is that it was always a matter in which the different parties to the action had a close interest. Niru's case against SGS lay in negligence and no suggestion was made on its behalf that Mr Carr had acted recklessly or dishonestly. Nonetheless, Niru was concerned to press its case against SGS as strongly as it could in order to ensure as far as possible that it was ultimately successful. CAI's position was rather different. It was pursing a claim against SGS for contribution under the 1978 Act. It was therefore very much in its interests to show that SGS's conduct was more culpable that its own since that could be expected to influence the way in which any liability was apportioned. A finding of fraud, or even recklessness, on the part of SGS could have had a significant effect on the court's view of the matter. Indeed, in his written closing submissions Mr Bloch did suggest that the false statements in the certificates could not have occurred by mistake and must have been...
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