Standard Chartered Bank v Pakistan National Shipping Corpn (No 4)

The Law Reform (Contributory Negligence) Act 1945 can apply beyond negligence, including to intentional or reckless conduct. But a deceit defendant cannot reduce damages merely because the claimant failed to check the representation or acted from additional motives. The claimant’s fault must independently satisfy the statutory definition and must cause the same damage. In this case, the majority held that the bank’s conduct did not justify apportionment. Aldous LJ held that the bank’s attempted deceit did not fall within the statutory concept of fault because deceit could not have supported a contributory-negligence defence at common law. Ward LJ considered that the bank’s conduct could qualify as fault, but found no causation and no just and equitable basis for reduction.

Standard Chartered Bank paid Oakprime under a letter of credit against a bill of lading issued by Pakistan National Shipping Corporation with a falsely stated shipment date. The bank later failed to notice discrepancies which entitled the issuing bank, Incombank, to reject the documents. It nevertheless sought indemnification from Incombank on the false basis that the documents had been presented in time.

The bank established a claim in deceit against PNSC. The Court of Appeal had previously upheld the existence of the cause of action and reserved the apportionment issue. PNSC appealed on the question whether the bank’s negligence and attempted deception were contributory fault under the Law Reform (Contributory Negligence) Act 1945, so that damages should be reduced.

1. Disposition. By a majority, the appeal was dismissed. Ward LJ and Aldous LJ rejected any reduction of the damages. Sir Anthony Evans LJ dissented and would have reduced the damages by 25 per cent.
2. Statutory framework. Section 1(1) of the Law Reform (Contributory Negligence) Act 1945 requires damage to have resulted partly from the claimant’s fault and partly from the defendant’s fault. Any reduction must be just and equitable having regard to the claimant’s share of responsibility. The definition of fault in section 4 has two limbs: the first concerns the defendant’s actionable tortious conduct; the second concerns claimant conduct which would, apart from the Act, have supported a defence of contributory negligence. Aldous LJ and Ward LJ accepted that analysis.
3. Deceit and reliance. Aldous LJ held that the bank’s attempted deception of Incombank did not fall within the second limb. Before 1945, a defendant liable in deceit could not defeat the claim by alleging that the claimant’s negligence or other conduct contributed to the loss. The bank’s conduct therefore could not provide the necessary statutory fault.
4. Ward LJ’s reasoning. Ward LJ considered that intentional conduct could in principle constitute claimant fault. However, the bank’s negligence did not cause the payment to Oakprime, and its attempted deception of Incombank concerned different potential damage. The statutory requirement of combined causation was therefore not met. Alternatively, responsibility for the loss was wholly that of PNSC, so no reduction would be just and equitable. The deceit was the legally operative cause of the bank’s loss, despite the bank’s other motives and misconduct.
5. Dissent. Evans LJ held that intentional or reckless misconduct could constitute contributory negligence and that the bank’s independent misconduct was causative of its loss. He would have apportioned responsibility under section 1(1), reducing damages by 25 per cent.

1. Court of Appeal (this judgment): dismissed PNSC’s appeal on apportionment and ordered that costs matters be reserved.
2. Court of Appeal (earlier hearing): on 3 December 1999, upheld the conclusion of Cresswell J that Standard Chartered Bank had established a good cause of action; the apportionment issue was left for later argument, reported as Standard Chartered Bank v Pakistan National Shipping Corporation (No 2) [2000] 1 Ll. LR. 218.
3. High Court, Commercial Court: Cresswell J decided the underlying deceit claim in favour of Standard Chartered Bank.