Re-Source America Ltd. v Platt Site Services Ltd & Anor (No 3)

A direct payment order requiring an indemnifying party to pay the claimant directly can remove the intermediate party’s entitlement to receive the payment and obligation to make it. The order must be construed with the related orders and the common factual background. Where the intermediate party is thereby excluded from the payment chain, it is not necessarily a party to the subsequent damages judgment or appeal. An indemnifying party that voluntarily pays an excessive sum without securing repayment cannot ordinarily recoup the loss from the intermediate party by alleging agency or overpayment of the indemnity.

Following a warehouse fire, Re-Source obtained judgment against Platt, while Barkin was ordered to indemnify Platt under Contribution Act 1978. To protect Platt from insolvency and litigation costs, orders required Barkin to pay Re-Source’s damages and costs directly. Platt did not participate in the quantum trial or Barkin’s subsequent appeal.

The Court of Appeal reduced the damages and ordered Re-Source to repay Barkin the excess. Re-Source did not repay. Barkin applied for an order requiring Platt to reimburse it, relying on the construction of the previous orders, indemnity, agency and restitutionary principles.

1. Application dismissed. Barkin was not entitled to require Platt to repay the sums which the Court of Appeal had ordered Re-Source to repay.
2. The orders were to be construed together, against the common background known to the parties and in accordance with the purpose of direct payment orders. Their effect was that Barkin, and not Platt, was to pay Re-Source the damages, interest and costs. Barkin’s direct payments discharged its obligation to indemnify Platt, while Platt was excluded from both entitlement to receive payment and obligation to make payment.
3. A direct payment order is an exercise of the court’s inherent power to regulate its proceedings. It may be appropriate where it avoids circuitry of action, allocates the risk of insolvency fairly and promotes procedural justice. The same practical rationale underlies Sanderson orders. The costs jurisdiction was additionally supported by CPR 44.3(2).
4. Platt was not a party to the quantum judgment or appeal. It had not participated in the quantum trial, was not affected by the appeal in the relevant procedural sense, and was neither ordered to pay Re-Source nor to receive reimbursement from Barkin. CPR 52.1 did not make it a party merely because Barkin had described it as a respondent in an application for permission to appeal.
5. Barkin was not acting as Platt’s agent. The direct payment orders made Barkin a principal payer, did not create an agency relationship and would have been frustrated if Platt’s insolvency representative could have redirected payment to Platt. Barkin’s loss resulted from its failure to obtain security or a stay before pursuing its appeal, not from authorised agency conduct.
6. Nor could Barkin recover as an indemnifying party. No order required it to pay Platt an indemnity sum. Its obligation was instead to make direct payments to Re-Source, and those payments discharged the indemnity. Barkin’s application was therefore dismissed, although it retained possible remedies against Re-Source and its parent company.

• High Court (Technology and Construction Court): liability judgment dated 4 June 2003, [2003] EWHC 1142 (TCC).
• Court of Appeal: liability appeal dismissed, subject to an immaterial variation, [2004] EWCA Civ 665.
• High Court (Technology and Construction Court): quantum judgment dated 23 December 2003, [2004] EWHC 1405 (TCC).
• Court of Appeal: quantum appeal allowed and repayment ordered on 8 February 2005, [2005] EWCA Civ 97.
• High Court (Technology and Construction Court): Barkin’s application against Platt dismissed in the present judgment.