Nationwide Building Society v Dunlop Haywards (DHL) Ltd (t/a Dunlop Heywood Lorenz) & Anor

In contribution proceedings, the relevant damage is the damage for which both defendants are liable, not necessarily the claimant’s total loss or the amount already paid in settlement. The court must identify the parties’ common liability and apportion that liability on a just and equitable basis. A defendant should not be required to contribute towards loss for which the other defendant alone is liable, particularly where that additional liability arises from fraud or the absence of a defence available to the contributing defendant. Statutory limits and contributory negligence operate as caps on the contributor’s liability, but do not necessarily define the amount to be apportioned.

The claimant succeeded in deceit against Dunlop Haywards in respect of fraudulent overvaluations which induced two secured advances. Its claim against Cobbetts, its solicitors, settled for £5,585,001, together with £555,000 in costs. Dunlop Haywards was in liquidation, and the remaining issues concerned the assessment of the claimant’s damages against it and Cobbetts’ contribution claim.

The court assessed the claimant’s total loss against Dunlop Haywards at £21,049,107, after credit for the property’s value, and considered the amount for which Cobbetts would have been liable in negligence. The central issue was the meaning of “the same damage” and “the damage in question” under the Civil Liability (Contribution) Act 1978, and the proper basis for apportioning contribution where one defendant’s liability was enlarged by fraud.

1. The claimant was entitled to judgment against Dunlop Haywards for £15,464,106 after credit for the recovery from Cobbetts. The recoverable loss included the net advances, lost interest, investigation costs, funding losses, lost mortgage opportunities, back-stop facility costs and the retail bond loss.

2. Under sections 1 and 2 of the Civil Liability (Contribution) Act 1978, “the same damage” means the damage for which both the person seeking contribution and the person from whom contribution is sought are liable. The court must distinguish between damage for which the defendants are responsible in different respects, damage for which they are equally liable, and damage for which one defendant has a lesser liability because of a defence or limitation.

3. The common damage was the foreseeable loss for which both defendants were liable, assessed at £13,200,179. Loss recoverable against Dunlop Haywards only because its conduct was fraudulent was excluded from the contribution calculation. Alternatively, it would have been just and equitable to disregard that loss when apportioning contribution.

4. Section 2(3) operates as a cap. Cobbetts could not be required to contribute more than the amount for which it would have been liable to the claimant after applying contributory negligence and its contractual limitation. The amount to be apportioned was nevertheless reduced by 50 per cent for the claimant’s contributory negligence, producing £6,600,090.

5. Having regard to the relative moral blameworthiness and causative potency, liability was apportioned 80 per cent to Dunlop Haywards and 20 per cent to Cobbetts. Cobbetts was therefore entitled to £4,264,983 in contribution for the compensation payment.

6. Following the approach in BICC Ltd v Cumbrian Industrial Ltd [2002] Lloyd's Rep PN, contribution could be awarded in respect of costs. The equitable sum was £333,000, giving total contribution of £4,597,983. Cobbetts’ costs were summarily assessed at £87,500 and the claimant’s costs against Dunlop Haywards at £700,000.

not stated in the judgment.