WH Newson Holding Ltd & Ors v IMI Plc & Anor

Following a bona fide settlement, the settling defendant may claim contribution under section 1(4) of the Civil Liability (Contribution) Act 1978 without proving actual liability to the claimant. The settling defendant need only show that, assuming the factual basis of the claim could be established, it disclosed a reasonable cause of action making that defendant legally liable for the damage.

The contribution defendant cannot reopen whether a collateral defence, including limitation, would have defeated the settled claim. Such an inquiry would contradict the subsection’s express exclusion of any investigation into actual liability. The factual basis may ordinarily be identified from comprehensive pleadings, although other material may be relevant where the circumstances require it.

Purchasers brought follow-on damages claims against participants in an unlawful price-fixing cartel. IMI settled those claims and pursued Delta for a contribution under section 1 of the Civil Liability (Contribution) Act 1978. Delta sought to contend that the settled claims against IMI had been time barred because the purchasers could not establish deliberate concealment under section 32(1)(b) of the Limitation Act 1980.

Rose J held in [2015] EWHC 1676 (Ch) that section 1(4) barred Delta from advancing that defence. Delta appealed. The central issue was the extent to which the proviso to section 1(4) permits a contribution defendant to investigate whether the settling defendant had a collateral defence to the original claim.

1. Appeal dismissed unanimously. Section 1(4) of the Civil Liability (Contribution) Act 1978 prevented Delta from arguing that the settled claims against IMI were time barred. Rose J’s order was therefore upheld, although for different reasons (Sir Colin Rimer, with whom Hamblen and Gross LJJ agreed).

2. Section 1 must be read as a whole. Sections 1(1) and 1(2) would ordinarily require the person claiming contribution to establish liability to the injured party at the relevant time. Where that person made a bona fide settlement, section 1(4) expressly qualifies those requirements. Subject to its proviso, the subsection neither requires nor permits an investigation into whether the settling defendant was actually liable. This facilitates settlements and avoids requiring a settling defendant to prove the claimant’s case against itself.

3. The proviso requires the settling defendant to show only that the assumed factual basis of the settled claim disclosed a reasonable cause of action which would make that defendant legally liable for the damage. Issues of quantum may remain. The proviso does not permit the contribution defendant to investigate whether a limitation defence or another collateral defence would have defeated the original claim. Such an investigation would contradict the express exclusion of any inquiry into actual liability.

4. To the extent that Arab Monetary Fund v Hashim decided that a contribution defendant could rely on a collateral defence available to the settling defendant, it was wrongly decided. The court accepted the reservations expressed in BRB (Residuary) Ltd v Connex South Eastern Ltd [2008] EWHC 1172 (QB).

5. Where carefully drawn and closed pleadings comprehensively define the issues, the court may identify the factual basis of the settled claim from them. This does not establish an inflexible rule excluding other material in cases where the claim was settled at another procedural stage or communicated less formally.

6. Alternatively, if the approach in Hashim had been correct, the factual basis would have included the claimant’s positive case in reply where that case had to be proved to defeat a collateral defence. On that alternative basis, the assumed facts included the purchasers’ deliberate-concealment case, and Rose J’s conclusion would still have been correct.

1. Court of Appeal (Civil Division): In [2016] EWCA Civ 773 , the court unanimously dismissed Delta’s appeal and upheld the declaration, although on different reasoning.

2. High Court, Chancery Division: Rose J held in [2015] EWHC 1676 (Ch) that section 1(4) of the Civil Liability (Contribution) Act 1978 precluded Delta from arguing that the settled claims against IMI were time barred.