Home » Law » UK Supreme Court: Farstad Supply AS (Appellant) v Enviroco Limited and another (Respondent) (Scotland)

UK Supreme Court: Farstad Supply AS (Appellant) v Enviroco Limited and another (Respondent) (Scotland)

Enviroco is not entitled to a contribution from Asco.

Farstad Supply AS (‘Farstad’) owned an oil rig supply vessel which was damaged by fire while berthed in harbour on 7 July 2002. At the time of the fire, the third party charterer, Asco UK Limited (‘Asco’), had engaged the defender, Enviroco Limited (‘Enviroco’), to clean out tanks on board the vessel. Following the fire, Farstad sued Enviroco for damages, alleging that the fire was caused by the negligence of Enviroco’s employees.

Enviroco, as well as alleging contributory negligence against Farstad’s employees, sought a contribution from Asco under section 3(2) of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1940 (‘the 1940 Act’).

Section 3 of the 1940 Act is entitled “Contribution among joint wrongdoers”. Section 3(1) deals with the case where the party suing (Farstad) proceeds against two defenders in respect of loss or damage caused by both and a judgment is given against both, so that both are “found jointly and severally liable in damages”. Subsection (2) provides that a defender who has been held liable and pays damages to the suing party under subsection (1), has a right to recover such contribution as the court deems just from “any other person who, if sued, might also have been held liable in respect of the loss or damage on which the action was founded”.

By clause 33(5) of the charterparty, Farstad agreed to “defend, indemnify and hold harmless” Asco from all liabilities resulting from damage to the vessel. If therefore Enviroco was entitled to a contribution from Asco under section 3(2) it was agreed that Asco would (at the least) be entitled to an indemnity from Farstad under clause 33(5). Whatever the result therefore, Asco would not ultimately be liable.

The Supreme Court unanimously allows the appeal. The Court holds that Enviroco is not entitled to a contribution from Asco under section 3(2) of the 1940 Act because it cannot establish that “if sued” Asco might have been liable to Farstad in respect of losses caused by the fire. Lord Clarke delivered the leading judgment.

In his judgment, Lord Rodger confirmed that the Court’s construction of section 3(2) is in line with the established case law of the courts of New Zealand and Canada on similar provisions. The policy which underlies the decisions of those courts is equally applicable to Scots law.

The appeal is allowed and the decision of the Lord Ordinary is restored.

Resources

Full judgement: http://www.supremecourt.gov.uk/docs/UKSC_2009_0008_Judgment.pdf

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