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Recoupment, Contribution And Subrogation Notes

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Essence of Recoupment

Brook's Wharf & Bull Wharf v Goodman Bros (1937) (CA) - Lord Wright MR
- essence is where there is [1] liability for the same debt on both claimant and defendant and [2] claimant has been legally compelled to pay but [3] defendant gets the benefit of the payment because his debt is discharged entirely or pro tanto, [4]
and the defendant is liable to pay the claimant i.e. X sues C for damage incurred by C and D. But then C can claim against D (1.1.b)

Types of Recoupment Burrows - a standalone primary/secondary liability analysis may be a problem in situations where X retains C's property unless a debt is paid by C to X. Birks describes this as proprietary liability, because the property is encumbered by a liability. However, this distorts the meaning of liability. It is better to recognise that legal compulsion comprises two categories of recoupment: [a] C discharges D's liability to X in order to recover C's property, [b] C and D both liability to X but C's liability is secondary to D's


Claimant ("C") and Defendant ("D") Both Liable to Third Party ("X")


D's Liability Moule v Garrett (1872) (HC) - lessee C compelled to pay for breach of covenant could seek reimbursement from D, an assignee, even though there had been intermediate assignees. Also, D could have been sued for breach of covenants so C had discharged D's liability.

Bonner v Tottenham & Edmonton Building Society (1899) (CA) - C assigned lease to X who mortgaged it to D. X went bankrupt and D took possession but failed to pay landlord. Landlord sued C for breach of covenant. C was compelled to pay landlord and sought to recover from D. Held that D's liability had not been discharged because D was a sublessee who was not liable to pay landlord any rent

Fortis Bank v India Overseas Bank (2011) (HC) - C agreed to pay X by letter of credit to be opened by D. Held that payment by C had not discharged any liability of D


C's Liability

Brook's Wharf & Bull Wharf v Goodman Bros (1937) (CA) - D imported squirrel skins from Russia and stored them in C's warehouse. D was primarily liable to pay tax to X but C had agreed to pay as well. C paid the tax when X demanded it. Lord Wright MR - D, as importer, was still liable for tax because C's payment did not supersede D's liability even though X could not compel payment a second time. An obligation on the part of C to pay implied by statute. Gebhardt v Saunders (1892) (CA) - house leased by D to C, which had a blocked drain. X served a notice requiring D or C to abate the nuisance. Primary responsibility for this fell on D, but C paid repairs. C then sued D for recoupment. Charles J - C was directly liable towards X and D was legally compellable to do the work. Therefore C could recover (1.2.c)

Seizure of Property Cases

C can get a claim for recoupment if he is compelled to pay, even if not liable to pay: Exall v Partridge (1799) (CA) - C left carriage in D's garage for repairs. D failed to keep up payments on the lease of the garage from X. X sought remedy of distrainment, i.e. keeping property until D was paid. C paid D's rent to get his carriage back. Grose J
- this was a compulsory (as opposed to voluntary) payment because the only way C could get his goods back was by paying. Therefore there was an implied promise by D to pay C Johnson v Royal Mail Steam Packet (1867) (HC) - C's ship was seized because D had failed to pay wages of crew. C paid the sum in order to obtain possession and was allowed to a claim in recoupment from D


D is Primarily Liable to X as Between C and D


Person Who Benefits From the Arrangement Primarily Liable Moule v Garrett (1872) (HC) - Willes J - if a party (C) is liable by immediate privity of contract to another (X) but the whole benefit of the contract is taken by another party (D), C is entitled to be indemnified by D in respect of the performance of the obligation


C Does Not Act Voluntarily



The original idea was that payment must be requested from C. However, this became implied. Nonetheless, remnants of the idea remained If C not legally compelled to pay, he is treated as having acted voluntarily. If he is legally compelled to act he is not treated as having acted voluntarily (e.g. Exall v Partridge) Bonner v Tottenham & Edmonton Building Society (1899) (CA) - Smith CJ - both C and D must be compellable to pay X. Otherwise, the C ? X payment is voluntary, which raises no implication of a request by D to pay X




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