Recoupment, Contribution And Subrogation Notes

1. Recoupment, Contribution & subrogation

   1. Recoupment / Reimbursement

      1. General

         1. 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. 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

  1. Claimant (“C”) and Defendant (“D”) Both Liable to Third Party (“X”)

     1. 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 sub-lessee 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

     2. 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. 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

  1. D is Primarily Liable to X as Between C and D

     1. 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

  2. C Does Not Act Voluntarily

     1. Request

• 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

  1. Volunteers

• Where C pays (e.g. money to X to get distrained property back), he cannot have a claim for recoupment if he took the risk that D might not pay him back. The more modern way of putting it is that volunteers cannot have a claim for recoupment

  • England v Marsden (1866) (CA) –C had machinery on D’s premises. C was entitled to take it away but didn’t. D defaulted on his lease, so X sought distraint. C therefore legally compelled to pay rent to get it back. Held that C had undertaken the risk not to be paid back, Exall v Partridge distinguished because he had left it there even when asked to take it away.

  • Edmunds v Wallingford (1886) (CA) – goods were seized, and C paid off D’s debt in order to get them back. Lindley LJ –a request should have been implied in England v Marsden

  • Burrows –hard to see why it should make a difference as to the motives for C acting, as long as he was compelled to discharge a liability of D

• Owen v Tate (1976) (CA) –D borrowed money from X which was secured by L. L didn’t want the loan secured on her property, so C helped him out. C told X that if X released L’s charge, C would personally guarantee D’s debt. D knew nothing about what C had done; in fact, D would have preferred it to have been secured on L’s real property. D defaulted on the debt and X sued C. C paid and tried to recover from D. Held that theobligation was assumed against D’s will,...

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