CIVIL LIABILITY (CONTRIBUTION) BILL (Hansard, 18 July 1978)

§ Lord SCARMAN
My Lords, I beg to move that this Bill be now read a second time. This is a modest Bill, designed to effect a degree of law reform in a very technical field of the law. It is drafted so as to give effect, with certain modifications, to the report and recommendations of the Law Commission. The reference of the report is Law Corn. No. 79. The Bill contains some differences or modifications from the recommendations in the Law Commission's report but they are all minor, save for one. The major difference is that the Bill as drafted will apply to Northern Ireland. It has been extended to cover Northern Ireland at the request of the Secretary of State, and no doubt his request reflects a general desire, among those concerned and interested in the subject matter in Northern Ireland, that the Bill if enacted should apply in Northern Ireland.
Save for that extension, the Bill, with certain drafting differences, faithfully contains the recommendations of the Law Commission. It has two objects and I shall state them very shortly, even though in doing so I am conscious that I shall he falling to some degree into the language of technicality. The more 246 important of the two objects of the Bill is to extend "contribution" between those liable for damage done to another person beyond the few classes of wrongdoer to whom at present the law allows this type of relief. Its second object is to amend the law relating to successive legal proceedings brought against persons who are liable either jointly for the same debt or jointly and severally for the same damage.
I have allowed myself at the outset what may superficially appear to be a little technical, lawyer's "gobbledygook" because it indicates, as I am sure noble Lords are aware, that the subject matter of the Bill is technical. Noble Lords must not, however, allow themselves to be deceived into believing that because the Bill is technical it possesses no substantive merits. In fact, the Bill is concerned with something very human. It is designed, within its limited and technical field, to remove from our law some anomalies and to improve in that field the quality of justice. I have no hesitation in suggesting to your Lordships' House that if this Bill should be passed both of those ends would be achieved.
The Bill was introduced originally in another place and, as introduced, was much wider in its scope than the Bill is now in the form in which it has been presented to your Lordships' House. If I may say so, some excellent Committee work in another place has slimmed down the Bill. The matters that have been removed from the Bill are all of them matters which were outside the purview of the Law Commission's report. Some of us might think that some of the matters removed had solid merit; but I would suggest to your Lordships that when one is concerned, as we are here, with law reform in a highly technical field, the path of wisdom is to stick to the recommendations of a body such as the Law Commission, recommendations which are the product of thorough research based upon relevantly wide consultation.
May I say at this stage to your Lordships that this modest Bill is supported by the two branches of the practising legal profession. In fact, it was they who first suggested to the Law Commission that the problems it covers should be studied. The Bill is supported by those concerned in the business of insurance and it has the general support of the Confederation of 247 British Industry. As I understand it, in its amended form, as I move it in your Lordships' House this evening, the Bill has all-Party support in another place. For those reasons, and because the matter is technical, I do not intend to weary your Lordships with a technical exegesis either of the law as it now stands or of the law as one hopes that it will be if this Bill becomes law. However, I must say a little about the present law so that noble Lords can see the nature of the gap in our law which this Bill is designed to fill.
I have indicated to your Lordships that "contribution"—a technical term in the law—is used to describe the distribution of the burden of financial responsibility among a number of persons responsible, in one way or another, for causing the damage which has to be compensated. A right to contribution or, indeed, to indemnity—which is really a 100 per cent. Contribution—can, of course, be secured by a prudent person by contract. Let me give noble Lords an illustration, taken from the pages of the Law Commission's report, because then it becomes clear what "contribution" is all about.
A contractor hires out to a customer a mechanical excavator with a driver, realising that these infernal machines, if operated negligently, can cause an immense amount of damage, for which someone has to pay. He inserts into his contract with his customer a provision to the effect that if damage is done by the driver—his servant, of course—in the course of operating the excavator for the customer, the customer will indemnify him in respect of all claims arising out of the driver's negligence. There one sees an indemnity, which is only an absolute form of contribution, being secured by a prudent person in his contract. The law, however, takes care of persons not all of whom are always so prudent as the gentleman in my illustration. The law provides that the co-contractors, the co-sureties, the co-trustees are entitled to "contribution" between each other if faced with a common demand or if they become responsible for the same damage to another.
The way it there works is by operation of what lawyers happily call quasi-contract—a combination of quasi-contract and equity, as we say. The combination of 248 the common law and equity is that there emerges in those situations which I have mentioned a general rule of equity that, in the absence of agreement to the contrary—of course, people can always make their own particular contracts if they are so minded—the burden will be shared equally among those who are liable and who are solvent: that is to say, who are able to pay.
May I emphasise one point: that none of this doctrine of contribution between wrongdoers in any way interferes with the right of the plaintiff to recover the whole of his loss or debt, as the case may be, from any one of those whom he chooses to sue. Contribution is a principle of law which distributes the burden among those liable without putting the plaintiff to risk. There is no objection to the common law or to the doctrines of equity as I have outlined them, so far as they go. The trouble is that they do not go far enough and a number of people are left out in the cold, and particularly that favourite of the lawyer—and this was so at common law—the tortfeasor.
I suspect that it was the advent of the motor car that led the lawyers and the Law Revision Committee in particular to introduce in the 1930s legislation to embrace, as I say, that favourite of the law, the tortfeasor in the kindly grip of the doctrine of contribution. In any event, there was a statute in 1935 felicitously entitled the Law Reform (Married Women and Tortfeasors) Act which, so far as concerned tortfeasors but not married women, extended the rights of contribution, so that—and I quote from the Statute: Where damage is suffered by any person as a result of a tort, any tortfeasor liable in respect of that damage may recover contribution from any other tortfeasor who is, or would if sued have been, liable in respect of the same damage". That in effect brings tortfeasors within the principle of a statutory right of contribution. The Act goes on to require that in such cases the court should determine the amount of contribution recoverable from any person upon the basis of what is just and equitable, having regard to that person's responsibility for the damage.
The Statute has worked well. The practice has developed in motoring and accident cases, where it is particularly important, of the plaintiff joining all the possible defendants in one action. He 249 formulates his claim, they put in their defences and they claim among themselves for contribution; all the issues concerning all the parties are considered in one trial, the judge determines liability and determines the extent, if any, of contribution among the defendants. It works well, and the purpose of this Bill is to extend that satisfactory legislation to persons who are not tortfeasors, who do not fall within the limited categories that I mentioned of those who have the right of contribution at common law, but who nevertheless in justice should be able to enjoy as between themselves and not at the plaintiff's expense the benefit of sharing the financial burden arising out of their wrongdoing.
Let me indicate very briefly the gaps which the Bill fills. First, neither at the moment at common law nor under the statute of 1935 can there be any contribution between a person liable in contract and a tortfeasor, even though they be liable for the same damage. Secondly, it is perfectly possible—and I will give an illustration to show it—for two persons under different and separate contracts to be liable to a third party, the plaintiff, for breaches of their separate contracts, those breaches having nevertheless caused the same damage.
There is a valuable illustration of that in the law books. A man builds a house; he engages an architect to design it and to supervise its building and, under a separate contract, he engages a builder to build it. The builder fails to put in a damp course; the architect fails to notice that the builder has failed to put in the damp course; the house becomes intolerably damp and it costs money to make good the damage. There is no contribution between the architect and the builder at common law or under the Statute because, although liable for the same damage, they are liable under different contracts. That is a gap which this Bill is designed to fill.
The other improvement is that the Bill is designed to attach to the right of contribution that flexibility in the adjustment of the burden of contribution which the common law and equity notably failed to provide. That is to say, at equity and in common law it was equal shares of the burden, irrespective of the degree of responsibility of those who were liable, always provided of course that they were solvent and could pay. This Bill will 250 extend the just and equitable principle introduced in the 1935 legislation to cover all cases of statutory contributions.
So this Bill in general terms can be welcomed by the jurist because it makes a modest step towards breaking down conceptual differences of the law and emphasises that what matters in the law is function; that is, the achievement of justice. And it also appeals to the practical man for reasons which I hope have become apparent from what I have already said. No doubt this is the reason why the practising profession and those concerned in their business lives with this sort of problem, support the Bill.
I will spend a very little time explaining the few clauses in the Bill. They are technical but they are well drafted and designed to carry out the objects which I have outlined. The important provision is in Clause 1(1) which provides in brief that any person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage". When one turns to Clause 6 one sees what is meant by "liable", and in a sense this is perhaps the fundamental clause in the whole Bill. A person is liable in respect of any damage for the purposes of this Act if the person who suffered it … is entitled to recover compensation from him in respect of that damage"— and here come the important words, in a bracket— (whatever the legal basis of his liability, whether tort, breach of contract, breach of trust or otherwise)". There are provisions in Clause 1 designed to ensure that persons who would otherwise be liable to contribute to a loss do not escape through some technicality. I will not weary your Lordships with those, except to say that they put right some decisions at common law and under the Statute which have proved unfortunate, but there is one very important provision in Clause 1 to which I should briefly draw your Lordships' attention. Basically, a person liable in respect of the same damage to another can recover contribution from another person also liable, whatever the basis of his liability, to that same person for that same damage. That would mean strictly, and indeed under the existing law it does mean, where applicable, that in order to 251 recover contribution the person claiming it must in the course of his case admit that he was liable. As your Lordships will know, the major proportion of litigation in this country is settled by compromise; it never reaches the court at all.
Must, therefore, a person who enters into a bona-fide compromise with the plaintiff of a claim brought against him, no doubt denying at that stage his liability to the plaintiff, go on to the reverse tack when he seeks contribution from another, either in the same proceedings or in subsequent proceedings, by now admitting that he was "a little bit liable, but not so much liable as you"? This, of course, is a nonsense and Clause 1(4) enables a person who enters into a bona-fide compromise with the plaintiff to recover compensation. Of course, there are dangers in such a proceeding if there are not carefully considered safeguards worked into the Bill.
There are such safeguards. I will not enumerate all of them; I will mention only two. First of all, of course, the person seeking the contribution has to prove that the person from whom he is seeking it is in fact liable to the plaintiff or other person who suffered the damage. Secondly, the person from whom contribution is sought does not have to accept the settlement figure agreed upon as the measure of the damage suffered by the claimant; he can have that proved. And the only relevance of the settlement figure is that he who seeks contribution may not in any event recover a higher amount from the person from whom he seeks it than that which he has agreed to pay the plaintiff.
There are other matters in the Bill; they are technical, they are sensible and valuable, and I do not propose, with your Lordship's permission, to go through them at this stage. Let me just say a word or two about the other object of the Bill and then close what I have to say. The other object of the Bill is strictly not concerned with contribution at all. Clauses 3 and 4 of the Bill seek to remove some anomalies from our law relating to the effect of judgments. Clause 4 does in fact make a piece of law reform sub silentio. Clause 3 provides simply that judgment recovered against any person 252 liable in respect of any debt or damage shall not be a bar to an action, or to the continuance of an action, against any other person jointly liable in respect of the same debt or damage. I should think that those of your Lordships who have been good enough to follow me this far and to have followed what I have just said would be surprised that that is the law. Many lawyers are surprised that it is. It is technical and archaic, and if this Bill is enacted it will go; that is the principle that judgment recovered against one person bars an action against another.
The other clause, Clause 4, however, does provide that if a plaintiff sues one person, and then sues another in respect of the same damage, he will not be entitled to the costs of the second action unless it was reasonable that he should have brought it. In fact the sub silentio law reform here is that under the existing law there is also what the lawyers know as the sanction against the second action in damages; that is to say, he cannot recover more in the second action, even though he has better evidence at that time, then he recovered in the first. That has gone. The view which I put to your Lordships, and which is shared by all those who have had considered this matter, is that the sanction in costs is a sufficient sanction, and that it would be wholly wrong and unjust to deprive the plaintiff who finds himself in the unusual position of having underestimated his damage at the time of the first action. There are other matters in the Bill, all incidental to what I have mentioned. They are, so far as I can see, technically correct and sensible.
My Lords, before I sit down I should like to make only one general remark. This little Bill—and it is a little Bill—should it be enacted, will nevertheless be a worthy member of the now substantial group of law reform Bills that have arisen from Parliament's consideration of Law Commission reports since the inception of the Law Commission in 1965. I looked up the figures and I think they are of more than passing importance. Since 1965, 65 reports with recommendations for law reform have come from the Law Commission; 52 of them have been implemented in whole or in part by Parliament. Those cynics who said, when the Law Commission Bill itself was before this House, that there was really 253 no purpose in bringing into existence the Law Commission because Parliament would never have time to enact its proposals, have been refuted by the history of events. I would say, as a past chairman of the Law Commission, and I think I can add, as a very new Member of your Lordships' House, that the general public should be indebted to Parliament for having been able, amidst many other much more pressing preoccupations, to devote so much time to such a difficult but rewarding subject as law reform. My Lords, I beg to move.

§ The Earl of MANSFIELD
My Lords, I am sure the House would wish to thank the noble and learned Lord, Lord Scarman, for his lucid, and, if I may say so, very easily understood explanation of this technical Bill. If it is apparently obscure to the layman or non-lawyer, nevertheless it will have important and indeed far-reaching effects. As the noble and learned Lord has said, the Bill, with some changes, is the fruits of the deliberations of the Law Commission, and in particular their Report No. 79. The parentage of the Bill I might describe as impeccable. The ideas behind the report emanated from a memorandum submitted by the Law Society and the General Council of the Bar in July 1971. The report of the Law Commission was laid before Parliament in 1977, and now, commendably soon thereafter, we have this Bill, although, as the noble and learned Lord has observed, it goes rather further than the Law Commission proposed.
Sufficient to say at this hour, and in view of the nature of the Bill, as one can see if one studies the Official Report of the Committee stage in the other place, the Bill has been the subject of close consultations between the sponsors and the Lord Chancellor's office. In the result the Bill has the blessing of all the major Parties at least in the other place, and not least of the Confederation of British Industry. All that remains for me to do is to wish the Bill all speed, and hope that with seeming lack of parliamentary time it makes the Statute Book without delay.

§ The LORD CHANCELLOR
My Lords, I should like to join with the noble Earl, Lord Mansfield, in thanking the noble and learned Lord, Lord Scarman, for the masterly way in which he has introduced his Bill and explained its provisions to us. I would thank him very much for sponsoring the Bill in your Lordships' House. He has fathered many a Law Commission Bill, if I may say so, and it must be a new experience for him to be responsible, in part, for its actual delivery. I have been very touched by his compliment to Parliament itself in what he has said about the readiness of Parliament to implement the recommendations of the Law Commission. I was involved with the noble and learned Lord, Lord Gardiner, in the setting up of the Law Commission. One of the most crucially important decisions made at the time was the appointment of Mr. Justice Scarman—as he then was—to chair the Law Commission.
Although the noble and learned Lord has paid a tribute to Parliament—and, if I may say so, to the respective Governments of both parties—for finding the time to give effect to the recommendations of the Law Commission, the fact that it has done so is a reflection upon the quality of the work of the Law Commission and of the confidence of Parliament in it. The thoroughness with which there is consultation, the professional skill involved in producing the reports, and, in particular, the great boon of the draft Bill attached to the reports, have made the institution of the Law Commission one of the most valuable supports for Parliament itself and, of course, a vitally important milestone in the progress of law reform in the post-war period.
Turning to the Bill itself, I am happy to say that the Government welcome the Bill and, as the noble Earl, Lord Mansfield said, hope that it will be speedily enacted. The case made for the reform that the Bill entails is set out by the Law Commission in its report and it is a very strong one. It is not surprising, as the noble and learned Lord, Lord Scarman, has said, that it has been supported and welcomed on all sides.
The Government agree with the main proposition in the Bill which the noble and learned Lord has explained—namely, that 255 where one person (whom I shall call Mr. A) has a right of action against two others (whom I shall call Mr. B and Mr. C) in respect of the same damage, and where Mr. B satisfies the liability both of himself and Mr. C to Mr. A, he should have, in consequence, a right of contribution against Mr. C to be assessed on the basis of what is fair and equitable as between them. At present, as the noble and learned Lord has pointed out, this sensible provision prevails only in a limited range of cases, notably where both the liabilities lie in tort. The present law on contribution has, I think, led to injustice by failing to provide all the remedies that are required. The Bill will correct that, and I am sure that it will be welcomed as a measure of law reform and as a step further to improve the quality of justice.
I should like to say a little more about the work of the Law Commission in this area. I think that it is the first reform to come forward as part of the general law of contract, if one leaves aside the two enormously important reports on exemption clauses which were dealt with by the Commission as a special exercise under Item 2 of their first programme. Limited as the Bill is in its impact, nevertheless I think that its impact is a valuable one and that it will be extremely useful in creating a greater degree of confluence—if that is the appropriate word—between the contracts stream and the tort stream. Happily, the exposition of the Bill by the noble and learned Lord has made it not only superfluous but almost impertinent for me to seek to elaborate it further, and I warmly welcome the Bill.