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	England and Wales High Court (Queen's Bench Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> BRB (Residuary) Ltd. v Connex South Eastern Ltd [2008] EWHC 1172 (QB) (23 May 2008) URL: http://www.bailii.org/ew/cases/EWHC/QB/2008/1172.html Cite as: [2008] EWHC 1172 (QB), [2008] 1 WLR 2867, [2008] WLR 2867

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		23/05/2008

Mr Justice Cranston:

Introduction

1. Say D1 admits liability to C, in the belief that it is legally liable, but at some point in the legal process realises that it has no liability but that D2 is liable. Can D1 recover from D2, what it has already paid to C? In the present case BRB (Residuary) Ltd ("BRB"), the claimant, seeks to recover from the Defendant, Connex South Eastern Ltd ("Connex"), BRB having settled a claim brought against it under the misapprehension that it was liable. As a matter of law liability always rested with Connex. Before discovering the mistake BRB had judgment entered against it on liability although it finally agreed damages only after the mistake became obvious. BRB now sues Connex under section 1 of the Civil Liability (Contribution) Act 1978 for what it paid out in accordance with the judgment. Connex denies that it is in any way liable.

Background

2. Malcolm Dines died in October 2003 from mesothelioma, a dreadful disease caused by exposure to asbestos. He had been born in 1931 and from the age of 16 spent his entire career working for the railways, except for two years National Service. Initially he worked as a cleaner, then as a fireman and later as a driver. There was no question but that his exposure to asbestos from 1947 until the late 1970s was through his work. So it was a liability going back almost sixty years. His widow, Valerie Dines, brought a claim on behalf of his estate under the Law Reform (Miscellaneous Provisions) Act 1934 and on her own behalf as the sole dependant of her husband under the Fatal Accidents Act 1976. The action was taken by the solicitors, Thompsons, who named as the defendant the claimant in this action, BRB. The proceedings were issued in February 2005 on a conditional fees basis.
3. Towards the end of Malcolm Dines' career, the railways were privatised under the Railways Act 1993. The manner in which this occurred was, and remains, controversial. For present purposes it needs simply to be noted that it led to a myriad of contracts with the range of rail operators, train maintenance companies, lessors of railway stock, and so on. One of the contracts was with the defendant in the present action, Connex. Connex had begun life in January 1995 as the South Eastern Train Co Ltd ("South Eastern"). The shares in South Eastern had originally been owned by the British Railways Board ("the Board"), the public authority which had under the Transport Act of 1962 taken over responsibility for the railways from the British Transport Commission. The latter had been formed under the Transport Act of 1947 on nationalisation of the railways. By a transfer scheme dated 20 July 1995 made under s. 85 of the Railways Act 1993, the liabilities of the Board (including any contingent liability to Mr. Dines) were transferred to what was then known as The South Eastern Train Company Limited ("the Company"). This transfer scheme came into effect on 23 July 1995. On the same date there was also a transfer to the Company of the Board's contingent liability to Mr. Dines under regulation 5 of the Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE). By share purchase agreement dated 20 August 1996 Connex Rail Limited, Connex's holding company, purchased all of the Board's shares in the Company. This share purchase agreement came into effect on 13 October 1996. The hiving off of companies, and their sale to private interests, was how privatisation of the railways was effected. On, or shortly after, 13 October 1996 the Company changed its name to Connex South Eastern Limited. This was also the date of a deed of indemnity, mentioned shortly between the Board, Connex (then known as The South Eastern Train Company Limited) and Connex Rail Limited. As a result of these changes, Malcolm Dines' employment transferred to The South Eastern Train Co Limited later, of course, Connex, in July 1995 and he continued in Connex's employment until 13 October 1996 when he retired. On 28 January 2001, BRB, a wholly owned subsidiary of the Secretary of State for Transport, inherited the residual liabilities of the Board, as a result of a scheme made under powers contained in the Railways Act 1993.
4. A deed of indemnity, entered in October 1996, was ancillary to the sale of the company by the Board to Connex Rail Ltd. Headed "Deed of Indemnity Relating to Industrial Diseases, Injuries and Third Party Liability" its effect is that BRB (as successor to the Board) indemnifies Connex and Connex Rail Limited against liability for industrial disease to the extent that such liability was caused by the act or omission of the British Railways Board or the British Transport Commission (clause 2). The Board's liability in this regard, including the liability that it inherited from the British Transport Commission, had transferred to South Eastern/Connex as a result of the transfer scheme already mentioned and the Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE). However, as a result of a quirk in the wording of the deed for the indemnity to be effective for some employees like Mr Dines a claim had to be notified to BRB prior to the expiry of Connex's franchise period (clause 4.1.1). Connex's franchise had terminated in November 2003, after public controversy about its standard of service. In this case the claim was not notified to BRB until July 2004. So although Connex had not itself exposed Mr Dines to asbestos, as a result of these various arrangements it was liable in law for the breach of the common law and statutory duties owed by the railways to him, but in his particular case Connex did not qualify for an indemnity from BRB.
5. Mrs Dines' claim form, issued in late February 2005, named BRB as the defendant. In the brief details on the claim form it was said that the claim was for injuries occasioned to Mr Dines during the course of his employment with BRB, which was clearly wrong, although the matter was spelt out in greater detail in the particulars of claim, that BRB were said to be successors in title to Mr Dines' employers and responsible for their negligence and breach of statutory duty. Even so, BRB was not the correct defendant; that was Connex. Mr Paul Sinclair, a solicitor working part time with BRB, explained in evidence that some 566 industrial disease claims of this nature were brought in the year 2005-6. A feature of many claims was that claimants sued BRB, not the railway relevant company, because ultimately it was BRB who paid. He regarded this as a straightforward claim: Mr Dines had been exposed to asbestos, he had died of mesothelioma and the policy of BRB was to be sympathetic in such cases. There was no need for the claim to be investigated because he was satisfied, given Mr Dines' working history, that this exposure was in the course of his employment on the railways and that there was a liability on their part. On 14 March 2005 he wrote to Weightmans, BRB's solicitors, and instructed them to act on behalf of the Board in dealing with the claim, indicating that all further correspondence should be addressed to BRB's loss adjustors, Crawford and Co ("Crawfords").
6. In what I accept was a standard form letter Mr Sinclair told Weightmans that the correct defendant was Connex in whom Mr Dines' employment had vested in 1996 but noted that BRB had a right to defend the claim in Connex's name by virtue of an indemnity. Mr Sinclair has records of railway employees so that he knows their employment history and in whom their employment vested on privatisation. Although the claim named BRB as the defendant, which was incorrect, the experience of BRB from the early days of privatisation was that the Masters of the Supreme Court would resist an amendment of such claims to insert the correct defendant. The Masters' attitude was that they saw claimants needing compensation quickly, and that since BRB would eventually pay under an indemnity it was an internal squabble in the railway industry as to who was named as defendant. Consequently, given the history with the Masters, and the costs of making such application, Mr Sinclair had not on this occasion contemplated seeking to substitute Connex as the correct defendant. Of course the mistake here was that not only was Connex the correct defendant, but they did not have any claim against BRB under the deed of indemnity. I accept Mr Sinclair's evidence that he was under a misapprehension that Connex's liability was to be indemnified by BRB and his explanation as to why Connex were not contacted. Although BRB can conduct the defence of an action under the deed of indemnity it needs under the relevant clauses to do so in the name of the franchisee. Mr Sinclair said that in practice the indemnified railway companies were content for the whole matter to be handled by BRB. Although Mr Sinclair was aware Connex's franchise had been withdrawn, because of the publicity surrounding the withdrawal, he had not associated that with the termination of BRB's indemnity. The deeds of indemnity with the privatised railway companies were not in standard form, although there were similarities between different categories, for example, those with the rail operating companies, the track maintenance companies and so on. The deeds of indemnity themselves were not consulted, although there were summaries available in a manual which he used.
7. BRB admitted liability to Mrs Dines' claim in its defence dated 15 April 2005. Having admitted liability judgment was entered against it by order of a Master dated 14 June 2005, sealed by the court on the 29^th of that month. It provided for an interim payment of damages in the sum of £40,000, assessment of damages to occur in October. I accept the evidence that it was not until mid July that Vicky Martins, who was working with Paul Sinclair, discovered the fatal mistake, that not only were Connex liable but that they had no indemnity against BRB. On 20 July Mr Sinclair emailed Crawfords, enclosing a draft letter to send to Connex and enquiring about the chances of successfully resiling from the erroneous admissions to Mrs Dines. That email had been copied to Dan Mitchell, a partner at Weightmans, who emailed advice to both Paul Sinclair and Crawfords on 25 July. That advice set out the considerations in an application to resile, based on Gale v Superdrug Stores plc [1996] 1 WLR 1089. An application to resile would need to include an application to for the return of the interim payment, and would involve costs. The best course would be to have Connex agree to allow the case to be continued with BRB as the defendant, but for Connex to give BRB an indemnity. The hearing was two months away, but action had to be taken quickly so as to obtain the indemnity from Connex or to make an application if the indemnity was not forthcoming. The letter which Crawfords then sent to Connex explained the mistake and suggested that the simplest way was for to Connex to grant an indemnity to BRB, allowing BRB to settle the case on the best possible terms. If the matter were not to be dealt with in that way, said Crawfords, it would be necessary for Connex to take formal steps to have themselves substituted as defendants. However, said Crawfords, it would be better to avoid that as it would delay settlement and increase costs.
8. On 24 August Mr Mitchell of Weightmans wrote to Crawfords enquiring whether anything had been heard from Connex and saying that if Connex were to be involved it must be done quickly. He had received the updated schedule of loss from Thompsons, acting on behalf of Mrs Dines, and suggested that he instruct counsel to settle a counter-schedule and provide advice on quantum. If Connex were not to agree a full indemnity then the matter would have to be settled or dealt with at the hearing in October and Connex pursued subsequently: the alternative would need the court's permission so as to resile from the previous admission, amend the defence and issue Part 20 proceedings for contributions against Connex. "[B]ecause this litigation is fairly advanced I envisage a court may be reluctant to grant us the various permissions that would be required". Two days later Mr Mitchell wrote to a lawyer at Connex, briefly explaining the situation, that there were no credible arguments on liability to Mrs Dines, that the claimant was bound to succeed, and that if he failed to hear from Connex consideration would be given to commencing a Part 20 claim for contribution against Connex which would necessarily increase costs. This action by BRB against Connex would not be prevented by the internal agreement between railway companies as to handling claims. It was very much hoped, however, that an action against Connex was not necessary and that they would agree to give the indemnity and instruct Weightmans to proceed to settle the matter as quickly and cheaply as possible. On 30 August Mr Mitchell wrote to Mr Sinclair at BRB recapitulating his advice and noting that the closer an application to resile, amend and commence Part 20 proceedings, the less favourably a judge would look upon the matter. "[W]e are already at a late stage for making such a crucial application … the cost of such an application will be irrecoverable even if the application succeeds."
9. Meanwhile, on 23 August Aon Claims Management had written to Crawfords on behalf of their client, Connex. The letter expressed surprise that BRB was attempting to make Connex liable, raised several questions, but concluded by denying any liability on the part of Connex in regard to the claim. There was, it said, no TUPE transfer to Connex and BRB was under a liability to indemnify. Clearly this was wrong. In an email dated 9 September Mr Mitchell explained briefly to Aon the reason for Connex's liability in relation to the claim. On 14 September he enclosed a copy of the deed of indemnity which Aon had requested in their original letter and noted that counsel had advised that a reasonable award was likely to be in the region of £114,000. He informed Aon that BRB had been in the process of considering this advice when an offer from the claimant's solicitors of £106,000 had been made, which BRB had accepted that very day. The letter noted that due to the impending assessment at a damages hearing in early October his client had taken the view that an application to resile from the admission of liability, amend the defence, have Mrs Dines pay back the £40,000 interim payment and commence Part 20 proceedings was bound to fail. Of course this was the first time that Connex knew about the nature of the offer. Mrs Dines' Part 36 offer of £106,000 was accepted on 14 September and the settlement put in the form of a consent order, sealed by the court on 14 November. During the present hearing Connex accepted that the £106,000 settlement for Mrs Dines' claim could not be said to be excessive.

The Legislation

10. BRB advanced its claim against Connex under the Civil Liability (Contribution) Act 1978, without attempting to draw on any wider restitutionary principles. For our purposes the relevant sections of the Act are as follows:

"1 (1) Subject to the following provisions of this section, 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 (whether jointly with him or otherwise).

…

1 (4) A person who has made or agreed to make any payment in bona fide settlement or compromise of any claim made against him in respect of any damage (including a payment into court which has been accepted) shall be entitled to recover contribution in accordance with this section without regard to whether or not he himself is or ever was liable in respect of the damage, provided, however, that he would have been liable assuming that the factual basis of the claim against him could be established.

…

6 A person is liable in respect of any damage for the purposes of this Act if the person who suffered it (or anyone representing his estate or dependants) is entitled to recover compensation from him in respect of that damage (whatever the legal basis of his liability, whether tort, breach of contract, breach of trust or otherwise)."

11. Contribution has a long history in the law, but was confined at common law to certain categories of wrongdoers. To extend contribution between joint and several concurrent tortfeasors, the Law Reform (Married Women and Tortfeasors) Act 1935 was introduced, but that provision proved deficient and the matter was referred to the Law Commission, which reported in 1977. The Law Commission recommended new legislation, and included a draft bill in its report (The Law Commission, Law of Contract. Report on Contribution, Law Com. No. 79, 1977). In the part of the report entitled "Bona Fide Compromise", the Commission addressed the problem of the "settling" party (D1) claiming a contribution from another tortfeasor (D2). It had taken the view in its working paper that it was unsatisfactory to require D1 to prove its own liability in order to entitle it to contribution from the other. Three reasons were given, first, that it would turn all the usual conventions of civil litigation upside down because D1 would have to call evidence in the possession of the claimant to establish its own liability and D2 would then call D1's witnesses in order raise a doubt about D1's liability; secondly, if the result of the contribution proceedings was that the liability of D2 was established, but that the liability of D1 was not, the defendant making the compromise, D1, would get no contribution although it itself was not to blame and D2, who really was to blame, would have to pay nothing; and thirdly, a defendant might be deterred from compromising claims in which liability was in doubt if their right to contribution was thereby put at risk. The Law Commission attached particular importance to the third point (paragraph 45). In relation to possible prejudice to D2, in that D2 might find it harder to defend itself on issues of liability and quantum after the fait accompli of a settlement between the claimant and D1, the Law Commission was not convinced. D1 would have to establish that D2 was liable, and as to quantum, if the figure was too high, D2 would only be liable to contribute on the basis of the proper figure (paragraph 51). To the objection that the claimant and D1 could collude as to the compromise, to the disadvantage of D2, the Law Commission agreed that it was desirable that any compromise should be open and above board. "[W]e also accept that it would not be right to allow contribution proceedings to result from a sham agreement where the settling defendant was an intermeddler and not someone against whom a case in law could possibly have been made out" (paragraph 53). The Law Commission accordingly recommended that contribution should be recoverable by D1 if he had made a bona fide compromise of a claim against him for damages (paragraph 56). Accordingly clause 3, sub-clause 2 of the draft Law Commission Bill provided:

"A person who, without actually being liable, has made or agreed to make any payment in bona fide settlement or compromise of any claim made against him in respect of any damage (including a payment into court which has been accepted) shall be entitled to recover contribution under this section as if he had in fact been liable in respect of that damage at the time when it occurred."

Overall the legislation enacted by Parliament can be regarded as having the same underlying policy intentions as identified in the Law Commission report.

12. As enacted section 1(1) of the Act reproduces almost exactly the recommendation of the Law Commission (in their draft Bill, clause 3(1)). Section 1(4) does not reflect, in full, the recommendation in clause 3(2) set out above. Both apply whether or not D1 was ever liable. Both require that a payment made in settlement or compromise be bona fide. The obvious intention was to strike at settlements where there had been collusion between the claimant and D1 by inflating the amount payable. However, they differ in that the enacted provision contains a proviso that D1 "would have to be liable assuming that the factual basis of the claim against him could be established". At this distance it is unnecessary, indeed undesirable, to attempt to divine what was behind this change to the Law Commission recommendation as enacted by Parliament (see the helpful note of Professor Dugdale, "The Civil Liability (Contribution) Act 1978", (1979) 42 MLR 182, 184, who says that the proviso was added during the committee stage of the Bill to ensure that a settlement based on possible liability solely through the provisions of foreign law could not form the basis of a contribution claim. Clearly the wording of the proviso as eventually adopted extends more widely to all settlements based on legal but not factual doubts). It is clear that although D2 cannot argue that D1 was not liable on the facts, D2 can defend the contribution claim by demonstrating that the legal basis of the claim against D1 had not been established.
13. Arab Monetary Fund v Hashim, Times Law Reports, 17 June 1993, is the only relevant authority on section 1(4). It involved a claim for contribution by First National Bank of Chicago (FNBC) against Dr Hashim, the previous Director General of the Arab Monetary Fund (AMF). FNBC had compromised a large claim by AMF in tort and constructive trust. It now sought contribution from Dr Hashim. In an amended defence which Dr Hashim proposed, it was contended (i) if the 1978 Act applied Dr Hashim denied that the settlement was bona fide and that he was liable; and (ii) as regards AMF's claim, FNBC were not liable for the reasons given in their defence. One aspect of FNBC's defence was that the concept of trust was not recognised by Swiss law. The issue arose as to whether Dr Hashim should be permitted to amend along these lines. In particular he contended that the factual basis of the claim against FNBC had not been established. In Dr Hashim's submissions the clause "factual basis of the claim" in section 1(4) meant that the court should not assume all the facts pleaded by FNBC by way of defence in the main action would have been successfully contraverted. By contrast, in FNBC's submissions all that that clause meant was that the court should confine itself to the facts pleaded in the statement of claim and determine whether they were sufficient to found the cause of action against FNBC. Chadwick J preferred Dr Hashim's interpretation. Certainly the factual basis of a claim was defined by the pleadings for the purposes of section 1(4), but it was not limited to the material facts pleaded in the statement of claim. Where a fact pleaded by way of defence by D1 was inconsistent with a material fact alleged in the statement of claim, the assumption which the court was required to make in section 1(4) would not have been established.

"The language in which the statutory hypothesis has been enacted – "assuming that the factual basis of the claim against him could be established" – does not bring within the assumption which the court is required to make facts which do not form any part of the plaintiff's case against the defendant and which are not facts which the plaintiff would need to establish in order to succeed against the defendant. The proviso cannot properly be construed to mean "assuming that [the plaintiff] would establish the factual basis of his claim against [the defendant] and that [the defendant] would fail to establish the factual basis of any collateral defence".

Thus D2 could resist a claim in contribution on the ground that D1 would not have been liable to the claimant in the main action, notwithstanding that the factual basis of the claim against him could have been established by the claimant in that action, not only in circumstances in which the factual basis of the claimant's claim gave no rise to liability in law, but also in circumstances in which D1 had a collateral defence to the claimant's claim arising out of facts which it would have been for D1, and not the claimant in the main action, to establish.

14. Had the matter been a blank sheet, it may have been that I would have been persuaded to adopt a more simple minded interpretation of the clause "the factual basis of claim" in section 1(4). In other words, I would have said that the clause confined the inquiry to whether the facts as pleaded in the statement of claim grounded a cause of action. However, the result of the Arab Monetary Fund case is that the court in contribution proceedings must go further to investigate allegations of fact which are said to support a collateral defence. This could lead to a lengthening of the inquiry, which may be contrary to one of the policy aims implicit in the Law Commission's recommendations, to avoid having to go into aspects of the viability of the claim in the main action. However, Arab Monetary Fund is authoritative, and D2 has the benefit of a collateral defence by which D1 could have avoided liability to the claimant in the main action. D2 is entitled to rely on allegations of fact contained in D1's defence in the main action, although only in so far as they are not inconsistent with the material allegations of fact upon which the claimant in the main action relied on in its statement of claim.

Connex's arguments

15. In submissions informed both by the case law and the literature, Mr Watt-Pringle QC contended that Connex had no liability to BRB under the Civil Liability (Contribution) Act 1978. The arguments turned on a construction of the legislation, but also on general principle, that since Connex remained liable to Mrs Dines there was no case for saying that it was under an obligation to pay BRB. In any event, continued the Connex argument, BRB was estopped from pursuing Connex for contribution given that BRB had misled Connex by not informing them about Mrs Dines' claim until the point when Connex could effectively do nothing.

(a) Construction of the Civil Liability (Contribution) Act 1978

16. The first of Mr Watt-Pringle QC's arguments in relation to the Civil Liability (Contribution) Act 1978 turned on the construction of section 1(1). That provision, it will be recalled, enables D1 to recover contribution from any person, such as D2, liable in respect of the same damage, whether jointly or otherwise. In order to bring itself within section 1(1) BRB must show that it and Connex were "liable in respect of the same damage". The meaning of the expression is laid down authoritively by the House of Lords in Royal Brompton Hospital NHS Trust v Hammond [2002] UKHL 14; [2002] 1 WLR 1397. After examining the historical basis of contribution, which is the notion of sharing a common liability, Lord Bingham of Cornhill said that when any claim for contribution falls to be decided the questions which needed to be answered were: (1) what damage has the claimant suffered?; (2) is D1 liable to the claimant in respect of that damage?; and (3) is D2 also liable to the claimant in respect of that damage or some of it? [paragraph 6]. That approach was endorsed by the other law lords. Lord Steyn said that sharing a common liability lies at the root of the principle [paragraph 27]. Lord Hope of Craighead expressed as the starting point for contribution "the assumption that two or more persons have contributed, albeit in different ways, to the same wrong."[paragraph 37]
17. In Connex's submissions, all of this means that it cannot be made liable under the Act because BRB was simply under no liability to the claimant. It was Connex which all along was solely liable. The second question which Lord Bingham of Cornhill said needed to be answered affirmatively for a contribution claim to succeed could not be answered, i.e. whether D1 is liable to the claimant in respect of the damage. Connex also invoked the leading modern authority on this area of the law, The Law of Contribution and Reimbursement (2003) by Professor Charles Mitchell of King's College London, who says:

"Recent cases touching on the proper construction of the 1978 Act support the proposition that the Act governs contribution claims between wrongdoers, and does not govern contribution claims between parties, one or more of whom is not a wrongdoer."[4.49]

The focus of Professor Mitchell's consideration is on restitutionary claims, which he considers are excluded because unjust enrichment is not a wrong. Part of his reasoning, that restitutionary claims are excluded from section 1(1) is because these are not claims to recover compensation [see paragraph 4.48. See also 6.02, 6.40]. Whatever the correctness of that premise, the present claim is definitely for compensation.

18. The answer to Connex's argument in this regard is provided by the Act itself. Section 6(1) defines liability: a person is liable in respect of any damage for the purpose of the Act if a claimant is entitled to recover compensation from them in respect of that damage, whatever the legal basis of their liability, "whether tort, breach of contract, breach of trust or otherwise". Mrs Dines had a judgment against BRB from June 2005. Whether before that date BRB was liable is irrelevant; the judgment itself gave rise to liability on the part of BRB. There is no direct authority on the point although this interpretation was assumed in Abbey National Plc v Gouldman [2003] EWHC 925 (Ch); [2003] 1 WLR 2042, [11]. (See also Professor Dugdale's note, mentioned above, at page 184). A number of authorities indicate that the Act is to be given a broad construction. In any event the words "or otherwise" in section 6(1) are wide enough to include judgements. That the judgment was writ in sand in my judgment matters not. The plain fact is that judgments are a final order of the court. That includes consent judgments, which share the same effect as judgments made after a contested hearing. If judgments are to be set aside there must be separate proceedings, although accidental slips or omissions can be corrected. But subject to this and to appeal a judgment is conclusive as between the parties and is conclusive evidence against the whole world of its legal consequences. The judgment in this case established a liability on BRB's part alongside Connex's liability. By virtue of the judgment BRB can be regarded as a "wrongdoer", if as Professor Mitchell contends this is a prerequisite to a contribution claim. As a result of the judgment BRB, along with Connex, were liable in respect of the same damage.
19. It was said on behalf of Connex that it would be odd if the outcome of BRB's claim for contribution depended on the fact that there just happened to be a judgment. My answer to that is that legal consequences often turn on a legal or factual contingency. However, Connex's observation in this regard does raise the issue of whether Connex would be liable under the Act in the absence of the judgment. That turns on an interpretation of section 1(4). There can be no dispute that the admission of liability and the acceptance of Mrs Dines' Part 36 offer amounted to a bona fide settlement or compromise within the terms of section 1(4). However, it will be recalled that that section has been interpreted so that Connex can resist a claim in contribution not only in circumstances in which the factual basis of Mrs Dines' claim gave no rise to liability in law but also in circumstances in which BRB had a collateral defence to her claim arising out of facts which it would have been for BRB, and not Mrs Dines, to establish: Arab Monetary Fund v Hashim, Times Law Reports, 17 June 1993. Connex says that in this case BRB would have had the benefit of a collateral defence by which it could have avoided liability to Mrs Dines.
20. The factual basis of the claim set out in Mrs Dines' particulars of claim and in the defence filed by BRB was straightforward. The claim was a claim for negligence and breach of statutory duty. The defence admitted that Mr Dines had been exposed to asbestos during the course of his employment with BRB's predecessors, that that was in breach of the common law and statutory duties owed by them to him and that the breaches of duty caused him to develop mesothelioma. The issue raised by the defence was damages, not liability. No collateral defence to liability was raised on the pleadings. Had BRB wished to contest Mrs Dines' claim it would have been necessary for it to withdraw the admission of liability in the defence and to deny that BRB was liable for the employer's negligence and breach of statutory duty of its predecessors and that those liabilities had transferred to them. It would had have had to plead positive facts relating to Mr Dines' employment with the British Transport Commission, the British Railways Board, the Southern Railway Company and Connex. It would have had to plead the terms of the 1995 transfer of employment to Connex, the effect of the transfer in law and the effect of the TUPE regulations. This would have been a defence, but it would not have been a defence on the existing pleadings. Chadwick J made clear that the factual basis of the claim between the claimant and D1 had to be defined by the pleadings. "[I]t is, I think, necessary to have regard, principally if not exclusively, to the terms of those pleadings". For this reason, in the particular circumstances of this case the factual basis of Mrs Dines' claim gave BRB no collateral defence. Thus BRB can claim a contribution from Connex under section 1(4) of that Act, as well as section 1(1).

(b) Connex's continued liability to Mrs Dines

21. Simply put, Connex contended it was under a continued liability to Mrs Dines. Since BRB was under no legal liability to her, what they had paid Mrs Dines was equivalent to a voluntary payment. If Connex was sued by Mrs Dines it was no answer that she had been compensated already by BRB's voluntary payment. Connex founded this proposition on Esso Petroleum Company Ltd v Hall Russell and Co Ltd [1989] AC 643. In that case, pursuant to a voluntary agreement, TOVALOP, Esso paid compensation to Scottish crofters who had been affected by pollution of the foreshore. Esso's claim in negligence was against the shipbuilders, Hall Russell, who it was said had been negligent in the building of a tug. The coupling had blown out of a hydraulic pipe above the engine exhaust of the tug which had been berthing a tanker, the Bernicia, belonging to Esso. That blow out led to a fire and extensive pollution as bunker oil escaped. In his speech, with which the other law lords agreed, Lord Jauncey of Tullichettle said:

"Indeed having received payments from Esso the crofters could have sued Hall Russell arguing that what they received was no more than gratuities from a disaster fund. TOVALOP is and remains a gratuitous contract of indemnity notwithstanding that the event which gave rise to the payments thereunder was damage to the Bernicia. Esso cannot pray in aid the latter event to convert their claim to repayment of sums paid under that indemnity into a claim for economic loss resulting directly from the damage. The matter can be tested in this way. Assume in the first place that the spillage of bunker oil was entirely due to the negligence of Hall Russell and that Esso had not entered into TOVALOP. In that event Esso would have been liable to the crofters neither in delict nor by virtue of statute and would have made no payments to them. Assume in the second place the same facts but that Esso had entered into TOVALOP, and had made payments thereunder to the crofters. What has caused these payments to be made? In my view they were made because Esso has chosen, by entering into and remaining a party to TOVALOP, to assume a voluntary obligation to the crofters and not because of any alleged negligence on the part of Hall Russell. It follows that Esso are not entitled to claim the sums second and third concluded for in conclusion (1) as direct heads of damage." (at 678 B-D). (See also Lord Goff of Chieveley's speech at 663 A-B).

Thus it is said that just as the crofters could still sue Hall Russell, despite Esso having made them voluntary payments for the damage the pollution caused, so in this case Mrs Dines could still sue Connex, BRB having in effect paid her compensation voluntarily because it was not legally liable.

22. There is nothing in this point. It simply does not make sense to say that BRB's payment of Mrs Dines' claim has failed to discharge Connex's liability to her. This is not on all fours with the Esso Petroleum case. Quite apart from anything else it was not a matter of BRB assuming a voluntary obligation to Mrs Dines. Payment was made under compulsion, the compulsion of a judgment which had been entered in her favour. The ordinary rule would apply, that BRB's payment would have to be brought into account in any claim by Mrs Dines against Connex: Eastgate Group Ltd v Lindsey Morden Group Inc [2001] EWCA Civ 1446; [2002] 1 WLR 642, [15]. BRB's payment of compensation under the judgment meant the diminution, indeed elimination, of Mrs Dines' loss.

(c) Estoppel

23. At one point the representation which based Connex's estoppel argument was said to be the failure of BRB to take steps to inform both Mrs Dines and Connex that there was no cause of action against it. Once it became clear that the mistake was not discovered until July 2005, after Mrs Dines had judgment against BRB, Connex's submission was that BRB's representation was that it would join Connex in the proceedings. It will be recalled that it went ahead and settled Mrs Dines' claim without doing so. In reliance on the representation that it would be joined in the litigation, Connex took no further steps to protect its position in the litigation. Connex suffered detriment as a result. It had been deprived of the right to conduct the Dines' litigation on the advice of a lawyer of its own choosing, deprived of the opportunity to investigate Mrs Dines' claim, and denied the opportunity of negotiating a settlement on its own terms and in its own interest. Connex's submission in this respect was put alternatively as an election by BRB as to the course it would pursue from which it could not subsequently resile.
24. Connex's submissions on estoppel fail to accord with the facts. BRB was not making any representation, or election, when its agents, Crawfords, and later Weightmans, contacted Connex in July and August. They set out the options for Connex now that it had been discovered that Connex, not BRB, was liable to Mrs Dines. Admittedly in late August Connex was told that if they failed to reply consideration would be given to commencing a Part 20 claim for contribution against them. Even if this constituted a representation of fact, rather than as to future conduct, it is difficult to see how Connex relied on it. In late August, Connex's agents, Aon Claims Management, had denied all liability for the claim and the matter had not advanced any further when BRB received an offer from Mrs Dines' solicitors, a settlement figure below what BRB's own counsel had said the claim was worth. Not surprisingly they decided to accept it. Albeit that Connex was by then a shell company, the franchise having been terminated two years previously, it did have claims managers and legal representation. No evidence was called from them as to how their principal, Connex, relied on what it was told by Crawfords or Weightmans. That being the position this is not a case where it is appropriate to draw any inferences as to how Connex was induced to act (see Spencer Bower, The Law Relating to Estoppel by Representation, 4^th edn, 2003, V 2.4). As to detriment, given that Connex now accepts that the settlement with Mrs Dines was not excessive – in light of the advice which BRB received from counsel it would be difficult to mount any such argument – it is not easy to see what that detriment was, apart from the theoretical advantage of Connex having representatives of its own choosing handling the matter. Estoppel's essential requirements are absent in this case.

Conclusion

25. There is no doubt BRB made a serious mistake in assuming that it was liable when it was served with Mrs Dines' claim which her solicitors, Thompsons, had launched. The peculiarities of railway privatisation meant that in Mrs Dines' case not only was the proper defendant Connex, not BRB, but also that in relation to her claim Connex had no indemnity from BRB. Once BRB discovered the mistake it behaved quite properly as regards both Ms Dines and Connex. To have changed course would have kept Mrs Dines out of the compensation she was entitled to as BRB and Connex squabbled between themselves as to who would pay. As for Connex, they were informed and told of the available options. They did not address the issue. In the light of counsel's advice as to what Mrs Dines' claim was worth it made good commercial sense for BRB to go ahead and settle on the terms they did. On the facts there can be no argument that BRB is now estopped by what it did from proceeding against Connex.
26. BRB can claim a contribution from Connex under the Civil Liability (Contribution) Act 1978. BRB was liable as a result of the judgment entered against it in Mrs Dines' favour. Connex were also liable to Mrs Dines for the same damage as a result of TUPE and the arrangements for railway privatisation. The terms of section 1(1) of the Act are therefore satisfied in that both BRB and Connex are liable in respect of the same damage. In addition, there was a bona fide settlement between Mrs Dines and BRB, and on the pleadings in the action giving rise to that settlement BRB had no collateral defence. Accordingly, section 1(4) is also satisfied. On both grounds, therefore, BRB can claim a contribution from Connex. The result accords with the policy behind the Act which is that even if there is a cloud over a defendant's legal liability that should not delay settlement of a meritorious claim while inquiries are made as to whether someone else is liable. While generally speaking the law will not come to the aid of those who make serious mistakes, to reach a different result in this case would mean that a party who was clearly liable in law would avoid having to pay. Since there is no dispute now about what Mrs Dines was paid as compensation for her losses BRB is entitled to judgment for this amount and for Mrs Dines' reasonable legal costs in pursuing it. However, since BRB had no legal liability to Mrs Dines, and could have defended her claim with costs if it had not made a mistake about its own liability, it would not be just and equitable, in the language of section 2(1) of the Act, for BRB to recover the costs it itself incurred in conducting Mrs Dines' claim.