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Supreme Court allows two Scots appeals

6 May 2010

The UK Supreme Court has allowed two appeals in the latest cases brought to it from the Court of Session.

In one case, the judges had to apply the rule on right of retention where there were two separate but related contracts. In the other, they had to consider the 1940 legislation on contributions among joint wrongdoers.

Inveresk plc v Tullis Russell Papermakers Ltd arose from an agreement by Tullis Russell to acquire from Inveresk the property rights to the Gemini brand of paper. In response to a claim by Inveresk for an instalment payment of £909,000, Tullis denied that the payment was due under the agreement and also maintained that Inveresk were in breach of required quality and customer service standards, claiming damages of over £5.3m.

In the Court of Session Lords Kingarth, Wheatley and Clarke found for Inveresk on both points. On the retention issue they ruled that although the two agreements in question were linked, there was no mutuality of obligations such as to give rise to a right of retention. However on appeal Lord Hope, with whom the other judges agreed, held that on a construction of the agreement Inveresk were not entitled to withdraw from their election to require a "tonnage audit" in order to determine what was due, even though the parties could not agree as to the basis on which it should be carried out.

On the retention point, the Inner House had founded on the fact that the parties had entered into separate contracts of sale and for services. But Lord Hope said there were ample grounds for regarding the two
agreements as depending on one another and as each forming part of the same transaction, and the conclusion that the principle of mutuality could apply to the transaction as a whole was inescapable. The Lord Ordinary's finding that the separate agreements were part of the same transaction should be carried to its logical conclusion. Lord Rodger agreed after a detailed examination of the types of retention.

Joint wrongdoers

In Farstad Supply AS v Enviroco Ltd and Asco UK Ltd, the question was whether Enviroco, on being sued by Farstad for damage caused by a fire on an oil rig supply vessel, could claim a contribution from Asco as a joint wrongdoer under s 3(2) of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1940, when Asco could not ultimately be liable, being entitled to an indemnity from Farstad.

The court said the answer depended on whether Asco would have had a defence to Farstad’s claim. This  depended on the true construction of the charterparty under which Asco chartered the vessel from Farstad, with the essential question being whether clause 33.5 excluded Asco’s liability to Farstad in respect of
damage to the vessel caused by Asco’s own negligence. The Court found that it did. Scots law applied the principle known in other jurisdictions as circuity of action, even if it did not recognise it by that name.

Click here to view the court's decisions. Farstad is [2010] UKSC 18; Inveresk is [2010] UKSC 19.

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