New Judgment: Farstad Supply AS v Enviroco Limited  UKSC 18
05 Wednesday May 2010
On appeal from: 2009 CSIH 35
Farstad owned an oil rig supply vessel which was damaged by fire. The third party charterer, Asco had engaged the defender, Enviroco to clean out tanks on board the vessel. Following the fire, Farstad sued Enviroco for damages, alleging that the fire was caused by the negligence of Enviroco’s employees.
There were three questions before the court:
1) The meaning and effect of section 3(2) of the Law Reform (Miscellaneous Provisions)(Scotland) Act 1940 – which provides for contributions between jointly or severally liable defendants who might also have been held liable in respect of the loss or damage on which the action is founded;
2) Whether a defence provided by a pre-existing contract (such as the charterparty) can be taken into account in determining whether a person “if sued, might also have been held liable” for the purposes of section 3(2); and
3) If the answer to (2) is yes, whether clause 33(5) of the charterparty has the effect that the charterer Asco is not a “person who, if sued, might have also been held liable” to Farstad for the purposes of section 3(2).
The Supreme Court unanimously allowed the appeal. It was held that section 3(2) is specifically intended to deal with the position where there are two actions it is not limited to such a case and the claim for contribution could be made by third party proceedings in the same action. The question under section 3(2) is whether, if Asco had been sued by Farstad, it would have been liable. That depends upon whether Asco would have had a defence to Farstad’s claim. The Court held that clause 33.5 of the charterparty excluded Asco’s liability to Farstad in respect of damage caused by Asco’s own negligence. As a result, Enviroco was not entitled to a contribution.