CITY INDEX LTD V GAWLER

[2007] EWCA Civ 1382, Court of Appeal, Lord Justice Mummery, Lady Justice Arden and Lord Justice Carnwath, 21 December 2007

Contribution – Whether person liable for knowing assistance with breach of fiduciary duty could claim contribution from person liable in negligence – Whether contribution order should be made – Civil Liability (Contribution) Act 1978

Between February 2000 and August 2004 Charter was defrauded of large sums by the manager of their foreign exchange department. Those sums were transferred to City Index to finance his betting. Charter commenced proceedings against City Index, alleging that the sums had been received with knowledge of breach of trust or fiduciary duty: the claim was settled for £5.5 million, £3 million of which represented City Index’s profits on the betting transactions. City Index commenced contribution proceedings under the Civil Liability (Contribution) Act 1978 against some past and present directors and the group auditors of Charter. The claim was based on alleged breaches of duty by them. The Court of Appeal held that: (1) a contribution claim based on knowing receipt was in principle within the scope of the 1978 Act; (2) the discretion of the court under s 2 of the 1978 Act to award contribution should not inevitably be exercised so as to refuse contribution to a person whose liability is based on knowing receipt.