Charter Plc and Another v City Index Ltd and others: ChD 12 Oct 2006

An employee of the claimant had fraudulently spent several million pounds of the claimant’s money on personal bets through the defendant company. The claimant said that the defendants knew the origin of the funds and were liable to repay them. Having settled the claim in part the defendants now claimed contributions from directors of the claimant companies, saying that they themselves contributed to the loss in failing to control their accounts adequately.
Held: The defendant’s request for summary dismissal of the claim succeeded. A claim in knowing receipt is one ‘to recover compensation…in respect of. damage’. The Part 20 claim of City Index satisfed ss.1 and 6 of the 1978 Act because (a) the decision of the Court of Appeal in respect of knowing receipt in Friends Provident Life Office v Hillier, Parker, May and Rowden was not overruled expressly or by implication by the House of Lords in Royal Brompton NHS Trust v Hammond; and (b) a claim for knowing receipt is a claim for compensation for damage sustained in consequence of a breach of trust notwithstanding that it may also be described as restitutionary. The decision of the Court of Appeal in Friends’ Provident that a claim in knowing receipt was one to recover compensation in respect of damage was binding, and the remedy for knowing receipt was compensatory within the provisions of section 6(1) even if it might also be described a restitutionary.
Sir Andrew Morritt, Chancellor
[2006] EWHC 2508 (Ch), Times 27-Oct-2006, [2007] 1 All ER 1049, [2007] 1 WLR 26
Bailii
Civil Liability (Contribution) Act 1978
England and Wales
Citing:
CitedEl Ajou v Dollar Land Holdings Ltd CA 2-Dec-1993
The court was asked whether, for the purposes of establishing a company’s liability under the knowing receipt head of constructive trust, the knowledge of one of its directors can be treated as having been the knowledge of the company.
Held: . .
CitedFriends’ Provident Life Office v Hillier, Parker May and Rowden CA 1997
Friends Provident had participated in a development project on terms which required it to pay its share of the development costs as it proceeded. It employed Hillier Parker, a firm of surveyors, to check demands made from time to time for payment of . .
CitedBank of Credit and Commerce International (Overseas) Ltd and Another v Akindele CA 22-Jun-2000
The test of whether a person who received funds held them on constructive trust, was not whether he himself was dishonest, but rather whether he had knowledge of circumstances which made it unconscionable to hold on to the money received. In respect . .
CitedRoyal Brompton Hospital National Health Service Trust v Hammond and others HL 25-Apr-2002
The claimants sought damages against the defendants for their late delivery of a building. The contractors sought to share the damages with the architects who had certified the delays, defeating their own claims.
Held: The Act sought to extend . .
CitedK v P (J, Third Party) 1993
Illegality was arguably not a defence to a claim under the Act of 1978: ‘The Act of 1978 extends the potential for contribution beyond joint tortfeasors to joint contractors, joint trustees and others who are liable in respect of the same damage. . . .
CitedNocton v Lord Ashburton HL 1914
The defendant solicitor had persuaded his client to release a charge, thus advancing the solicitor’s own subsequent charge on the same property. The action was started in the Chancery Division of the High Court. The statement of claim alleged fraud . .
CitedTarget Holdings Ltd v Redferns and Another CA 24-Nov-1993
Solicitors were liable to mortgagees for mortgage monies which had been out by them paid in advance of the completion of the purchase which would allow the mortgagee’s loan to be charged. The basic liability of a trustee in breach of trust was not . .
CitedNiru Battery Manufacturing Company, Bank Sepah Iran v Milestone Trading Limited CA 28-Apr-2004
Niru contracted to buy lead from Milestone, to be paid for in a letter of credit, against certifying documents produced for the purpose. Mr Mahdavi, the individual behind Milestone, procured CAI to finance the acquisition of warrants to be retained . .
CitedRoyal Brunei Airlines SDN BHD v Tan PC 24-May-1995
(Brunei) The defendants were a one-man company, BLT, and the one man, Mr Tan. A dishonest third party to a breach of trust was liable to make good a resulting loss even though he had received no trust property. The test of knowledge was an objective . .
CitedHurstwood Developments Ltd v Motor and General and Andersley and Coinsurance Services Limited and Another CA 21-Nov-2001
. .
CitedGruppo Torras v Al Sabah ChD 24-Jun-1999
Liability based on knowing receipt did not ‘depend on the commission of any wrong or give rise to any obligation to make good any loss other than by way of restitution.’ . .
CitedTwinsectra Ltd v Yardley and Others HL 21-Mar-2002
Solicitors acted in a loan, giving an undertaking as to its application. In breach of that undertaking they released it to the borrower. The appellants appealed a finding of liability as contributors to the breach.
Held: ‘Money in a . .
CitedDowns v Chappell; Downs v Stephenson Smart (a Firm) CA 1996
The plaintiff purchased a book shop. He claimed that in doing so he had relied upon the accounts prepared and signed off by the respective defendants.
Held: The judge had been wrong by testing what would have been the true figures as against . .
CitedR McDonald v Coys of Kensington Ltd CA 5-Feb-2004
The claimants were car auctioneers. They had been instructed to sell a car, but to withhold the cherished number plate. By mistake it was transferred with the car. Before the plate could be returned, the defendant had transferred it to his partner. . .
CitedDubai Aluminium Company Limited v Salaam and Others HL 5-Dec-2002
Partners Liable for Dishonest Act of Solicitor
A solicitor had been alleged to have acted dishonestly, having assisted in a fraudulent breach of trust by drafting certain documents. Contributions to the damages were sought from his partners.
Held: The acts complained of were so close to . .
CitedEastgate Group Ltd v Lindsey Morden Group Inc, and Smith and Williamson (a Firm) CA 10-Oct-2001
The defendant faced a claim for breach of warranties given by vendors in a company share sale agreement. The sought a contribution from the purchasers accountants who had prepared figures upon which the purchase decision was based. The defendants’ . .

Cited by:
Appeal fromCity Index Ltd and others v Gawler and others; Charter plc v City Index Ltd CA 21-Dec-2007
A senior employee of Charter had fraudulently spent substantial sums with City Index. City Index had paid out on a claim of knowing receipt, and sought contributions from directors of Charter and their auditors, saying that they had known of the . .

These lists may be incomplete.
Updated: 31 January 2021; Ref: scu.246077