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Dear all

I have recently inherited a case which raises, at least for me, an interesting question about the relationship between contribution as an equitable and contribution as a statutory remedy. I raise the issue both as I imagine it may be of general interest, and also I confess in the hope that any received observations may assist me to achieve the desired result at a forthcoming hearing.

A Ltd. entered a lease agreement with B Ltd. A Ltd. entered a guarantee and indemnity agreement with C and D, directors of B Ltd. under which C and D

(1) hereby guarantee the payment to you on demand of all sums that become payable to you by the B Ltd. under the agreement and the due performance and observance by B Ltd. of all the terms and conditions of the agreement

(2) hereby indemnify you against any failure by B Ltd. to observe and perform B Ltd.'s obligations set out in the agreement and agree to pay you on demand any sums which B Ltd. has agreed to pay under the agreement and any sums which become payable to you as a consequence of B Ltd.'s said failure.

B Ltd. subsequently went into liquidation. A Ltd. sought to recover against C and D. As no one could find C and effect service, D fought on alone, but ultimately in vain, and A Ltd. were awarded judgment. Generously, the judgment was subsequently set aside by consent, substituting in full and final settlement a considerably lower sum.

Some 2 ½ years later, a claim is issued against C, by D, for a 50% contribution of the F&F settlement sum.

C initially states "you're time barred, under the CL(C)A you have two years to bring a claim for contribution". D however retorts "but see Hampton -v- Minns, the CL(C)A doesn't cover claims for contribution where the original judgment sounds in debt, i.e. where the guarantee in question falls within Lord Reid's first category of guarantor obligations in Lep Air Services -v- Rolloswin Investments Ltd [1973] AC 331 Therefore I had 6 years to bring my claim."

So it seems that whether the claim is time barred depends on whether upon true construction, the guarantee entered by C and D guarantees to either (a) perform B Ltd.'s contractual obligations (Lord Reid's second category), or (b) pay B Ltd.'s debts to A Ltd. (Lord Reid's first category). If the answer is both, Hyundai -v- Papadopolous [1980] 2 All ER 29 assists D.

My interpretation of the Guarantee puts clause 1 within Lord Reid's second category and clause 2 within Lord Reid's first category, and hence provides D with a right to claim contribution within 6 years.

I would greatly appreciate any thoughts on this generally, and in particular whether clause 2 of the guarantee can on any construction be squeezed within Lord Reid's second category. Also, in relation to the rationale of the distinction, why should so much rest on the damages/debt divide? If I am right, the distinction leaves contribution pursuant to half of the above guarantee time barred, while allowing a claim in relation to the other half.

Any thoughts?

Simon MacDonald

p.s. a quick hello to Charles Mitchell and Donal Nolan who introduced me to Restitution at King's!