CORINTH PIPEWORKS S.A. v BARCLAYS BANK PLC [2014] DIFC CFI 024 — Contribution claims post-settlement (23 April 2014)

This judgment addresses the procedural and substantive requirements for a settling defendant to pursue a contribution claim under the DIFC Law of Obligations, specifically clarifying the threshold for recovery under Article 14(2).

How did the settlement between Corinth Pipeworks and Barclays Bank PLC trigger the dispute over the US$24 million claim?

The litigation originated from a substantial commercial dispute involving the supply of pipes, where the Claimant, Corinth Pipeworks S.A., sought recovery of approximately US$24 million. Barclays Bank PLC was named as the Defendant, and the bank subsequently initiated third-party proceedings against Afras Limited and Mr. Radhakrishnan Nanda Kumar. The core of the conflict involved the allocation of liability for the unpaid sums related to these pipe supplies.

On 11 April 2014, shortly before the scheduled trial, Barclays settled the primary claim with Corinth for US$4 million. Following this settlement, the original Claimant exited the proceedings, leaving the third-party contribution claim as the sole remaining matter. The Part 21 Defendants, Afras and Mr. Kumar, sought to strike out the claim and adjourn the trial, arguing that the settlement fundamentally altered the legal basis upon which Barclays could seek contribution. As noted in the judgment:

"Absent those additional words it was contended that Article 14(2), did not allow for a contribution unless the claimant is or was liable in respect of the damage."

The dispute centers on whether Barclays, having settled the claim, could still pursue Afras and Mr. Kumar for contribution without the court having made a prior finding of liability against the bank. Further context regarding the jurisdictional history of this matter can be found in CORINTH PIPEWORKS S.A. v BARCLAY'S BANK PLC [2010] DIFC CFI 024 — Jurisdiction over non-DIFC activities of Centre Establishments (09 February 2011).

Which judge presided over the CFI hearing for Corinth Pipeworks S.A. v Barclays Bank PLC on 22 April 2014?

The matter was heard before Justice Sir David Steel in the DIFC Court of First Instance. The oral judgment was delivered on 22 April 2014, with the formal written judgment issued on 23 April 2014.

What specific legal arguments did Mr. John Brisby QC and Mr. John Taylor QC advance regarding the amendment of the third-party claim?

Mr. John Brisby QC, representing the Part 21 Defendants (Afras and Mr. Kumar), argued that the amendment to rely on Article 14(2) of the Law of Obligations was legally insufficient. He contended that for a settling party to recover contribution, they must prove their own underlying liability to the original claimant. He further argued that the amendment introduced new, unpleaded allegations, necessitating an adjournment to allow the Defendants to gather additional evidence and expert opinions.

Conversely, Mr. John Taylor QC, for Barclays, argued that Article 14(2) was specifically designed to facilitate recovery for settling parties without the need to relitigate the merits of the settled claim. He maintained that the amendment was a natural consequence of the settlement and that the Defendants were not entitled to an adjournment, as the case was already trial-ready. The court noted the intensity of the debate:

"There was also much debate about whether in the skeleton argument produced by the Claimant bank for the purposes of the trial, there was a large range of additional allegations which had never been pleaded."

Does Article 14(2) of the DIFC Law of Obligations require a settling defendant to prove their own liability to obtain contribution?

The court had to determine whether the "factual basis" requirement in Article 14(2) imposes a burden on the settling party to prove they were actually liable for the loss they settled. The doctrinal issue was whether the statute requires a trial-within-a-trial to establish the settling party's liability, or whether the settlement itself, combined with a showing that the third party would have been liable if the facts were established, is sufficient to trigger the right to contribution.

How did Justice Sir David Steel interpret the scope of Article 14(2) of the Law of Obligations?

Justice Sir David Steel rejected the narrow interpretation proposed by the Part 21 Defendants. He reasoned that the purpose of the provision is to encourage settlements by allowing a party to pay a claim and then seek contribution from others who share responsibility, without the settling party being forced to prove their own liability. He explained the mechanism as follows:

"Of course, once the settlement with Corinth was implemented, as was predictable, the Defendant bank proposed an amendment to their claim to rely upon Article 14(2)which reads:
"A person who makes a payment in settlement of a claim arising under this Law may recover from any other person who would have been liable in respect of the same loss if the factual basis of the claim against him could be established."
13."

The judge further clarified the test:

"It is simply premised on the basis that where there is a claim in respect of a payment in settlement of a claim, another person who would have been liable in respect of the same loss, may be required to contribute to it, regardless of whether the claimant himself is, or ever was, liable."

Which specific statutes and sections were applied by the court to resolve the contribution dispute?

The court primarily applied the DIFC Law of Obligations, No. 5 of 2005. Specifically, the court contrasted Article 14(1), which governs contribution between parties who are both found liable, with Article 14(2), which governs contribution following a settlement. The court also referenced Article 56 of the same law regarding the general principles of liability.

How did the court use the English Law Commission report on contribution to interpret the DIFC Law of Obligations?

Justice Sir David Steel looked to external persuasive authority to confirm his interpretation of the DIFC statute, noting that the legislative intent behind Article 14(2) mirrored that of the English Civil Liability (Contribution) Act 1978. He cited the report to demonstrate that the law was intended to prevent the absurdity of a settling party being unable to recover from a truly liable third party simply because the settling party chose to compromise rather than litigate to judgment. He noted:

"This construction is fortified in my judgment by the material which has been furnished to me in one of the skeleton arguments supplied by Mr Taylor QC for Barclays, where there is set out the terms of the Law Commission report on contribution which led to the passing of Section 1(4) of the Civil Liability Contribution Act in 1978."

The court also addressed the potential for injustice if the interpretation were otherwise:

"The second problem was that if the result of the contribution proceedings was that the liability of the second Defendant was established but the liability of the person who had made the compromise was not the Defendant who really was to blame would have to pay nothing at all."

What was the final disposition of the applications regarding the amendment, strike-out, and adjournment?

Justice Sir David Steel allowed Barclays to amend its third-party claim to rely on Article 14(2) of the Law of Obligations. He categorically refused the Part 21 Defendants' application to strike out the claim, finding no merit in the argument that the settlement precluded the contribution claim. Furthermore, he denied the application for an adjournment, dismissing the Defendants' claims that they needed more time to find witnesses or documents as unfounded. He remarked:

"The suggestion that this was the opportunity to allow the Defendants, Mr Kumar and Afras, to go and seek additional documents, in my judgment, is almost laughable."

"Equally absurd, in my judgment, is the suggestion that the opportunity is needed to take stock as what other witnesses to call."

How does this ruling change the practice for settling defendants in DIFC commercial litigation?

This judgment provides significant clarity for practitioners, confirming that settling defendants in the DIFC are not required to prove their own liability to recover contribution from third parties. Litigants must now anticipate that a settlement will not act as a bar to contribution claims, provided they can establish that the third party would have been liable for the same loss. This reduces the procedural burden on settling parties and prevents third parties from using the settlement as a shield to avoid contribution.

Where can I read the full judgment in Corinth Pipeworks S.A. v Barclays Bank PLC [2010] DIFC CFI 024?

The full judgment can be accessed via the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/corinth-pipeworks-s-v-barclays-bank-plc-v-1-afras-limited-2-radhakrishnan-nanda-kumar-2010-difc-cfi-024 or via the CDN link: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/court-first-instance/corinth-pipeworks-s-v-barclays-bank-plc-v-1-afras-limited-2-radhakrishnan-nanda-kumar-2010-difc-cfi-024.txt

Cases referred to in this judgment:

Legislation referenced:

• Law of Obligations, No. 5 of 2005, Article 14(1)
• Law of Obligations, No. 5 of 2005, Article 14(2)
• Law of Obligations, No. 5 of 2005, Article 56