[RHC O16] The Normar

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  • Practice – Third-party procedure – Counterclaim by third party, a defendant in the action – Third-party notice served by second defendants on third defendants claiming indemnity or contribution – Third-party notice treated as statement of claim – Defence and counterclaim by third defendants – Whether court had jurisdiction to entertain counterclaim – Counterclaim including claim for payment and set-off of alleged indebtedness for work done in relation to matters, some of which were not the subject of the plaintiffs’ action – Exercise of court’s discretion to strike out counterclaim or to direct separate trials – RSC, Ord 15, r 2, r 5(2), Ord 16, r 1(3), r 8(3).
In an action against dock owners for damages caused to the plaintiffs’ ship by the collapse of a crane at the docks, the dock owners denied negligence and alleged negligence on the part of the manufacturers of the crane or of the manufacturers’ sub-contractors who erected the crane. The plaintiffs then added the manufacturers and the crane erectors as second and third defendants respectively. The manufacturers served a third party notice on the crane erectors claiming indemnity under a clause in the sub-contract for contribution under the Law Reform (Married Women and Tortfeasors) Act, 1935, s 6. The crane erectors counterclaimed against the manufacturers (a) (by para 5 of their counterclaim) for indemnity or contribution, and (b) (by para 4 and para 6 of their counterclaim) for a sum of £4,444 11s 5d on account of work done under the sub-contract and for set-off in respect of this sum. The sum of £4,444 11s 5d was in respect of the erection of sixteen cranes and not merely of the erection of the one crane that collapsed. On appeal by the manufacturers from refusal of their application to strike out the crane erectors’ counterclaim, for which relief they had applied on the ground that a third party could not counterclaim, and from refusal of an order for separate trials of the issues (a) and (b) above if the counterclaim were not struck out,

Held – (i) there was jurisdiction to entertain a counterclaim made by a third party, that jurisdiction deriving from RSC, Ord 16, r 1(3)a and, in particular, from the word “defence” therein (see p 757, lettersg and h, post).

  • Footnote a     RSC, Ord 16, r 1(3), is set out at p 757, letter b, post.

(ii) by virtue of the present RSC, Ord 15, r 2b there was jurisdiction for a defendant claiming against a third party to counterclaim against the counterclaim made by the third party; accordingly the manufacturers could counterclaim in answer to the crane erectors’ counterclaim (see p 759, letter i, to p 760, letter a, post).

  • Footnote b     RSC, Ord 15, r 2, so far as material, is set out at p 759, letter g, post.

(iii) there was discretion under RSC, Ord 15, r 5(2)c to strike out the counterclaim or to order separate trials (see p 758, letter b, post), but, as the manufacturers would be entitled, in accordance with (ii) above, to counterclaim against the crane erectors’ counterclaim and thereby the area of the dispute might be enlarged (since the crane erectors’ money payment claim related to sixteen cranes), such a counterclaim by the manufacturers might lead to delay in the trial of the plaintiffs’ action; in the circumstances, as the plaintiffs were clearly entitled to damages from one or more of the defendants, and as there would be no advantage in directing separate trials, para 4 and para 6 of the crane erectors’ counterclaim to the third party

  • Footnote c     RSC, Ord 15, r 5(2), is set out at p 757, letter i, post.

    [1968] 1 All ER 753 at 754

notice would be struck out (see p 760, lettersb and i, and p 762, letter b, post).

Dictum of Scrutton LJ in Barclay’s Bank v Tom ([1922] All ER Rep at pp 279, 280) applied.

Appeal allowed.

Cases referred to in judgment

Barclay’s Bank v Tom [1922] All ER Rep 279, [1923] 1 KB 221, 92 LJKB 346, 128 LT 558, 50 Digest (Repl) 511, 1839.

Eden v Weardale Iron and Coal Co (1884), 28 ChD 333, 54 LJCh 384, 51 LT 726, 50 Digest (Repl) 521, 1915.

James v Page (1888), 85 LTJo 157, 40 Digest (Repl) 454, 391.

McCheane v Gyles [1902] 1 Ch 287, 71 LJCh 183, 86 LT 1, subsequent proceedings, [1902] 1 Ch 911, 50 Digest (Repl) 511, 1842.

Renton, Gibbs & Co v Neville & Co [1900] 2 QB 181, 69 LJQB 514, 82 LT 446, 40 Digest (Repl) 454, 392.

Toke v Andrews (1882), 8 QBD 428, 51 LJQB 281, 40 Digest (Repl) 453, 390.

Appeal.

This was an appeal by the second defendants, Morris & Butters against a decision of the Admiralty registrar refusing to strike out parts of a third party defence and counterclaim by the third defendants, Cozens & Sutcliffe, Ltd

The plaintiffs were the owners of the motor vessel Normar which suffered damage on 25 February 1966, when a crane collapsed on to the ship at Alexandra Dock, Hull. They sued the first defendants, British Transport Docks Board, as owners and occupiers of the dock for damages for negligence. The first defendants by their defence denied negligence and claimed that the fall of the crane was due to the negligence of the manufacturers of the crane or of the sub-contractors who had erected the crane under sub-contract with the manufacturers, or of both the manufacturers and the sub-contractors. The plaintiffs thereupon amended their writ and statement of claim to add the manufacturers as second defendants and the crane erectors as third defendants, alleging negligence against each of them. The second defendants by their defence admitted that they had manufactured the crane under contract with the first defendants and had sub-contracted the erection of it to the third defendants, but they denied negligence and alleged that the fall of the crane was due to the negligence of the first defendants (the dock owners) or of the third defendants (the erectors of the crane). The third defendants admitted by their defence that they had erected the crane in pursuance of such a sub-contract, but they denied negligence and alleged that the fall was due to the negligence of the first defendants (the dock owners) or of the second defendants (the manufacturers). After discovery in the action, the second defendants (the manufacturers) served a third party notice on the third defendants (the crane erectors) claiming indemnity under an indemnity clause in the sub-contract, alternatively, contribution under the Law Reform (Married Women and Tortfeasors) Act, 1935. An order for directions was made, ordering that the third party notice should be treated as the second defendants’ (manufacturers’) statement of claim, and providing for the third defendants’ (crane erectors’) defence thereto, for discovery and for trial of the third party claim at or immediately after the trial of the action. The third defendants’ defence to the second defendants’ claim against them admitted the sub-contract but denied the right to indemnity or contribution. By para 4 of their defence the third defendants

[1968] 1 All ER 753 at 755

(crane erectors) claimed to set-off the sum counterclaimed in para 6. By para 5, they counterclaimed indemnity or contribution under the Act of 1935. By para 6, they counterclaimed £4,444 11s 5d, alleged to be due for work done under the sub-contract. The second defendants (the manufacturers) applied to the Admiralty registrar to strike out para 4, para 5 and para 6 of the third defendants’ (the crane erectors’) defence and counterclaim. The registrar made no order on the application save as to costs. The second defendants (the manufacturers) appealed and asked that either all three paragraphs be struck out or else that the issues raised by para 5 and para 6 be tried separately from the other issues. The appeal was heard in chambers but judgment was given in open court.



J C Tylor for the plaintiffs.

R E Hopkins for the first defendants, the dock owners.

A P Clarke for the second defendants, the manufacturers.

J P M Phillips for the third defendants, the crane erectors.

21 December 1967. The following judgment was delivered.

read the following judgment. This is an appeal from a decision of the Admiralty registrar refusing to strike out parts of a third party defence and counterclaim. [His Lordships stated the facts, and continued:] The second defendants first contend that, as a matter of law, a defendant on whom a third party notice is served by another defendant cannot counterclaim. There is no authority directly in point, but there are two decisions of the Court of Appeal dealing with the right of an ordinary third party, nor a defendant in the action, to counterclaim. The first of these cases is Eden v Weardale Iron and Coal Co, where it was decided that a third party could not counterclaim against a plaintiff; but Bowen LJ expressed uncertainty ((1884), 28 ChD at p 338.) whether a third party could counterclaim against the defendant who had brought him in. The second case is Barclays Bank v Tom. In that case it was decided that a counterclaim would lie by the third party against the defendant who had brought him in, and I shall read a passage from the judgment of Scrutton LJ where he said ([1922] All ER Rep at pp 279, 280; [1923] 1 KB at pp 223–225.):

“The question whether a third party can counterclaim against the defendant requires careful consideration, because BOWEN, L.J., when deciding, in Eden v. Weardale Iron and Coal Co., that a third party could not counterclaim against the original plaintiff, said ((1884), 28 ChD at p 338.): ‘If the application had been for leave to the third party to counterclaim against the defendant, I should have desired to consider the question. It appears to me an open question whether the court could have given leave.’ It is important to keep clearly in mind what the third-party procedure is. A plaintiff has a claim against a defendant. The defendant thinks that if he is liable, he has a claim over against a third party. With that matter between the defendant and the third party the plaintiff has clearly nothing to do, not being concerned with the question whether the defendant has a remedy against somebody else. His remedy is against the defendant. But the defendant is much interested in getting the third party bound by the result of the trial between the plaintiff and himself, for otherwise he might be at a great disadvantage if, having fought the case against the plaintiff and lost, he had then to fight the case against the third party possibly on different materials, with the risk that a different result might be arrived at. The object of the third-party procedure is therefore, in the first place, to get the third party bound by the decision given between the plaintiff and the defendant. In the next place, it is directed to getting the question between the defendant and the third party decided as soon as possible after the decision between the plaintiff

[1968] 1 All ER 753 at 756

and the defendant, so that the defendant may not be in a position of having to wait a considerable time before he establishes his right of indemnity against the third party while all the time the plaintiff is enforcing his judgment against the defendant. And, thirdly, it is directed to saving the extra expense which would be involved by two independent actions. With these objects in view the third-party order usually provides that the third party may appear at the trial between the plaintiff and the defendant. When the third party has so appeared, as party to the proceedings, various questions arise as to what he can do. Can he counterclaim against the plaintiff? The answer is ‘No’, for such a counterclaim would have nothing to do with the issue in the action to which he is admitted as a party—Eden v. Weardale Iron and Coal Co.. Can he interrogate the plaintiff? The answer is ‘Yes’, if the object of the interrogatories is to show that the plaintiff’s claim against the defendant cannot be supported—Eden v. Weardale Iron and Coal Co.. I remember in one case in which I was counsel the third party was, on the same principle, allowed to raise a defence on behalf of the defendant which the defendant would not raise on his own behalf. When it has been ascertained that the defendant is liable to the plaintiff the next step is to try, in such manner as the judge may direct, the question between the defendant and third party. The defendant says, ‘You owe me so much by way of contribution or indemnity’. How may the third party defend himself? Of course he may deny that he is under any such liability at all. But he may admit his liability and say that he has a cross-claim against the defendant which prevents any effective judgment being given against him. He may say, ‘Your right to contribution will result in £100 being due from me to you, but I have a set-off in another matter in respect of which £100 will be due from you to me’. Or, again, he may, while admitting his liability to contribution, say that he has a claim against the defendant which cannot be made the subject of a set-off but will result in the defendant having to pay him so many pounds. It seems to me that the proper view to take on this part of the third-party procedure is that taken by COZENS-HARDY, L.J., in McCheane v. Gyles([1902] 1 Ch 287 at p 301.)—namely, that ‘The Act, therefore, treats the third party procedure

The other member of the court was Eve J. He gave a short judgment, saying ([1922] All ER Rep at pp 280, 281; [1923] 1 KB at pp 225, 226.):

“I agree. I respectfully agree with the view expressed in McCheane v. Gyles that the Judicature Act, by which the third-party procedure was created, treats that procedure ‘as analogous to a cause instituted by the defendant as plaintiff against the third party’. It is clear that the service of the third-party notice does not make the person on whom it is served a defendant to the action, but it seems to me that it does make him a defendant quoad the person serving the notice. That seems to be the reasonable view to take, because the main object of the procedure was to obviate the need for two actions. In the main action the rights of the plaintiff and the defendant are determined without reference to the defendant’s claims over against the third party, but when those rights have been ascertained it is then open to the person brought in by the third-party notice to have all relevant disputes determined between him and the person serving the notice. I think that a

[1968] 1 All ER 753 at 757

third party being in the position of a defendant in relation to the person who served the notice, is entitled to counterclaim against him.”

On behalf of the second defendants it was contended that this ruling has no application where the third-party is already a defendant. No reason was suggested why the law should so distinguish. It is said to follow from the wording of RSC, Ord 16, r (3), as contrasted with r 1(3) of the same order. Rule 1(3) is the rule which provides for the service of a third-party notice on a person who is not already a party to the action, and provides:

“Where a third party notice is served on the person against whom it is issued, he shall as from the time of service be a party to the action (in this order referred to as a third party) with the same rights in respect of his defence against any claim made against him in the notice and otherwise as if he had been duly sued in the ordinary way by the defendant by whom the notice is issued.”

Rule 8 is the rule which enables a similar notice to be served on a person who is already a party to the proceedings, and r 8(3) provides as follows, and I shall omit the references to “appearances” which form part of the sub-rule. The relevant part is this:

”… the same procedure shall be adopted for the determination between the defendant by whom, and the person on whom, such a notice is served of the claim, question or issue stated in the notice as would be appropriate under this order if the person served with the notice were a third party … “

What is pointed out on behalf of the second defendants is that, whereas under r 1(3) there are conferred on the third party the same rights “in respect of his defence … and otherwise” as if he had been sued in the ordinary way, all that is provided by r 8(3) is the procedure for determination of “the question or issue stated in the notice”—and it is suggested that the latter sub-rule does not give the person on whom the third-party notice is served all the rights which an ordinary defendant would have, including the right of counterclaim, but gives strictly only rights of defence in respect of the particular claim made on him. It is argued that the right to counterclaim in the case of the ordinary third party is derived from the words “and otherwise” in the sub-rule relating to him. I cannot believe that it was intended by the use of those words “and otherwise” to make a wholly meaningless difference between the two kinds of third party. In my view, the right to counterclaim does not arise under the word “otherwise” in r 1(3), but under the word “defence“. It will be clear from the passage that I read from the judgment of Scrutton LJ in the Barclays Bank case ([1922] All ER Rep at pp 279, 280; [1923] 1 KB at pp 223–225.) that he based his decision on the view that the counterclaim was a manner of defending the claim made against the third party.

For these reasons, I hold that there is jurisdiction to entertain the counterclaim.

Counsel for the second defendants goes on to say that, in the event of my holding that there is jurisdiction in the court to entertain a counterclaim, nevertheless there is clearly jurisdiction to strike out the counterclaim if it would be convenient to do so, and reliance is placed here on RSC, Ord 15, r 5(2), which provides that

“If it appears on the application of any party against whom a counterclaim is made that the subject-matter of the counterclaim ought for any reason to be disposed of by a separate action, the court may order the counterclaim to be struck out or may order it to be tried separately or make such other order as may be expedient.”

Counsel for the second defendants invites me to say that, under that rule, there is a discretion to strike out the counterclaim, or to order separate trials, and I ought to exercise my discretion in one or other of those ways in relation to para 4

[1968] 1 All ER 753 at 758

and para 6, but not para 5, of the counterclaim. Counsel for the second defendants concedes that, once it is held that there is jurisdiction for the third defendants to counterclaim against the second defendants, it is convenient that the issue raised by their para 5 should be tried along with the other issues in this case. But in relation to the claim for the £4,444 odd, it is contended that it would be inconvenient and unjust that that should be allowed to stand and be tried along with or immediately after the main action. I am satisfied there is a discretion in the court in the matter under the rule that I have just read, and, therefore, the question is, how should my discretion be exercised?

The £4,444 odd is the balance of account not merely for one crane which was involved in this accident, but for sixteen cranes which were erected by the third defendants under their contract with the second defendants. There is, on the face of it, no connexion between this claim and the issues raised in the action or by the third-party notice, and, consequently, it is not, to use Eve J’s language ([1922] All ER Rep at p 281; [1923] 1 KB at p 225.), a “relevant” counterclaim. The third defendants say, however, that the only possible answer that they know of for recovering this money is by way of a cross-claim for defective workmanship and that this forms a link with the action. This raises the question whether, if the third defendants’ counterclaim is allowed to stand, the second defendants can counterclaim against them for damages. If not, it would clearly be inequitable that the present counterclaim should be allowed to stand. It is clear that, when a defendant counterclaims against a plaintiff, there is a right for the plaintiff to counterclaim against the defendant’s counterclaim. In this connexion, it is convenient to look first at a case which was decided under the old Rules of the Supreme Court, namely, Renton Gibbs & Co Ltd v Neville & Co. In that case, a counterclaim against a counterclaim was allowed. The leading judgment was given by Collins LJ who said ([1900] 2 QB at pp 185–187.):

“It has been argued that a counterclaim cannot be set up by a plaintiff in his reply, and that the rule do not contemplate such a case. In support of that view reference is made to James v. Page, a case only noticed in the Law Times. An incidental observation on that case is that what was there set up was a counter-claim properly so called—a counterclaim used not as a shield but as a sword. It is contended on behalf of the defendants that the plaintiffs must submit to have their counterclaim struck out, and that their proper course is to introduce the subject-matter of their counterclaim into the statement of claim as an alternative original cause of action. It is clear that it would be inequitable to allow the defendants to have the benefit of their counterclaim free altogether from the matters raised in the reply. The question is whether the rules are so framed as to necessitate the putting of the parties to the unnecessary expense of beginning the pleadings de novo. What would be the result if they had to do this? The plaintiffs do not want to rely on the contract upon which the defendants base their counterclaim, and indeed they deny that it is binding on them. If they are bound to deal with the contract in their statement of claim, they would be embarrassed by having to set up a cause of action, whose existence they deny, inconsistent with and hampering their real cause of action. In that state of circumstances it would be an obvious injustice to the plaintiffs to oblige them to introduce this question under the contract into the statement of claim by an amendment. The natural place for it is in the reply in which it is now found. In this way the plaintiffs, in dealing with the counterclaim under the contract, can deny their liability on the ground that the contract is not binding on them, and can add that, if they are liable, then and only then do they claim to shield themselves from the result of that liability by claiming unliquidated damages from the defendants arising out of an alleged breach of the contract by them. I do not think that we are prevented from allowing the plaintiffs so

[1968] 1 All ER 753 at 759

to shape their case. Toke v. Andrews establishes a principle which abundantly justifies us in affirming the decision of the learned judge. In that case the action was brought for rent in arrear. Before delivery of a statement of defence the tenancy was determined, and thereupon a claim arose to the defendant as outgoing tenant, and another quarter’s rent became due to the plaintiff. In answer to the claim in the action the defendant set up a counterclaim on an outgoing valuation to a larger amount than the rent claimed. To that counterclaim the plaintiff in his reply set up a counterclaim for the further quarter’s rent accrued since the action commenced. There was no machinery in that case any more than there is in this for effecting that under the rules; but FIELD, J., and HUDDLESTON, B., held that it would be an injustice to the plaintiff if he were obliged to submit to the counterclaim overtopping the amount claimed in his statement of claim. It was held that, looking at the wide language of sub-s. (3), s. 24, of the Judicature Act, 1873, and sub-s. (7) of the same section, it was impossible to say that a matter upon which, if well founded, the plaintiff was clearly entitled to relief as against the defendant’s counterclaim was not within the words and the spirit of the enactment, or to hold that such a matter was not properly brought forward at the only stage and in the only manner in which it could be raised. That is practically the state of affairs in the case before us, because it would be unjust to the plaintiffs to make them set up as a claim that which they only want as a defence and a shield to the counterclaim. In my opinion the order of PHILLIMORE, J., was right, and the appeal must be dismissed;”

and Romer LJ ([1900] 2 QB at p 187.) gave judgment to the same effect. So at that time it is clear that a counterclaim against a counterclaim could be allowed, but, on the basis as indicated by Collins LJ that it was permissible as a shield rather than as a sword, that is to say, that it could be used only to such extent as might be necessary to defeat the counterclaim of the defendant, but not by way of claiming something against the defendant over and above the amount for which he was counterclaiming.

It would, however, appear that this limitation has now disappeared in relation, at any rate, to a counterclaim and cross-counterclaim as between plaintiff and defendant. This emerges from RSC, Ord 15, r 2, which provides:

”(1) Subject to r. 5(2), a defendant in any action who alleges that he has any claim or is entitled to any relief or remedy against a plaintiff in the action in respect of any matter (whenever and however arising) may, instead of bringing a separate action, make a counterclaim in respect of that matter; and where he does so he must add the counterclaim to his defence.

”(2) Rule 1 shall apply in relation to a counterclaim as if the counterclaim were a separate action and as if the person making the counterclaim were the plaintiff and the person against whom it is made a defendant.”

So the effect of that is clearly to give an express right to a plaintiff to counterclaim against a counterclaim, and a note in The Supreme Court Practice 1967, p 145, with the side note “15/2/5”, interprets the rule in that way, because it reads:

“Counterclaim to a counterclaim. Paragraph (2), supra, adopts and probably extends the previous law, and enables the plaintiff to raise a counterclaim to the counterclaim raised by the defendant against him, even though the plaintiff’s counterclaim may be more than a mere protection against the defendant’s counterclaim … “

and then it mentions a separate point. Does this apply to third party proceedings of the type with which I am concerned? I think that it does. In my view, the effect of RSC, Ord 16, r 8(3), which I have already read, is to throw one back to look at r 1(3) of the same order, and that, in turn, throws one back to RSC, Ord 15, r 2, and, therefore, in my view, the second defendants would be

[1968] 1 All ER 753 at 760

entitled to counterclaim against the third defendants’ counterclaim and to counterclaim not merely so much as was necessary to defeat the third defendants’ counterclaim, but to counterclaim the whole of their damages. That is a view about which, I may say, I have had some doubt. I was very much inclined at one stage to the contrary opinion, but, in the end, I have reached the conclusion that that is the true view of the law.

I must, therefore, envisage that, if the present counterclaim is allowed to stand, there will be a counterclaim against it by the second defendants which has some connexion with the original action. However, the area of dispute between the second and third defendants would be greatly enlarged, expensive discovery ranging over the whole of the business between those two parties relating to all the sixteen cranes would be needed, and inevitably there would be delay, and it may well be substantial delay, in bringing the action to trial. This particularly affects the plaintiffs, who support this appeal. They point out that it is nearly two years since the accident in which their ship was damaged. They issued their writ promptly, they have proceeded with their steps in the action with reasonable expedition, discovery is nearly complete, and they will shortly be asking for a date for the action to be tried. They are clearly entitled to damages against somebody, and why should they suffer delay while matters which have no connexion with that claim are investigated? I think that this is an important objection to allowing the counterclaim to stand. Other inconveniences were suggested which made less impression on me. One was that the length of the hearing would be much increased if the counterclaim were allowed to stand. This could, perhaps, be avoided if the third party issues were tried immediately after the trial of the action instead of along with it, a course which would be in accordance with the existing order for directions. Another point made is that the second defendants’ solicitors are instructed by insurers under a policy which covers their liability to the plaintiffs, but not any liability to the third defendants. I do not attach much importance to this. It is a situation which arises whenever a defendant is insured in respect of a plaintiff’s claim but has a counterclaim in which the insurers are not interested. A point made by counsel on behalf of the first defendants was that there are other claims, or possible claims, between these various parties. If the third defendants are allowed to counterclaim against the second defendants for the balance of their account, and if the second defendants can then counterclaim against the third defendants for damages for negligent performance of the whole contract, what of the first defendants’ claim for their damaged crane against the second and third defendants? Then, the crane driver was injured and may sue the first defendants as his employers. Ought they to be allowed to make a claim over in these proceedings against the second and third defendants? Further enlargement of the scope of the proceedings in these various ways is clearly undesirable.

However, I think that the present issue should be decided without speculating as to what course other defendants might take hereafter. It does seem to me, for the reasons which I have indicated, that the prospect of delay, with its inconvenience to the plaintiffs, and the prospect of making these proceedings very complicated, are good reasons for removing para 4 and para 6 of this defence and counterclaim unless there is some really good reason why they should be allowed to stand. I cannot see that there would be any injustice or inconvenience to the third defendants in removing this part of their present counterclaim. Their claim can perfectly well be tried in a separate action, and I look at what was said by Scrutton LJ in the Barclays Bank case ([1922] All ER Rep at pp 279, 280; [1923] 1 KB at pp 223–225.) about the objects of third party procedure, which seem to me to be equally applicable to the case of a counterclaim arising in third party proceedings, and he mentioned three objects. The first of them was to get the third party bound by the decision between the plaintiff and the defendant. That does not arise here. All these defendants are already

[1968] 1 All ER 753 at 761

parties to the plaintiffs’ suit, and, on the basis of the existing pleadings, including the third-party notice and para 5 of the third defendants’ counterclaim, the issues will be decided in a way which will be binding on all those concerned. The next object referred to by Scruttion LJ was to get the question between the defendant and the third party decided as soon as possible after the decision between the plaintiff and the defendant so that the defendant may not be in a position of having to wait a considerable time before he establishes his right to indemnity. That is a point which arises only when it is a question of indemnity or, of course, of contribution, and that is already covered by the third party notice itself and the counterclaim in para 5. Thirdly, says Scrutton LJ there is the question of saving extra expense which would be involved by two independent actions. It seems to me highly improbable that any great expense would be caused by separate actions here. There will be the trivial expense of issuing a fresh writ, but I should have thought that, if anything, expense will be saved by having a comparatively simple form of action running alongside, or subsequent to, the existing action rather than complicating the existing action with the addition of this part of the counterclaim. The only conceivable injustice which I can see that could arise in relation to the third defendants would be if judgment were given against them in favour of the second defendants for contribution and if that judgment were enforced before the third defendants had had an opportunity of having tried their claim for balance of account. That matter can easily be dealt with by means of a stay of execution if it does happen that the second defendants get judgment against them for some contribution, and I have no doubt that any court would grant such a stay if informed that the action on the balance of account was pending.

The third defendants contend that a good reason for allowing the counterclaim to stand is that there is one main question in these proceedings, namely, whose fault was it that certain defects in the crane which caused the accident were there and were allowed to continue to be there? They say that, once this question is determined, there will be no real dispute about anything else except the quantum of damages. That may or may not be so. I do not yet know whether the second defendants accept the third defendants’ claim for balance of account, subject to the counterclaim, and I do not know whether, if it is once established who was responsible for the defects in this particular crane, this will determine whether the third defendants were guilty of defective workmanship in regard to the other cranes. Counsel for the third defendants says: “Let the counterclaim stand. Let the second defendants plead to it and then at that stage, or after discovery, let somebody apply under RSC, Ord 15, r 5(2), if necessary for a separate trial.” I do not accede to this proposal for several reasons. First, if I am wrong in my view that the second defendants can counterclaim their damages in full against the third defendants, then it would follow that it would be wrong for the third defendants’ counterclaim to stand. It would be most unfortunate if I allowed it to stand and at a later stage some other court were to hold the second defendants’ right to counterclaim was limited to using it as a shield against the third defendants’ claim for balance of account.

Next, if the question enunciated by counsel for the third defendants is really the only question of substance in this litigation, it will be determined as between the second and third defendants on the existing pleadings; it will then be res judicata and there will be no danger of two courts coming to different conclusions on the same issue. Next, I cannot see any practical disadvantage to the third defendants in proceeding by separate action. They can issue their writ tomorrow with their claim specially endorsed on it, and, if they serve it at once, the second defendants’ time for defence will expire almost as soon as if I gave them twenty-one days from today. I cannot accept that proceedings by way of counterclaim would produce any acceleration of the hearing of the issue raised by them; and delay in bringing on the plaintiffs’ action for trial would probably be caused if it was left uncertain today whether the wider issues were to be

[1968] 1 All ER 753 at 762

tried along with or immediately after it, or were at some later stage to be given a separate trial or struck out. Finally, again because of the doubt which remains in my mind about the scope of a counterclaim on a counterclaim, and because I see little or no advantage in directing separate trials over striking out the paragraphs in question, I think that the better course is to strike them out.

I, therefore, allow the appeal and direct that para 4 and para 6 of the third defendants’ counterclaim to the second defendants’ third party notice be struck out.

Solicitors: Bentleys, Stokes & Lowless (for the plaintiffs); John Rigby, British Transport Docks Board (for the first defendants); Clyde & Co (for the second defendants); Beddington, Hughes & Hobart (for the third defendants).

N P Metcalfe Esq Barrister.

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