Case No: A2/2003/2365
Neutral Citation Number: [2004] EWCA Civ 582
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM 
HIS HONOUR JUDGE HAWKESWORTH
Royal Courts of Justice
Strand, 
London, WC2A 2LL

Thursday 13 May 2004
Before :

LORD JUSTICE KENNEDY
LORD JUSTICE BUXTON
and
LORD JUSTICE MAY

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Between :

	Padden	Appellant	
	- and -		
	Arbuthnot Pensions & Investments Ltd	Respondent	

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(Transcript of the Handed Down Judgment of
Smith Bernal Wordwave Limited, 190 Fleet Street
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Jonathan Miller (instructed by DKLL Solicitors, Ewell, Surrey) for the Appellant
Neil Kitchener (instructed by CMS Cameron McKenna, Bristol) for the Respondent

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Judgment
Lord Justice Kennedy: 
1.	This is a defendant’s appeal from a decision of Judge Hawkesworth QC, sitting as a judge of the High Court, who on 21st October 2003 ordered that summary judgment be entered for the claimant in respect of a substantial part of the claim.  In particular -
(1) It was declared that “the claimant is entitled to be indemnified by the defendant in respect of any liability it might have incurred to Mrs Partridge arising out of the facts pleaded in paragraphs 11 to 23A of the Amended Particulars of Claim.”
(2) Damages for loss of commission attributable to the actions of the defendant were assessed at £50,360, and judgment was entered for the claimant against the defendant in that sum.
(3) Save as set out in the order, it was provided that proceedings be stayed generally with liberty to apply, and -
(4) Orders were made as to costs, including an order that the claimant have 80% of its costs of the action, to be assessed if not agreed.
Appellant’s Notice.
2.	By his Appellants Notice the defendant appellant challenges each of those four aspects of the judge’s order.  He contends that -
(1) The declaration was made without jurisdiction, in relation to a hypothetical liability, and could serve no useful purpose.
(2) The judge was wrong as to the measure of damages.
(3) There should have been no stay, but rather the claimant should have abandoned the rest of its claim, and
(4) The order for costs was inappropriate because it was based upon a misperception of the claimant’s measure of success.
3.	Before us Mr Jonathan Miller for the appellant conceded at the outset that his third and fourth grounds of appeal would only arise for further consideration should he be successful in relation to one or other of his first two grounds.
Background facts.
4.	Before I can deal with the grounds of appeal it is necessary to set out the background to this litigation.  The appellant is a financial adviser who, prior to May 1988, owned and managed an unincorporated business in Exeter known as Southernhay Financial Services.  That business was acquired by Secure Trust Banking Group plc, the parent company of the respondents, Arbuthnot Pensions and Investments Ltd, under the terms of agreements the detail of which it is unnecessary to explore, and with effect from 5th May 1998 the appellant became an employee of the respondents.  He remained in that employment until 10th September 2002.  He was the regional manager in the south west, and in that capacity in August 2001 he was contacted by a stockbroker, Mr Graham Rowland, of Rowan Dartington and Co about a client, Mrs Partridge, who was expecting to receive £1.5m from her ex-husband, and who wanted to invest an substantial part of that sum in order to produce a regular income.  The appellant set out his advice in a letter dated 16th August 2001, written on the respondent’s letter-head and he then met Mrs Partridge on a couple of occasions.  It was the respondent’s case, accepted by the judge, that the advice which the appellant, as regional manager of the respondents, offered to Mrs Partridge, and which she accepted, can be summarised thus -
(1) the money should be paid initially into Southernhay’s bank account:
(2) £800,000 would then be remitted to three insurance companies, to be invested in insurance bonds which at 5% would produce a yield of about £40,000 per annum.  Mrs Partridge believed the insurers concerned to be NPI, Royal and Sun Alliance, and Norwich Union, and she further believed that she signed application forms in respect of the bonds.
(3) The balance of the £1.5m would be transferred to new accounts to be opened for Mrs Partridge with the respondent’s immediate parent company, Arbuthnot Latham and Co.
5.	The appellant’s case was and is that although he did discuss bonds with Mrs Partridge, and although she did indicate that she wanted a regular income of £40,000 per annum, he was not required to invest in bonds, and in the event decided not to do so.  
6.	On 14th September 2001 Mrs Partridge’s ex-husband remitted £1.5m as agreed to Southernhay’s account.  It was not of course one of the respondent’s accounts, and so far as the respondent was aware the appellant had given up trading in that name over three years earlier.  
7.	On 17th September 2001 £684,423.49 was transferred to new Arbuthnot Latham accounts in Mrs Partridge’s name, that money coming from an account at the Exeter branch of the Co-Operative Bank in the name of N. Padden t/a Premier Crystal.  It is not clear when or why the money was moved from Southernhay’s account to the account of N. Padden, but it does seem as if most of the difference between £800,000 and £1.5 m did end up with Arbuthnot Latham and Co as agreed.  There may also have been a relatively small balancing payment into the account of Mrs Partridge with HSBC.
8.	What is not in dispute is that the £800,000 was not used to purchase insurance bonds, and it is the case for the respondent, accepted by the judge, that the appellant simply treated the money as his own, and used it for his own purposes.
9.	Mrs Partridge was not expecting to receive income from her bond holding for 12 months.  She had been advised by the appellant not to draw on her investments for that period, but from 1st October 2002 onwards she did expect to receive, and did receive from the appellant (who by then had left the employ of the respondent), sums paid monthly into her HSBC account at Totnes which were equivalent to 5% on three bond holdings totalling £800,000.  The monthly payments went on until March 2003.  Mrs Partridge then enquired of the respondents about her bonds, and of course it emerged that there were no bonds.  She was advised by the respondents to seek independent legal advice, and the respondents, it seems, have paid for that advice. 
These proceedings.
10.	The respondent then instituted these proceedings against the appellant in which it is alleged that in breach of contractual, fiduciary and other duties the appellant was trading in competition with the respondent whilst employed by the respondent.  The details of his dealings with Mrs Partridge are relied upon as evidence of fraud, and it is alleged that if the appellant had purchased insurance bonds as instructed the respondent would have received commission from the insurance companies involved of £50,360.  
11.	In the amended Particulars of Claim it is suggested that the appellant may have acted dishonestly in relation to other named clients of the respondent, and, as well as seeking to recover in respect of past losses, the respondent in paragraph 31A of its amended Particulars of Claim seeks a declaration that -
“It is entitled to be indemnified by the (appellant) in respect of any liability it might have incurred to Mrs Partridge and others arising out of the facts and matters pleaded in paragraphs 11 to 24 above and/or by reason of any breaches by him of his obligations set out in paragraphs 4 and 5 above.”
In his Defence dated 14th April 2003 the appellant contends in paragraph 31 that -
“(a) to the extent that Mrs Partridge might have any claim against the (appellant) it has been compromised between the (appellant) and Mrs Partridge by a settlement that ensures that Mrs Partridge’s investment is repaid in full with interest; and
(b) the (respondent) can have no vicarious liability alleged or otherwise for any alleged wrongdoing by the (appellant) which is in any event denied.”
The Compromise Agreement and its aftermath.
12.	In order to set the Compromise Agreement in its context it is necessary to say a little more about the development of the present proceedings.  They began on 21st March 2003, when the respondent obtained freezing and disclosure orders from Mitting J.  At a hearing on notice five days later the appellant did not attend, and the disclosure order was made more specific.  The appellant then, on 1st April 2003, made a statement in which he produced evidence to show that his home was valued at £835,000, and that it was subject to a first charge to secure a debt of £171,000.  He also claimed to have four insurance endowment policies worth in total £50,000 and some share holdings.  In the Particulars of Claim served on 1st April 2003 the focus was on the appellant’s alleged breaches of his contract of employment and his breach of fiduciary duty, which was said to have undermined his Termination Agreement, but in paragraphs 11 to 22 details were given of “the Partridge Fraud” concluding with paragraph 23 which read -
“23.1 API has lost commission on the investments of £800,000 which Mr Padden ought to have arranged in his capacity as Regional Manager for API.  That commission is estimated at £40,000;
23.2 the Defendant has exposed API to a potential claim by Mrs Partridge on the basis of its (alleged) vicarious liability for his wrongdoing;
23.3 the Defendant is liable to account to API for the £800,000 received and retained by him and/or its traceable proceeds.”
The pleading went on to allege in paragraph 24 that the appellant might have defrauded others whilst purporting to act as Regional Manager of the respondent, and some preliminary details were provided.  More evidence has emerged since then.  The relief claimed was damages, equitable compensation, an account of profits, relief in relation to the termination agreement, and -
“A declaration that the Defendant holds all monies and profits received by him in breach of his various duties to API in trust for API, together with the traceable proceeds of such profits.”
13.	On 2nd April 2003 the respondent obtained a further order for disclosure, and on 10th April 2003 the appellant was ordered to attend at court on 16th April 2003 for cross-examination.  Also on 10th April 2003, without notice to the respondent, the appellant, his wife and Mrs Partridge, with their solicitors, met and entered into an agreement under the terms of which the appellant agreed -
(1) to pay to Mrs Partridge £860,000 (i.e. £800,000 plus interest) and costs in full and final settlement of any claim she might have against him arising from his receipt on her behalf of the sum of £800,000 for investment.  
(2) to secure the payment of £860,000 by -
(a) registering a second legal charge on his house as security for a debt of £740,000:
(b) charging his insurance policies and his share holdings.
      (3) to pay the sum of £860,000 by instalments -
(a) £120,000 to be paid forthwith;
(b) an additional £120,000 to be paid within 35 days;
(c) the surrender value of the insurance policies (estimated at £55,000) to be paid within 42 days;
(d) 25% of the commutation value of the appellant’s pension policies to be paid as soon as received after his fiftieth birthday, and -
(e) the balance to be paid upon sale of the appellant’s home.
The first payment was made as arranged, but no further payment had been made by 21st October 2003 when this case came before Judge Hawkesworth, and it was not suggested to us that any further payment has been made since then.
14.	On 14th April 2003 the appellant made a further statement and served his defence, in which he revealed the existence of the compromise agreement which he and his wife had made with Mrs Partridge, but disclosure of the documentation relating to that agreement was refused until ordered by Gage J on 9th June 2003.  The respondent was then, on 1st July 2003, granted leave to amend its Particulars of Claim to take account of the appellant’s allegation that he was authorised by Mrs Partridge to invest on a discretionary basis, and paragraph 23.2 was amended to read -
“The Defendant has exposed API to a potential claim by Mrs Partridge by reason of his misconduct and his dealings with the money given to him by Mrs Partridge and/or on the basis of its (alleged) vicarious liability for his wrongdoing and/or on such other basis as Mrs Partridge may allege.”
Paragraph 31A was introduced seeking the declaration which is now central to this appeal (see paragraph 11 above).
15.	Mrs Partridge had made a statement to the police on 2nd May 2003, setting out her recollection of her dealings with the appellant, and on 19th August 2003 the respondent applied for summary judgment in relation to part of its claim.  Mrs Partridge, on 18th August 2003, made a statement in support of that application, and the matter was fixed for hearing before Judge Hawkesworth in October.  In preparation for that hearing the appellant’s solicitors on 6th October 2003 obtained a statement from Mr Dunston, a former employee of the respondent, dealing with the amount of commission he considered should have been claimed from the insurers if bonds had been purchased.  I will return to his evidence, and to the evidence adduced by the respondent in relation to that issue, when I deal with the second ground of appeal.
16.	On the same day, 6th October 2003, the appellant’s solicitors wrote to the respondents’ solicitors inviting the respondent to indemnify Mrs Partridge, and offering to re-imburse the respondent if it were to do so “for sums which (the respondent) is liable to Mrs Partridge arising out of matters which are the subject of this litigation”.  The solicitors in a separate letter offered to settle the respondent’s claim for loss of commission by a payment of £16,000.  The respondent did not accept either offer.
17.	On 17th October 2003 Mr Scott, the solicitor acting for Mrs Partridge, made a statement in which he made it clear that she “has a contractual claim against the (respondent) in respect of the mis-investment” of her monies.  Mr Scott said that she “does not wish to issue proceedings against either party (the appellant or the respondent) because she remains hopeful that (the respondent and the appellant) will resolve matters in a way which will result in her being fully compensated for her loss.”  She was anxious to obtain a variation of the freezing order to permit registration of the charges which form part of her settlement agreement with the appellant, and in due course that variation formed part of the judge’s order.  Mrs Partridge is also, according to Mr Scott, anxious that any judgment obtained by the respondent should not inhibit the appellant’s ability to continue to trade, because she sees that as her best hope of obtaining from him what he has undertaken to provide.  Whether it is in the public interest that the appellant should be permitted to continue to trade may be quite another matter.
Ground 1: The Declaration.
18.	Mr Miller submitted that the judge was wrong to make a declaration because it relates to a situation which may never arise, and it has been said in the past that the court does not have jurisdiction to grant declarations in relation to hypothetical situations.  If the appellant fulfils the terms of his compromise agreement with Mrs Partridge, or if he fails to do so but she chooses not to seek relief from the respondent, then the declaration will serve no useful purpose.  It would be different if the respondent had actually been sued by or admitted liability to Mrs Partridge.  
19.	The starting point, as it seems to me, must be a recognition that the power to make a declaration is a discretionary power which is not circumscribed by any statute or rule.  CPR 40.20, like its predecessor Order 15 Rule 16, simply states that -
“The court may make a binding declaration whether or not any other remedy is claimed.”
Accordingly no question of jurisdiction really arises, but there may well be circumstances where it would be inappropriate to grant a declaration, and in cases of that kind courts have sometimes said that they had no jurisdiction to grant a declaration.
20.	In re Clay [1919] 1 Ch 66 an executor, against whom an order for costs was made, paid as directed but stated that he reserved his rights under a deed of indemnity.  The beneficiaries of the estate then sought a declaration that he was not entitled to be re-imbursed under the terms of the deed.  In this court it was said that it would not be appropriate to make a declaration.  Duke LJ said at 78 -
“I do not myself believe that, in the ordinary case of possible controversy between parties, it is open to one of the parties, because he apprehends a claim will be made against him, to serve a writ or other process upon the other party in order to obtain a decision that that claim could not be made.”
The judgments did speak of the lower court having “no jurisdiction” to grant a declaration (see, for example, Eve J at 79) but, as I have explained, that is not how, as it seems to me, the conclusion would now be expressed, nor is it how in my judgment the decision should be understood.
21.	In Midland Bank v Laker Airways [1986] 1 QB 689 the liquidator of the defendant company told the Bank that it was intended to start proceedings against the Bank in the United States alleging that the Bank had withdrawn support from the defendant airline in circumstances where the US court might infer a conspiracy with other airlines to put the defendant airline out of business.  The Bank then began proceedings in England seeking various forms of relief, including a declaration that it was not liable under English law for the collapse of the airline.  As to that Lawton LJ, with whom the other members of this court agreed, said at 700H -
“As the liquidator has never threatened to take proceedings against either bank in the English courts, on the authority of In re Clay … there is no jurisdiction in the court to make the declarations asked for.”
As I have said, I consider that the use of the word jurisdiction should be treated with caution.  Mr Miller invited us to apply the decision in the Midland Bank case by holding that until Mrs Partridge at least threatens to take proceedings against the respondent the court has no jurisdiction to make the declaration which was made in this case.  I decline to follow that route.
22.	In Vokins Holdings v Robin Moors Allnutt [1996] PNLR 354 a dispute arose in relation to water penetration after the development of an industrial estate.  The plaintiff landowners sued the defendant architects whom they had engaged to design and oversee the development.  The architects took third party proceedings against VCL, an associated company of the owners, which had done the building work.  VCL counter-claimed against the architects, seeking a declaration that if VCL were held to be liable to the owners the architects would be liable to make a contribution under the Civil Liability (Contribution) Act 1978, or to indemnify them on the basis that the architects owed them a direct duty of care in tort.  There were other parties to the litigation who, for present purposes, do not matter.  The architects sought to strike out the counter-claim as an abuse of process on the basis that VCL had not been sued by the owners, and no proceedings against them were contemplated.  The judge refused, and this court upheld his decision.  At 359C Morritt LJ set out and responded to the appellant’s argument -
“What he says is that the court is being asked to make a declaratory judgment in respect of a hypothetical question about a future issue, that is to say the liability of the builder to the owner concerning future events, namely the decision of the court in the present proceedings brought by the owner against the architect and by the architect against the builder. 
In my judgment the events which are said to be future are not, strictly speaking events relating to liability at all.  The facts of the matter are, as I have said, known or ascertainable in the existing proceedings.  The claim to a liability by the builder against the architect is based not only on liability in respect of the same damage and a right to contribution under the 1978 Act but … also on an alleged direct liability of the architect to the builder arising in contract and in tort.  The only contingent element that appears to me to exist is the quantum of the damage that might be recoverable under those claims if made good as a matter of law.  Those contingencies do not appear to me to be the sort of contingencies or hypotheses which exclude the courts jurisdiction to grant declaratory judgments.”
As Mr Miller pointed out, only two parties were before the court and the court did not have to do more than decide that a claim for a declaration was arguable, but the approach of Morritt LJ is instructive.
23.	Assistance can also be derived from what was said by Neuberger J in FSA v Rourke 19th October 2001 unreported, where the claimant sought declarations as to the defendant’s alleged acceptance of deposits in contravention of section 3 of the Banking Act 1987, and as to four occasions when he was alleged to have made statements knowing them to be false, contrary to section 35 of the same Act.  At page 8 of the transcript the judge said -
“So far as the CPR are concerned, the power to made declarations appears to be unfettered.  As between the parties …. it seems to me that the court can grant a declaration as to their rights, or as to the existence of facts, or as to a principle of law, where those rights, facts or principles have been established to the court’s satisfaction. The court should not, however, grant any declarations merely because the rights, facts or principles have been established when one party asks for a declaration.  The court has to consider whether, in all the circumstances, it is appropriate to make such an order.”
The judge then referred to two authorities including the observation of Lord Woolf MR in Messier-Doughty Ltd v Sabena SA [2000] 1 WLR 2040 at 2051C that -
“The development of the use of declaratory relief in relation to commercial disputes should not be constrained by artificial limits wrongly related to jurisdiction.  It should instead be kept within proper bounds by the exercise of the court’s discretion.”
Neuberger J then continued -
“It seems to me that, when considering whether to grant a declaration or not, the court should take into account justice to the claimant, justice to the defendant, whether the declaration would serve a useful purpose and whether there are any other special reasons why or why not the court should grant the declaration.”
24.	That is why I consider it important to look quite closely at the facts of this case.  If there was only a remote prospect of the respondent of having to meet a claim from Mrs Partridge then a court might well say that it should not grant a declaration because to do so would be hypothetical, and would serve no useful purpose, but that is simply not this case.  In my judgment the interests of justice and the over-riding objective referred to in CPR 1.1, make it entirely appropriate for the court, as a matter of discretion, to grant a declaration in this case.  Before the declaration was sought the respondent had already instituted proceedings against the appellant.  In the context of those proceedings it was clearly sensible to resolve the issue of whether if, as seems all too likely, Mrs Partridge does eventually seek redress from the respondent, the respondent can then require indemnification by the appellant, not least because the appellant seems to have no answer to such a claim.  If he fulfils his agreement with Mrs Partridge with the result that she does not claim against the respondent, then the existence of the declaration will do him no harm, but if he does not fulfil his agreement the declaration which has, in my judgment, been rightly made does away with the need for further litigation.
Ground 2: Damages.
25.	The evidence before the judge was that if bonds had been purchased by the appellant on behalf of Mrs Partridge from the three named insurers the insurers would have been prepared to pay commission to the respondent totalling £50,360.  That evidence was not contested, but it was contended that on occasions financial advisers did not ask for all of the commission that the insurers were willing to pay.  Sometimes they would agree to accept half of the available commission, and ask the insurers to retain the rest as part of the investor’s fund, and there were letters apparently showing that the appellant had on occasion made a proposal of that kind to a prospective client.  As the judge pointed out, there was no such letter in relation to Mrs Partridge, and no evidence that he had made such a proposal to her.  On other occasions financial advisers would seek a relatively low commission on initial investment, with further commission payable on renewal, one of the possibilities to which Mr Dunston referred in his statement.  He said that in his view the initial commission should not have been more than 1 to 2%.  As to that Mr Barnes, the respondent’s solicitor, says in his statement of 10th October 2003 that he has consulted Mr Moore of Arbuthnot Latham and in paragraph 10 of his statement Mr Barnes says -
“I am advised by Mr Moore that, whilst it is possible to take a reduced initial commission with ongoing renewal commission, this is not the (respondents) general practice and that, for the type of investment recommended to Mrs Partridge, it is standard practice to accept a one-off initial commission.”
Mr Barnes goes on to explain that by paying a one-off initial commission the client will pay less in the end.
26.	The judge dealt with this matter at paragraph 19 of his judgment, saying that Mr Dunston’s evidence “does not in the circumstances dispel the clear impression that the amount of commission received by a financial adviser varied widely within the industry and was not subject to any agreed or accepted norm.”  As the judge went on to point out, the appellant had seen fit to file no evidence on this aspect of the claim, so it seemed to the judge to be “wholly appropriate and just in all the circumstances to grant recovery of the full commission payable by the insurance companies.”
27.	Mr Miller now submits that the loss should have been quantified not in terms of the fees of which Mr Padden had deprived the respondents, but in terms of the profit that they would have made on the transactions.  I do not agree.  Quite apart from serious difficulties of quantification, Mr Padden deprived the respondents’ business of an item of income.  They are entitled to be put in the same position as they would have enjoyed but for Mr Padden’s misconduct:  that is, on the clear evidence that the judge was entitled to accept, receipt of £50,360 from the insurance companies.
Conclusion.
28.	Having regard to my conclusions in relation to the first two grounds of appeal it is unnecessary to consider grounds 3 and 4.  As I indicated at the end of the hearing this appeal fails and is dismissed.
Lord Justice May:
29.	I agree with the reasons given by Kennedy LJ for dismissing this appeal and I gratefully adopt his account of the facts and circumstances.  I do not wish to add anything on the issue relating to damages.
30.	Mr Miller submits that there is no jurisdiction to make a declaration, or alternatively that the court should not in its discretion make a declaration, because it would be based on facts which are hypothetical and because a declaration would serve no useful purpose.  It is, he says, hypothetical because Mrs Partridge has not brought a formal claim against API and may never do so.  It would serve no useful purpose because, in the light of the compromise agreement between Mrs Partridge and the defendant, the only circumstances in which she would claim would be if the defendant had insufficient secured funds to honour his agreement with her.  In that event, an indemnity against him in favour of API would be valueless.
31.	Although cases which consider the court’s power to make declarations (for example In re Clay [1919] 1 Ch. 466 and Midland Bank v. Laker Airways [1986] 1 QB 689) speak in terms of the court not having jurisdiction to make a declaration, I do not consider that in the modern world of the CPR it is really a question of jurisdiction.  The court certainly has jurisdiction to make declarations, as CPR Rule 40.20 recognises.  Making a declaration is a discretionary remedy.  Certain principles apply to the exercise of the discretion.  One is that the court will not normally entertain an academic or theoretical question which has no practical application.  The business of civil courts is to determine real issues between parties that are before the court.  There is a strong disinclination, to say the least, from deciding issues upon facts which have not arisen.  The supposed facts may never arise or, if they do, variations of detail or emphasis may make the earlier decision inapt. The common law develops incrementally by deciding particular cases as they occur.  By that process general principles gradually emerge and are refined.  Orderly development is not assisted by the court deciding moot points.
32.	The discretion to make a suitable declaration is a flexible one.  In my view, it extends to cases in which the party seeking the remedy is entitled to have his legal rights declared upon facts which he establishes and where there is a practical utility in doing so.  Whether a court will make a declaration in a particular case is a matter for the court’s discretion in that case.
33.	Special considerations apply to applications for a declaration that a party, against whom a claim has not been made, would not be liable if it were.  This is not such a case.
34.	I do not accept that API’s claim to an indemnity against the defendant is based on hypothetical facts or should otherwise be regarded as hypothetical.  The facts and events giving rise to such liabilities as there are have all occurred and are known.  I respectfully agree with and adopt as relevant to the present appeal the analysis of Morritt LJ in Vokins Holdings v. Robin Moor Allnut [1996] PNLR 354 at 359B-F, which Kennedy LJ has quoted.
35.	On the face of it, Mrs Partridge has a clear cut right of action against API.  Their representative, Mr Padden, failed to act on her instructions and, whatever the exact nature of the instructions, he failed to invest her £800,000 for her.  Instead, he spent or lost it.  He has compromised her personal claim against him, but has failed to comply with the terms of the compromise.  She is still out of pocket to the tune of £740,000.  The value of his house after discharging the first charge on it and of his insurance policies may, but may not, be sufficient to pay the remainder of her claim in full.  There is a real prospect that she may bring proceedings against API.  Her solicitor has articulated that possibility, but explained why she is holding off for the moment.  She apparently regards her best prospect of recovery as being against the defendant.  She does not want him to be made bankrupt, believing that her prospects of recovery are better if he is able to carry on in business.  It is not clear to me how he is able to do so in the light of his conduct in relation to the present case. The fact remains that she appears to have a clear cut right of action against API.  In my view, there is a real possibility that she may decide to bring such a claim.  API may well have no defence to such a claim, but should not now be required to abandon any defence they may have.   The ability to claim to be entitled to damages amounting to an indemnity against a claim does not depend on first admitting that claim.  It is commonplace for defendants to claim damages or an indemnity against a third party in respect of a claim against them by claimants while at the same time maintaining defences against the claimant.  If Mrs Partridge’s claim against API were to be brought and to succeed, there is no vestige of a defence which Mr Padden could raise against API’s claim to be indemnified by him.  The possibility that he would not in those circumstances be able to meet the indemnity does not in my view detract from API’s entitlement to have their right to damages amounting to an indemnity judicially determined and declared to exist.
Lord Justice Buxton:
36.	I have read the judgments of Lord Justice Kennedy and Lord Justice May and agree with both.

Order: Appeal dismissed.
(Order does not form part of the approved judgment)