Settle Smart series part six: Settlements involving multiple parties

Our series focused on the settlement of disputes considers issues encountered by practitioners across a range of dispute resolution specialities. This blog explores settlements involving multiple parties.

The navigation of settlements involving multiple parties represents a legal tightrope, where a single misstep could seriously prejudice a claimant’s position. Practitioners and claimants involved in multi-party cases need to consider carefully whether settling their claim against one defendant could be a bar to pursuing another defendant who is jointly responsible for the loss.  

The Vanden Case

The inadvertent release of a claim was an issue considered by the Court of Appeal in Vanden Recycling Ltd v Kras Recycling Ltd.

The Vanden case concerned joint tortfeasors (two or more parties responsible for the same damage through the same tortious act). Vanden Recycling Limited (“Vanden”) issued a claim against its former employee, (“Tumulty”), and two competitor companies it had a commercial relationship with, Bolton Brothers (“Bolton”) and Kras Recycling BV (“Kras”).

When Tumulty resigned, Vanden was suspicious of the timing and reasons given. Vanden alleged that Tumulty had unlawfully provided confidential and commercially sensitive information to Bolton and Kras, and that all three defendants had conspired together to divert business away from Vanden to set up a business in direct competition.

After disclosure, settlements were reached between Vanden, Tumulty and Bolton resulting in consent orders. The consent order between Vanden and Bolton stated Bolton was “to pay the total sum of £275,000 in full and final settlement of the claimant's claims against the second defendant [Bolton] in these proceedings together with interest and costs.” The consent order between Vanden and Tumulty recorded Tumulty’s full admissions to all the allegations of misconduct made against her.

After receiving the consent order, Kras applied to have the claim against it struck out or summary judgment entered in its favour. The High Court granted the application under Kras’ first ground that since the judgment by consent against Bolton had been satisfied, a satisfied judgment against either joint or concurrent tortfeasors discharges the tort.

Vanden appealed the decision, which was partially allowed by the Court of Appeal.

The Court of Appeal concluded the consent order between Vanden and Bolton, in full and final settlement, amounted in substance and effect to a judgment rather than a settlement agreement. This distinction was important because a satisfied judgment generally bars claims against other tortfeasors who are liable for the same damage (see Jameson v CEGB), whereas a satisfied settlement agreement will only bar claims if the sum agreed and paid was intended to fix the full measure of a claimant’s loss (see Heaton v AXA Equity & Law Life Assurance Society plc).

Hamlen LJ noted that the White Book commentary on CPR 40.1 discusses the difference between judgments and orders, and that no basis for distinguishing them can be derived from the CPR themselves. The distinction largely comes from other court rules and legislation. In making the distinction in Vanden, the Court of Appeal focused on what the order did rather than what it said, which was to require a specific sum to be paid in settlement of Vanden’s claims. Although the consent order did not use the wording of adjudication or judgment, the order it made was found to have the same effect as one which would be made following judgment.

The Court of Appeal held that the consent order amounted to a judgment by consent and, as Bolton had paid the sums due, barred Vanden’s claims against Kras in conspiracy because it was the same conspiracy which gave rise to the same damage as Bolton. However, the Court of Appeal overturned the summary judgment in respect of the balance of Vanden’s claims which pleaded other causes of action against Kras. As these were separate from the conspiracy claim, they were not therefore caught by the consent order. 

Comment

Vanden highlights the importance of careful drafting when it comes to settlements with one party in multi-party cases. Vanden had loosely expressed the following intention to pursue other defendants in its consent order with Bolton:

“For the avoidance of doubt should the claimant be unable for any reason to recover costs from any other party to this action whether subject to an order or otherwise the claimant acknowledges that in consideration of the second defendant entering the consent order on these terms it shall not be able to recover any further costs from the second defendant.”

However, this clause was insufficient to protect Vanden’s conspiracy claim against Kras because the Court of Appeal found that the effect of the order was to extinguish the entire claim.

When drafting a settlement agreement with one party in a multi-party case it is important, therefore to carefully consider the wording of any consent order: is there another defendant liable under the same cause of action; does wording need to be included to make it clear which claims are being settled; and is there any risk that the consent order prepared could amount to a judgment.

Further information

If you have any questions, please contact Abigail Hall in our Dispute Resolution team. 

About the author

Abigail Hall is a senior associate in the Dispute Resolution team. She has extensive and wide-ranging litigation experience, including in contractual disputes, civil fraud, professional negligence claims, and disputes involving cross jurisdictional issues.