Heaton v AXA Equity & Law Life Assurance Society Plc

A settlement with one alleged wrongdoer does not automatically extinguish claims against another. Its effect depends on the proper construction of the settlement, read with the surrounding circumstances and the nature of the liabilities.

The rule in Jameson concerning full satisfaction by one concurrent tortfeasor does not generally determine claims against successive contract breakers. Satisfaction of overlapping contractual loss prevents double recovery, but does not extinguish the separate cause of action. A settlement restricting claims against the settling parties does not ordinarily release claims against a third party unless that intention is clearly established. Declaratory and related relief may also be pursued where there is a genuine interest in vindicating reputation, provided the proceedings are not an abuse of process.

The claimants were former directors and shareholders of Glyne Investments Ltd, trading as Inter City, which acted as an appointed representative for Target Life Assurance Company Ltd and Equity & Law. Target terminated its agreement with Inter City in January 1993, and Equity & Law terminated its agreement shortly afterwards.

Inter City assigned its claims against both businesses to the individual claimants. The claimants brought proceedings against Target and later settled those claims with Abbey Life, Target’s successor, for £10 million under a Tomlin order. They then continued proceedings against Equity & Law for contractual damages, alleged publication of inaccurate reports and references, corrective relief and declarations.

Mr Justice Laddie held that the settlement precluded the Equity & Law proceedings, relying principally on Jameson v Central Electricity Generating Board. The central issues on appeal were whether the settlement extinguished the separate contractual claims, whether it prevented proceedings which might expose the settling defendants to contribution claims, and whether continuation of the proceedings would be an abuse of process.

1. Appeal allowed. The settlement with Target and Abbey Life did not preclude the claims against Equity & Law.
2. The contractual claims concerned successive breaches of separate contracts. Unlike concurrent tort claims, loss is not an essential element of the cause of action for breach of contract. The settlement could prevent double recovery for the same loss, but could not extinguish the separate contractual causes of action. If the settlement had fully compensated particular loss, the recoverable damages for that loss might be nominal.
3. Jameson v Central Electricity Generating Board was principally concerned with the full-satisfaction question in concurrent-tortfeasor cases. It established that a settlement intended to be in full satisfaction of the whole claim, once paid, may extinguish the claim against other concurrent tortfeasors. It did not decide the separate final-settlement question, namely whether pursuing another defendant would be inconsistent with the settlement because of possible contribution proceedings.
4. The final-settlement question was governed by the parties’ objective intention, ascertained by construing the settlement in its factual and commercial context. Clause 2.1 confined the settlement and prohibition on proceedings to claims and proceedings between the parties. Clause 5 likewise released claims against the releasees, rather than separate claims against non-parties. The agreement contained no clear indication that the claimants were to lose their rights against Equity & Law.
5. The surrounding circumstances supported that construction. The claims against Target and Equity & Law were overlapping but not co-extensive. The settlement could sensibly have reflected a discount for disputed causation while leaving Equity & Law responsible for loss properly attributable to its own conduct.
6. The proceedings were not an abuse of process. The individual claimants had a genuine interest in determining whether Equity & Law’s continuing allegations of serious financial misconduct were justified and in obtaining declarations or corrective relief. Proceedings seeking such relief were not futile merely because some damages might prove nominal.
7. Lord Justice Robert Walker added that claims against separate contract breakers commonly overlap rather than concern precisely the same damage. He also observed that a settlement with an original publisher would not ordinarily bar a claim against a republisher in defamation. Sir Roy Beldam agreed and emphasised the claimants’ interest in vindicating their reputation.

• Court of Appeal: Appeal from the order of Mr Justice Laddie dated 8 July 1999 allowed. The order dismissing the consolidated proceedings on the preliminary issue was set aside in substance.
• High Court, Chancery Division: Mr Justice Laddie held that the settlement with Abbey Life, as successor to Target’s business, precluded continuation of the claims against Equity & Law and dismissed the proceedings with costs.