Cape & Dagleish (A Firm) v Fitzgerald & Anor

Whether a settlement prevents a later claim against another wrongdoer depends on the objective meaning of the settlement agreement, read in its factual context. The court must distinguish between full satisfaction and final settlement. A settlement may prevent further recovery where it was intended to satisfy the whole loss, but broad releases limited to claims against the settling party do not necessarily do so. In a contract case, the court assumed, without deciding, that the full-satisfaction principle could apply by analogy with concurrent tortfeasors. The agreement and surrounding circumstances did not show that the claimant had accepted the shares as the full value of its losses or had promised not to sue other contract breakers.

The appellant had been sued by IM Group of Companies for fraud and related breaches. The parties entered into a settlement under which he transferred his shares and the company released claims against him and covenanted not to sue him. The company later succeeded in an action against its auditors, who then brought contribution proceedings against the appellant under the Civil Liability (Contribution) Act 1978.

On preliminary issues, the High Court held that the settlement did not bar the company’s claim against the auditors. The appeal concerned whether the settlement constituted full satisfaction of the company’s losses or, alternatively, whether its finality prevented the later action and consequent contribution proceedings.

1. Appeal dismissed. The settlement did not prevent the company from pursuing the auditors or expose the appellant to no contribution liability merely because the company had settled with him.
2. The court treated the parties as being in a position closely analogous to concurrent tortfeasors because the claims concerned substantially the same heads of loss. The distinction between the full-satisfaction question and the final-settlement question, drawn in Heaton v AXA Equity & Law [2000] 3 WLR 1341, was material.
3. Both questions depended on construing the settlement objectively, by reference to its wording and the relevant surrounding circumstances. The background known to the parties could properly assist construction, applying the approach in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896.
4. The agreement released claims against the appellant and prevented claims against him, but it did not state that the shares were accepted in full and final satisfaction of all losses. Nor did it purport to prevent claims against other persons. The surrounding circumstances, including uncertainty about the value of the losses and the possibility of claims against the auditors, supported the same conclusion.
5. The court assumed, without deciding, that the full-satisfaction principle in Jameson v CEGB [2000] 1 AC 455 had some relevance in a contract case. Even on that assumption, the settlement did not establish full satisfaction. The appeal was dismissed with costs. Permission to appeal to the House of Lords was refused.

• Court of Appeal (Civil Division): Appeal from the order of Mr Colin Mackay QC, sitting as a High Court judge, dated 2 February 2000. Appeal dismissed with costs.