Gnitrow Ltd v Cape Plc

Settlement terms between a claimant and one contributor are not generally protected by without-prejudice privilege from disclosure to another party seeking contribution. Where the claimant has settled a specific claim for a fixed sum, the terms may be disclosed to the remaining defendant so that it can assess contribution and make realistic Part 36 offers.

Disclosure should be limited to the material apportionment terms. The trial judge should not see them when determining responsibility, because a settlement may reflect commercial considerations rather than the parties’ assessment of the merits. The terms may be shown to the judge afterwards solely to prevent double recovery.

Gnitrow Ltd sought indemnity or contribution from Cape Plc for sums paid in settlement of asbestos-related claims by former shipyard employees. Newalls, another contractor whose activities may have contributed to the exposure, was not a party to the proceedings. Gnitrow’s insurers had reached a national agreement with Newalls concerning its contribution in shipyard asbestosis cases.

His Honour Judge Rudd ordered a stay of Gnitrow’s action until the agreement was disclosed to Cape. Gnitrow appealed, contending that the agreement was protected by without-prejudice privilege and was irrelevant to the apportionment of responsibility. The central issues were whether the settlement terms were privileged and how, if relevant, they should be used in the contribution proceedings.

1. Appeal allowed on terms. The relevant terms of the agreement between Gnitrow’s insurers and Newalls, so far as they provided for apportionment of liability arising from the Cowes shipyard operations, were to be disclosed to Cape.
2. Without-prejudice privilege did not extend to the settlement agreement itself. Although disclosure to a non-settling party might discourage settlements in multi-party litigation, that concern did not justify extending the privilege protecting statements made during negotiations to the resulting settlement terms.
3. The agreement was not relevant to the judge’s task of assessing the parties’ respective responsibility for the damage. The judge had to assess the evidence called in the action and determine the responsibility of Gnitrow, Cape and Newalls. Cape’s liability was limited to the share attributable neither to Gnitrow nor to Newalls. The position was the same under the pleaded contract and under the Civil Liability (Contribution) Act 1978.
4. The agreement was relevant for the separate purpose of preventing excessive recovery by Gnitrow and enabling Cape to make realistic Part 36 offers. The judge should therefore be protected from seeing the terms until liability had been apportioned. If necessary, the relevant terms could then be disclosed to the judge to ensure that Gnitrow recovered no more than it had paid.
5. The procedure was confined to the circumstances before the court: a claimant had settled a specific claim for a fixed sum and sought only indemnity or contribution for that sum. Other situations, including settlements in personal injury claims where damages were at large, required separate consideration.

Sir Murray Stuart-Smith agreed. Cape was awarded half of the costs of the appeal below.

• Court of Appeal: Appeal from the order of His Honour Judge Rudd dated 18 April 2000. The appeal was allowed on terms.
• Southampton County Court: Proceedings were stayed until disclosure to Cape of the agreement between Iron Trades and Newalls.