Heaton and Others v. AXA Equity & Law Life Assurance Society plc and Others

A compromise with one wrongdoer does not automatically release another wrongdoer. It bars a later claim for substantial damages in respect of the same loss only where, properly construed in its factual context, the compromise sum represents full satisfaction of that loss.

Comprehensive language settling all claims between the parties has limited significance. An express reservation of claims against another wrongdoer supports the conclusion that full satisfaction was not intended, but its absence may carry little weight. The principle applies to overlapping breaches of contract as well as concurrent torts. A claimant may recover any unsatisfied balance from another wrongdoer, but must give credit for sums already received and cannot obtain double recovery.

The respondents, acting personally and as assignees of a financial services company, had settled claims against Target for £10 million. They subsequently pursued the appellants for losses allegedly caused by the wrongful termination of a separate appointed-representative agreement and by inaccurate reports and allegations of misconduct. Some heads of loss overlapped with those advanced against Target.

Laddie J determined a preliminary issue by holding that the settlement precluded the later proceedings. The Court of Appeal unanimously reversed that decision: [2001] Ch 173. The appellants appealed to the House of Lords, relying principally on Jameson v Central Electricity Generating Board [2000] 1 AC 455.

The central issue was whether the Target settlement represented full satisfaction of the respondents’ loss and thereby extinguished their entitlement to pursue substantial damages against the appellants.

1. Disposition. The House unanimously dismissed the appeal. The settlement with Target did not preclude the respondents from pursuing the appellants, subject to giving appropriate credit for sums already recovered.

2. Effect of full satisfaction. Lord Bingham, whose reasons were adopted by Lord Steyn and Lord Hope, explained Jameson v Central Electricity Generating Board [2000] 1 AC 455. A judgment will ordinarily fix the full measure of the loss for which the defendant is liable. A compromise may do so, but does not necessarily do so. If the claimant accepts a sum representing the full measure of the same loss, a later tort claim fails for want of damage and a later contract claim can yield no more than nominal damages.

3. Construction of the compromise. Per Lord Bingham and Lord Mackay, the question is whether the agreement, construed in its factual context, shows that the sum was intended to constitute full satisfaction of the relevant loss. Releasing one concurrent tortfeasor or contract-breaker does not itself release another. Broad language conclusively settling claims between the contracting parties has little bearing on whether the claimant’s entire loss has been satisfied. An express reservation of other claims is supportive but unnecessary because those claims ordinarily remain available without reservation.

4. Application. Per Lord Mackay, with whom Lord Bingham agreed, the settlement could properly be read as resolving Target’s part in the destruction of the business rather than accepting that Target bore full responsibility for all resulting loss. The appellants were not parties, made no contribution and were not mentioned. Target had denied responsibility for the appellants’ termination of the separate agreement. The respondents also had live claims against the appellants. The agreement therefore did not exhaust those claims.

5. Overlapping contract claims and contribution. Lord Bingham and Lord Rodger considered that the full-satisfaction principle extends to successive or overlapping breaches of contract. It prevents double recovery, not recovery of an unsatisfied balance. The possibility that the settling party might later face contribution proceedings did not justify releasing another wrongdoer. A settler may protect itself through an enforceable undertaking not to sue another wrongdoer or an indemnity. Lord Rodger also relied on section 1(3) of the Civil Liability (Contribution) Act 1978.

6. Corrective statement. Lord Mackay, whose reasons were adopted by Lord Steyn and Lord Hope, held that the court could not compel a party to make a statement which it did not accept as true. If the pleaded facts were proved, the suitable remedy was a declaration. Further pursuit of the claim for a corrective statement was conditional on its reformulation as a claim for an appropriate declaration.

• House of Lords: Unanimously dismissed the appellants’ appeal in Heaton and Others v AXA Equity & Law Life Assurance Society plc and Others [2002] UKHL 15, leaving the respondents free to pursue their claims subject to credit for the Target settlement.
• Court of Appeal: Unanimously allowed the respondents’ appeal and held that the settlement did not inhibit pursuit of the claims against the appellants, subject to appropriate credit: [2001] Ch 173.
• High Court: On 8 July 1999, Laddie J decided the preliminary issue in the appellants’ favour, declared that the settlement precluded continuation of the proceedings and dismissed the action.