Brennan v Burdon & Ors

A compromise agreement, including one expressed by consent order, may be set aside for a common mistake of law. The mistake must be both common and fundamental to the agreement, amounting to the assumption or precondition on which it was made. Courts should be slow to invalidate compromises because settlement of disputes is in the public interest. A mistaken assessment of litigation risks or a subsequent belief that a settlement was a bad bargain is insufficient. Where parties settle on the shared and fundamental assumption that a claim has been irretrievably defeated by an erroneous legal ruling, the agreement may be avoided.

The claimant pursued personal-injury claims arising from alleged carbon-monoxide exposure in accommodation owned by the London Borough of Islington. Her first action included claims against solicitors and the Council. A recorder struck out claims against two defendants after holding that the claim form had not been served within the required period, relying on Anderton v Clwyd County Council. The claimant’s solicitor and a Council solicitor then agreed that the first action should be discontinued.

The Court of Appeal subsequently reversed the decision relied upon by the recorder and valid service was conceded. The Council nevertheless contended that the earlier agreement was a binding compromise. The central issue was whether the agreement was voidable for common mistake of law.

1. The appeal was dismissed. The agreement to discontinue the first action was capable of being set aside if founded on a common and fundamental mistake of law.

2. A compromise or consent order is not immune from ordinary contractual principles. A consent order may be impeached on any ground which invalidates the agreement that it records, including common mistake.

3. The court should be very slow to set aside a compromise. Settlement is in the public interest, and parties commonly assess factual and legal risks before compromising litigation. A mistake must therefore be more than a misjudgment or an unfavourable bargain. It must be the common assumption or precondition upon which the compromise was made.

4. The claimant’s solicitor and the Council’s solicitor shared the mistaken belief that service of the claim form was invalid and that the claim was doomed to fail. That belief arose from the recorder’s decision, which itself derived from the erroneous first-instance decision in Anderton v Clwyd County Council. The mistake was the fundamental basis, and the only effective springboard, of the agreement.

5. The court considered that it would be anomalous for mistake of law to be recognised in restitution and misrepresentation but not in contract. The authorities supporting the general law of common mistake also required the mistake to be fundamental. The compromise was therefore avoided at the defendants’ suit, and the appeal was dismissed.

The judgment records that the recorder struck out claims in the first action on 2 January 2002. The Court of Appeal later reversed that decision in Anderton v Clwyd County Council, [2002] 3 All ER 813 , and valid service was conceded. The Deputy Master subsequently refused the Council’s application to stay the claimant’s claim, and the present court dismissed the Council’s appeal.