Lewis v Barnett (t/a Windmill Racing Stables)

Where parties settle pending proceedings by an agreement intended to dispose of the claim, the proceedings end and the agreement creates a new contractual cause of action. A later failure to perform the settlement does not revive the original claim. Revival would ordinarily require the proceedings to be stayed so that the settlement terms could be carried into effect. The court should examine the agreement as a whole, including any provision requiring the parties to notify the court that the action has been settled. On an appeal out of time, potentially material fresh evidence should not be excluded before its relevance and effect have been properly assessed.

The respondent had obtained a county court judgment for unpaid horse-stabling and training fees. The parties had previously signed an agreement under which horses and £2,000 were to be provided in full settlement, and agreed to notify the court that the action had been settled. The county court nevertheless entered judgment for the amended claim after treating non-payment of the settlement sum as reopening the original claim.

After enforcement proceedings threatened the appellant’s home, Ward LJ granted permission to appeal out of time and transferred the appeal. The central issues were whether the settlement displaced the original cause of action, what the county court had actually found about payment to an alleged business partner, and whether documents from related partnership litigation should be disclosed as fresh evidence.

1. Settlement displaced the original claim. The principal effect of the agreement was that, in return for discontinuance of the pleaded claim and withdrawal of other outstanding claims, the appellant would transfer two horses and pay £2,000. The agreement also made separate contractual provision for the care of a third horse. The proceedings therefore ended on the settlement date and were replaced by contractual arrangements.
2. Breach did not revive the proceedings. A failure by either party to honour the agreement gave rise to a fresh cause of action on the agreement. It could not revive the original claim. If revival had been intended, the conventional mechanism would have been to stay the proceedings to carry the settlement terms into effect. The agreement’s provision requiring notification to the county court that the action had been settled strongly supported the contrary construction.
3. Fresh evidence and the county court’s findings. The notes of the recorder’s judgment did not safely establish that the appellant had never paid £2,000. They recorded that the respondent had not received the money and that, if it had reached the alleged partner, it had not necessarily discharged the debt. The relationship between the respondent and that person could therefore be crucial, making documents from related litigation relevant.
4. The application to prevent the fresh evidence was refused. The earlier disclosure direction was restored, subject to legal professional privilege, and the appeal was adjourned for 28 days to allow production. The stay of execution of the possession order continued. Depending on the documents, the court indicated that it might allow the judgment to stand only for £2,000 or set it aside entirely. Any further proceedings would have to proceed on the settlement agreement, including the unresolved dispute about the horses. The respondent could amend the claim on that basis, but only if the appellant waived any limitation defence.
5. Both Lord Justices strongly encouraged mediation and warned that unreasonable refusal to use it might have costs consequences.

• Wandsworth County Court: On 7 March 1997, Mr Recorder Ross Martin entered judgment for the respondent on the amended claim, with interest and costs.
• High Court enforcement proceedings: A charging order and possession order were made, and Patten J later suspended execution to enable the appellant to seek permission to appeal.
• Court of Appeal: Ward LJ granted permission to appeal out of time and transferred the appeal. On the present hearing, Sedley LJ, with Neuberger LJ agreeing, refused to exclude the proposed fresh evidence, restored the disclosure direction, continued the stay, and adjourned the appeal.