Gladman Commercial Properties v Fisher Hargreaves Proctor & Ors

A settlement which releases one or more joint tortfeasors ordinarily releases all joint tortfeasors. A claimant may preserve a right to sue the others by an express or implied reservation, but implication requires strict necessity and depends on the agreement’s objectively ascertained meaning.

A claimant contemplating related proceedings should promptly seek case-management directions in the existing action. Failure to follow that course may support a finding of abuse where it produces extensive duplication, oppression and waste. A damages pleading must also explain the causative link between the alleged wrong and the claimed loss; oral submissions cannot repair a materially defective statement of case.

The appellant contracted to buy adjoining properties after receiving statements from the respondent surveyors about their suitability for student accommodation. When the purchases did not complete, the vendors brought proceedings for specific performance. The appellant counterclaimed for rescission and damages on the basis that the same statements were fraudulent misrepresentations made through the surveyors as agents.

That first claim was compromised by an agreement under which the appellant received £2.7 million in full and final settlement of its claims against the vendors. It later sued the surveyors for fraudulent or negligent misrepresentation. Arnold J struck out the second claim because the settlement released all joint tortfeasors, the new proceedings were an abuse of process, and the appellant had not adequately pleaded causation and loss.

The appeal concerned whether the settlement reserved a right to sue the surveyors, whether the second claim was abusive, and whether the amended particulars disclosed a coherent case that the alleged misrepresentations caused loss exceeding the earlier compensation.

1. The appeal was dismissed unanimously. The vendors and surveyors were, on the appellant’s pleaded case, joint tortfeasors. At common law, a settlement releasing one or more joint tortfeasors releases the others unless the claimant has reserved the right to sue them. Section 3 of the Civil Liability (Contribution) Act 1978 abolished the corresponding rule for judgments, but not for compromises.

2. The settlement was a release, not merely a covenant not to sue. It contained no express reservation. Whether a reservation should be implied depended on ordinary principles of construction and implication. The relevant intention was the parties’ objectively ascertained common intention, not the subjective intention of the claimant. An implied term must be strictly necessary to avoid defeating the parties’ reasonable expectations.

   No reservation could be implied. The parties were legally represented and must reasonably have understood the usual effect of settling with some joint tortfeasors. It was improbable that the vendors had implicitly agreed to pay substantial compensation while remaining exposed to contribution claims arising from later proceedings against the surveyors. Earlier letters threatening such proceedings did not establish a continuing reservation after the appellant achieved a substantial settlement.

3. The second claim was also an abuse of process. Although the respondents had not been defendants to the first claim, there was almost complete overlap between the issues. A second lengthy trial would duplicate substantial expense and court time and subject the individual surveyors to repeated hostile cross-examination on allegations threatening their careers and reputations.

   The appellant had sufficient material to formulate its claim against the respondents by October 2010. The guidance in Aldi Stores Ltd v WSP Group plc [2008] 1 WLR 748 required a contemplated related claim in complex litigation to be referred promptly to the court managing the existing proceedings. Failure to comply with that mandatory guidance was relevant to abuse. On the facts, compliance could have avoided the extensive duplication.

4. The pleading of causation and loss was independently defective. It alleged that earmarking £7 million from £30 million of available funding rendered an intended student-accommodation business wholly unviable and caused profits of £30–39 million to be lost. It did not explain that causal step. A statement of case must itself give the opponent and the court a sufficient written explanation of the case to be met; oral submissions cannot cure the deficiency.

1. Court of Appeal (Civil Division): The appeal was dismissed unanimously. The court upheld the striking out of the second claim on the grounds of release, abuse of process, and inadequate pleading of causation and loss: [2013] EWCA Civ 1466.

2. High Court, Chancery Division: Arnold J struck out the claim. His reserved judgment of 18 January 2013 addressed release and abuse of process. After permitting an attempt to amend the pleading, he held on 13 February 2013 that causation and loss remained inadequately pleaded. No neutral citation is stated in the judgment.