Settling old scores?
The Court of Appeal has recently found, in McGill v The Sports and Entertainment Media Group & Ors, that a claimant's previous settlement agreement for a breach of contract claim against a contract breaker did not prevent him subsequently pursuing the defendants in tort for the same loss he had suffered in the breach of contract claim.
Facts
Anthony McGill ("Mr McGill/the Claimant") alleged he had entered into an oral agreement with Gavin McCann ("Mr McCann"), a football player at the time playing at Aston Villa, to act as his agent to secure him a new contract. Mr McGill further alleged that it was agreed under this oral agreement that he would obtain an agent's fee for securing a new contract for Mr McCann.
Mr McGill subsequently claimed that he had arranged a transfer to Bolton Wanderers Football Club ("Bolton") for Mr McCann pursuant to their oral agreement. However, the defendants, finding out about this transfer deal, induced Mr McCann to breach his contract with Mr McGill, and subsequently arranged a transfer deal, essentially on the same terms, with Bolton while obtaining a £300,000 commission from Bolton as a result.
Mr McGill initially brought proceedings against Mr McCann for breach of contract and restitution. These proceedings were settled by Tomlin Order on the first day of trial for £50,000 in "full and final settlement of all claims arising out of the matters set out in the statements of case in the action, including any outstanding orders as to costs."
Three years after the settlement of the action against Mr McCann, Mr McGill brought proceedings against the defendants on the basis of their inducement of Mr McCann to breach his oral agreement with Mr McGill.
Decision
The High Court dismissed Mr McGill's claim. However, the Court of Appeal reversed the High Court's decision and allowed Mr McGill's appeal. The Court of Appeal's decision is interesting as it addressed an argument deployed by the defendants that Mr McGill was precluded from bringing his claims against them as a result of the previous settlement agreement, which fixed the full measure of loss, between Mr McGill and Mr McCann.
Reasoning
In considering the defendants' argument that the previous settlement agreement barred the Claimant's claim against them the Court of Appeal had to consider the cases of Jameson v CEGB [2000] 1 AC 455 ("Jameson") and Heaton v Axa Equity and Law Life Assurance Society PLC [2002] ("Heaton").
In Jameson the House of Lords found that in the case of concurrent tortfeasors, where there is a settlement agreement in full and final satisfaction of the claimant's claim against one of them (irrespective of any discount for litigation risk), this is a bar to a claim against any other concurrent tortfeasor where the claim is for the same damage.
Heaton expanded the principal in Jameson to apply to successive contract breakers.
In considering these two authorities the Court of Appeal commented that the true question that has to be considered is whether, by settling the earlier action, a claimant has fixed the full measure of his loss, so that he has no remaining loss to recover from anybody else and that the answer to this question depends on the proper construction of the settlement agreement, placed in its factual and legal context.
The Court of Appeal considered that despite the substantial identity of the loss claimed in the two actions and despite the comprehensive wording of the settlement agreement that the claims in tort in the current action were of such a different character from the settled claim in contract against Mr McCann that clear language wording would be required if, by settling with Mr McCann, Mr McGill was to have settled his claim against the defendants. Such clear language was not prevalent in the settlement agreement.
This particular view was further fortified by the fact the defendants were not parties in the action against Mr McCann.
Interestingly, the Court of Appeal also considered Mr McGill's subjective intention in entering into the settlement agreement with Mr McCann- Mr McGill regarded the real perpetrators as the defendants and was accordingly prepared to accept £50,000 to leave Mr McCann alone- and commented that fairness requires that the court should be able to take such motivation into account as part of the factual matrix relevant to the issue whether a claimant has indeed accepted a sum representing the full measure of his estimated loss. However, the Court of Appeal did further comment that whether or not it is legitimate to take this into consideration it still would have allowed Mr McGill's appeal on this point.
Comment
This decision assesses whether a previous settlement agreement precludes a claimant from bringing a claim against a subsequent defendant for the same loss and whether it will be a question of construction of the settlement agreement.
This decision further indicates that when the causes of action against the different defendants are different that unless clear wording is used in the previous settlement agreement the earlier agreement is unlikely to preclude the claimant in its claim against the subsequent defendants.
Finally, the following principals can be gleaned from this case when preparing a settlement agreement:
- State precisely who is being discharged from the claims under the settlement agreement;
- If future claims against non-parties to the settlement agreement are not intended to be waived by entering into the settlement agreement ensure that rights are expressly reserved;
- If future claims against non-parties to the settlement agreement (perhaps other parties in the chain of distribution of a product) are intended to be compromised by the settlement agreement this should be expressly stated and specific reference should therefore be made to the Contracts (Rights of Third Parties) Act 1999; and
- A clear statement of the claimant's intent in accepting the settlement sum is also advisable if the settling claimant intends on pursuing non-parties to the settlement agreement for the same losses as the settled claim.