The vast majority of claims settle by way of negotiation rather than running cases to a conclusion at proof/trial.

The arrival of QOCS in the personal injury procedure has tipped the costs vs benefits calculation even further towards settlement.

In sole defender cases, the settlement terms are usually easy to document. If the case is pre-litigation the settlement terms will typically be outlined in correspondence. Perhaps a discharge/release will be insisted upon. Long, formal, settlement agreements are the exception. If the case is litigated then a short document (a Joint Minute) will be signed by both parties confirming disposal of the court action and a monetary judgment for the correct amount will be granted or, if the funds have already been paid, decree of absolvitor (like dismissal but with added protection that the action cannot be re-raised) will be granted. So far so good.

However, where there are multiple defenders then the position can get more complicated. There might be more than one party sued because there are multiple arms-length wrongdoers (for example the employer and the occupier of a premises). Or, in the case of a vessel or platform, the employer and the operator. Those two entities may be linked and covered by the same insurance/P&I cover. Or there may be a hold harmless agreement in place where one party is indemnifying the other. In the latter case there will typically be the same legal representation for both defenders in the court action.

When the settlement terms are agreed it is important that it is made clear who the settlement is on behalf of. For example, just because the money is coming from defender A, if defender B is indemnified by defender A, it is important to clearly document that decree of absolvitor is to be granted in favour of both defenders. If not, then the pursuer is at risk of continuing his claim against defender B – particularly if the settlement agreed involved some discount.

A noteworthy situation arose in the judgment issued by the Sheriff Appeal Court in December 2022 in Thomas Ward v ADR Network [2022] SAC (Civ) 35. This was an employer’s liability case raised against the pursuer’s employer and the operator of the HGV involved in the accident (we’ll refer to them as Employer and Operator respectively). The pursuer valued the case at over £300,000. The Operator refused to make any offers. The Employer agreed settlement terms with a discount (the exact level of discount not being entirely apparent) at £110,000. Subsequent to that, contributory negligence was agreed at 30% for the purposes of an NHS Charges appeal. A Joint Minute was signed for the Pursuer and Employer confirming the settlement terms.

The case then continued against the Operator. The Operator challenged the pursuer’s entitlement to do so – arguing that the pursuer had accepted the £110,000 paid by the Employer in full and final satisfaction of all his claims for the harm done by the negligence, not only against the Employer but also against the Operator. The Pursuer submitted he did not, as the wording of the settlement was specifically directed against the Employer and an inference should not be drawn that the settlement terms agreed with the Employer represented the full measure of his claim.

Whilst the Operator succeeded at first instance, it lost on appeal. In delivering the opinion of the three bench Sheriff Appeal Court, Lord Turnbull stated: “The fact that the settlement with the [Employer] was for around one-third of the valuation given to the claim by the [pursuer] in his statement of valuation of claim is, in our view, not neutral. There can be many reasons why a pursuer may elect to accept less than the full amount claimed in settlement. The [pursuer] did not receive the full value of his claim from the [Employer]. The [pursuer] expressly did not accept the settlement in full satisfaction of his claim. The onus was upon the [Operator] to establish that the [pursuer] had been fully indemnified.”

Whilst it may not always be possible if the multiple defenders are at arms-length, this case is a timely reminder for those defending cases with multiple group companies or where there is an indemnity in place between the defenders – make sure that any settlement agreed is properly considered and is explicitly for the benefit of all parties which are to be released from the claim. Particularly if the claim is being settled for a discount.

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