Heaton v AXA Equity & Law Life Assurance Society Plc

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLORD BINGHAM OF CORNHILL,LORD MACKAY OF CLASHFERN,LORD STEYN,LORD HOPE OF CRAIGHEAD,LORD RODGER OF EARLSFERRY
Judgment Date25 April 2002
Neutral Citation[2002] UKHL 15
Date25 April 2002

[2002] UKHL 15

HOUSE OF LORDS

Lord Bingham of Cornhill

Lord Mackay of Clashfern

Lord Steyn

Lord Hope of Craighead

Lord Rodger of Earlsferry

Heaton

And Others

(Respondents)
and
Axa Equity & Law Assurance Society PLC

And Others

(Appellants)

And Others

LORD BINGHAM OF CORNHILL

My Lords,

1

The issue in this appeal may be expressed in this way: if A, having sued B for damages for breach of contract, enters into a settlement with B expressed to be in full and final settlement of all its claims against B, is A thereafter precluded from pursuing against C a claim for damages for breach of another contract to the extent that this claim is for damages which formed part of A's claim against B? Expressed in another way, the issue is whether the majority decision of the House in Jameson v Central Electricity Generating Board [2000] 1 AC 455, properly understood, laid down any rule of law and, if so, whether that rule applies to successive contract-breakers as well as concurrent tortfeasors.

2

The facts giving rise to these issues have been very fully recorded in the judgment of Chadwick LJ in the decision of the Court of Appeal reported at [2001] Ch 173 at 180-188, paras 3-27, and are summarised in the opinion of my noble and learned friend Lord Mackay of Clashfern, whose summary I gratefully adopt and need not repeat. The issues in the appeal can, I think, be illuminated by resort to schematic examples.

3

A brings an action against B claiming damages for negligence in tort. The claim goes to trial, and judgment is given for A for £x. There is no appeal and the judgment sum is paid by B to A. £x will thereafter be taken, in the ordinary way, to represent the full value of A's claim against B. A cannot thereafter maintain an action for damages for negligence in tort against C as a concurrent tortfeasor liable in respect of the same damage for two reasons: first, such a claim will amount to a collateral attack on the judgment already given; and secondly, A will be unable to allege or prove any damage, and damage is a necessary ingredient for a cause of action based on tortious negligence. A cannot maintain an action against C in contract either, in respect of the same damage, for the first reason which bars his tortious claim. There is however no reason of principle, in either case, on the assumptions made in this example, why B should not recover a contribution from C under the Civil Liability (Contribution) Act 1978 as a party liable with him for the same damage suffered by A.

4

In a second example the facts are varied. A brings an action against B claiming damages for negligence in tort. The action does not proceed to judgment because B compromises A's claim by an agreement providing that he will pay A damages of £x, which he duly does. If £x is agreed or taken to represent the full value of A's claim against B, A cannot thereafter maintain an action against C in tort in respect of the same damage for the second reason given in the last paragraph, and although he is not precluded from pursuing a claim against C in contract in respect of the same damage he cannot claim or recover more than nominal damages. There is again, in the ordinary way, no reason of principle in either case, on the assumptions made in this example, why B should not recover a contribution from C under the 1978 Act as a party liable with him for the damage suffered by A.

5

There is, however, an obvious difference between the action which culminates in judgment and the action which culminates in compromise: that whereas, save in an exceptional case (such as Crawford v Springfield Steel Co Ltd, unreported, 18 July 1958, Lord Cameron), a judgment will conclusively decide the full measure of damage for which B is liable to A, a sum agreed to be paid under a compromise may or may not represent the full measure of B's liability to A. Where a sum is agreed which makes a discount for the risk of failure or for a possible finding of contributory negligence or for any other hazard of litigation, the compromise sum may nevertheless be regarded as the full measure of B's liability. But A may agree to settle with B for £x not because either party regards that sum as the full measure of A's loss but for many other reasons: it may be known that B is uninsured and £x represents the limit of his ability to pay; or A may wish to pocket a small sum in order to finance litigation against other parties; or it may be that A is old and ill and prefers to accept a small sum now rather than a larger sum years later; or it may be that there is a contractual or other limitation on B's liability to A. While it is just that A should be precluded from recovering substantial damages against C in a case where he has accepted a sum representing the full measure of his estimated loss, it is unjust that A should be so precluded where he has not.

6

The majority decision of the House in Jameson v Central Electricity Generating Board [2000] 1 AC 455 appears to have been understood by some as laying down a rule of law that A, having accepted and received a sum from B in full and final settlement of his claims against B in tort, is thereafter precluded from pursuing against C any claim which formed part of his claim against B. I do not think that my noble and learned friend Lord Hope of Craighead, in giving the opinion of the majority of the House, is to be so understood.

7

Mr Jameson (A) had contracted lung cancer as a result of exposure to asbestos dust during his employment by B. He brought an action in negligence against B claiming damages. Very shortly before his death the claim was settled for £80,000, which was paid just after his death. It was appreciated that his claim on a full valuation was worth £130,000 but also that the outcome of the litigation was uncertain. About a year after his death, a claim on behalf of his widow was brought under the Fatal Accidents Act 1976 for damages for her loss of dependency. This second action was brought against C, in whose premises A had worked during some of the time when he had been exposed to asbestos dust during his employment by B. Section 4 of the 1976 Act, as substituted by section 3(1) of the Administration of Justice Act 1982, had the effect that the widow did not have, in estimating the value of her dependency, to give credit for the damages of £80,000 which she had inherited from A on his death. Thus, if the claim was maintainable, C would be potentially liable to the widow for a substantial sum and could look to B for contribution under the 1978 Act, and B would be potentially liable to contribute without any requirement that credit should be given for the £80,000 it had already paid. The widow could only maintain her claim against C if A, had he lived, would have been able to do so and it was held that A could not have done so because, by accepting £80,000 from B in full and final settlement of his claim, he had extinguished it and so had no claim which he could have pursued against C.

8

This conclusion was reached by a number of steps which included the following:

(1) Proof of damage is an essential step in establishing a claim in tortious negligence ( [2000] 1 AC 455, 472A-C).

(2) Such a claim is a claim for unliquidated damages (473D, 474A).

(3) Such a claim is liquidated when either judgment is given for a specific sum or a specific sum is accepted in a compromise agreement (473D, 474B, 474E).

(4) A judgment on such a claim will ordinarily be taken to fix the full measure of a claimant's loss (473E, 474B).

(5) A sum accepted in settlement of such a claim may also fix the full measure of a claimant's loss (473E, 474E-F): whether it does so or not depends on the proper construction of the compromise agreement in its context (473B, 476E, 474H).

(6) On the facts of A's case, the sum accepted from B in settlement was to be taken as representing the full measure of A's loss: it followed that A's claim in tortious negligence was extinguished and he had no claim which could be pursued against C (476E).

I do not think the first four of these steps are controversial. The fifth proposition may perhaps have been stated a little too absolutely in Jameson, but as expressed above I do not think it can be challenged. There was clearly room for more than one view, as the division of judicial opinion in Jameson showed, whether the sum accepted in settlement by A was to be taken as representing the full measure of his loss, but if it did the conclusion followed: A could not have proved damage, an essential ingredient, in his action against C, and that was fatal to the widow's Fatal Accidents Act claim against C.

9

In considering whether a sum accepted under a compromise agreement should be taken to fix the full measure of A's loss, so as to preclude action against C in tort in respect of the same damage, and so as to restrict any action against C in contract in respect of the same damage to a claim for nominal damages, the terms of the settlement agreement between A and B must be the primary focus of attention, and the agreement must be construed in its appropriate factual context. In construing it various significant points must in my opinion be borne clearly in mind:

(1) The release of one concurrent tortfeasor does not have the effect in law of releasing another concurrent tortfeasor and the release of one contract-breaker does not have the effect in law of releasing a successive contract-breaker.

(2) An agreement made between A and B will not affect A's rights against C unless either (a) A agrees to forgo or waive rights which he would otherwise enjoy against C, in which case his agreement is enforceable by B, or (b) the agreement falls within that limited class of contracts which either at common law or by virtue of the Contracts (Rights of Third Parties) Act 1999 is enforceable by C as a third...

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