Summary

A settlement agreement between the first defendant and a third party had not had the effect of extinguishing the third party's claim against the present claimants, with the consequence that the present claimants could look to the first defendant for a contribution towards the damages that they had been ordered to pay to the third party.

Facts

Appeal by the first defendant ('F') from a decision of the Court of Appeal dismissing his appeal from a decision of Mr C Mackay QC ('the judge'). On the trial of a preliminary issue, the judge held that a settlement agreement made between F and IM Properties plc ('IMP') was not capable of extinguishing any claims that IMP might have had against its auditors ('Cape'). Cape were the present claimants. The consequence of the judge's decision was that Cape was entitled to look to F for a contribution in respect of those damages that it had been ordered to pay to IMP following a trial of those claims. Prior to May 1993, F was the chairman and chief executive of IMP. He also owned 10 per cent of the shares in IMP's holding company ('IMPIL'). Following his summary dismissal, IMP commenced proceedings against F for damages for breach of his service contract and breach of fiduciary duty. Those proceedings were settled shortly thereafter on terms by which F transferred his shareholding in IMPIL at IMP's direction. In due course IMP brought proceedings against Cape for breach of contract and/or negligence in failing to identify and/or report upon F's activities and defalcations. Cape was found liable in the sum of £704,568, from which was deducted the value of F's shareholding in IMPIL (£430,000), leaving a balance of £274,568 plus interest and costs. By these proceedings Cape now sought to recover those sums, or a contribution towards them under s.1(1) Civil Liability (Contribution) Act 1978 from F. The preliminary issue was directed to that part of F's defence by which he asserted that the settlement agreement between himself and IMP had effected an accord and satisfaction and release of all F's liabilities to IMP, such that IMP had no longer had any cause of action against Cape.

This decision was an application of Jameson v CEGB (2000) 1 AC 455 with regards to the effect of a settlement with one wrongdoer on claims against another. The House of Lords appeal was heard with Heaton v AXA (2002) 2 AC 329. The Fitzgerald decision has a more general application of general relevance to claims against professionals for failing to detect or enabling wrongdoers conduct where the "victim" has settled with the wrongdoer.

Held

In the context of a contribution claim, a settlement with one injurer does not prevent a claim being made with regards to the same subject matter against another injurer.