Settlement - Disclosure – Abuse of Process – Second Action
In this case the Defendants entered into negotiations with the Claimant, which led to a settlement before trial. In the course of the proceedings however the Defendants gave very extensive disclosure (about 139,000 documents). When the Claimant came to examine that disclosed material, the Claimant discovered that it demonstrated they had further, different and substantial claims against the Defendants.
The Claimant obtained permission to use the disclosed documents to commence fresh proceedings against the Defendants. It was common ground that the terms of the settlement agreement did not compromise the new claims, but the Defendants submitted that it was an abuse of process for the Claimant to bring the new claims, on the basis that they could and should have been brought as part of the original action.
Legatt J refused to dismiss the second claim as an abuse of process. He found that the second claim had not been in the Claimant’s contemplation as at the date of the settlement; at most, the Claimant was carrying out the investigations that ultimately led to that second action. There was no reason to suppose that if the disclosed material had been available earlier, the Claimant would not have included the new claims in the original action. In the circumstances, it was not an abuse of process for the Claimant to bring a second claim. The second action involved serious allegations of dishonesty against one of the defendants and it was not appropriate for that defendant to allege that the second claim was abusive when a major factor in it not being brought beforehand was his own alleged deliberate concealment.
This case demonstrates circumstances in which the Court will, and will not permit a second action to be brought between the same parties in relation to the same or related issues. Generally the Court has always required a party to bring the whole of his case before the court once, so that all matters can be tried at the same time, by the same judge. That sensible approach to case management has been reinforced by the CPR, and given the recent tightening up of the rules and the new, less forgiving attitude of the judiciary to procedural mistakes following the Jackson Reforms, expect that rule to get stricter.
But this case demonstrates the limitation of the rule that all claims must be brought at the same time. It is not surprising given the facts that Legatt J gave permission when the availability of the second claim only became clear on a careful review of a very large number of disclosed documents, and when there was at least a prima facie case that the defendant had disclosed the facts relevant to the second action.
What is interesting for TEDR readers is of course the implications for mediation and settlement. Often in reaching a settlement one of the most powerful negotiating tools is to say – there is no more money beyond what I am offering, and in return for giving you that I want a full and final settlement of all claims, known and unknown, and whether or not you have articulated them. It is often a difficult question as to whether to agree to such a settlement when the true state of affairs is not known.
The Defendants here seem to have been confident (overconfident?) that they did not need such protection because they thought the chances of the Claimant bringing a further claim once they had examined disclosure were remote. It is not clear whether the Defendants attempted to get a “full and final” settlement clause inserted in respect of unknown claims, but if they did, it did not work; the settlement agreement did not bar future claims. It is perhaps not surprising that in a case involving allegations of dishonesty that the settlement did not include such a clause. In other cases however, such a clause may well be inserted as a matter of course. But as this case demonstrates, where there is no such bar and further claims come to light, it is not impossible to bring them again at a later stage.