SETTLEMENTS, REASONABLENESS AND REMOTENESS OF DAMAGE

In Supershield Ltd v Siemens Building Technologies FE Ltd [2010] EWCA Civ 7, [2010] All ER (D) 113 (Jan) the Court of Appeal held that the claimant was entitled to recover from the defendant the amount it had agreed to pay in order to settle the claims which had been brought against it. In rejecting the submission that the settlement sum was not reasonable, the court held that the trial judge had not under-estimated the strength of the defences available to the claimant. One of these defences was that the loss was too remote a consequence of the breach. The Court of Appeal affirmed that the law on remoteness is grounded on the policy that the loss recoverable by the victim should be limited to loss from which the party in breach may reasonably be taken to have assumed a responsibility to protect the victim. This being the case, the question of remoteness cannot be isolated from consideration of the purpose of the contract and the scope of the contractual obligation.

The facts

The case arose out the failure of a nut and bolt connection on a float valve which led to water from a storage tank overflowing into the basement of a new office building in London. There were a number of parties to the ensuing litigation as the parties sought to pass liability down the contractual chain. After a mediation between the various parties, Siemens Building Technologies FE Ltd (hereafter ‘Siemens’), who had contracted to supply and install the sprinkler system, settled the claims with the parties up the contractual chain. This left Siemens with its Part 20 claim against Supershield Ltd (hereafter ‘Supershield’) and it is with this claim that we are here concerned.