Lloyd's Maritime and Commercial Law Quarterly
SETTLEMENTS FOLLOWING BREACH OF CONTRACT
Wayne Courtney*
The defendant’s breach of contract may lead the claimant to compromise a claim by, or against, a third party. Biggin & Co Ltd v Permanite Ltd is the root of modern authority on the recovery of damages for losses under settlements. The theme developed in this article is that later cases have not necessarily followed Biggin strictly, but instead have applied the principles in a more obviously commercial and pragmatic manner. Attempts to reformulate the Biggin principles in terms of causation or remoteness or mitigation are, for the most part, unhelpful.
I. INTRODUCTION
A breaches its contract with B. This, it appears, causes B to make some default in relation to a third party, C. C makes a claim on B for £x. That claim is not so obviously groundless as to be dismissed immediately. Cognisant of the uncertainties involved in litigation and perhaps also of Sir Robert Megarry’s description of the law reports as the “charts of the wrecks of unsinkable cases”,1 B decides to settle C’s claim for £y, which is usually less than £x. B seeks to recover the sum of £y from A as damages for A’s breach. A asserts that B was not liable to C, or that the quantum of B’s true liability was less than £y.
In a typical case, A may be a seller of goods, B the buyer, and C the sub-buyer of the same goods who sues B for non-delivery or breach of warranty caused by A’s corresponding default.2 Alternatively, A may be a subcontractor on a construction or maintenance project, B the contractor and C the employer.3 In another variation, A is the insurer under a contract of liability insurance, B is the insured, and C is the party whose claim leads B to seek coverage under the policy. One basis for B’s claim against A may
* Senior Lecturer, Faculty of Law, University of Sydney.
1. Quoted in Supershield Ltd v Siemens Building Technologies FE Ltd [2010] EWCA Civ 7; [2010] 1 Lloyd’s Rep 349, [28], per Toulson LJ.
2. Biggin & Co Ltd v Permanite Ltd [1951] 2 KB 314; Wong v Hutchinson (1951) 68 WN (NSW) 55 (NSWSC); Joseph & Co Pty Ltd v Harvest Grain Co Pty Ltd (1996) 39 NSWLR 722 (NSWDC). Cf Elbinger AG v Armstrong (1874) LR 9 QB 473 (late delivery).
3. Fisher v Val de Travers Asphalte Co (1876) 1 CPD 511; Fletcher & Stewart Ltd v Jay & Partners
(1976) 17 BLR 38; White Industries Qld Pty Ltd v Hennessey Glass & Aluminium Systems Pty Ltd [1999] 1 Qd R 210 (QCA); Bovis Lend Lease Ltd v RD Fire Protection Ltd [2003] EWHC 939 (TCC); (2003) 89 Con LR 169; Railcorp NSW v Fluor Australia Pty Ltd [2009] NSWCA 344. For other variations, see Oxford University Press v John Steadman Design Group (1990) 34 Con LR 1; P&O Developments Ltd v The Guy’s and St Thomas’ National Health Service Trust [1998] EWHC 295 (TCC); (1998) 62 Con LR 38; Royal Brompton Hospital National Health Trust v Hammond [1999] EWHC 272 (TCC); (1999) 66 Con LR 42; John F Hunt Demolition Ltd v ASME Engineering Ltd [2007] EWHC 1507 (TCC); [2008] Bus LR 558.
LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY
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