SETTLEMENT DOES NOT BAR CLAIM AGAINST SUCCESSIVE CONTRACT BREAKER

Heaton v AXA Equity and Law Life Assurance Society plc [2002] UKHL 15; [2002] 2 WLR 1081

In Heaton v AXA Equity and Law Life Assurance Society plc [2002] UKHL 15; [2002] 2 WLR 1081 the House of Lords affirmed the decision of the Court of Appeal (on which see our December 2000 issue, pp.9–11) and held that a settlement with one contract breaker did not bar a claim against a successive contract breaker. On the facts it was held that the settlement of the claim against the first contract breaker was not intended to fix the full measure of the claimant’s loss. This being the case it remained open to the claimant to bring an action against the second contract-breaker in order to recover the loss that it had suffered as a result of the breach of contract by that party (provided that there was no element of double recovery in respect of the same loss). The vital question to be asked when deciding whether or not the claimant is entitled to bring proceedings against the second contract breaker is therefore whether or not the first settlement was intended to fix the full measure of the claimant’s loss. If it does (as was held to be the case in Jameson v Central Electricity Generating Board [2000] 1 AC 455 on which see our July 1999 issue, pp.10–11) then the claimant will not be entitled to bring the second action. On the other hand, if it does not, then the claimant will generally be entitled to bring a second action.