Civil Engineering Reference
In-Depth Information
Limited
(1951). That case concerned the question of whether a reasonable sum paid
in settlement of a claim can be regarded as the proper measure of damages in a sub-
sequent action when liability was not being disputed. It was said the settlement sum
would constitute the upper limit of what could be recovered in the third party case.
Ifreasonable,itshouldbetakenasthemeasureofdamages.Onthequestionofwhat
evidence would be necessary to establish reasonableness, this would include proof
that the settlement was made on the basis of legal advice. here would also need to be
evidenceonwhatwouldbelikelytobeprovediftheirstcasehadproceededtoallow
the court to consider reasonableness of the sum paid.
The basis for that approach is that the third party is taken to have foreseen that a
consequence of its breach of contract would be that the party pursuing it would be
liable to the other party, that that liability might give rise to litigation, and that any
such litigation might be compromised resulting in loss to the pursuer. See
Bovis Lend
Lease Limited
v
.RDFireProtectionLimited
(2003).
It is necessary as part of mitigation of loss for the pursuer to show both that it was
reasonable to settle the claim at all and that the settlement amount was reasonable.
Where there are a number of heads of claim and if it is possible, it would be prudent
to identify heads of claim and the individual treatment of each of these in the settle-
ment as well as the amount of money allocated to each issue, see
P&O Developments
Limited
v.
he Guy's and St homas' National Health Service Trust
(1999). In this case,
the starting point was said to be a requirement to show that the third party was in
breach of a duty owed. he breaches by the third party were likely to be different from
those by other parties. That meant the consequences of any breaches could not be
said to be identical and that questions of causation would arise in assessing damages.
In this case a global settlement of £83 million had been reached by Guy's with their
management contractor which Guy's then sought to recover from their project man-
ager and M&E services engineer. The court found that even if that overall settlement
sum was found to be reasonable, it did not necessarily follow that the sums then allo-
cated to individual works contractor claims were also reasonable. This meant it did
not follow that, if the reasonableness of the global sum was established, the sums then
allocated to works contractors would represent Guy's loss. It was said to be necessary
forGuy'stoprovethatthesumsinfactallocatedwerereasonablesumstoallow.
Itcanbediiculttoachieveanallocationofasettlementbetweenvariousheadsof
claim in the context of a negotiated settlement where often a global figure is arrived
at. In that case, it should be recognized that this may present a problem when it comes
to proving liability and thereafter allocation of responsibility against the third party.
However, this will not necessarily be fatal and the courts will be reluctant to allow
aclaimtofailonthisbasis.In
Bovis
v.
RDFireProtection
above, it was said:
However, it does not follow from these difficulties that it is impossible to allocate
either an overall value to the settlement or a value of that part of the settlement that
is attributable to defects in the fire protection works. Even rudimentary evidence
of how the settlement was arrived at would enable it to be determined whether
anything was included for fire protection works claims and as to whether the over-
all value of the individual component claims being settled should be pro rated or
assessed in some other way. If such an apportionment or assessment is not possible
