The claimant sought damages alleging his back had been injured at work. The insurers accepted liability but said that the claimant had exaggerated the extent of his injury. The claim was settled, but later a neighbour of the claimants said that the claim of a serious back injury had been dishonest. The insurers sought recission of the settlement agreement. The claimant contended that the Tomlin order created an estoppel per rem judicatam and/or by record, alternatively that the action was an abuse of the process because the issue of fraud had been compromised by the settlement.
Held: The appeal was allowed. In the light of its pleaded assertions that the claimant’s presentation of his injuries had been dishonest, the insurers could not be said to have relied on his presentation when entering into the settlement.
Underhill LJ said: ‘it is important to recall the very particular context in which the reliance is said to occur – that is, that the contract in issue is a settlement agreement and the misrepresentations relied on comprise the very allegations advanced as part of the claim being settled. No doubt in one sense those allegations do operate on the mind of the defendant in his consideration of whether to settle, and at what level: he may actually believe them to be true, but even if he does not he will inevitably be influenced by the possibility that they will be believed by the Court – which is of course what the Judge found to be the case here. But to my mind that does not constitute reliance in the relevant sense. The defendant is not concerned with the truth or otherwise of the statements as the factor motivating his action. Rather, he is treating them simply as part of the claimant’s case. It is inherent in the antagonistic relationship of claimant and defendant that in deciding whether to settle he has to form an independent judgment about whether the disputed statements made as part of the claim are (to the extent that they are material to the outcome) likely to be accepted by the Court. I do not believe that a relationship of reliance arises in that context.’
Briggs LJ said: ‘the judge’s finding that Zurich was induced into making the settlement agreement by reliance on the Appellant’s dishonest misrepresentations about his continuing injury was based upon a view of the law for which there is no authority, which is wrong in principle and the recognition of which would have most unfortunate consequences.’ and: ‘ the true principle is that the equitable remedy of rescission answers the affront to conscience occasioned by holding to a contract a party who has been influenced into making it by being misled or, worse still, defrauded by his counterparty. Thus, once he discovers the truth, he must elect whether to rescind or to proceed with the contract. It must follow that, if he already knows or perceives the truth by the time of the contract, he elects to proceed by entering into it, and cannot later seek rescission merely because he later obtains better evidence of that which he already believed, still less if he merely repents of it. This seems to me to be a fortiori the case where, as here, the misrepresentation consists of a disputed claim in litigation, and the contract settles that claim.’
Moore-Bick LJ said: ‘If it is to succeed in its action Zurich will have to persuade the court that it was induced to agree to the settlement by fraud on the part of Mr Hayward, a task that may not prove easy, given the fact that it already knew enough to justify the service of a defence in the terms indicated earlier.’
Underhill, Briggs, King LJJ
[2015] EWCA Civ 327
Bailii
England and Wales
Citing:
Cited – Arkwright v Newbold CA 1881
Cotton LJ discussed the tort of deceit and said: ‘In my opinion, it would not be right in an action of deceit to give a plaintiff relief on the ground that a particular statement, according to the construction put on it by the court, is false, when . .
See Also – Zurich Insurance Company Plc v Hayward CA 27-May-2011
The court was asked whether an action alleging that the settlement of an earlier personal injuries action was obtained by fraud should be struck out on the grounds that the issues are res judicata or that the action is an abuse of process because . .
Cited – Redgrave v Hurd CA 1881
The plaintiff, an elderly solicitor wishing to retire, advertised for someone to enter into partnership with him and to buy his house. The defendant responded to the advertisement and negotiations followed, in which the plaintiff stated that the . .
Cited – Strover v Harrington 1988
A property was at first wrongly described by the agents as having mains drainage. Correcting information was sent to the buyer’s solicitors by the Agents, but the solicitors did not pass on the correction to their client. The mistake was later . .
Cited – Sprecher Grier Halberstam Llp and Another v Walsh CA 3-Dec-2008
Ward LJ said: ‘a man cannot be deceived if he knows the truth’ . .
Cited – Callisher v Bischoffsheim 1870
The settlement of an ill-founded claim is nonetheless binding. However, that would not be the case where the claim was fraudulent. A forgoing of a bona fide but unfounded claim is good consideration for a payment made in settlement of it but not the . .
Cited – Gilbert v Endean CA 1878
The plaintiff had obtained an order against a defendant for the defendant to give a bond for payment of money to the plaintiff and to deposit some shares as security for compliance. Subsequently, the plaintiff entered into a compromise with the . .
Cited – Wauton v Coppard 1899
A statement was made as to the meaning or effect of a document can amount to an actionable misrepresentation. The defendant had said that running a boys’ school was not capable of amounting to nuisance, but he was wrong.The running of a boys’ school . .
Cited – Kyle Bay Ltd (T/A Astons Nightclub) v Underwriters CA 7-Feb-2007
The claimant had been insured under a business interruption insurance policy issued by the respondent defendaants. A claim had arisen, and had been settled, but the caimant said that the parties had mistaken the basis of the policy and had settled . .
Cited by:
Appeal from – Hayward v Zurich Insurance Company Plc SC 27-Jul-2016
The claimant had won a personal injury case and the matter had been settled with a substantial payout by the appellant insurance company. The company now said that the claimant had grossly exaggerated his injury, and indeed wasfiully recovered at . .
Cited – Gohil v Gohil SC 14-Oct-2015
The Court was asked ‘Do the principles referable to the admissibility of fresh evidence on appeal, as propounded in the decision of the Court of Appeal in Ladd v Marshall [1954] 1 WLR 1489, have any relevance to the determination of a spouse’s . .
Lists of cited by and citing cases may be incomplete.
Personal Injury, Litigation Practice
Updated: 29 December 2021; Ref: scu.544995