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A Court of Appeal decision highlights the need for care when settling with one of a number of defendants

The Court of Appeal has found that a claimant who settled a claim against one defendant by recording the terms in a consent order, which was satisfied, could not continue its claim against another defendant who was liable for the same damage.

However, the settlement did not prevent the claimant pursuing claims against the other defendant in relation to separate losses or for remedies other than damages, such as injunctive relief: Vanden Recycling Limited v Kras Recycling BV [2017] EWCA Civ 354

The decision emphasises that where a claimant settles a claim against only one or more of multiple defendants the settlement needs to be carefully structured.

In particular, where the terms of settlement are recorded in a consent order, this is likely to be treated as a judgment by consent which fixes the full amount of the claimant’s loss, whether or not that was the parties’ intention. Where such a judgment has been satisfied, this will prevent the claimant from pursuing other defendants who are liable for the same damage.

If the claimant wishes to preserve its right to make a claim against other defendants who are liable for the same loss, the settlement terms should not be recorded in the body of a consent order. Instead the parties should enter into a freestanding settlement agreement, or alternatively a Tomlin order – ie a consent order staying the proceedings on agreed terms and granting the parties permission to apply to the court for the purpose of enforcing those terms, which are set out in a schedule or separate agreement referred to in the order. The agreement should expressly reserve the claimant’s right to sue the other defendants, which will be particularly important where the liability is joint.