Lloyd's Maritime and Commercial Law Quarterly
Relying on settlements: the rationale of Biggin v. Permanite
T.O.Trotman *
Introduction
1. A party (B) enters into a contractual transaction with another (C). Poor performance of his obligations under that transaction by C causes B to incur a liability to A. B chooses to settle that liability by agreeing to pay A £X. B seeks in legal proceedings to recover from C as damages for breach of contract, £X. According to the Court of Appeal in Biggin & Co. Ltd
v. Permanite
,1
B may recover £X if he can show that such sum was a reasonable settlement of A’s claim against B. B need not prove every item within £X, and the court can be satisfied that the damages claimed by B against C are “somewhere around” £X.2
I shall refer to this result as the “Biggin
principle”; to the dispute between A and B as the “settled dispute”; and to the action between B and C as the “substantive action”. A related scenario which I shall consider is where, following settlement with A, B seeks contribution from C under the Civil Liability (Contribution) Act 1978 where both
B and C are liable in some way to A.
2. Biggin
v. Permanite
has been considered recently in two cases of the Technology and Construction Court, P. & O. Developments
v. The Guy’s & St Thomas NHS Trust
3
and The Royal Brompton Hospital NHS Trust
v. Hammond
.4
The principle has been heavily criticized in a decision of the High Court of Australia, Unity Insurance Brokers Pty Ltd
v. Rocco Pezzano Pty Ltd
.5
The purpose of this article is to attempt to assess whether there is a rational basis for the Biggin
principle. It is tentatively suggested that
(a) it is a misuse of the rules of remoteness in contract following Hadley
v. Baxendale
6
to apply them to support the Biggin
principle;
(b) reported cases have used the language of remoteness when in reality considering a prior issue, did C’s default cause B to settle with A, and in what sum?
(c) the use of a policy basis (encouragement of settlements) to support the Biggin
principle has masked difficulties of causation and remoteness; and
(d) cases following Biggin
v. Permanite
have left unclear how much evidence, and of what kind, is required to establish that £X in para. 1 above was a reasonable settlement.
* Barrister, Deans Court Chambers, Manchester.
1. [1951] 2 K.B. 314.
2. Ibid.,
326, per
Singleton, L.J.
3. [1999] B.L.R. 3.
5. (1998) 193 C.L.R. 603.
6. (1854) 9 Ex. 341.
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