In the recent case of Vanden Recycling Ltd V Tumulty & Others (2015) (“Vanden”) the court has revisited the question of whether settlement of a claim against one defendant in a case involving several defendants was a bar to the continuation of the proceedings against the remaining defendants.
Vanden was an operating subsidiary of Vanden Global Limited (“VGL”) based in Hong Kong, a group of companies involved in plastic waste management specialising in buying industrial and commercial plastic and selling it on to third party customers for a profit.
From 7/10/13 Vanden employed Bevin Tumulty as a business development officer. Her duties included the development of Vanden’s European customer base including developing purchaser relationships in Holland.
Two specific customers of Vanden for whom Ms Tumulty had responsibility were Bolton Brothers Limited (“Bolton”), a waste management company based in Ipswich and Kras Recycling BV (“Kras”), a Netherlands company carrying out a range of waste management services.
In December 2013 Vanden and Kras established a commercial relationship resulting in Vanden both purchasing plastic waste from Kras and selling it on to them. VGL and Kras entered into a non-disclosure and non-competition agreement on 13/12/13. The provisions of the agreement were to apply to VGL and all its subsidiaries.
In mid-March 2015 Vanden agreed with Ms Tumulty that in future she would focus solely on the purchase of plastic waste rather than its sale. However, shortly after this agreed change of role Ms Tumulty resigned.
Vanden were suspicious of the timing of her resignation which they viewed as being designed to cause maximum disruption to their business. Accordingly, Vanden instructed a computer forensics company to carry out an investigation and analysis of her work laptop and mobile phone. Vanden considered the findings produced significant evidence of unlawful conduct during late 2014 and 2015 showing Ms Tumulty providing confidential and commercially sensitive information to both Bolton and Kras. Vanden also considered the findings showed an intention by all three parties to divert business away from Vanden.
The court proceedings
Vanden commenced proceedings against all three parties on 18/5/15. Vanden sought, in relation to each of the three parties, an injunction and account of profits or, alternatively, damages in relation to Ms Tumulty’s breach of confidence and/or for conspiracy to harm Vanden by unlawful means. Damages were stated to be limited to £100,000.00.
At a hearing on 22/5/15 the court granted orders for interim relief sought against Ms Tumulty and Bolton, all parties having given appropriate undertakings, including undertakings by Ms Tumulty and Bolton as to disclosure and delivery up of documents belonging to Vanden and VGL. Directions were also made as regards the continuance of the proceedings to trial for the claim against Kras which had not yet been served due to it being resident outside of the jurisdiction.
The proceedings were eventually served upon Kras on 4/6/15 and correspondence entered into between solicitors as regards undertakings being sought by Vanden against Kras. In the meantime, following disclosure provided by Ms Tumulty and Bolton, Vanden agreed terms of settlement with these defendants.
The consent orders
Two separate consent orders were made by the court in relation to the terms of settlement with Ms Tumulty and Bolton.
The first order (“the Bolton order”)
This was dated 25/6/15 and set out the terms agreed with Bolton. It provided, so far as is relevant:
3. The Second Defendant is to pay the total sum of £275,000 in full and final settlement of the Claimant’s claims against the Second Defendant in these proceedings together with interest and costs …
4. All further proceedings in these proceedings as against the Second Defendant be stayed forthwith …
5. The Claimant is permitted to retain and make use of all disclosure that has been provided by the Second Defendant in these proceedings in respect of its continuing claim against the First Defendant and the Third Defendant.
14. The Second Defendant shall pay the sum of £275,000 … (the “Settlement Sum”) to the Claimant in full and final settlement of the Claimant’s claims against the Second Defendant in this action.
15. The Settlement Sum shall be paid to the Claimant as follows:
(a) £200,000 … must be paid within 14 days from the date of this Order.
(b) The balance of £75,000 … must be paid by 31 August 2015.
The sums required to be paid were duly paid by Bolton.
The second order (“the Tumulty order”)
This was dated 26/5/15 and set out the terms of agreement with Ms Tumulty. The order recorded Ms Tumulty’s admissions to the allegations of misconduct made against her, and also provided, amongst other things, for there to be judgment in Vanden’s favour against Ms Tumulty as regards the admissions, with damages to be assessed in due course.
Kras’ position in the proceedings
On 9/7/15 Kras filed a defence denying all allegations of unlawful conduct.
Vanden’s application for interim relief against Kras was listed to be heard on 20/7/15. Witness statements were filed by both parties which detailed an extensive factual dispute between the parties. Limited undertakings were given and on this basis no order was made on Vanden’s application and instead directions were given as regards the continuance of the matter up to and including trial.
At this stage, both parties were proceeding with the claim on the basis that it would progress to trial. However, on 23/10/15, without any prior notice of its intention to do so, Kras issued an application for Vanden’s claim to be struck out as an abuse of the court’s process or as otherwise likely to obstruct the just disposal of the proceedings or, alternatively, for summary judgment to be entered in its favour on the basis that Vanden had no real prospect of succeeding with the claim as against Kras.
Kras advanced three grounds in support of its application that Vanden’s claim should be struck out or for summary judgment. The primary submission (in respect of which the application was determined) was that since the judgment by consent against Bolton had been satisfied a satisfied judgment against either joint or concurrent tortfeasors discharges the tort so there was no claim left to pursue against Kras.
Vanden opposed Kras’ application contending, in relation to Kras’ primary submission, that there was no decided case in the field of employee competition litigation where settlement on terms with one defendant has led to the claim against another being struck out in this way. Vanden submitted that there was no reference in the order to a “judgment” and accordingly no “judgment” had been satisfied – the fact that Bolton had complied with its payment obligations was not the same thing. Lastly, Vanden submitted that the wording of paragraph 5 of the order made it clear the claim against Kras was continuing.
The court was referred to two previous cases, namely Bryanston Finance Limited v de Vries (1975) (“Bryanston”) and Jameson V CEGB (1998) (“Jameson”) as well as the views of the editors of Halsbury’s Laws, the latter of which stated “Judgment recovered against any person liable in respect of any debt or damage is not a bar to an action, or to the continuance of an action, against any other person who is (apart from any such bar) jointly liable with him in respect of the same debt or damage. However, a satisfied judgment (except in the case of a foreign judgment) is a bar to a claim against other tortfeasors, whether joint or several, who are liable for the same damage.”.
In Bryanston the Court of Appeal held that Section 6(1)(a) of the Law Reform (Married Women and Tortfeasors) Act 1935 (as subsequently re-enacted and extended by Section 3 of the Civil Liability (Contribution) Act 1978) abolished the former common law rule that judgment against one tortfeasor barred proceedings against the others. The consent judgment in that case had not been satisfied but the court made it clear that if it had been, there would have been a good defence to the claim against Mr de Vries.
In Jameson the House of Lords stated “… a claim for damages in tort is a claim for unliquidated damages. It remains unliquidated until the amount has been fixed by the judgment of the court or by an agreement as to the amount which must be paid to satisfy the claim. It cannot be doubted that once the amount of damages has been fixed by a judgment against any one of several concurrent tortfeasors, full satisfaction will have been achieved when the judgment is satisfied…. In the case of concurrent tortfeasors a judgment recovered against one of them did not put an end to the cause of action against any of the other tortfeasors until it had been satisfied … Section 6(1)(a) of the Law Reform (Married Women and Tortfeasors) Act … altered the common law on these matters. As the law now stands, a plaintiff is barred from going on with a separate action against another tortfeasor if the judgment which he has obtained in the first action has been satisfied.”.
Having considered the relevant authorities, the court rejected Vanden’s contentions. It held there was no basis for the suggestion that the order should not be regarded as a consent judgment. Consent judgments and orders are referred to interchangeably at CPR 40.6 but what mattered was substance rather than form. The parties had chosen not to file a “Tomlin” form of order with the proceedings stayed on agreed terms scheduled to the order. No interpretation of a straightforward court order could remove or reduce its status as a judgment of the court containing the terms agreed by the parties. The court noted that to date this point had not arisen in the specific context of employee litigation but there was no basis for suggesting that the principle should not apply in such litigation. The consent judgment against Bolton having been satisfied there was now a bar to the continuance of the claim against Kras – satisfaction had extinguished the claim against the concurrent tortfeasors.
In the circumstances, whilst it was considered inappropriate to describe the claim as an abuse of the court’s process or such as to justify an order that the claim be struck out, the court found in favour of Kras and ordered summary judgment in its favour on the basis that there was now no real prospect of success for the claim against Kras.
The case serves as a useful reminder to all parties to litigation to ensure that extra care is taken when settling claims with one of several defendants if the intention is that the claimant should be able to continue with proceedings against other parties.
For more information about this case or to find out more about how the Dispute Resolution team can help you please contact Ally Tow on 0118 952 7206 or email [email protected].
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