Settlement Agreement - Later discovery of misrepresentations
A settlement agreement, like any agreement, is subject to contract law and can only be set aside in a narrow set of circumstances. In this instance, Mr Hayward suffered an injury at work and brought a claim against his employer. His claim was supported by expert evidence from an orthopaedic surgeon. The employer’s defence was conducted by their insurers, Zurich, who argued that Mr Hayward had exaggerated the extent of his injuries. The parties reached an out of court settlement under which Zurich (on behalf of the employer) agreed to pay £134, 973.11 in full and final settlement.
About two years later Mr Hayward’s neighbours contacted the employer to say they believed Mr Hayward’s claim to have a serious back injury was dishonest and that he had fully recovered at least a year before the settlement. Zurich commenced proceedings for deceit and claimed that his statements, and his accounts to medical experts, constituted fraudulent misrepresentations.
The Court of Appeal held that a defendant could not seek to have a settlement agreement set aside at a later date simply because it could then show that the factual statements relied upon in the case were false. It was Zurich’s risk and it chose to settle rather than to fight the claim. The position would be different if the factual statements were not just false but fraudulently made (Callisher v Bischoffsheim (1870) LR 5 QB 449).
As the Court noted, ‘it may stick in the throat’ that a claimant can retain the reward of his dishonesty in a case such as this but the point is that where a defendant has its eyes open to the possibility of fraud it cannot later complain about it. The court also underlined that there is an important public interest in the finality of settlements.
(Hayward v Zurich Insurance Company plc [2015] EWCA Civ 327)
Posted on 06/02/2015 by Ortolan
