The Court of Session recently issued a decision in the case of Loretto Housing Association Limited v Cruden Building and Renewals Limited and Ors, in which the court was asked to examine the rights that one party has to claim a right of relief against another party under the Law Reform (Miscellaneous Provisions) (Scotland) Act 1940. The case serves as an important reminder of the steps which must be taken when settling a multi-party action if there is a potential right of relief against any other party.
Background
An action for damages was raised by Loretto in respect of building works carried out at a property in Glasgow. Two defenders, including Cruden, were sued. Cruden convened three third parties to the action and argued that the third parties were also to blame for the defective works. Shortly before proof, Cruden agreed to settle Loretto’s claim for a six-figure sum. Settlement was reached ‘extra-judicially’ and decree of absolvitor was granted in favour of Cruden.
Cruden then sought to recover the sums it paid to Loretto from one of the third parties under the Law Reform (Miscellaneous Provisions) (Scotland) Act 1940. The question for the court was whether Cruden had been ‘found liable’ for Loretto’s claim.
Decision
The court held that the terms of the Act are clear. For a party to be able to seek a contribution from a joint wrong-doer, there must be a formal court decree stating that the party has been found liable for the claim. The terms of the extra-judicial settlement agreement reached between Loretto and Cruden did not meet the requirements of the Act and Cruden was unable to seek a contribution from the third party.
There are many reasons why an extra-judicial settlement might be considered in a case, including a desire to reduce costs by reaching a global settlement with the pursuer, or for other commercial reasons. However, this case serves as a reminder to those involved in multi-party actions to carefully consider how such cases are settled. In many cases, the most straightforward approach will be to settle the case by way of Minute of Tender and Acceptance. If an alternative means of settlement is to be used, advice should always be sought on the form and wording to ensure that any right of relief is not prejudiced.
A link to the decision can be found here.
For more information or advice, please contact one of our experts in our Casualty Injury Team.
