Compromise — Vitiation by mistake — Whether compromise of claim reached on basis of assumed legal position binding where subsequent judgment reversing that position — Appeal allowed
The respondent brought a personal injury claim against her landlords, the appellant council. She also claimed against two firms of solicitors for an alleged negligence in representing her in her action against the council. The two solicitors’ firms applied successfully before a recorder to strike out the claims against them on the ground that the claim form had not been served on time. The decision in their favour was based upon the view of the law reflected in two judgments, including Anderton v Clwyd County Council [2001] CP Rep 110.
In the meantime, the respondent brought a further claim against, inter alia, the council. She agreed to discontinue the first action against them on the basis that, in the light of the recorder’s decision in relation to the other defendants, the council would have succeeded in an application to strike out that claim.
Anderton was subsequently reversed on appeal. The respondent was given permission to appeal out of time against the recorder’s earlier decision, and, in the light of the new Anderton decision, one of the solicitors conceded the appeal.
The council then made an application either to stay the first action until the respondent had performed the agreement to discontinue or to strike out that claim on the basis that it had been compromised. That application was refused at first instance and on a first appeal. The council then brought a second appeal.
Held: The appeal was allowed.
The evidence did not disclose a true mistake of law, but merely a state of doubt. The compromise was a matter of give and take that should not lightly be set aside. The compromise had remained performable at all times, and that was, in itself, sufficient to put it beyond the reach of a common mistake of law: Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2002] EWCA Civ 1407; [2003] QB 679 applied. The essence of a compromise was finality. There was a real difference between the situation where a compromise had been agreed in ignorance of significant facts and the law that would be applicable to them, and the situation in the present case, where the compromise was agreed with no misapprehension of the facts, but merely an erroneous assumption about the law: Bank of Credit and Commerce International SA v Ali (No 1) [2001] UKHL 8; [2002] 1 AC 251 distinguished. Where a party wished to reserve its rights in the event of a subsequent judicial decision in a future case to which it was not a party, it should take it upon itself to stipulate for protection. In the present case, as a matter of construction, the risk of a future judicial decision affecting matters to the respondent’s advantage was impliedly accepted and bargained away by her then solicitors: Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349 considered.
John Norman (instructed by Barlow Lyde & Gilbert, as agent for Islington London Borough Council) appeared for the appellants, Islington London Borough Council; Philip Bartle QC (instructed by Alison Trent & Co) appeared for the respondent.
Sally Dobson, barrister
