Adam Korn assesses a case that affects the timing of bringing partial settlements

The Court of Appeal has recently ruled in a case of considerable significance to personal injury practitioners.

In Drinkall v Whitwood [LTL 6/11/2003: TLR 13/11/2003: (2004) 1 WLR 462], the court ruled that partial settlements of claims brought by those under a disability are not legally binding on the parties to such settlements until approved by the court.

The claimant was 14 years old when she was cycling home from school and was injured when she was hit by the defendant's car.

When the claimant was still a minor her solicitors made an offer in pre-action correspondence under Civil Procedure Rule (CPR) part 36.10 to settle liability 80:20 in her favour.

The defendant's insurer's loss assessors accepted the offer.

Some 18 months later and 22 days short of the claimant attaining her majority, the defendant's solicitors sent a letter to the claimant's solicitors withdrawing from the liability agreement, giving no reason for doing so.

Later, they said that they wished to contend for a higher degree of contributory negligence because the claimant had not been wearing a cyclist's helmet.

The claimant subsequently issued a particulars of claim relying on the pre-action exchange of letters which, she pleaded, constituted a binding agreement on the issue of liability.

The defendant denied that a binding agreement had been reached, pleading that the claimant, a minor, was '...unable to enter a binding settlement whether as alleged or at all without the approval of the court, which approval was not sought or given'.

The issue of whether or not there was a valid compromise agreement was tried as a preliminary issue.

The point hinged on the true construction and application of CPR 21.10:

'21.10(1) Where a claim is made (a) by or on behalf of a child...

no settlement, compromise or payment and no acceptance of money paid into court shall be valid, so far as it relates to the claim by [or] on behalf of...

the child, without the approval of the court.

'(2) Where

'(a) before proceedings in which a claim is made by or on behalf of [a] child ...

(whether alone or with any other person) are begun, an agreement is reached for the settlement of the claim; and

'(b) the sole purpose of proceedings on that claim is to obtain the approval of the court to a settlement or compromise of the claim, the claim must:

'(i) be made using the procedure set out in Part 8 (alternative procedure for claims); and

'(ii) include a request to the court for approval of the settlement or compromise.'

The claimant's argument was that claim in CPR 21.10(1) referred to the whole claim, and that until the whole claim was settled there was no obligation under the rules to have the settlement approved.

Until such time as settlement of the whole claim was achieved, the normal rules of contract law applied so as to make the settlement enforceable by the claimant but not against her, and that any other construction would be to place her under a considerable disadvantage in litigation.

The defendant's argument was that it is illogical and inconsistent to read claim in CPR 21.10(1) as referring to the whole claim, and that the court was bound to follow the House of Lords authority of Dietz v Lennig Chemicals Limited [1969] 1 AC 170.

The claimant succeeded at first instance but not in the Court of Appeal.

In deciding the appeal in the defendant's favour, the court followed Dietz.

This was a claim brought by a widow against her husband's employers for damages arising out of her husband's death.

Before proceedings were issued, the claimant widow accepted the defendant's offer of 10,000 to settle her and her infant son's Fatal Accidents Act claims 'subject to the approval of the court'.

An originating summons was issued for the court to approve that settlement.

Between the issuing of the summons and the hearing of the application, the claimant remarried, unknown to the solicitors on either side.

The master duly approved the settlement but, before the consent order had been drawn up, the defendant's solicitors learned of the claimant's remarriage and applied to set the order aside.

The master acceded to that application and his decision was appealed to the judge, the Court of Appeal, and finally the House of Lords.

The point decided in Dietz and revisited in Drinkall was whether or not the settlement agreement, prior to its approval, was binding on the parties (or at least on the defendants) or whether either side could repudiate.

The point was decided against the claimant on the grounds that such was the true effect of order 80, rule 11 (equivalent to CPR 21.10(I).

(At the time the rules governing settlements on behalf of claims brought by claimants under a disability was RSC order 80 rules 11 and 12.

This has been replaced by CPR 21.10(1) and (2), identical to the old rule in all essential respects.)

In Drinkall, Lord Justice Simon Brown found Dietz '...decisive upon the present appeal...' He considered whether a different result might be possible in Drinkall as Dietz involved the settlement of the whole claim.

He found that 'paragraph 1 ...

was drafted essentially without thought for partial settlements'.

He said the most obvious reading of paragraph 1 of part 21.10 was that 'the settlement of the claim' there referred to final settlement of the whole claim.

He pointed out that 'the claimant would hardly otherwise be issuing proceedings under part 8; rather he would be seeking approval within an ordinary part 7 action'.

However, he found: 'The real difficulty with the argument...

becomes apparent when examining its consequences.

If part 21.10 is really to be construed as having no application to partial settlements, then it would follow that, provided only one aspect of a claim remained in contention (perhaps only a minor head of damage in a high value case) the court's approval would not be required at all.

Take this very case and assume that quantum were to be contested: the 80:20 liability split never needed approval...

The rule need not be and accordingly should not be construed so as to produce this absurd result.'

The court was alive to the fact that its judgment worked a 'regrettable' result.

The judges expressed surprise that the case of Dietz had not found its way into either the Green Book or White Book and raised the possibility of a change to the rules.

The ruling in Drinkall has far-reaching consequences.

It is usually the case that personal- injury claims are settled piecemeal over a long period.

This is particularly true of larger claims, where it will be open to defendants' lawyers to argue right up to the point of approval by the court, that any partial settlement of the claim is not binding on them.

As the Court of Appeal recognised, this course would not be open to defendants' lawyers in claims brought by claimants of full age or sound mind.

This creates a problem for those acting for claimants under a disability: how to settle their clients' claims piecemeal with any confidence?

The 'absurd result' identified by Lord Justice Simon Brown is unlikely to materialise in practice (claims get settled or abandoned).

And less absurd than the consequences of the judgment in Drinkall, is that minors and patients - among the most vulnerable claimants who come before the courts - are placed at a considerable disadvantage in settling their personal injury claims.

This was not the intention of the rules committee.

But be that as it may the point arising from Drinkall is clear: lawyers representing minors or patients in personal injury actions should bring partial settlements before the court for approval at the earliest possible stage.

Adam Korn is a Barrister at 7 Bedford Row