In reaching a settlement with one party, you need to be careful how it will affect potential recovery against another party.
The recent case of Costain Limited v Charles Haswell and Partners Limited once again raises the problem of settling with a party "up the line" and then taking proceedings against a different party "down the line".
Costain was engaged by United Utilities ("UU") to design and construct the Lostock and Rivington Water Treatment Works at Bolton. Costain retained Charles Haswell ("Haswells") as their civil engineering design consultants. Part of the design related to the design of the ground treatment works.
Haswells interpreted the geological data as showing the ground to be "predominantly granular". As a result Haswells recommended that a "surcharging" procedure be used. This procedure involves placing a load on the ground where foundations are later to be constructed in order to cause the ground to settle by a pre-determined amount. There are two types of surcharging: the first is known as "pre-loading". This involves applying a load to the ground broadly equivalent to the load which will ultimately be imposed by the relevant structure once it has been completed. The other is known as "surcharging" which, as its name suggests, involves applying a load to the ground greater than the load ultimately to be imposed by the completed structure.
Haswells recommended pre-loading. In the event, neither the interpretation of the geological data nor the recommendation to use pre-loading proved to be the right choice. Accordingly, Costain expended time and cost in testing the pre-loading, designing piled foundations and completing the piling works.
Costain sought to recover these costs against Haswells. At trial it was found that Haswells had been negligent, both in interpreting the geological data as showing the ground to be "predominantly granular" and for recommending pre-loading. However, Costain faced an uphill struggle in proving that part of its losses were attributable to Haswells' negligence.
The trouble was that, before claiming against Haswells, Costain had made two settlements. The first was with UU; the second was with Ondeo Degremont ("OD"), Costain's groundworks contractor. In the OD settlement, Costain had paid OD £850,000 for delay. The court found that Costain had not established a sufficient "causal link" between the delays which OD had suffered and the delays for which Haswells were responsible.
Haswell further argued that Costain had received monies within the UU settlement which related to the OD delay costs now being claimed against them. Case law established that it was firstly for Haswells to show a prima facie case of double recovery. If they did so, it was then for Costain to prove that there had, in fact, been no such double recovery. On the facts Haswells were able to require Costain to prove there had been no double charging. Due to the global nature of the UU settlement, Costain were not able to prove that the OD delay costs had not been included within the UU settlement. Accordingly, Costain could not recover those costs from Haswells for this additional reason.
The case shows the need to plan settlements very carefully. Where there is the likelihood of further recovery proceedings against a different party, the settlement must be structured to assist recovery against that other party.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
