The recent decision in Boyd v (First) Gates (UK) and Others 2015 CSOH 100 concerned an action for damages for a personal injury resulting from exposure to asbestos. In this case, the defenders agreed to an extra- judicial provisional settlement, under Section 12 of Administration of Justice Act 1982. Whilst parties agreed on the appropriateness of a Section 12 order, there was a dispute as to whether or not the defenders required to admit liability to effect settlement under Section 12.

Submissions

The pursuer submitted that the wording of Section 12 meant that any order either had to be preceded by a proof or the admission of liability by the defender. The offer of provisional damages carried with it an implied offer to admit liability, as, once the damages were accepted, it was implicit that there was no remaining issue of liability. Further, failure to find in their favour would leave the status of Section 12 in doubt, as there would be the potential for a court to find, further down the line, that there was no entitlement to damages and the provisional damages needed to be repaid.

The second defenders rejected the position of the pursuer, arguing that there is no requirement for a defender to admit liability in extra-judicial settlements on a provisional basis; highlighting that there are a number of economic reasons where it is in a defender’s interest to settle a case without conceding liability and, further, at the time of settlement, there was no agreement that settlement was dependent on an admission of liability. The second defenders submitted that, if liability is required to be admitted to provisionally settle, it would prevent disposal of these cases on an economic basis, where there is potentially a defence on liability, but it would be uneconomic to advance it. To do so would restrict the ability to defend liability when certain specified return conditions are met and it might be economic to defend on liability.

Decision

Lord Uist issued his judgment this morning in favour of the Pursuer. He stated that, on review of the wording of Section 12, an act or omission giving rise to action must amount to a wrongdoing. Further, the court would not issue an interlocutor concerning damages unless liability had been accepted. Thus, in light of both these points, by agreeing to a Section 12 order, the defender implicitly admitted liability. The decision is currently being considered by the second defenders and Counsel to determine whether or not an appeal should be marked.

Impact

This decision, as it stands, will have a notable impact on the way insurers and employers consider provisional settlements in low value claims. If there is a potential defence on liability, provisional settlement on an economic basis will require that the defence be conceded, which will mean that insurers and employers will lose the right to argue that they are not liable, if the pursuer develops more serious specified return conditions, when it may be economic to advance the defence.  

As an alternative to provisional settlement, Lord Uist suggested that the defenders could have agreed a sum for the damage sustained to date, on an interim basis, under Rule of Court 43.11 (3)(b), with an agreement between the parties to either sist the case or leave the case open to allow redress in the event that the more serious condition develops. Ordinarily, payment of interim damages does not lead to the matter being sisted, but is a pure interim payment prior to proof on quantum where liability is admitted. Further, the court is reluctant to sist matters indefinitely. If the court allows matters to be sisted indefinitely on payment of interim damages, as mooted by Lord Uist, this may allow pragmatic economic resolution of low value claims, such as pleural plaques, reserving the right to defend the claim on liability, if return conditions are met. The practical corollary of this option will be that the Courts will become cluttered with sisted actions and require to hold court processes indefinitely.

Defending parties will require to consider the age of the pursuer and strength of their defence on liability that they are being asked to concede by entering into provisional settlement. If pursuers insist on provisional settlement or Proof, as many do, we may find that more low value claims proceed to Proof.