Disclosure of confidential settlement agreements

The recent High Court judgments in the case of Cadogan Petroleum Plc and others v Mark Tolley and others [2010] EWHC 1107 and [2009] EWHC 3291 give a good illustration of when a settlement agreement with one defendant will be disclosable to others.

The application arose in the context of a multi-party dispute relating to the sale of two gas processing plants. The claimants had entered into a settlement agreement on confidential terms with four of the fifteen defendants, as a result of which the action was dismissed against those defendants. A number of the remaining defendants applied for an order requiring the claimants to disclose the settlement agreement. The claimants did not oppose the application but the former defendants did.

The judge referred to the established test of whether an order for disclosure is necessary to dispose of the proceedings fairly; confidentiality is a relevant factor, particularly where it is the confidentiality of a third party to the action, but the paramount consideration is to ensure that every party has an opportunity for a fair trial. Here the judge held that if the remaining defendants did not have access to material which was germane to their liabilities there would be a potentially serious miscarriage of justice.

Accordingly, he held that the remaining defendants were entitled to disclosure of all aspects of the settlement agreement which related to the proceedings, but not those aspects which extended beyond the subject matter of the action. The settlement agreement was relevant to the quantum of the remaining defendants' potential liability and whether the claimants had properly mitigated their loss, as well as whether the settlement agreement might have the effect of releasing the remaining defendants. It might also be relevant to potential contribution claims against the former defendants, though the judge saw this as more doubtful.

The judge commented that, as a matter of public policy, there was a further reason for disclosure of provisions of the settlement agreement in which the parties attempted to restrict disclosure and the giving of evidence by the former defendants. Those provisions meant that the claimants would not be able to obtain disclosure or evidence from the former defendants other than by way of a court order. The judge said that the terms of the settlement agreement were relevant to the court both in considering whether to make such orders if applied for, and also to explain why the former defendants had not provided information or made themselves available for trial.

The result of this case is not surprising, but it is a useful reminder that confidentiality is not necessarily a bar to disclosure and that the terms of a confidential settlement agreement between some parties might have to be disclosed if relevant to remaining issues in the action.