High Court orders evidence of settlement with other claimants to be excluded from trial

The High Court has held that evidence of settlement terms agreed with two other claimants was inadmissible in the trial of the remaining claimant's claims, or alternatively should be excluded pursuant to the court's power to control the evidence under CPR 32.1: Omanovic v Shamaazi Ltd [2025] EWHC 110 (KB).

The decision provides valuable guidance as to the circumstances in which a settlement with other parties to an action may be adduced as evidence at trial. It suggests that, applying the Court of Appeal's decision in Gnitrow Ltd v Cape Plc [2000] EWCA Civ 5561, until or unless there is a close link between the settlement and the issues the court has to decide, it is preferable that the settlement terms are not disclosed to the trial judge.

In coming to its decision the court emphasised the importance of the policy to encourage settlement in all cases, which could be undermined if the evidence were to be admitted. Interestingly, the court also commented that the defendant would be put in a difficult or impossible position if cross-examined on the settlement, given that the reasons for the settlement would be covered by legal professional privilege.

Background

The dispute related to the existence and terms of a contract the claimant, Mr Omanovic, said he had entered into with the defendants in relation to the development of a charitable donation platform that the second defendant, Mr Dainehine, had conceived and launched through his corporate vehicle, the first defendant.

Initially the proceedings also involved two other claimants (the "Other Claimants"), with all three claimants bringing claims for breach of contract as well as tortious conspiracy. More specifically, all three claimants alleged that they were promised equity rights in the first defendant, although the way in which each claimant sought to prove its case was different.

The Other Claimants settled their claims shortly before the trial started, and Mr Omanovic wished to use the fact and details of those settlements as evidence at trial. The defendants applied for an order excluding the evidence.

Mr Omanovic argued that the settlement evidence was relevant, or at least potentially relevant, and that before ruling whether it was admissible, the court should know what that evidence was, including as to the quantum of the settlements.

Mr Omanovic argued that the quantum of the settlements would indicate the extent to which the merits of the Other Claimants' claims were acknowledged: a settlement of a few hundred pounds having completely different connotations to a settlement for a few hundred thousand pounds. Mr Omanovic pointed to Mr Dainehine's denial that any contracts existed with any of the claimants, and argued that the settlement of the Other Claimants' claims for significant sums, rather than just nuisance payments, was inconsistent with this defence.

Mr Omanovic said that if the court were to conclude that, by settling the Other Claimants' claims in the sums that they did, the defendants must be taken to have at least implicitly acknowledged that there were contracts with those claimants, this would considerably strengthen Mr Omanovic's position that he too had a contract with the defendants. It would also go to Mr Dainehine's credibility, as it would suggest that he never had an honest belief in his defence.

The defendants argued that Mr Omanovic's reliance on the settlement evidence appeared to be based on the following assumptions, each of which was wrong:

• that because the defendants had settled the Other Claimants' claims, those claims should be treated as having been proved or admitted;
• that due to the defendants being treated as having admitted the claims, the defence of those claims was dishonest; and
• that because the defence of the Other Claimants' claims was dishonest, the defence to Mr Omanovic's claim was equally dishonest.

The defendants relied on the principles set out in the Court of Appeal's decision in Gnitrow (referred to above), in which the claimant, Gnitrow, had made a contribution claim against various defendants in relation to sums paid to its employees for personal injury. One of the defendants against whom Gnitrow had made a claim for contribution had settled its liability in relation to the contribution proceedings. The Court of Appeal held that details of that settlement were not relevant to the court's apportionment of damages as between the claimant and the remaining defendants. The only relevance was to ensure that there was no excess recovery by the claimant (ie that it couldn't recover more than it had paid to its employees), and the judge should not be permitted to see that evidence until it was necessary for that purpose. The defendants in the current case argued that, applying Gnitrow, since the claimants had different claims and were not seeking the same damages, there was no need for the court to see the settlement evidence.

Decision

The High Court (Spencer J) allowed the defendants' application. It held that the case should be decided on the evidence surrounding the formation of the charitable donation platform and any documents and oral evidence as to what was or wasn't agreed between the parties.

The judge noted that Mr Omanovic remained able to assert dishonesty on the part of Mr Dainehine. However, Mr Dainehine should not be put in an "impossible position" where he was cross-examined in relation to the settlements but the reasons for those settlements would be covered by legal professional privilege. The judge said that a decision to settle could have been based on a multitude of reasons, none of which recognised the validity of Mr Omanovic's claim or any dishonesty on the part of Mr Dainehine in defending the claims brought by the Other Claimants.

He also accepted the defendants' submission that admitting the evidence risked undermining the courts' policy to promote settlement.

The judge commented that the courts are constantly faced with denials of liability that are supported by statements of truth in claims that are eventually settled. It would set an extraordinary precedent if a party's decision to defend a case in the first instance implied dishonesty if they later settled the case.

Applying Gnitrow, until or unless there was a close nexus between the settlement and the issues the court had to decide, it was preferable that the terms of a settlement should not be disclosed to the trial judge. That was not the case here.

Even if the judge was wrong about the relevance of the settlement, he would have exercised his discretion to exclude the evidence, not just because of its prejudicial effect (which the court could have put out of its mind) but because of the difficult or impossible position it would put Mr Dainehine in, and because of the need to promote the policy to encourage settlement in all cases.