In John F Hunt Demolition Limited v ASME Engineering 2007 EWHC 1507 (TCC), the court considered the position where Party A settles an action with Party B and then seeks to claim back the settlement sum from Party C, in circumstances where there was, in fact, no or very limited liability to Party B.

The case related to a building contract where the builder-claimant settled a dispute with its employer and then sought to recover the full amount of the settlement from its subcontractor. However, the claimant's liability to the employer was for a far lesser sum than that at which it had settled.

The court held that there is no principle of law that A must prove his liability to B before recovering against C the sums he paid to B. The question is one of reasonableness of the settlement.

The case is a useful reminder that, in concluding settlements with one party in a multi-party situation, where the paying party intends to recover some or all of the settlement amount from another party, clients should be advised of the risks that, if challenged, settlements may subsequently be held to have been unreasonable.