Is a Settlement or Deed of Release With MVIL Binding?

Most MVIL claims settle. The law on settlements is ordinary contract law, but the reported cases show four points at which a settlement with the insurer has gone wrong.

A settlement binds MVIL, and can be sued on

In Wallace v MVIT [1991] PGNC 84; [1991] PNGLR 341 a quadriplegic’s claim was settled at K100,000, the then cap, on terms that included statutory interest and costs, before any writ was issued. The Trust paid the K100,000 and then denied liability for the rest. The court held that “in the absence of proceedings in the court before settlement was agreed the plaintiff was entitled to sue on the agreement to settle to enforce the terms thereof as to costs and interest”, that the Trust was estopped from denying the jurisdiction the agreement had conferred, and entered judgment with interest at 8 per cent from the accident. A claimant with a signed settlement therefore has a contract, and a contract claim, if MVIL does not perform.

A lawyer’s authority to settle

MVIT v Salem [1991] PGNC 65; [1991] PNGLR 305 held that “a lawyer on the record is ... authorised to bind his client by compromise of existing proceedings on terms which do not involve collateral or extraneous matters unless the client has limited his authority and has communicated that limitation to the other party”. A claimant who does not want his lawyer to settle without express instructions must say so, and the other side must know. Equally, a settlement agreed by MVIL’s lawyers binds MVIL.

Deeds set aside: the illiterate claimant

The courts scrutinise deeds of release signed by claimants who did not understand them. In Gene v MVIT [1994] PGLawRp 676; [1995] PNGLR 344 a father claiming for his daughter’s death had signed a deed of release “by thumb print”, as an illiterate villager, “in the absence of his legal advisers”, and the Trust had known he had lawyers when it obtained his signature. The court held the parties were not on an equal footing and set the deed aside. The case is a warning to insurers and a comfort to claimants: a release obtained by going around a claimant’s lawyer to a person who cannot read it will not stand.

Enforcing a deed: a separate action

A settlement that MVIL then fails to honour is enforced by suing on the deed, not by applying for judgment in the injury proceedings. In Kawage v MVIL [2008] PGNC 75; N3354 the plaintiff, having signed a deed for K80,000, applied for summary judgment in his damages action. The National Court dismissed the application and the proceedings as an abuse of process, with liberty to sue on the deed, observing along the way that K80,000 was far outside the range for the injuries when compared with Tabanto and Kulange. On appeal, Kawage v MVIL [2010] PGSC 16; SC1066, the Supreme Court held that the trial judge had rightly decided that the deed must be enforced by separate action but had erred in dismissing the whole proceedings as compromised, since the deed had been signed only by the plaintiff and MVIL had withdrawn from it. Whether MVIL was bound by a deed it had not executed was left for the fresh action. Summary judgment is in any event not available in a personal injury claim (John v MVIL [2022] PGNC 422; N9827).

Children and disabled claimants

No settlement of a claim by a child, or by a person under a disability, binds anyone until the National Court approves it under its protective jurisdiction. The court may refuse: None v MVIT [1990] PGLawRp 317; [1990] PNGLR 561 rejected a dependency settlement calculated on children being dependent only to 16; Tapie v MVIT [1986] PGNC 28; [1986] PNGLR 78 refused approval without proof that Basic Protection money had reached the children. Where approval is given, the child’s share is paid into court or to the Public Curator, as in Coady v MVIT [1985] PGLawRp 504; [1985] PNGLR 450, where the court also awarded the infant costs despite a payment into court exceeding the award, because the claim could only be settled with the court’s sanction.

Settling at the cap: losing the excess

A claimant whose damages exceed K150,000 should not settle with MVIL at the cap if he hopes to pursue the owner or driver for the balance. Gigmai v MVIL [2004] PGSC 26; SC750 held that a compromise is not an “award of damages made by a court” and section 54(5) cannot be invoked after it. See what happens if damages exceed the limit.