Part 36 Settlement and Henderson Abuse: Distinct Unpleaded Contract Claims May Proceed, but Known Unreserved Infringement Claims Are Barred

1. Introduction

In Lish v The Northern Block Ltd & Anor [2026] EWCA Civ 497, the Court of Appeal (Arnold LJ, with whom Coulson LJ and Moylan LJ agreed) revisited the Henderson v Henderson species of abuse of process in the context of a settled intellectual property dispute. The appellant (a typeface designer) had previously brought copyright infringement proceedings (the “Newcastle Claim”) against a type foundry (TNB) and its director. That claim settled when the defendants accepted the claimant’s CPR Part 36 offer.

The present proceedings contained three heads of claim, of which two mattered on appeal: (i) a contractual claim for unpaid royalties accruing before termination of the parties’ distribution agreement (the “Unpaid Royalties Claim); and (ii) a further set of copyright infringement claims concerning additional typefaces not pleaded in the Newcastle Claim (the “Infringements Claim”). The High Court struck out both as an abuse of process under CPR r.3.4(2)(b). The claimant appealed.

The key issues were (a) when a post-settlement claim “should have been” brought earlier (rather than merely “could have been”), and (b) how the finality of a Part 36 settlement interacts with unpleaded and/or unreserved claims.

2. Summary of the Judgment

• Appeal allowed in relation to the Unpaid Royalties Claim: it was not an abuse of process. It was distinct from the earlier pleaded causes of action, concerned a different period and different remedies, and had been asserted (though not pleaded) before settlement; the defendants settled knowing it was outside the pleaded case.
• Appeal dismissed in relation to the Infringements Claim: it was an abuse of process. It involved the same kind of issues and remedies as the earlier copyright claims; the claimant knew of the additional infringement allegations before settlement but did not plead or reserve them, so pursuing them after settlement undermined finality and unjustly harassed the defendants.

3. Analysis

3.1 Precedents Cited

The Court treated the governing principles as well-settled and drew heavily on modern appellate summaries:

• Henderson v Henderson (1843) Hare 100: the foundational “should have been raised” principle underpinning this form of abuse of process.
• Johnson v Gore Wood & Co [2000] UKHL 65, [2002] 2 AC 1: the leading authority, emphasising a broad merits-based judgment and rejecting any rule that a later claim is necessarily abusive merely because it could have been raised earlier. The Court of Appeal applied Lord Bingham’s focus on whether the later step is a misuse of process, usually involving unjust harassment.
• Dexter v Vlieland-Boddy [2003] EWCA Civ 14: Clarke LJ’s structured summary (approved in Aldi Stores Ltd v WDP Group plc) was used as a convenient checklist: burden on the party alleging abuse; greater caution where the later claim is against the same party; “unjust harassment or oppression” as a typical hallmark.
• Aldi Stores Ltd v WDP Group plc [2007] 1 WLR 1260, [2008] 1 WLR 748: relied on for the emphasis on finality and efficiency, and for the appellate restraint principle when reviewing first-instance abuse decisions.
• Orji v Nagra [2023] EWCA Civ 1289: important for the proposition that settlement can be as “final” as a judgment; it can therefore be abusive to use later proceedings to circumvent a settlement. The Court of Appeal in Lish accepted this, but stressed that the question remains whether the later claim undermines the settlement’s finality on the matters actually resolved.
• Stuart v Goldberg Linde [2008] EWCA Civ 2, [2008] 1 WLR 823: central to the Court’s rejection of a loose “reasonable diligence” expectation as a free-standing basis for abuse. Lloyd LJ warned against treating claimants as generally obliged to investigate potential claims pre-action; if diligence is relevant, it is fact-sensitive and the onus remains on the defendant alleging abuse.
• MW High Tech Projects UK Ltd v Outotec (USA) Inc [2024] EWCA Civ 844, [2024] 4 WLR 85: cited as the Court of Appeal’s recent comprehensive review of the doctrine, confirming the same principles and approach.

3.2 Legal Reasoning

(A) The Unpaid Royalties Claim: why it was not abusive

The High Court had struck the claim out largely because (i) the claimant could have withdrawn her Part 36 offer after learning (from a draft amended defence/counterclaim) that royalties might not have been paid as she assumed, and (ii) settling the Newcastle Claim and then suing for royalties was said to be oppressive and to prejudice the defendants. The Court of Appeal held that this analysis contained material errors and then re-made the abuse assessment.

1. Different causes of action, issues, period, and remedy. The Newcastle Claim was primarily a post-termination copyright infringement case (with the usual infringement remedies and a limited contractual accounting claim relating to post-termination receipts from pre-termination sublicences). The Unpaid Royalties Claim was a purely contractual pre-termination claim (construction of the distribution agreement and the alleged 2015 variation; whether sums due were paid), seeking an account of unpaid royalties. The Court held the issues and remedies were not the “same” (and not even meaningfully similar), which mattered to the abuse inquiry.
2. No undermining of settlement finality on what was settled. The settlement resolved the pleaded Newcastle Claim. It did not compromise the unpaid royalties claim (a conclusion the High Court had reached and which was not challenged). The Court of Appeal treated that as a strong indicator that pursuing royalties did not “reopen” what had been finally resolved.
3. Knowledge at settlement: defendants settled knowing the royalties issue had been raised (but was unpleaded). Before acceptance of the Part 36 offer, the claimant’s solicitors had asserted underpayment and sought information. The defendants’ solicitors refused on the basis that no such claim had been pleaded. The Court of Appeal considered it significant that, in this state of knowledge, the defendants accepted an offer explicitly directed to the “entirety” of the issued claim—i.e. the pleaded case—not a newly surfaced, unpleaded contractual claim.
4. No proper basis for “one hand tied behind their backs”. The Court rejected the High Court’s view that the defendants had prejudiced themselves by acknowledging copyright ownership in settlement: copyright ownership was irrelevant to the contractual royalties dispute. Any supposed negotiation disadvantage was also viewed as immaterial given the lack of connection between the “admission” and the royalties issues.
5. No requirement to withdraw the Part 36 offer or to warn that it excluded royalties. Applying Johnson v Gore Wood & Co, the Court held it was not enough that the royalties claim could have been added pre-settlement. The critical question was whether it should have been. The Court saw no reason why the claimant was obliged to derail settlement of the existing pleaded dispute in order to litigate a newly appreciated, distinct monetary claim. Nor did she need to “make clear” the claim was outside the Part 36 offer: the defendants had already taken the position that it was outside the pleaded case.
6. “Reasonable diligence” and notice findings were unsafe. The Court identified factual/legal missteps in the High Court’s alternative reasoning that the claimant “should have” realised earlier. In particular, she did take steps (requests for information) once the issue crystallised, and was met with refusal; and the High Court’s reasoning risked hindsight bias. This aligned with the caution in Stuart v Goldberg Linde.

On the re-made merits-based assessment, the Court concluded there was no “unjust harassment or oppression” in allowing a distinct, unadjudicated, unsettled claim to proceed. Striking it out would, on the Court’s analysis, amount to a denial of justice.

(B) The Infringements Claim: why it was abusive

The position was materially different for additional infringement claims concerning typefaces not pleaded earlier:

1. Same legal character as the earlier claim. Unlike the royalties claim, this was more of the same kind of case: copyright infringement allegations requiring substantially similar issues (ownership/infringement) and seeking the same kind of remedies.
2. Claimant’s knowledge and tactical non-pleading. The claimant accepted she could have included these typefaces in the Newcastle Claim and had made a pragmatic decision not to. That choice did not justify bringing them later after settlement.
3. Silence at settlement undermined finality and created unfairness. The Court held the defendants had every reason to think the Part 36 settlement concluded the claimant’s copyright claims. If the claimant intended to hold back additional infringement claims, the onus was on her to reserve them expressly before settlement. Pursuing them after settlement was therefore an abuse.

The Court accepted that the defendants’ settlement acknowledgement of copyright ownership in the pleaded typefaces could handicap their position (at least in negotiating leverage) in relation to the unpleaded typefaces, reinforcing the “unjust harassment” conclusion.

3.3 Impact

• Sharper line between “distinct new claim” and “more of the same”. The decision illustrates that post-settlement litigation risk is significantly higher where the later claim is essentially a continuation/expansion of the same pleaded dispute (as with additional infringement allegations), and significantly lower where it is a genuinely distinct cause of action with different remedies/time period (as with pre-termination unpaid royalties).
• Part 36 settlements: reserving known additional claims matters. Parties settling an IP claim via Part 36 should explicitly address whether the settlement is intended to resolve (or exclude) other known potential claims of the same type. Where a claimant knows of additional infringement causes of action, failing to plead or reserve them may bar later proceedings as abusive.
• Defendants cannot assume a settlement bars an asserted-but-unpleaded distinct claim—especially if they settle knowing it is being raised. If a defendant wishes finality beyond the pleaded claim, they should negotiate express release language or require the claimant to confirm no other claims will be pursued.
• Limits on “you should have investigated sooner” arguments. The Court’s treatment of the High Court’s “dots to be joined” reasoning, read with Stuart v Goldberg Linde, suggests courts should be cautious about converting hindsight and loose diligence critiques into an abuse finding, particularly where the defendant controlled relevant accounting information.

4. Complex Concepts Simplified

Abuse of process (Henderson v Henderson abuse)

A court can stop a second claim if bringing it misuses the court’s procedures—typically because it unfairly re-litigates matters that were (or should have been) resolved in earlier proceedings, causing unjust harassment or undermining finality.

“Could have been raised” vs “should have been raised”

Many claims could be brought earlier; abuse arises only where, in all the circumstances, they should have been brought earlier (a broad merits-based assessment, not a rigid rule).

CPR Part 36 offer

A formal settlement mechanism with costs consequences. Acceptance usually compromises the claims covered by the offer; disputes can arise about whether it also resolves other claims not pleaded or not clearly within scope.

Strike out under CPR r.3.4(2)(b)

A procedural power to dismiss claims that are an abuse of the court’s process (without deciding the full merits at trial).

Finality of settlement

Settlements are treated as final resolutions similar to judgments. But the “finality” extends to what was actually settled (and what, on a proper merits-based view, ought to have been brought and resolved at the same time).

5. Conclusion

Lish draws an important operational distinction in the modern abuse-of-process analysis. A claimant is not necessarily barred from pursuing a distinct contractual claim that was not pleaded and was known to be outside the pleaded case when the earlier action settled—particularly where it does not reopen the settled dispute. However, a claimant who knows of additional infringement claims of the same character as those already pleaded, and who settles without pleading or reserving them, risks having those later claims struck out as abusive for undermining settlement finality and causing unjust harassment.