I am going to assume that this all happened or didn’t exactly as you/your friend say for my response.
In life, sometimes, false accusations are made. You know that they are false and that you did nothing wrong or an incident has been exaggerated. The thing is, sometimes you also do not have any or much evidence to prove that this is the case. Maybe, the other party has evidence which they have forged or a witness willing to lie for them?
You can continue to try to defend yourself legally, go all the way to court, but because you do not have the necessary evidence/proof all this is likely to mean is that you lose even more than you would if you settled with the other party.
Legal fees, time, additional stress and a larger demanded pay out are likely.
You can see from this thread how a third party who does not know you or your friend well is likely to react, because you do not have any evidence the fire was started by something besides negligence. The very fact it started on your friend’s property implies he caused the fire in some way. The other party can also point to the burning of weeds and rubbish on the property, even if this were coincidental and done at different times. You yourselves cannot explain the fire, but only say it was not caused by burning weeds or rubbish, and you believe the friend did not cause it. Meanwhile, the neighbours are providing a simple explanation, witnesses etc.
Life, sometimes, is quite cruel and unfair. Sometimes pragmatism is required, and finding ways to make the best of a raw deal.
The only alternative I can see, is that your friend finds compelling evidence he did not cause the fire through negligence, despite it starting on his property and the fire brigade not offering an alternate source or explanation (even if not naming him or something he has done as the cause). It’s not enough to say maybe it was solar lights or a cigarette, your friend needs actual proof instead of supposition because the fire started on his land. If it hadn’t started on his land potential liability would not be assumed. As such, the burden of proof lies with him.