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Construction - Compromise agreement - Parties reaching settlement of action arising out of tripartite agreements
Kazeminy v Siddiqi and others: CA (Civ Div) (Lord Justices Mummery, Moore-Bick, Lady Justice Black): 2 April 2012
The claimant and the defendant reached a settlement agreement on the first day of a trial of an action between them and associated parties.
The trial had arisen out of the provision by the claimant of part of the finance needed to enable the commercial exploitation of certain innovative technologies developed by the defendant. Finance had also been provided by a third individual (G), and companies owned or controlled by him, resulting in tripartite agreements between the claimant, defendant and G. The settlement agreement had been between the claimant and defendant, and had provided that settlement had been entered in full and final settlement of all and any claims that the claimant had or might have had against the defendant, whether past, present or future and whether or not known or contemplated at that date of the settlement ‘arising under or in any way connected’ with the action.
Subsequently, G, and a company controlled by him, had executed a deed of assignment in favour of the claimant, under which they had transferred to the claimant all their rights against the defendant and his companies. The claimant commenced proceedings as assignee of G’s rights. The defendant applied to have those proceedings struck out on the grounds that the rights that the claimant had been seeking to enforce had been compromised by the settlement agreement. That application had been refused on the grounds that the context in which the settlement agreement had been made pointed to the conclusion that it had been concerned with rights arising only between the claimant and the defendant, and had not been intended to extend to rights that the claimant might, in the future, have acquired from third parties, including G. The defendant appealed.
The defendant submitted that the clear intention of the parties of the settlement agreement had been to capture every possible claim that the claimant might have had against the defendant then, or at any time in the future, and that the parties had chosen the particular language of the settlement agreement as a means of ensuring that the defendant would never need to fear another claim from the claimant in relation to the technology in question. The claimant submitted that the parties had not turned their minds to the rights of third parties, over which they had had no control, or to the possibility that the claimant might have acquired from a third party rights which he might then have sought to enforce against the defendant. The appeal would be dismissed.
There could be no doubt that both parties had been well aware that G had been in a position to make similar claims against the defendant based upon the same agreements as those which the claimant had been claiming. However, the defendant had not sought to join G as a party to the proceedings or to draw him into the settlement negotiations. It had to have been obvious, therefore, that the settlement agreement could not have affected G’s rights, which he had remained free to enforce in his own name or transfer to third parties as he wished. The defendant had to have been aware of that, but no attempt had been made in the settlement agreement to provide for the possibility that G might have chosen to assign his rights to the claimant, which had not been surprising given that it would have been very unusual to provide for such an eventuality in an agreement of that kind.
However, if that possibility had occurred to the defendant, one would have expected him to have ensured that the settlement agreement had provided for it in the terms. The fact that it had not, had suggested that the parties had not envisaged it as a possibility and that they had been directing their minds solely to claims arising between them as original parties. Moreover, since it had not been suggested that the amount paid to the claimant under the settlement agreement had reflected to any extent the value of G’s claims, as well as those of his own, the defendant would have obtained a significant windfall should they have come into the claimant’s hands. There had been no reason to think that the parties had had such an eventuality in mind.
The scope of the critical phrase ‘in any way connected’ had been potentially so wide that its meaning in the case had to be determined by the context in which it had been used. Although the broad language of the settlement agreement had supported the conclusion that the parties had wanted to spread the net wide, it had not followed that they had intended to spread it so wide as to compromise claims that the claimant would have been in a position to make only if he had acquired rights from G (see - of the judgment).
Neil Kitchener QC and David Caplan (instructed by Pinsent Masons) for the claimant; Robert Miles QC and Richard Hill (instructed by Herbert Smith) for the defendant.
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