Ferraris, Frauds And Settlement Agreements

• Published date: 27 April 2023
• Subject Matter: Litigation, Mediation & Arbitration, Criminal Law, Trials & Appeals & Compensation, White Collar Crime, Anti-Corruption & Fraud
• Law Firm: Norton Rose Fulbright
• Author: Mr Jack Beevers

In two recent judgments, Maranello Rosso Ltd v Lohomij BV & Ors [2022] EWCA Civ 1667 and ED & F Man Capital Markets Limited v Come Harvest Limited [2022] EWCA Civ 1704, the Court of Appeal has provided significant guidance on the principles applicable to the interpretation of settlement agreements.

Maranello

Background

The claim was brought in relation to the auction of an extremely valuable collection of cars including vintage Ferraris. The sale did not generate the returns expected and the claimant brought a claim including for negligence and breach of duty against the auction house. The parties entered into a settlement agreement which included a clause that released the defendants from "all and any Claims". "Claims" was very widely defined under the agreement but did not specifically refer to claims in fraud or dishonesty. The claimant subsequently issued new proceedings against the defendants alleging unlawful means conspiracy and wrongdoing before and after the settlement. The case turned on whether the settlement agreement compromised the claimant's new claims.

Decision

The Court of Appeal upheld the decision of the High Court. The "cautionary principle" means that, in the absence of express words, a court will not readily conclude that a reasonable person would understand a release to refer to fraud or dishonesty claims. However, the usual principles of contractual construction applied to settlement agreements and there is no set requirement for express wording to release claims in fraud or dishonesty. The object of the Court is to give effect to what the parties intended and here the parties could have easily excluded fraud from the scope of the provisions in the agreement had they intended to do so.

The Court took into account the commercial and factual context in which the dispute had been settled which included the allegations and accusations already made by the claimant. It applied the test referred to in Satyam Computer Services v Upaid Systems Limited [2008] EWCA (Civ) 487 that if the parties, on entering the settlement agreement, had been asked whether the claimant could thereafter bring claims including as part of an unlawful means conspiracy claim, the answer would surely have been that they could not.

ED & F

Background

The claim related to forged warehouse receipts for nickel, purchased by the claimant from two Hong Kong companies (D1 and D2) for a total of US $284m. The claimant, unknowingly, then sold the forged receipts on to ANZ...