Full And Final Settlement ' A Cautionary Tale

• Published date: 05 July 2021
• Subject Matter: Corporate/Commercial Law, Insolvency/Bankruptcy/Re-structuring, Corporate and Company Law, Directors and Officers, Insolvency/Bankruptcy
• Law Firm: Mills & Reeve
• Author: Catherine Noble

Equitable Law Capital Limited (ELC) ran a legal redress scheme to fund claims against the mis-selling of bonds. It was under-capitalised, leading to a Ponzi like scheme which ultimately led to ELC's compulsory liquidation.

The liquidators of ELC issued claims against nine respondents, including the de jure directors, a de facto director and an insurance company. The claims included fraudulent and wrongful trading claims, as well as claims for TUVs, dishonest assistance and conspiracy.

The liquidators entered into a "full and final settlement of the claims" with the de jure directors. The agreement made no distinction between the claims giving rise to concurrent liability and those claims where there was joint and several liability between the respondents.

The respondents who were still engaged at the time of the hearing argued that the claims should not be able to proceed because the discharge of the de jure directors operated as a discharge of all the respondents.

Accepting that common law suggests that joint tortfeasors would be released, on the facts, the court concluded that a term should be implied into the settlement such that the other claims...