Natural Meaning Of A Settlement Agreement Releases Claims Against Party's Own Affiliates

• Jurisdiction: European Union
• Law Firm: Norton Rose Fulbright
• Subject Matter: Corporate/Commercial Law, Corporate and Company Law
• Author: Gill Davy, Emma Houldsworth and Akaash Harnal
• Published date: 17 January 2023

In Schofield & Anor v Smith & Anor [2022] EWCA Civ 824 the Court of Appeal held that a settlement agreement which included releases of the parties' affiliates had the effect of preventing one of the parties from bringing a later claim against its own affiliates, not just the affiliates of the other party. The court dismissed the appellants' argument that statements made before the conclusion of the settlement agreement could cast light on what the compromise reached in the settlement agreement was intended to achieve and which entities were covered by the releases. Pre-contractual negotiations were not admissible as evidence of the parties' intentions.

Background

The case arises out of a dispute between a group of companies and Barclays Bank Plc (the "Bank"). The Bank had provided loan facilities to, and had entered into interest rate hedging agreements with, the group. Upon the group's failure to meet its repayment obligations, the Bank appointed administrators to three companies in the group. The administrators instructed solicitors to review various claims the companies had asserted against the Bank. The administrators did not pursue these claims. However, by the end of the administrations and the discharge of the administrators, the companies had issued claims against the Bank on the grounds that it had missold swaps and made dishonest representations about LIBOR. This dispute was eventually concluded by a settlement agreement between the Bank and the three companies (the "Settlement Agreement").

Several years after the Settlement Agreement, the companies issued proceedings against (i) the administrators claiming that they should not have accepted the instructions and had breached fiduciary duties in the way they carried them out, including failing to pursue the claims against the Bank, and (ii) the solicitors appointed by the administrators alleging breach of fiduciary and other duties in their assessment of the companies' claims against the Bank. The administrators and solicitors applied to summarily dismiss these claims on the basis that the Settlement Agreement released them from such claims as they were "Affiliates" of the companies. The Judge agreed that the Settlement Agreement had released all the claims asserted against the administrators and most asserted against the solicitors. The Judge relied on the natural interpretation of the Settlement Agreement, which provided that the agreement was "in full and final settlement of all Claims any...