Recent decisions highlight the risk of inadvertently settling more claims or releasing more parties than was actually intended.

  • Botleigh Grange Ltd v Revenue and Customs Commissioners [2016] EWHC 3081 (Ch) considered the scope of a consent order agreed between HMRC and a company in respect of a dispute over a winding-up petition. The High Court found that a reasonable person with the relevant background knowledge would consider that the company had not successfully preserved its rights and had thus lost its ability to bring a cross-claim.
  • Marsden v Barclays Bank plc [2016] EWHC 1601 (QB) concerned a settlement agreement which provided that the entry into a loan was "in full and final settlement of all complaints, claims and causes of action which arise directly or indirectly, or may arise, out of or are in any way connected with the Swaps".
  • The issue of a settlement with joint tortfeasors arose in Anthony McGill v Sports & Entertainment Media Group & 8 Ors [2016] EWHC Civ 1063 where the Court of Appeal concluded that a claimant's previous settlement with a contract breaker did not discharge the claimant's claims against other parties for inducing a breach of the same contract.
  • More generally, in Joseph Ackerman V (1) Andrew Robert Thornhill (2) Naomi Ackerman (3) Barry Ackerman (4) Bana One Ltd [2017] EWHC 99 (Ch) the High Court held that there is substantial public interest in finality in litigation, and that it was not in the public interest to permit settlement agreements to be undermined, except on the clearest possible grounds.

These recent cases serve as a useful reminder that:

  • There need to be very clear grounds to undermine a concluded settlement agreement;
  • As with any other contract, in interpreting a settlement agreement, the courts will try to determine what a reasonable person, with the parties' background knowledge, would have understood the relevant settlement terms to mean.
  • If more than one interpretation is available, the courts will strive to give the settlement agreement a meaning consistent with business common sense.
  • However, even very wide release wording will not usually be sufficient to show that the parties intended to settle fraud claims, unless express words are used.
  • Unless clear words are used to reserve the right to pursue other joint tortfeasors, settlement with one joint tortfeasor will generally be presumed to release all joint tortfeasors.
  • Careful consideration must be given to whether there is a single cause of action or separate causes of action against defendants and care should be taken in drafting any settlement to ensure that claims are not unintentionally released. To minimise the risk of unintentional release, an express reservation of the right to pursue other parties should be included or the settlement worded as an agreement not to sue as opposed to a release of liability.
  • Where there are separate causes of action against different defendants, the court is unlikely to conclude that a settlement with one will release the others from liability unless it is clear that the effect of the settlement is to extinguish the claimant's entire loss.