In the context of high profile celebrity phone hacking lawsuits, the English High Court has struck out claims for phone hacking on the basis that they were compromised by settlement agreements previously agreed between the claimants and the defendant newspaper group: Brazier v News Group Newspapers Limited & Leslie v News Group Newspapers Limited [2015] EWHC 125 (Ch)

Although the settlement agreements were drafted narrowly, by reference to specific claim numbers and with no mention of future claims, the fresh claims fell within their scope. The original pleadings had been drafted sufficiently broadly to cover the new allegations, even though those allegations were based on evidence that emerged only after the settlement.

The decision is a useful reminder that the construction of a settlement agreement, like any other agreement, will turn on the words used in the relevant context and against the relevant background facts. Even if a settlement agreement appears on its face to be drafted narrowly, by reference to a specific claim number, it may be found to have a broader effect, depending on the extent of the claims made in the original statements of case.

The judgment also illustrates the limits of the often cited “cautionary principle” that a court will be slow to find that a party intended to settle claims of which it was ignorant at the time of the settlement, in particular drawing an interesting distinction between “known unknowns” and “unknown unknowns”. The decision suggests that where at the time of settlement a claimant is aware that there may be further claims, but is ignorant of the detail, a court may be more likely to conclude that the settlement was intended to cover such claims than if the possibility of further claims was completely unknown. Sam Waudby, an associate in our London office, considers the decision further below.

Background

The two claimants had settled previous phone hacking claims with News Group Newspapers Limited (NGN). Each of the settlement agreements stated that the parties had “agreed terms in full and final settlement of the Claimant’s claim in proceedings [HC12C00607 / HC12A03643]”.

The claimants sought to bring fresh claims against NGN once new evidence of alleged further phone hacking emerged as a result of a Metropolitan Police Service investigation.

NGN applied for summary judgment, or for the claims to be struck out, on the grounds that the claims had been compromised by the settlement agreements. NGN argued that although the agreements settled the claims by reference to specific claim numbers, the pleadings in those claims were drawn widely enough to catch the phone hacking activities alleged in the fresh claims.

In contrast, the claimants argued that the original and subsequent proceedings were about distinct sets of phone hacking and so the fresh claims were not compromised by the settlement agreements. The claimants relied on the fact that the new claims were brought as a result of new evidence not available at the time of the compromise.

Decision

The court (Mr Justice Mann) concluded that the fresh claims had been compromised by the settlement agreements.

Since the settlement agreements were drafted specifically by reference to the claim numbers of the original claims, it was necessary to consider the particulars of claim in the original claims in detail. Mann J held that the original particulars of claim were broad enough that the new claims would have been included had the claimants been aware of them at the time because the original actions were, in effect, claiming in respect of all incidences of phone hacking.

Though the different sets of particulars focused on different incidences of phone hacking, this simply reflected the state of the claimants’ knowledge at the time. It was a significant factor in reaching this conclusion that the claimants had alleged that the information available at the time of the first set of proceedings was but the tip of the iceberg; they believed they had further claims but did not know their scope.

Mann J then proceeded to consider whether the claimants’ ignorance about the further incidences of alleged phone hacking meant that the words of the compromise should be construed in such a way as to exclude them from the compromise.

In deciding against such a construction, he had regard to the decision of the House of Lords in BCCI v Ali [2001] UKHL 8 in which a settlement was concluded in ignorance of the existence of other potential claims. Employees of BCCI had agreed a settlement of their redundancy claims in “full and final settlement of all claims of whatever nature that exist or might exist against the employer”. Despite the general wording of the agreement, the House of Lords held that it did not preclude the employees from bringing subsequent claims based on “stigma”, as at the time of the compromise it was not known or understood that such a claim could exist as a matter of law.

Mann J noted that it was plain from Ali that parties may be taken to have settled unknown claims. In Ali, Lords Bingham and Browne-Wilkinson indicated that the court would be slow to find that a party had intended to surrender claims he did not, and could not, have known about. However, Mann J pointed out, the remainder of their Lordships did not accept that formulation, as a general proposition, looking more to the particular circumstances of the case.

That reflected the fact that each case will turn on the wording of the release clause and the circumstances in which it was entered into. Although there may be a need for caution in ascertaining the intentions of the parties in relation to unknown claims, there is no principle that parties cannot be taken to have settled unknown claims, nor indeed any presumption.

An important difference between Ali and the present case was that here the claimants were not totally ignorant of the existence of further claims. They positively averred that there were wider phone hacking activities, though they did not know their scope. Accordingly, at the time of the settlement, the further phone hacking claims were “known unknowns”. By contrast, in Ali, the claim based on “stigma” was an “unknown unknown”.

In essence, the judge found that in the present case the claimants had decided to compromise their claims without becoming better informed of potential further causes of action, as they would have been had they waited to settle until after disclosure in the actions. In other words, they had elected to accept an offer in the knowledge that, whilst they knew there were further causes of action, they did not know how many and, crucially, were aware that they did not know how many. Therefore, their ignorance of the further claims did not affect the construction of the settlements.