Nasser Kazeminy v Kamal Siddiqi & Ors  EWCA Civ 416 2 April 2012
A settlement agreement entered into between two parties was concerned only with rights as between those parties and did not extend to any third party rights which one party subsequently acquired.
Mr Siddiqi obtained finance from Mr Kazeminy and Mr Grano under a series of tripartite agreements in order to develop certain technologies. Mr Kazeminy subsequently sought to enforce his rights under the tripartite agreements and, on the first day of trial, Mr Siddiqi and Mr Kazeminy entered into a settlement agreement (“the Settlement Agreement”). Mr Grano was not a party to those proceedings.
The Settlement Agreement stated that it was entered into:"in full and final settlement of all and any claims that the Claimants may have against the Defendants...whether past, present, or future and whether or not they are known or contemplated at the date of this settlement agreement arising under or in any way connected with...the proceedings or with any dealings between the parties concerning loans to or investments in the Defendant by the Claimant or whosoever...".
Subsequently, Mr Grano assigned all his rights against Mr Siddiqi in favour of Mr Kazeminy, and Mr Kazeminy started fresh proceedings based on the assigned rights. Mr Siddiqi applied to strike out the claim on the grounds that the rights Mr Kazeminy was seeking to enforce had been compromised by the settlement agreement.
At first instance the judge dismissed Mr Siddiqi’s application on the basis that the settlement agreement was only concerned with rights arising between Mr Siddiqi and Mr Kazeminy and not intended to extend to third party rights which were subsequently acquired. Mr Siddiqi appealed.
The Court of Appeal upheld the decision. The court noted that settlement agreements are to be construed in the same manner as other contracts, interpreting the words used by the parties in the way in which they would be understood by reasonable persons who were aware of the factual background known to both parties.
Whilst the words of the Settlement Agreement were so broad as to potentially cover third party rights, the true scope could only be determined by the context in which it was made. Both parties were aware that Mr Grano was in a position to make similar claims against Mr Siddiqi. As Mr Grano was not a party to the Settlement Agreement, it would have been obvious that it could not affect his rights, which he remained free to enforce in his own name or transfer to third parties. In addition, Mr Siddiqi did not suggest that the amount paid to Mr Kazeminy under the Settlement Agreement reflected the value of Mr Grano's claims.
Therefore, although the broad language of the Settlement Agreement supported the conclusion that the parties wanted to spread the net widely, it did not follow that they intended to spread it so wide as to compromise claims Mr Kazeminy would be in a position to make only if he acquired rights from Mr Grano.
As with any contract, the language of a settlement agreement is not the only factor in determining its scope. Where very broad language is adopted, its meaning will be looked at in relation to the context in which it is used. When seeking to settle a claim, language should be included to expressly cover the assignment of causes of action from third parties.