Priory Caring Services Ltd v Capita Property Services Ltd - effect of release [2010] EWCA Civ 226 In 2003 Priory gave an undertaking promising not to issue court proceedings against its surveyor Capita in connection with the latter’s role in designing and supervising the repair of Priory’s hotel following a fire in 1998. In return at Priory’s request, Capita provided a witness statement to be used in an arbitration to support a claim against its insurers. Almost two years later, Priory discovered that the refurbished hotel had been disastrously affected by damp penetration which they attributed to the negligence of Capita’s surveyor Vince Owen. In 2008 they brought proceedings against Capita.

The release of claims against Capita was stated to be “in relation to matters arising from Capita’s appointment as surveyors to Priory Caring Services Ltd in relation to the Priory Hotel”. Priory argued that the release was limited to claims of which the parties were aware at the time the undertaking was given and did not cover its claim concerning damp penetration. It appealed against a decision striking out the proceedings.

The Court of Appeal dismissed Priory’s appeal. It found that Priory was a commercial concern which, with the assistance of its lawyers, made a deal with its eyes open, knowing of the possibility of negligence and worse on the part of Mr Owen. It was prepared to forgo claims it might be able to bring because of its keenness to buy Capita’s assistance in the arbitration claim against its insurers.

Comment: Priory relied upon the decision in BCCI v Ali where the House of Lords held that a widely-worded release did not extend to the bank’s employees’ claims for “stigma damages” since this type of claim did not as a matter of law exist, and whose existence could not have been foreseen, at the date when they agreed the release. This decision could not help Priory in the context of a dispute arising out of a construction contract since claims arising out of latent defects have been held to be precisely the kind of claims which may be expected to be within the contemplation of parties when they agree a generally-worded release of claims (see Mostcash Plc v Fluor Ltd). The courts will not intervene in such a case unless there is evidence of sharp practice where the party to whom the release was given knew that the other party might have a claim and knew that the other party was ignorant of this.