REUTERS | Mike Blake

All wrapped up? Is your settlement really full and final?

In Kazeminy v Siddiqi, a “full and final settlement” wasn’t so final. It’s a valuable reminder of the first rule of settlement.

Picture this: it is 10pm on the second day of a mediation. The sandwiches are stale, the experts have gone home and the mediator’s fees kicked into hourly rates four hours ago. You know the feeling. Somehow, the negotiators find enough common ground to reach a deal. Nobody is ecstatic with the outcome, but that’s mediation.

Full and final?

You reach for your template settlement agreement and fill in the blanks: the parties, the dispute, the settlement sum. You make a quick check of the settlement clause:

“This Settlement Agreement is entered into in full and final settlement of all and any claims, actions, liabilities, costs or demands that the Claimants have or may have against the Defendants whether past, present or future and whether or not known or contemplated at the date of this Settlement Agreement arising under or in any way connected with these Proceedings or with any dealings between the parties concerning the Project.”

The standard wording will cover it, won’t it? Pay the settlement sum and we’re off the hook forever. Maybe. Maybe not.

Nasser Kazeminy v Kamal Siddiqi

Very similar wording was used to settle High Court proceedings between Nasser Kazeminy and Kamal Siddiqi in 2010. Eight months later, Mr Kazeminy commenced proceedings against Mr Siddiqi in respect of the same transaction that the settled proceedings related to. And the Commercial Court (and then the Court of Appeal) agreed that he could.

How could that happen? If the combination of words like “full and final”, “all and any”, “whether or not known” and “in any way connected with” can’t let you sleep at night, what will? As you might have anticipated, the Court of Appeal’s decision turned on the particular circumstances of the dispute and the parties involved.

Other claims

The transaction that was the subject of both proceedings involved Mr Kazeminy and Mr Siddiqi, but also a third party, Mr Grano (plus various companies associated with all three). Mr Grano had his own claims against Mr Siddiqi but these were not part of the first proceedings, nor was he or the companies owned or controlled by him, parties in those proceedings. Some time after the settlement, Mr Grano assigned his rights against Mr Siddiqi to Mr Kazeminy, who commenced fresh proceedings against Mr Siddiqi as assignee of those rights.

Understandably, Mr Siddiqi relied on his settlement agreement with Mr Kazeminy in an application to strike out the claim. He argued that the parties had chosen the wide-reaching language of settlement so that he need not fear another claim from Mr Kazeminy relating to the transaction ever again.

The Court of Appeal didn’t agree. In doing so, it gave a useful analysis of some of the authorities on settlement and terms such as “in any way connected with”. This included BCCI v Ali, Investors Compensation Scheme v West Bromwich Building Society and Arbuthnott v Fagan [1996] LRLR 135. Following those decisions, it confirmed that Mr Kazeminy and Mr Siddiqi’s settlement agreement was to be construed like any other contract: its true scope could be determined only by reference to the context in which it was made.

The Court found that both parties had been fully aware that Mr Grano might assert similar claims against Mr Siddiqi, and yet Mr Siddiqi had not joined Mr Grano to the proceedings or the settlement with Mr Kazeminy. It was clear that the settlement could not have affected Mr Grano’s rights, which he had remained free to enforce or assign. If the parties had intended to deal with the prospect of Mr Grano assigning his claims, then this could have been achieved through express provision being made in the settlement agreement.

The first rule of settlement

Back to the stale sandwiches and your draft settlement agreement…

This case involved a number of parties and particular circumstances surrounding the settlement. It is nonetheless a useful reminder to check whether your standard settlement clauses are up to the job – especially where multiple parties are involved (and they are not a party to the dispute in hand).

It is clear that you cannot simply rely on very broad terms of settlement alone. It may be necessary, for example, to extend the scope of settlement specifically to related claims that other parties may have. Alternatively, it may be necessary to include indemnities to protect the defendant from being joined into proceedings in respect of those other claims.

The fact that this is a very real problem in construction related disputes was recently demonstrated in Point West v Mivan. In that case, one party (the developer) thought it had settled only certain issues, but the other party (the contractor) successfully argued that the terms of the settlement reached were much wider and encompassed the known patent defects in the property’s curtain walling at the time of the settlement.

Crucially, these decisions serve as a valuable reminder of the first rule of settlement – to be clear as to what has actually been settled.

One thought on “All wrapped up? Is your settlement really full and final?

  1. It is also worth remembering that you need to be clear in your drafting in the settlement agreement if you wish obligations to be considered as conditional or mutually dependant on each other.

    In Helmsley Acceptances Ltd v Ali and another [2012] EWHC 1591 (Ch), the court had to consider whether two separate clauses were independent obligations: one required the claimant to withdraw its claim (no time or trigger for doing this was included); the other required the defendant to pay a sum of money.

    The money wasn’t paid and the question was whether the claimant still had to withdraw its claim. Were the obligations independent or was withdrawal conditional upon payment?

    The court held that it had to look at the settlement agreement as a whole to determine its true meaning and effect, to:

    “give it a sensible commercial interpretation in the light of all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.”

    On the facts, the obligations were held to be mutually dependent.

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