Tchenguiz and others v Grant Thornton UK LLP and other [2016] EWHC 865 (Comm)

The matter involved the collapse of the Icelandic bank, Kaupthing Bank HF (Kaupthing) in 2008. The High Court was charged with deciding whether settlement agreements could also encompass fraud-based claims; even where the claimants were unaware of the existence of the fraud based claim.

Background

Following the collapse of Kaupthing, the English Serious Fraud Office (SFO) began investigations into Kaupthing; as per the claimants, the SFO investigation arose out of instigations by a member of the winding up committee, Mr Johansson (the fifth defendant). He alleged that the claimants had acted criminally, including providing false valuations.

Although the proceedings were brought against Kaupthing, a settlement agreement was eventually reached. The agreement contained wide-ranging releases in favour of Kaupthing.

These releases included:

  • Releasing Kaupthing from, “any claim arising out of or in connections with the Dispute; whether known or unknown, howsoever and whenever arising, and whether presently existing or arising in the future”.

 

  • The term “Dispute” was defined to include any actual or potential claim based upon any act or matter prior to the execution of the settlement agreement.

 

  • The settlement agreement also included releases from any claims for Specified Disputes, “whether known or unknown, howsoever and whenever arising, and whether presently existing or arising in the future”.

 

  • The Term “Specified Disputes” were found to have included; the investigations carried out by any authorities, the proceedings in England and Iceland and the collapse of Kaupthing.

Once the settlement agreement had been reached, the claimants had then sought to claim for damages against the fifth defendant’s instigation of the SFO investigation and proceedings were again brought to the High Court.

Outcome

Knowles J held that the parties to the agreed settlement had chosen to expressly state the Specified Disputes released were “known” and “unknown”. Moreover given that Specified Disputes were defined as including, “investigations carried out or actions taken by any authorities”, the language used was clearly targeting a particular subject area and in doing so, the SFO investigation was clearly included.

The claimants argued that if the settlement agreement was compromised, there was still Sharp Practise, i.e. dishonest dealings. Therefore the claimants would still have a remedy.

The claimants’ argument had been taken into consideration and Knowles J had referred to the case of BCCI v Ali. In this case Lord Hoffman stated that a party could not rely on a release in general terms if that party was aware that the other party had a claim but was unaware that he had a claim.  However  given that there were specific releases, particularly investigations carried out or actions taken by any authorities, Sharp Practise could not apply in this instance.

It was held that the settlement agreement had compromised the claim thus Mr Johansson was entitled to a summary judgement.

Comments

Evidently from above, it is vital that parties to a settlement agreement are aware of what is being released. Parties should be aware of the implications of widely-drafted clauses; whether or not they act to release fraud-based claims and not to unintentionally settle future claims.

The above does not constitute legal advice and is a general position of the law. Please contact us for further information.

 

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