English rulings highlight need for care when drawing up settlement agreements

Where a mediation or settlement negotiations succeed, the parties will usually draw up a settlement agreement to record what they have agreed. Two recent cases demonstrate the care that needs to be taken when describing exactly what is being settled. 

In Dawnvale Café v Hylgar Properties, the parties entered into a settlement agreement which confirmed (upon payment) the full and final settlement of "any and all claims…arising from or in connection with these proceedings". When a new claim was brought, the judge was required to decide whether it fell within this phrase. 

He defined the proceedings as the enforcement action which was started after judgment was obtained in favour of the defendant in an adjudication. It did not cover the new claim that sought recovery of additional losses which had not yet been adjudicated. Express wording was needed to show that the two commercial parties (acting with the benefit of legal advice) intended to settle all potentially related future claims. They could have done that by referring to the contract between them, the works to be performed under that contract or "the dispute(s)". Instead, they had chosen to limit the settlement to the enforcement of an adjudication on a particular issue. 

While this case is not groundbreaking in its conclusion, it does highlight the need for caution when deciding what is and isn't being settled in your agreement. For example, a reference to claims, etc. "arising out or in any way connected with the facts and/or subject matter of the Dispute, including for the avoidance of doubt the claim in the Proceedings" would be a broader provision than the one used in this case (although not as broad as referring, for example, to the underlying contract or relationship between the parties), which may not be something that the claimant would be prepared to agree to. 

Similarly, the parties in Bin Obaid & Ors v Al-Hezaimi referred to "all and any claim or cause of action of any kind" but only "arising out of or in connection with the claims made in the English Proceedings". Accordingly, they had not agreed a general release of all possible claims. As the Court of Appeal put it: "There is no doubt that the effect of the Settlement Deed is only to settle certain claims and to leave the parties free to pursue others. It is therefore not a general release but a release of particular claims". 

Two other issues of note which arose from the judgment were that:

• The importance placed by the Court of Appeal on the recitals in the deed: "The usual role of recitals in a deed is to explain the background to the deed and identify what its purpose is, at least in general terms". They therefore disagreed with the judge at first instance that the recitals were of little assistance.
• The Court of Appeal noted that the reference to claims made in the proceedings included matters raised by way of defence as well.