Fraud-based claims released by settlement agreement, despite no express words

Allen & Overy LLP

Allen & Overy LLP

In striking out claims for fraud, dishonesty and conspiracy, the court confirmed that the normal principles of construction apply to the interpretation of contractual releases in settlement agreements.

Maranello purchased a collection of classic cars, using financing provided by Lohomij. The terms of the financing arrangement required Maranello to sell the cars through an auction house, Bonhams, and prohibited Maranello from disposing of the collection without Lohomij’s consent. Following allegations that Lohomij and Bonhams had acted negligently in conducting the sale, the parties entered into a settlement agreement in respect of Maranello’s complaints.

Maranello subsequently issued proceedings for unlawful means conspiracy, fraudulent misrepresentation, breach of fiduciary duty and the duty of good faith, and dishonest assistance. The main issue was whether these claims had been compromised and released by the settlement agreement.

The court confirmed the approach taken in BCCI v Ali, emphasising that the normal principles of construction applied to the interpretation of contractual releases, such as those contained in settlement agreements. There was no rule of law requiring that express words referring to claims based on fraud or dishonesty had to be used if a release was to extend to them. Although the courts may be slow to infer that a party intended to surrender rights of action of which it was not aware and could not have been aware, or that a party intended to release fraud-based claims, in this case the words used in the settlement agreement were sufficient to cover such claims. The language of the settlement agreement was held to be clear, precise, wide-ranging and comprehensive. The claims for dishonesty, fraud and conspiracy clearly fell within the scope of the release according to its natural meaning, and the facts of the case reinforced that interpretation.

The settlement agreement was held to have effected a release of all claims, and Maranello’s claims were therefore struck out by the court.

Judgment: Maranello v Lohomij

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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