High Court Rules in Favor of Solicitor Firm in Dispute Over Settlement Agreement's Release Provisions

Citation: [2023] EWHC 3136 (Ch)
Judgment on

Introduction

In the High Court case of Abdullah Nasser Bin Obaid & Ors v RLS Solicitors Limited t/a RLS Law, Deputy Master Lampert presided over a dispute concerning the enforceability of a settlement agreement’s contractual release provisions, which shielded a solicitor firm from professional negligence claims linked to a prior fraud allegation and property acquisition. This case offers insight into the principles of contract interpretation as applied by UK courts, the scope of settlement agreements, and the implications these have on related parties or ‘affiliates’.

Key Facts

The claimants brought an action against RLS Solicitors Limited (the “Defendant”), alleging professional negligence and equitable compensation. The situation arose from a settlement agreement (the “Settlement Deed”) that resolved prior proceedings between the claimants (referred to as the “ANBO Parties”) and other parties associated with Dr. Khalid Abdullah Al-Hezaimi (the “KAH Parties”). The Defendant was not a party to the original proceedings but was implicated due to joint retainer arrangements and allegations of fraudulent property transactions involving the claimants and the KAH Parties.

The Defendant sought to dismiss the current claim, arguing that the Settlement Deed’s release clause protected them from litigation. The court examined whether the Defendant constituted an ‘Affiliate’ of the settled parties and whether the claims fell within the release provision’s ambit.

The legal debate centered on contract interpretation and the application of specific principles to construe the Settlement Deed’s terms. Among the cited cases, BCCI v Ali [2002] 1 AC 251 informed the standards for ascertaining the intent of contract terms by considering the agreement’s purpose and the circumstances under which it was made.

The court also referenced Chartbrook Limited v Persimmon Homes Limited and others [2009] UKHL 38 regarding the rule against admitting evidence of pre-contractual negotiations when interpreting contractual terms. In the context of Abdullah Nasser Bin Obaid & Ors v RLS Solicitors Limited t/a RLS Law, this rule was emphasized to reject considerations of subjective intent or potential oversight during negotiation on the Settlement Deed’s meaning.

Additionally, Easy Air Limited v Opal Telecom Limited [2009] EWHC 339 (Ch) guided the court’s approach to applications for summary judgment, stating that courts should decide short points of law or construction when reasonably robust evidence allows and if no trial-worthy material facts are in dispute.

Outcomes

Deputy Master Lampert concluded that the Settlement Deed grouped the disputing parties into two ‘camps’. The Defendant was deemed an ‘Affiliate’ due to its dual representation of Oh-Na, one of the ANBO Parties, and OFY and Latifah, amongst the KAH Parties. It was held that the Defendant, as an ‘Affiliate’, was released from all claims by any of the ANBO Parties under the broad clause of the Settlement Deed.

The court also established that the present claim for professional negligence was indeed a ‘Claim’ within the meaning of the Settlement Deed, as it arose out of or in connection with the Previous Proceedings.

Subsequently, the claim against the Defendant was struck out under CPR Rule 3.4(2)(a), with the court stating there were no reasonable grounds for bringing the claim. Alternatively, under CPR Rule 24.2, the court granted summary judgment for the Defendant on the entire claim due to the lack of real prospects for success on part of the claimants.

Conclusion

The case exemplifies the judicial system’s approach to interpreting settlement agreements, emphasizing the literal and natural understanding of the contract terms over subjective intents or negotiation histories. The implications of this ruling are significant for legal entities involved in multi-party settlements, as it underscores the necessity for precise and thoughtful consideration of potential conflicts and the scope of release clauses within settlement deeds. Importantly, it clarifies for legal professionals that parties to a prior dispute may inadvertently obtain a release from liability if they are considered ‘Affiliates’ under a settlement agreement, reinforcing the need for judicious drafting and review of such agreements.

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