In a recent case [1] the court has held that a negligence claim worth more than £70 million was caught by the terms of a settlement agreement over a dispute in connection with unpaid invoices.  The agreed settlement sum was £90,000.

The settlement agreement stated that the agreement was “…in full and final settlement of all or any Claims which the parties have, or could have had against each other (whether in existence now or coming into existence at some time in the future, and whether or not in contemplation of the Parties…)”.

Claim was defined in part as:

“…any claim, potential claim…whether known or unknown, suspected or unsuspected…however and whenever arising…arising out of or in connection with the Action or the invoice…”.

Two years later the negligence claim was issued. The defendant argued the claim was caught by the invoice settlement agreement and so was doomed to failure.  The court agreed that the £70 million negligence claim had been compromised by the £90,000 invoice settlement agreement.

The case highlights the importance of ensuring that when settling a matter future claims are not inadvertently compromised.  In the absence of clear language the court will be slow to infer that a party intended to surrender rights and claims of which it was unaware and could not have been aware.  It is difficult to compromise what are considered to be “unknown unknowns”.  In this case at the time of the settlement of the invoice dispute no allegations of professional negligence had been raised.  However even though the claim was unsuspected at the time of the settlement agreement the court said that the objective bystander could not have said that it was impossible.

Settling a dispute is often the best way out.  But the terms of settlement must be carefully considered by both sides to ensure that the settlement agreement works in the way you want it to, not only in relation to the claim being settled but also in relation to future claims, whether known or unknown at the time of entering into the settlement agreement.

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[1] Khanty-Mansiysk Recoveries Ltd v Forsters LLP [2016] EWHC 522 (Comm)

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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.