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Inside Disputes

Unknown unknowns - a cautionary tale

Unknown unknowns - a cautionary tale

How an earlier agreement settling a £75k dispute precluded the claimant from bringing a £70m negligence claim against former solicitors

In the recent case of Khanty-Mansiysk Recoveries Limited v Forsters LLP [2016] EWHC 522 (Comm), the Claimant sought to bring a claim in negligence against former solicitors, claiming damages in excess of £70 million.   The solicitors argued that the claim was caught by an earlier settlement agreement and was "inevitably doomed". 

The earlier settlement related to a dispute over unpaid fees, with the claim amounting to £75,000 plus VAT.  The Court considered that the wording of the settlement agreement was "very wide indeed".  It covered claims which were not yet in existence nor even in the contemplation of the parties.  It included "potential claims" "whether known or unknown, suspected or unsuspected" "however and whenever arising"

Although there was limiting wording, restricting such claims to those "arising out of or in connection with the Action [being the claim in relation to the unpaid fees] or the invoice", the Court found that this did not save the new negligence claim.  The Court accepted that the new claim did not "arise out of" the Action or the invoice but that the words "in connection with" were plainly of wider scope.  The court found that the new claim was for breach of contract and/or negligence in relation to "the very same legal services" which were the subject of the invoice and the Action.  The new claim was therefore caught by the settlement agreement. 

The moral of the story?  Always ensure that proper consideration is given to release clauses in settlement agreements.  In particular, ensure that the release of claims is properly limited to the particular subject matter that you intend to capture, to avoid potential claims which you did not intend to be caught being inadvertently compromised.