The Court of Appeal case Khanty-Mansiysk Recoveries Limited v Forsters LLP [2018] EWCA Civ 89 considers the ambit of settlement agreement wording and the extent to which this can cover future claims.

Background facts

Forsters LLP (“Forsters”) were solicitors who had been instructed by Rupert Galliers-Pratt (“RGP”) to assist with preparatory work required to incorporate Irtysh Petroleum plc (“Irtysh”).

Once Irtysh were incorporated, Forsters were also instructed on their behalf to acquire an oil exploration opportunity in Russia. In this respect, Irtysh agreed to buy shares in a company called YBI, which owned 49% of three companies each holding an oil field exploration licence.

Forsters issued an invoice to Irtysh for the sum of £129,853.22 inclusive of VAT. There was a dispute between the parties as to how much of the invoice was in respect of work carried out by Forsters for Irtysh and how much was in respect of work carried out by Fosters for RGP.

Forsters brought a claim against RGP for payment of the invoice pursuant to a guarantee that RGP had given.

The parties subsequently agreed to a settlement by which Irtysh and/or RGP would pay Forsters the sum of £90,000 in return for the action being discontinued, and a settlement agreement was drawn up between Irtysh, Forsters and RGP to this effect.

Clause 2.1 of that Settlement Agreement provided “This Agreement and the terms set out herein shall be 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 the contemplation of the Parties on the date hereof)”.

The term “Claims” was defined in Clause 1.1 as being “any claim, potential claim, counterclaim, potential counterclaim, right of set-off, or potential right of set off, right of contribution, potential right of contribution, right to indemnity, potential right to indemnity, cause of action, potential cause of action or right or interest of any kind or nature whatsoever, whether known or unknown, suspected or unsuspected, however and whenever arising in whatever capacity or jurisdiction, whether or not such claims are within the contemplation of the Parties at the time of this Agreement arising out of or in connection with the Action or the invoice dated 1 July 2010 addressed to [Irtysh] by [Forsters] and referred to in the Action”.

After the Settlement Agreement had been entered into, Irtysh discovered that it did not own YBI due to the fact that there had not been an actual transfer of shares to Irtysh.

Irtysh subsequently went into liquidation and its claims against Forsters were allegedly acquired by a company called KMR from the liquidators. KMR brought a claim against Forsters in negligence and sought damages in excess of £70 million in respect of the failure to transfer the shares in YBI (“KMR’s Claim”). Continue Reading