Kazeminy v Siddiqi & Ors [2012] EWCA Civ 416

Case No A3/2012/0065[2012] EWCA Civ 416
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
COMMERCIAL COURT
Mr. Justice Flaux
2011 Folio 920
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 2 April 2012
Before
LORD JUSTICE MUMMERYLORD JUSTICE MOORE-BICKLADY JUSTICE BLACK
Between
NASSER KAZEMINYClaimant/KAMAL SIDDIQI & ORSDefendants/Appellants
Mr. Robert Miles Q.C.and Mr. Richard Hill (instructed by Herbert Smith LLP) for appellantsMr. Neil Kitchener Q.C.and Mr. David Caplan (instructed by Pinsent Masons LLP) for respondentHearing Hearing date : 5 th March 2012
JudgmentLord Justice Moore-Bick :
[1]This appeal concerns the construction of a settlement agreement entered into between the appellant, Mr. Kamal Siddiqi, and the respondent, Mr. Nasser Kazeminy, and various companies represented by each of them. Although there were in total ten parties to the agreement, it is convenient for present purposes to refer simply to Mr. Siddiqi and Mr. Kazeminy who were the real protagonists to the dispute.[2]The agreement, dated 22nd November 2010, was made on the first day of the trial of claims made by Mr. Kazeminy against Mr. Siddiqi arising out of the provision by Mr. Kazeminy of part of the finance needed to enable the commercial exploitation of certain innovative technologies developed by Mr. Siddiqi. Finance had also been provided by another investor, Mr. Joseph Grano, and companies owned or controlled by him under various agreements, the most recent of which were a series of tripartite agreements made between September 2006 and April 2007 to which he, Mr. Kazeminy and Mr. Siddiqi were all parties. At the time of the trial Mr. Grano had intimated various claims against Mr. Siddiqi, but neither he nor any of his companies was a party to the proceedings. However, at the time the agreement was made he was present in London, having come to this country for the purposes of giving evidence in support of Mr. Kazeminy’s case.[3]The settlement agreement is a detailed document which bears all the hallmarks of having been drafted by lawyers. The critical part as far as this appeal is concerned is clause 5, which provides as follows:
“5. Save as set out in clause 8 below this Settlement Agreement is entered into in full and final settlement of all and any claims, actions, liabilities, costs or demands that the Claimants have or may have against the Defendants or Metrocab Limited (“Metrocab”) or Frazer-Nash Technology Limited (“FNT”) whether past, present or future and whether or not known or contemplated at the date of this Settlement Agreement arising under or in any way connected with Part A and B and the Counterclaim of the court proceedings in the Commercial Court of the Queen’s Bench Division of the English High Court under Claim Number 2009 Folio 1078 (the “Proceedings”) or with any dealings between the parties concerning loans to or investments in the Defendants or FNT or Metrocab by the Claimants or by any person whosoever. In particular: 5.1 This Agreement constitutes a full and final settlement in accordance with clause 5 above of all and any claims against the Defendants and Metrocab and FNT in respect of all advances identified in Schedules 1 and 2 of the Re-Re-Amended Particulars of Claim in 2009 Folio 2078, except those advances identified at paragraphs 9 and 22 of Schedule 1. 5.2 The Claimants jointly and severally warrant that they give good discharge in respect of the advances identified as settled at clause 5.1 above.” 5.1 This Agreement constitutes a full and final settlement in accordance with clause 5 above of all and any claims against the Defendants and Metrocab and FNT in respect of all advances identified in Schedules 1 and 2 of the Re-Re-Amended Particulars of Claim in 2009 Folio 2078, except those advances identified at paragraphs 9 and 22 of Schedule 1. 5.2 The Claimants jointly and severally warrant that they give good discharge in respect of the advances identified as settled at clause 5.1 above.”
[4]On 14th April 2011 Mr. Grano and a company controlled by him, Centurion Holdings LLC (“Centurion”), executed a deed of assignment in favour of Mr. Kazeminy under which they transferred to him all their rights against Mr. Siddiqi and his companies, including Metrocab and Frazer-Nash Technology. Notice of assignment was given to Mr. Siddiqi on 25th May 2011 and on 29th July 2011 Mr. Kazeminy started proceedings in the Commercial Court as assignee of Mr. Grano and Centurion against Mr. Siddiqi. The particulars of claim in that action followed closely those in the earlier action between Mr. Kazeminy and Mr. Siddiqi which had been the subject of the settlement agreement.[5]Mr. Siddiqi’s response was to apply to the court to strike out the claim, or to enter judgment against Mr. Kazeminy, on the grounds that the rights he was seeking to enforce had been compromised by the settlement agreement. The application came before Flaux J. who dismissed it on the grounds that the agreement did not extend to any rights of third parties that Mr. Kazeminy might subsequently acquire by assignment or otherwise.[6]This appeal from the judgment of Flaux J. turns on the relationship between language and context. Mr. Robert Miles Q.C. for Mr. Siddiqi quite properly emphasised the exceptionally broad language of clause 5, in particular the use of the expressions “whether past, present or future and whether or not known or contemplated” and “arising under or in any way connected with [the current proceedings] . . . or with any dealings between the parties concerning loans to or investments in the Defendants . . . by the claimants or any person whosoever.” These, he submitted, demonstrated a clear intention on the part of the parties to capture every possible claim that Mr. Kazeminy might have against Mr. Siddiqi then or at any time in the future, whether either of them was aware of it or not. They had been chosen as a means of ensuring that Mr. Siddiqi would never need to fear another claim from Mr. Kazeminy in relation to the technology in question and could devote his energies to developing and exploiting his inventions without further interference from him. It was intended, as Mr. Miles put it, to achieve a clean break.[7]Mr. Neil Kitchener Q.C. for Mr. Kazeminy submitted, on the other hand, that, however broad the language, it was necessary to identify from the context what was the object and scope of the agreement. The parties may have intended to ensure that any claims that Mr. Kazeminy might be entitled to make against Mr. Siddiqi then or in the future should be settled, whether the parties were aware of them or not, but they had not turned their minds to the rights of third parties, over which they had no control, or to the possibility that Mr. Kazeminy might acquire from a third party rights which he might then seek to enforce against Mr. Siddiqi.[8]The agreement is drawn in very wide terms and I am left in no doubt that the parties intended it to encompass all rights and obligations between them arising out of their dealings in relation to the technology in question, whether they knew of their existence or not and whether they were already capable of enforcement or might become enforceable only in the future or were contingent on the happening of some future event. The parties appear to have been influenced in their choice of language by the decision in Bank of Credit and Commerce International S.A. v Ali [2001] UKHL 8, [2002] 1 A.C. 251. In two respects the language is capable of extending even more widely than that, because the words “in any way connected with [the current proceedings]” are inherently capable of encompassing rights and obligations that have only the most tenuous connection with the subject matter of the proceedings. Likewise, the words “claims . . . in any way connected . . . with any dealings between the parties concerning loans to or investments in the Defendants . . . by . . . any person whosoever” are capable of being given a very wide meaning. Indeed, it is an essential part of Mr. Miles’ argument that they are apt to refer to loans and investments made by Mr. Grano under the tripartite agreement of September 2006, with the result that once any obligations owed to Mr. Grano came into Mr. Kazeminy’s hands they were discharged.[9]The problem of deciding what the parties intended to be the scope of broad language of this kind has troubled the courts on many occasions. In BCCI v Ali the House of Lords confirmed that settlement agreements are to be construed in the same manner as other contracts. That involves interpreting the words used by the parties in the way in which they would be understood by reasonable persons who were aware of the factual background known to both parties: Investors Compensation Scheme Ltd v West Bromwich Building Society [1988] 1 W.L.R. 896. The judge referred to the case of Arbuthnott v Fagan [1995] C.L.C. 1396 in which Hoffmann L.J. pointed out at page 1403D that whenever words such as “in any way connected with” are used it is necessary to ascertain the degree of connection which the parties had in mind, an exercise that can only be undertaken by reference to the context in which they are used. The need to undertake that exercise is not removed by the use of the expression “in any way”. In BCCI v Ali Lord Nicholls expressed the matter succinctly in this way (paragraph 29):
“ . . . the scope of general words of a release depends upon the context furnished by the surrounding circumstances in which the release was given. The generality of the wording has no greater reach than this context indicates.”
[10]Mr. Miles began his submissions by drawing attention to the similarity between the claims made by Mr. Kazeminy in the original proceedings and those he is making in the current proceedings. In particular, in each case a claim is made under the tripartite agreements to compel Mr. Siddiqi to transfer an interest in certain of his companies to Mr. Kazeminy. As Mr. Miles pointed out, in that respect the proceedings are identical and are based on the same agreements, although there are also separate claims to recover loans alleged to have been made to Mr. Siddiqi and his companies. In that respect, therefore, it can certainly be said that the claims being made in the present proceedings are closely connected to the previous proceedings and the dealings between the parties out of which they arose. However, as both Lord Hoffmann and Lord Nicholls have observed, the true scope of the settlement agreement can be determined only by reference to the context in which it was made.[11]There can be no doubt that both parties were well aware that Mr. Grano was in a position to make similar claims against Mr. Siddiqi based on the same agreements. However, Mr. Siddiqi had not sought to join him as a party to the proceedings or to draw him into the settlement negotiations. It must have been obvious, therefore, that the agreement could not affect his rights, which he remained free to enforce in his own name or transfer to third parties as he wished. Mr. Siddiqi must have been aware of that, but no attempt was made in the settlement agreement to provide for the possibility that Mr. Grano might choose to assign his rights to Mr. Kazeminy. I do not find that surprising. It would be very unusual to provide for such an eventuality in an agreement of this kind, unless, perhaps, something had happened to raise the possibility of an assignment. However, if that possibility had occurred to Mr. Siddiqi one would have expected him to have ensured that the agreement provided for it in terms. The fact that it does not do so strongly suggests that the parties did not envisage it as a possibility and that they were directing their minds solely to claims arising between them as original parties. Moreover, since it is not suggested that the amount paid to Mr. Kazeminy under the settlement agreement reflected to any extent the value of Mr. Grano’s claims as well as that of his own, Mr. Siddiqi would obtain a significant windfall should they come into Mr. Kazeminy’s hands. There is no reason to think that the parties had such an eventuality in mind; if they had thought about it and had intended to provide for it, it is impossible to think that they would have done so in such an unbusinesslike way.[12]There was some discussion before the judge about the purpose of including the words “by any person whatsoever” in the context of dealings between the parties concerning loans to or investments in Mr. Siddiqi’s companies. Mr. Miles submitted that they were intended to ensure that the agreement extended to claims arising in favour of third parties such as Mr. Grano, but I find it difficult to accept that the parties would have dealt with a matter of that importance in such an oblique way. I think that the inclusion of those words is also to be explained by the context in which the agreement was made. As the judge pointed out, there had been a dispute about whether Mr. Kazeminy was entitled to bring proceedings in his own name in respect of certain claims or whether others were the proper claimants. Those claims, which it is not necessary to describe in detail, became known as the “friends and family” claims. It was important to Mr. Siddiqi to ensure that they were settled regardless of the identity of the proper claimant which provides an obvious reason for including those words. In my view the presence of sub-clause 5.2 does not answer the point.[13]For the purposes of Mr. Miles’ argument the critical phrase in clause 5 is “in any way connected with”, since that enables him to argue with some force that the claims which Mr. Kazeminy is now seeking to make are sufficiently closely connected with the previous proceedings. However, as the authorities show, its scope is potentially so wide that its meaning in the individual case must be determined by the context in which it is used. Although the broad language of the settlement agreement supports the conclusion that the parties wanted to spread the net wide, it does not follow that they intended to spread it so wide as to compromise claims which Mr. Kazeminy would be in a position to make only if he acquired rights from Mr. Grano.[14]The judge rejected Mr. Miles’ submissions because in his view the context in which the settlement agreement was made pointed to the conclusion that it was concerned with rights arising only as between Mr. Kazeminy and Mr. Siddiqi and was not intended to extend to rights which Mr. Kazeminy might in the future acquire from third parties, including Mr. Grano. That is a conclusion which does not admit of a great deal of analysis or elaboration. However, in relation to Mr. Miles’ argument that the claim was connected through the medium of the tripartite agreements with dealings between the parties concerning loans or investments made by Mr. Grano, the judge expressed the view that the clause still required dealings between Mr. Kazeminy and Mr. Siddiqi and was not wide enough to encompass dealings solely between Mr. Siddiqi and Mr. Grano. Mr. Miles submitted that the judge was wrong in that respect because the tripartite agreements under which Mr. Grano made his investments also involved dealings between Mr. Siddiqi and Mr. Kazeminy. I agree with Mr. Miles that the words are capable of being construed in the way he suggests, but that does not answer the question whether they should be.[15]In the end, however much one subjects wording of this kind to textual analysis, the question whether the clause was intended to have the effect of extinguishing in Mr. Kazeminy’s hands rights obtained from third parties inevitably elicits a response that is largely intuitive, but which is for that reason no less sound, being based on the nature of the agreement and the context in which it was made. That, I think, is what lies at the root of the judge’s decision, which in my view was correct. I would dismiss the appeal.

Lady Justice Black:

[16]I agree.

Lord Justice Mummery:

[17]I also agree.

Cited in 3 later judgments