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Full and final settlement … a cautionary tale

The liquidators of ELC issued claims against nine respondents, including the de jure directors, a de facto director and an insurance company. The claims included fraudulent and wrongful trading claims, as well as claims for TUVs, dishonest assistance and conspiracy. 

The liquidators entered into a “full and final settlement of the claims” with the de jure directors. The agreement made no distinction between the claims giving rise to concurrent liability and those claims where there was joint and several liability between the respondents.

The respondents who were still engaged at the time of the hearing argued that the claims should not be able to proceed because the discharge of the de jure directors operated as a discharge of all the respondents.

Accepting that common law suggests that joint tortfeasors would be released, on the facts, the court concluded that a term should be implied into the settlement such that the other claims could continue. The decision was based on the clear intention expressed in the agreement that the other claims were to be continued.

Further, the settlement with the de jure directors was made on the basis of means to pay; the settlement sum could not be said to the measure of loss experienced by ELC. As such, the agreement could be interpreted as allowing the other claims to continue.

Whilst in this instance it was not necessary to distinguish between the claims with joint and several liability and those with concurrent liability, the case demonstrates the need to the expressly preserve the right to continue litigation against other respondents when settling with individuals in multiparty cases.

In the matter of Equitable Law Capital Limited [2021] EWHC 763 (Ch)

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