Royle & Ors v Burger King Ltd & Ors

Compromise agreements release claims within their language when construed in the factual and commercial context known when they were made. Broad wording covering claims alleging an intention to injure or cause damage can include conspiracy claims. An allegation that insolvency administrators joined a conspiracy cannot realistically succeed merely because they compromised claims without further consultation or legal advice where the surrounding evidence shows an independent asset-realisation decision, creditor support and an application for court directions. Release of alleged co-conspirators also defeats a conspiracy claim against an alleged joint tortfeasor.

The claimants, former franchisees operating businesses through a partnership and a company, alleged that Burger King, the Royal Bank of Scotland, HM Group Ltd and insolvency office-holders had caused losses exceeding £12 million. Their claims included conspiracy, breach of contract, breach of statutory duty and breach of good faith.

Mr Justice Etherton struck out the company claims, including because they were not properly constituted derivative proceedings, and entered summary judgment on the partnership claims. He held that compromise agreements made by the company’s administrative receivers and the partnership’s administrators released the pleaded claims. The claim against HM Group in conspiracy consequently also failed. The Court of Appeal considered whether the administrators could realistically be inferred to have joined the alleged conspiracy and whether the compromise agreements covered the claims.

1. Appeal dismissed. The claims against Burger King and HM Group could not proceed.
2. The allegation that the partnership administrators were conspirators rested on their alleged failure to consult the partnership or its solicitors, obtain legal advice, or scrutinise the claims objectively and carefully. That inference had no real prospect of success against the surrounding facts. The administrators had been appointed to realise assets more effectively than on a winding-up; a going-concern sale depended on Burger King’s co-operation; the administrators lacked funds to pursue the claims; creditors declined to fund them and substantially approved the compromise; and the administrators sought court directions. The absence of any allegation of conspiracy at the earlier directions hearing, when a claimant was present, could properly be treated as significant after eight and a half years.
3. A compromise agreement is construed like any other agreement, by interpreting its language in the circumstances in which it was made. As explained in BCCI v Ali [2001] UKHL 8, the context determines whether a broad release covers the claim. Clause 9 of the Partnership Compromise Agreement was plainly wide enough to include conspiracy claims because it covered claims alleging an intention to injure or cause damage. Clause 1 of the Company Compromise Agreement produced the same result, including for claims not then known to the parties.
4. The company claims were therefore released, making it unnecessary to determine the Foss v Harbottle issue concerning their derivative form. Since the Burger King claims had been released, the accepted consequence was that the conspiracy claim against HM Group, an alleged co-conspirator, could not be maintained.

Lord Justice Chadwick gave the judgment, with Lord Justice Moses and Sir Peter Gibson agreeing. Order: appeal dismissed.

1. Court of Appeal (Civil Division): appeal dismissed from the order of Mr Justice Etherton dated 7 February 2005. The court upheld the striking out of claims brought in respect of or through the company and the summary judgment on claims brought in respect of or through the partnership.
2. High Court, Chancery Division: Mr Justice Etherton struck out the company claims and entered summary judgment for the defendants on the partnership claims: [2005] EWHC 2003 (Ch).