Fairbriar Plc v Van Reyk & Anor

A release clause must be construed by giving its words their natural meaning in the context of the agreement and its factual matrix. A clause expressed in general terms does not necessarily release every claim between the parties. The court must identify the subject matter to which the release was directed and the claims which the parties reasonably contemplated when contracting. A release contained in an agreement supplemental to earlier management arrangements may be confined to claims arising from those arrangements and their termination, rather than extending to earlier fiduciary breaches outside that contractual relationship.

Fairbriar plc claimed damages from Philip van Reyk for alleged breaches of fiduciary duty committed while he was its managing director in connection with development agreements entered into in 2002. The parties later entered into management and investment agreements in 2004, followed by a Supplemental Agreement dated 11 October 2004.

The preliminary issue was whether the second sentence of clause 8 of the Supplemental Agreement, stating that no party had any claim for any antecedent matter whatsoever against another party, released the alleged fiduciary-duty claim. The court had to determine the proper construction and scope of that release.

1. The preliminary issue was determined in favour of Fairbriar. Clause 8 did not release the alleged claim against Mr van Reyk concerning his conduct as a director in 2002.

2. The proper approach was to construe the words of the clause according to their natural meaning, read with the agreement as a whole and against the factual matrix known to the parties when it was made. The fact that the words were capable, standing alone, of constituting a general release did not determine their scope.

3. The Supplemental Agreement was expressly supplemental to the 2004 Agreements. Its recitals and operative provisions showed that its purpose was to amend those agreements and provide an orderly framework for bringing them to an end. Clause 8 was therefore read as supplemental to its first sentence, confirming that the parties waived claims relating to performance of the 2004 Agreements existing when the Supplemental Agreement was made, without prejudicing claims arising from their subsequent implementation.

4. The use of the word “whatsoever” did not require the release to extend to every possible claim. The court was not satisfied that the parties contemplated releasing claims for breaches of fiduciary duty dating from two years before the 2004 Agreements, and outside the contractual relationships to which the Supplemental Agreement related.

5. The evidence also distinguished between the alleged 2002 misfeasance claim and possible claims arising from the attempted development under the 2004 Agreements. The latter claims were covered by clause 8. The former was not. The claim consequently remained available to Fairbriar.