Helmsley Acceptances Ltd v Ali & Anor

Where a settlement agreement contains reciprocal obligations but does not state when one obligation must be performed, the court must construe the agreement as a whole. It must consider the language, relevant background and commercial consequences. An obligation to withdraw proceedings may be conditional upon payment of a settlement sum where that construction is necessary to give the agreement a sensible commercial meaning. Expressly conditional provisions elsewhere in the agreement do not, by themselves, make the withdrawal obligation independent.

The claimant had brought proceedings concerning implied easements needed to give value to its security over development land. The parties later signed a settlement agreement under which the claimant agreed to withdraw the claim and release its security, while the first defendant agreed to pay £270,000. The proposed refinancing failed, and the first defendant did not pay the settlement sum. The claimant contended that its obligation to withdraw was dependent on payment; the first defendant contended that the obligations were independent. The preliminary issue was whether the claimant remained entitled to maintain the claim.

1. The court determined the preliminary issue on contractual interpretation and repudiation, declining to debar the first defendant or adjourn the matter for further pleadings.
2. Because the settlement agreement contained a whole agreement clause, the draft Tomlin order and related correspondence could not be used to construe it. The agreement had to be read as a whole.
3. The obligation to withdraw the claim was capable of two constructions: immediate withdrawal, or withdrawal only after payment of the settlement sum. Applying the principles stated in Rainy Sky SA v Kookmin Bank [2012] UKSC 50, the court considered the language, the agreement as a whole, the relevant background and business common sense.
4. The settlement agreement was predicated on the first defendant having secured finance from a new lender. The provisions concerning release of the claimant’s charges and the deed of priority did not make commercial sense unless the settlement sum was paid. Payment and withdrawal were therefore mutually dependent obligations.
5. Since the first defendant had not paid the £270,000, the claimant was not obliged to withdraw the claim and remained entitled to maintain it against the first defendant.