Alphasteel Ltd v Shirkhani & Anor

A settlement agreement is construed objectively like any other contract. Broad release and covenant-not-to-sue language intended to end all disputes arising from earlier proceedings may prevent an application to use disclosed documents in later proceedings. Such an application is a claim or pursuit of a right against the disclosing party, even though it seeks permission from the court and asks no relief from that party. Civil Procedure Rules 31.22 imposes an obligation owed to the court, but the disclosing party retains a qualified interest in the privacy and confidentiality of its documents. That interest may be protected by the settlement agreement.

Alphasteel’s Commercial Court action against its former finance director and his company was settled by agreement, and the proceedings were stayed. Alphasteel subsequently applied under Civil Procedure Rules 31.22(1)(b) for permission to use documents disclosed by the appellants in proposed proceedings in Switzerland against third parties.

Andrew Smith J held that the application was not a claim against the appellants and granted permission: [2012] EWHC 2407 (Comm). The central issue was whether the application was prohibited by the settlement’s broad covenant not to sue, read with its release provisions, and whether the stay had to be lifted.

1. Appeal allowed. The order permitting Alphasteel to use the disclosed documents in intended Swiss proceedings was set aside.
2. A settlement agreement is construed in the same manner as any other contract, by objectively ascertaining the parties’ intention in context, as confirmed in Bank of Credit and Commerce International v Ali [2002] 1 AC 251. Clauses 9 and 10 used deliberately broad language covering claims, rights and complaints of whatever nature. Their evident purpose was to bring the dispute and related dealings to a final end.
3. Under Civil Procedure Rules 31.22, the restriction on subsequent use of disclosed documents is an obligation owed to the court and supports the administration of justice, as explained in Marlwood Commercial Inc v Kozeny & Ors [2005] 1 WLR 104. That does not leave the disclosing party without any continuing interest in privacy or confidentiality. The court must take that interest into account when deciding whether to permit collateral use. The speeches in Home Office v Harman [1983] AC 280 supported that approach.
4. An application for permission to use documents for a collateral purpose seeks to override the disclosing party’s defeasible protection against further use and to obtain an entitlement at that party’s expense. It is therefore a claim, or pursuit of a right, against the disclosing party. The absence of relief sought against that party is immaterial; a declaratory or permission application may still be brought against an opponent.
5. Construed realistically, Alphasteel’s application involved the appellants in further litigation connected with the settled proceedings and sought to defeat their refusal to consent. It was consequently prohibited by clause 10.1(a). The court did not need to decide wider questions about lifting the stay or granting permission in separate proceedings. Written submissions were invited on whether the confidential judgment below should remain confidential.

• Court of Appeal (Civil Division) — Allowed the appeal and set aside the order permitting collateral use of the disclosed documents.
• High Court, Commercial Court — Andrew Smith J granted Alphasteel permission to use the documents in proposed Swiss proceedings: [2012] EWHC 2407 (Comm).