Starlight Shipping Company v Allianz Marine And Aviation Versicherungs AG & Ors

A settlement expressed to be in full and final settlement is construed in its commercial context. Where the assured’s claims against insurers allege joint tortious conduct by their servants or agents, the release may extend to those servants and agents if that construction is required by the parties’ objective intention and business common sense. The common-law joint tortfeasor rule provides additional support, subject to a covenant-not-to-sue exception and an express or implied reservation of rights.

A full and final settlement may entail a continuing promise not to sue. That promise can support declaratory relief and, where damages are inadequate, specific performance. Third parties expressly identified as a class and intended to benefit may enforce such promises under the Contracts (Rights of Third Parties) Act 1999.

The judgment concerned applications arising from the sinking of the vessel Alexandros T. Starlight and associated parties had settled insurance claims with the CMI, LMI and Hellenic insurers. They later commenced proceedings in Greece alleging that insurers, their employees, lawyers and adjusters had fabricated evidence and disseminated false information.

Following earlier English decisions, including the judgment of Burton J, the Court of Appeal dismissed the merits appeal and upheld relief enforcing the settlement agreements. The present applications concerned joinder, declarations, damages, specific performance and related relief against individual underwriters, employees, lawyers and adjusters. The central issues were whether the settlements covered claims against servants and agents, whether the joint tortfeasor rule applied, and what remedies were available.

1. Construction of the settlements. The references to “Underwriters” in the CMI and LMI settlement provisions encompassed the insurers’ servants and agents. The proper approach was the unitary construction exercise stated by the Supreme Court in Rainy Sky v Kookmin Bank [2011] UKSC 50. The defined-term argument was relevant but not decisive. Excluding servants and agents would leave the insurers exposed to further litigation and possible indemnity claims, contrary to the commercial purpose of a general release and the intended clean break.
2. The wording “full and final settlement of all and any claims” was classic release language. The reasoning was supported by BCCI v Ali [2002] 1 AC 251 and by the settlement analysis in Gladman Commercial Properties v Fisher Hargreaves Proctor [2013] EWCA Civ 1466. The settlements therefore covered the Greek claims against the individual insurers, Hellenic’s servants or agents, the HD parties and the CTa parties.
3. The common-law joint tortfeasor rule independently supported that conclusion. Settlement or release of one joint tortfeasor generally releases the others, subject to a covenant not to sue and an express or implied reservation of the right to sue. Neither exception applied. No reservation was necessary, and professionally represented parties wishing to preserve such rights should have expressly reserved them.
4. The settlement provisions also created continuing promises not to pursue the released claims. The LMI and LMI Individuals were entitled to specific performance. The order did not interfere with the Greek court’s jurisdiction or European Union law because it determined rights under English-law contracts and did not purport to control the Greek proceedings.
5. The HD parties could enforce the relevant promises under section 1 of the Contracts (Rights of Third Parties) Act 1999. They were identified as a class of servants or agents and the settlements purported to confer a benefit on them. They were awarded damages to be assessed and an interim payment of £225,000. The CTa parties received analogous relief and an interim payment of £100,000.
6. All applicants obtained declaratory relief. The LMI and LMI Individuals obtained specific performance and a further £150,000 payment into the indemnity fund. The precise form of the orders, including any further application by the HD parties for specific performance, was reserved for hand-down.

• Supreme Court: In the related procedural appeal, the insurers’ appeal was allowed and the Article 27 stay was lifted: [2013] UKSC 70.
• Court of Appeal: The merits appeal was dismissed and Burton J’s orders were upheld: [2014] EWCA Civ 1010.
• High Court (Commercial Court): The present applications were determined in favour of the applicants.