Tchenguiz & Ors v Grant Thornton UK LLP & Ors

A settlement agreement may release claims arising from a specified subject area, including allegations of deliberate wrongdoing, where that is the objective construction of the agreement. A contract achieved by unlawful means is not thereby an illegal contract. The illegality doctrine does not generally permit a party to retain the benefits of a settlement while refusing its burdens. The sharp-practice principle identified in BCCI v Ali is directed to general releases and does not extend to a specific release where the parties knowingly accepted the risk of releasing unknown claims. Summary judgment is appropriate where a claim demonstrably has no foundation, provided the court does not conduct a mini-trial.

Two sets of proceedings were brought by members of the Tchenguiz family and related entities against Grant Thornton, its partners and, in the second proceedings, Jóhannesson. The claims concerned alleged conspiracy, malicious procurement and execution of search warrants, and malicious prosecution arising from an investigation by the Serious Fraud Office.

The claimants sought to maintain claims despite a settlement agreement containing releases in favour of Kaupthing and its advisers. The court had previously granted summary judgment to Jóhannesson in the VT Proceedings in [2016] EWHC 865 (Comm). The present applications concerned the scope and enforceability of the releases, alleged illegality and sharp practice, the claims brought by CBG, and the evidential foundation of the Somerfield Proceeds Claim.

1. Summary judgment. The procedure was not a mini-trial, but the court was required to scrutinise closely whether a claim demonstrably lacked foundation. It was appropriate to determine such an issue summarily where allowing the claim to proceed would itself cause the prejudice said to be avoided by the settlement.
2. Construction of the Settlement Agreement. The reference to present and former advisers to Kaupthing included Grant Thornton and its relevant partners. The wording was not limited to work performed in connection with the receivers. The release was directed to specified subject areas, rather than particular causes of action. It therefore covered claims concerning investigations or actions by authorities, including allegations of misconduct or deliberate wrongdoing arising from the Investigation.
3. Illegality. Following the approach explained in Patel v Mirza [2016] UKSC 42, the Settlement Agreement was not itself illegal, and neither its object nor performance was illegal. The agreement was a legal contract said to have been achieved or used by unlawful means. Any remedy arising from that conduct would be founded on the alleged conspiracy, not on treating the settlement as illegal. The claimants could not retain the agreement’s benefits while selectively refusing enforcement of its burdens.
4. Sharp practice. The principle discussed in BCCI v Ali [2002] 1 AC 251 concerned general releases. The present agreement was a specific release of claims in identified subject areas. Parties represented by legal advisers could assume the risk that an identified release might compromise a claim known to one party but not another. The release therefore remained effective.
5. Applications. CBG had no real prospect of proving recoverable loss or a coherent conspiracy claim, and the deficiencies could not realistically be cured by access to SFO documents. The Somerfield Proceeds Claim likewise lacked an evidential foundation. The contemporaneous legal advice showed that Investec settled because it had been advised that the claim was without merit; the contrary case was speculation.
6. The GT Defendants were granted summary judgment in the VT Proceedings. The GT Defendants and Jóhannesson were granted summary judgment on the Somerfield Proceeds Claim in the RT Proceedings.

This was a first-instance decision. The judgment records an earlier summary judgment decision in the related VT Proceedings: [2016] EWHC 865 (Comm). The present court reconsidered the relevant arguments with the benefit of further evidence and argument.