Singularis Holdings Ltd v Chapelgate Credit Opportunity Master Fund Ltd

In construing a litigation-funding agreement, provisions disregarding or adding back reductions in recoveries are read in their contractual and commercial context. Clauses referring to netting, set-off, counterclaims, costs orders and other quantifiable orders generally address liabilities owed by the claimant to another party. They do not ordinarily include a reduction in damages for contributory negligence, which is part of the court’s apportionment of recoverable damages and does not create a separate liability owed by the claimant. Where the parties knew that contributory negligence was a material litigation risk, the absence of express wording requiring the reduction to be added back supported that construction.

Singularis, in official liquidation, had obtained damages against Daiwa Capital Markets Europe Ltd in earlier proceedings. The damages were reduced by 25 per cent for contributory negligence. ChapelGate, which had funded those proceedings, had already received its undisputed entitlement under the funding agreement but claimed a further amount on the basis that the reduction should be ignored when calculating the defined term “Proceeds”.

The proceedings were brought under Part 8 for determination of the construction issue. The question was whether the agreement’s “disregarding” and “adding” clauses applied to a contributory-negligence reduction as well as to set-offs, counterclaims, costs orders or similar liabilities.

1. Claim determined in favour of Singularis. The court declared that the reduction applied for contributory fault or negligence was not to be added to “Proceeds” for calculating ChapelGate’s profit share.
2. The applicable approach was to construe the agreement objectively in its documentary, factual and commercial context, considering the natural and ordinary meaning of the words, the agreement as a whole, its purpose, relevant circumstances known at execution and commercial common sense, while excluding subjective intention. In a sophisticated agreement drafted by skilled professionals, textual analysis generally carries particular weight unless the wording is unclear, illogical or incoherent.
3. The “disregarding” clause focused on reductions caused by setting off cross-claims or liabilities. “Netting” and “set-off” were used synonymously in the context of recoveries from litigation. Counterclaims and costs orders were examples of reductions arising from a liability owed by the claimant to another party. The words “other reduction” therefore meant other reductions within that category.
4. Contributory negligence was fundamentally different. It did not depend on a claim or liability owed by the claimant to the defendant or another person. It formed part of the statutory apportionment of damages recoverable for the claimant’s loss. The court relied on the distinction explained in Nance v British Columbia Electric Railway Co [1951] A.C. 601.
5. The “adding” clause was construed consistently with the “disregarding” clause. “Counterclaims”, costs orders and other quantifiable orders were subsets of reductions by reason of set-off. A contributory-negligence determination was not an “other quantifiable order”: the order made in the earlier proceedings awarded the reduced sum and contained no separate order requiring Singularis to pay another party.
6. ChapelGate’s broad construction of “set-off” would capture reductions arising from any defence or appellate argument and would make no commercial sense. The parties knew that contributory negligence was a live and significant risk. If they had intended the reduction to be added back, express wording would have been expected.

First-instance Part 8 determination. The judgment records that the underlying damages proceedings against Daiwa were unsuccessfully appealed to the Court of Appeal and the Supreme Court, but those decisions formed part of the same litigation and were not decisions under appeal in this case.