Groombridge v Groombridge

A settlement agreement is interpreted as a unitary exercise. The court considers the natural and ordinary meaning of the language, the agreement as a whole, its purpose, relevant facts known to both parties, and commercial common sense at the date of contracting. Subjective intentions are excluded, and the court must not improve the parties’ bargain.

Where a contractual allocation refers to clients, the meaning depends on the agreement’s language and commercial context. It may include client accounts and trusts linked to named individuals. An assignee may enforce a company’s assigned causes of action where the assignment covers rights incidental to the agreement, but a director cannot personally recover loss suffered by the company. An obligation to transfer physical records requires delivery of records within the relevant party’s possession or control; it does not necessarily impose a continuing obligation to maintain them.

The parties were brothers who had jointly operated investment-advice and wealth-management businesses through JOML and JOMS. Their relationship broke down, and they entered into a settlement agreement dated 18 July 2013 allocating clients, regulating accrued income, providing compensation for clients who moved between their businesses, and requiring transfer of physical records.

The claimant sought unpaid sums under clauses 5 and 8. The defendant counterclaimed under clause 9, for breach of clause 13, and for repayment of a director’s loan. The principal issues concerned the meaning of “clients” in Annex 1, the evidential requirements for clients changing businesses, the effect of an assignment by JOML and JOMS, and whether physical records had been transferred.

1. Contractual interpretation. The settlement agreement required a unitary interpretation based on all relevant objective material. This included the language used, the agreement’s other provisions, its purpose, facts known or reasonably available to both parties at the date of contracting, and commercial common sense. Subjective intentions were excluded. The court was not entitled to rewrite an imprudent bargain or improve it with hindsight.
2. Meaning of “clients”. Reading the agreement as a whole, and having regard to the nature of the businesses and the parties’ common background, “the clients and advisers listed in Annex 1” meant client accounts bearing the listed names. Those accounts included trusts established by the named individuals. The interpretation therefore applied to income from both personal products and products placed in linked trusts.
3. Clauses 5, 8 and 9. The claimant was entitled to damages for sums not paid in breach of clause 5. For clause 8, the relevant trigger was a client instructing the defendant’s business by 31 December 2013, rather than merely having received advice or generated commission. For clause 9, an existing client had first to be responsible for income received by JOML in the second quarter of 2013. Where that condition was satisfied, an existing client instructing the claimant could engage the clause in respect of the relevant policies.
4. Assignment and corporate loss. The defendant could not personally claim for management work undertaken as director where the loss was suffered by JOML or JOMS. However, the assignment was effective to transfer the director’s-loan claim and, in the circumstances, claims relating to the records were capable of being treated as incidental to the settlement agreement.
5. Physical records. Clause 13 required transfer of physical files and records within the claimant’s possession or control on 18 July 2013. It did not require the claimant to maintain physical files indefinitely. On the evidence, the claimant had transferred the relevant records and was not in breach.
6. Disposition. The claimant’s claims and the defendant’s counterclaims succeeded in part. The defendant obtained judgment for the outstanding director’s loan and the proven clause 9 claims. The clause 13 counterclaim failed.