MARANELLO ROSSO LIMITED v LOHOMIJ BV

A contractual release is construed according to ordinary principles, even where the later claim alleges fraud, dishonesty or conspiracy. Express reference to such claims is not invariably required. The court must ascertain the objective meaning of the language in its contractual and commercial context, while recognising that parties ordinarily expect honest dealing.

A broadly drafted release may therefore settle unknown dishonesty claims where they concern its defined subject matter. A party cannot evade such a release merely by recasting previously alleged deliberate wrongdoing as an unlawful means conspiracy. Nor does the sharp practice principle ordinarily assist where the releasor knew the substance of the alleged wrongdoing, chose not to investigate further and settled for valuable consideration.

The appellant acquired a company owning a valuable collection of classic cars using finance provided by Lohomij BV. Bonhams and its affiliate subsequently auctioned cars from the collection. After alleging that the auction arrangements and conduct had caused substantial losses, the appellant entered a settlement agreement with Lohomij, Bonhams and the affiliate. It released all known and unknown claims connected with the acquisition, financing and sale of the collection.

The appellant later alleged that the respondents had participated in an unlawful means conspiracy involving dishonest and deliberate wrongdoing before and after the settlement. HHJ Keyser QC, sitting as a deputy High Court judge, summarily dismissed all relevant claims and refused proposed amendments: [2021] EWHC 2452 (Ch).

The appeal concerned whether the release covered fraud, dishonesty and conspiracy claims; whether reliance on it amounted to sharp practice; whether the judge had impermissibly conducted a mini-trial; and whether terms restricting the secured lender's conduct could be implied.

1. Appeal dismissed. The settlement agreement released all claims existing on 31 July 2015 which concerned its defined subject matter, including claims in fraud, dishonesty and unlawful means conspiracy. Grounds concerning the constituent unlawful means consequently required no determination.

2. A release is construed by the ordinary, unitary process of contractual interpretation. There is no special rule requiring express reference to fraud, dishonesty or conspiracy. The expectation of honest dealing and the caution against surrendering unknown rights form part of the commercial context, but they do not displace the language and purpose of the agreement.

   The release was formal, professionally drafted and exceptionally broad. It extended to every cause of action, whether known or unknown, connected with the acquisition, financing or sale of the collection. Before settlement, the appellant had already alleged deliberate self-interested conduct, illegality, duress, breaches of agency duties and the prejudicial connection between Bonhams and Lohomij. Objectively, the settlement prevented those allegations from being recast as a conspiracy involving dishonest breaches of fiduciary duty.

3. The sharp practice argument failed. This was not a case in which the respondents surreptitiously obtained a release of claims of whose substance the appellant was wholly ignorant. The appellant knew and had alleged the relevant deliberate wrongdoing, chose not to investigate its full background and settled for substantial consideration. Where parties objectively intend to release unknown fraud and conspiracy claims concerning a defined subject matter, little scope remains for treating reliance on that release as unconscionable.

4. The deputy judge had not impermissibly conducted a mini-trial. A court determining a summary application may critically assess the evidence and reject an assertion which is belated, internally inconsistent, contradicted by contemporaneous documents and inherently incredible. The appellant identified no instance in which the judge exceeded those limits.

5. The proposed implied terms restricting Lohomij from preventing or interfering with sales, or requiring contractual good faith, were not reasonably arguable. The detailed facility agreement worked coherently without them. A non-interference term was vague, unnecessary and inconsistent with Lohomij's express right to withhold consent. English contract law contains no general principle of good faith, and the debtor-creditor and chargor-chargee relationship was sufficiently governed by the express agreements and applicable equitable principles.

1. Court of Appeal (Civil Division): The court unanimously dismissed the appeal: [2022] EWCA Civ 1667.
2. High Court of Justice, Business and Property Courts, Business List (ChD): HHJ Keyser QC, sitting as a deputy High Court judge, summarily dismissed the relevant claims, refused permission to amend them and granted summary judgment on indemnity counterclaims: [2021] EWHC 2452 (Ch).