Robert Nicholas Jason Scholfield & Anor. v Matthew David Smith & Anor.

Detailed settlement agreements, including releases, are construed by ordinary objective principles. Subjective intention and pre-contractual negotiations are generally excluded when determining contractual meaning, although objective background facts and the objectively assessed commercial purpose may be relevant. Defined terms releasing all claims against Released Parties may include each contracting party’s own Affiliates, particularly where that protects against contribution or ricochet claims. Administrators acting as company officers and agents, and solicitors acting on the company’s behalf beyond mere advice, may fall within such definitions. Where liability is released in whatever capacity, the release is not confined to the capacity that brought the person within the released class. The Ex p James principle does not prevent court officers relying on a freely negotiated release absent clear unfairness. A late rectification claim does not justify keeping released proceedings alive indefinitely.

The Rhino group brought misfeasance proceedings against former administrators and separate claims against Clyde & Co, solicitors instructed in connection with potential claims concerning interest-rate swaps. The proceedings followed a settlement between group companies and Barclays. The settlement released claims against defined Released Parties and provided for enforcement by Affiliates.

The High Court, in [2021] EWHC 2533 (Ch), struck out the misfeasance proceedings against the administrators and partially struck out the claim against Clyde & Co. The Rhino appellants challenged those orders. Clyde & Co cross-appealed, arguing that their claim should have been struck out in full. The issues included the interpretation of the release, whether the administrators and solicitors were Affiliates, the application of the Ex p James principle, and whether the proceedings should await recently issued rectification proceedings.

Newey LJ gave the leading judgment. Arnold and Warby LJJ agreed.

1. Interpretation and evidence. A release is construed by ordinary contractual principles. The court seeks the objective meaning conveyed by the language in its factual and commercial context. Textual and contextual analysis are tools whose weight depends on the agreement. The exclusionary rule prevented reliance on Mr Schofield’s subjective intention and on communications said to show a negotiating consensus about the scope of the release. The limited admissibility of objective background facts and the objectively assessed aim of the transaction did not assist the appellants.
2. Meaning of the release. Read naturally, the Settlement Agreement released each Party’s own Affiliates as well as those of other Parties. The construction was supported by the language of clauses 2.1 and 3.1 and by the evident purpose of protecting Barclays against contribution or ricochet claims. Any redundant release of a Party itself caused no difficulty.
3. Affiliates. Under the Settlement Agreement’s definitions, the former administrators were officers and agents of the companies and therefore Employees, Affiliates and Released Parties. Clyde & Co were also agents. The word agents was not confined to persons with power to affect legal relations. It could include independent contractors acting on a Party’s behalf, and Clyde & Co’s involvement extended beyond giving advice.
4. Scope. Claims comprised liabilities arising in whatever capacity. Consequently, Clyde & Co were released from all relevant claims, not merely claims concerning conduct undertaken as agents. The High Court’s partial striking-out order was therefore insufficient.
5. Ex p James. The principle, as stated in Lehman Bros Australia Ltd v MacNamara, prevents court officers from acting in a way clearly wrong for the court itself, judged by current standards of fairness and the right-thinking person. It did not prevent the administrators relying on the release. They had not procured the settlement, the companies had settled freely with legal advice, and the statutory scheme disclosed no unfairness.
6. Rectification and disposal. The late rectification proceedings did not justify a stay. The appellants knew of the release issue and could have sought rectification earlier. They had elected to run the interpretation risk and were not entitled to leave the claims outstanding indefinitely.
7. Orders. The Rhino appellants’ appeals were dismissed. Clyde & Co’s appeal was allowed. The misfeasance proceedings and the claim against Clyde & Co were to be disposed of summarily in their entirety.

1. Court of Appeal (Civil Division): The Rhino appellants’ appeals were dismissed. Clyde & Co’s appeal was allowed. The claim against Clyde & Co was ordered to be disposed of summarily in full: [2022] EWCA Civ 824.
2. High Court of Justice, Insolvency and Companies List (ChD): The misfeasance proceedings against the former administrators were struck out or summarily dismissed. The claim against Clyde & Co was struck out only insofar as it alleged breach of duty while acting as agents: [2021] EWHC 2533 (Ch).