England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		15/04/2015

Mr. Justice Andrew Smith:

1. The application before me is brought by the second defendant, Mr Wilmer Ruperti, a Venezuelan businessman, and two Panamanian companies owned by him, the third and fourth defendants: I refer to those three parties together as the "Ruperti defendants". The respondents are the first, second, third, fourth, ninth and tenth claimants, whom I call the "Novoship companies". The real issue is the interpretation of a settlement agreement between the Ruperti defendants and the Novoship companies dated 26 September 2013 (the "Settlement Agreement"), which was the subject of a Tomlin order made by Eder J and dated 2 October 2013. In light of its interpretation, I must consider an application by the Ruperti defendants to discharge or vary a freezing order made against them by Leggatt J on 14 January 2015, but I shall hear any specific submissions about that later because the parties are agreed that it essentially depends on the interpretation issue.
2. After a trial in May, June and July 2012 at which the Ruperti defendants did not appear, Christopher Clarke J held in a judgment of 14 December 2012 that the Ruperti defendants were liable to the Novoship companies for a total of US$59,209,952. He also ordered that they pay costs assessed on the indemnity basis. On 18 January 2013 he ordered that they pay pre-judgment interest of some $27 million. He found the first defendant, Mr Vladimir Mikhaylyuk, liable to the claimants for more than £200 million and nearly $60 million, plus interest, and the sixth, seventh and eighth defendants, Mr Yuri Nikitin and two of his companies, the so-called "Nikitin defendants", liable for more than $108 million, plus interest. His order recited that the claimants (including the Novoship companies) confirmed that, where they were entitled to judgment against more than one defendant in respect of the same "item", they would not seek to recover more than the amount of that item. I was told, and it was not disputed, that Mr Mikhaylyuk was (but the Nikitin defendants were not) liable under the judgment in respect of the same "item" as the Ruperti defendants, and therefore the Ruperti defendants are protected by this provision in so far as there has been recovery from Mr Mikhaylyuk.
3. The Novoship companies recovered some $8 million against the judgment debts of the Ruperti defendants: some $4.5 million from the Ruperti defendants as a result of a "Rule B attachments" made by United States District Courts for the Southern District of New York and for Florida, and other recoveries from Mr Mikhaylyuk. Otherwise the judgment debts remained outstanding and attracted post-judgment interest: the Ruperti defendants stated that they were not in a position to meet them, and provided asset disclosure schedules that showed only limited assets available for enforcement, many of them in Venezuela. As the Novoship companies recognised, it would not be easy for them to enforce the outstanding judgment debts. However, according to the evidence of Mr Richard Allen, a solicitor with Baker & McKenzie LLP, in 2013 the Ruperti defendants anticipated that they would receive funds from negotiating a settlement with some unrelated third parties, to whom I shall refer as PDVSA, and (as I interpret Mr Allen's statement) the Novoship companies were aware when they entered into the Settlement Agreement that the Ruperti defendants were engaged in negotiations about reaching a settlement with PDVSA. It is disputed that the Novoship companies were so aware, but to my mind nothing turns on whether they did.
4. The Novoship companies and the Ruperti defendants entered into the Settlement Agreement on 26^th September 2013. It provided, amongst other things, for the Ruperti defendants to make staged payments in 2013, 2014 and 2015 of US$40 million, and for the settlement of claims of the Novoship companies against the "Released Parties", including the judgment debts of the Ruperti defendants, and claims that the Ruperti defendants might have against the Novoship companies. The Ruperti defendants also agreed in a paragraph headed "Cooperation" (and to which I shall refer as the "cooperation paragraph") that for a period lasting until 31 December 2015 they would provide information and documentation and cooperate with the Novoship companies, inter alia by providing oral and written evidence. By the Settlement Agreement the parties consented to an order substantially in the form of the Tomlin order later made by Eder J, which provided that "all enforcement and execution proceedings in this matter against the [Ruperti defendants] be stayed upon the terms of the Settlement Agreement … except … for the purpose of enforcing the terms of the Settlement Agreement" (and for another exception that is irrelevant for present purposes).
5. Because of uncertainty about whether the Rule B attachment obtained from the New York court would remain effective, the Novoship companies applied for the funds attached there to be transferred to England, with a view to obtaining a freezing order over them. On 9 November 2009 Gross J had made a freezing order against the Ruperti defendants in favour of the Novoship companies other than Tuscany Maritime SA, the tenth claimant, and it was continued by Burton J on 12 February 2010. It was limited to $17.15m (reflecting the amount of the New York attachment). It remained in force after the judgment of Christopher Clarke J and the order of Eder J.
6. Mr Ruperti provided disclosure and information pursuant to the cooperation paragraph of the Settlement Agreement, and made himself available to give oral evidence in an appeal by other defendants in these proceedings (although his evidence was not ultimately required). However, the Ruperti defendants did not make any payments under the Settlement Agreement in 2013 or 2014. According to the evidence of Mr Allen, the Ruperti defendants' explanation is that they were unable to do so "due to the extended delay in reaching a settlement with PDVSA".
7. In view of this default and because they thought that the Ruperti defendants had failed to make proper disclosure of their assets in accordance with the order of Burton J, on 18 December 2014 the Novoship companies applied without notice to vary his order and, amongst other things, to increase the amount frozen to US$98 million, a sum representing some $79 million by way of the judgment debts, plus pre-judgment interest and less the recoveries, some $4.5 million by way of post-judgment interest that had accrued, $12.3 being a calculation of the recoverable costs of the proceedings and an allowance for the costs of the application for a freezing order. The Claimants also sought permission to seek similar relief in Switzerland and Florida (where assets were thought to be located) and to lift the stay. Teare J granted the order sought, including that "The stay imposed by the order of Eder J be lifted". The worldwide freezing order with a limit of $98 million was continued by Leggatt J on 14^th January 2015 at a hearing on notice, at which Mr Ruperti was, but his companies were not, represented.
8. On 13 March 2015 the Ruperti defendants, having received payment under a settlement of the PDVSA matter, transferred $25,558,345.74 to the account specified in the Settlement Agreement to receive payments under it. This sum represented the payments that had fallen due under the Settlement Agreement, together with contractual interest that had accrued due thereon under it. The Novoship companies, through their solicitors, Ince & Co, wrote that "any such payment [would] be received as partial satisfaction of the judgment debt only and that [the Novoship companies] are entitled to enforce the judgment debt in full".
9. At the start of the hearing before me on 1 April 2015 the Ruperti defendants had not paid the whole of the Ruperti Payment Obligation. The payment that they had made was only in the amount of the instalments that had fallen due in 2013 and 2014 and interest on them because they were paid late. Their position with regard to the two remaining instalments of $5 million and $10 million was, as Baker & McKenzie LLP stated in a letter dated 13 March 2015 and Mr Edward Poulton, a partner in Baker & McKenzie LLP, stated in a witness statement, that they were willing to "ring fence that sum of US$15 million, either through an escrow agreement or by payment into court, until it becomes due under the Settlement Agreement". However, when in exchanges during the hearing it was suggested that the judgment debts (and other claims) were discharged, released and settled only when the full amount of the Ruperti Payment Obligation and any interest thereon had actually been paid, Mr Andrew Hunter QC, who represented the Ruperti defendants, stated that they therefore would openly tender the further $15 million immediately. I observe that paragraph 2 of the Settlement Agreement expressly permits them to pay before the instalment dates, and the obvious purpose of this, as I see it, is to enable them to trigger the full and final settlement of claims before 31 December 2015, by which date the last instalment was to be paid.
10. The Ruperti defendants did not give (and I did not require) a formal undertaking that they would do so, but later on 1 April 2015, Baker & McKenzie wrote to Ince & Co offering unconditional payment of the $15 million, and asking for the Novoship companies' consent to them doing so in order that the payment might be made without contravening the freezing order. Ince & Co replied by letter dated 7 April 2015 that they would "not object" to the payment being made, but that the Novoship companies would accept it only in partial satisfaction of the judgment debts. As I read it, the freezing order would require the Novoship companies' agreement to the expenditure, and there might be room for debate as to whether it sufficed that they did not object, but, subject to any submissions that the parties wish to make about this, I think that I can proceed on the basis that the Ruperti defendants have now tendered the $15 million and that the Novoship companies have impliedly dispensed with any technical requirement for the production of money or other formalities of valid tender; see Chitty on Contract (31^st ed, 2012) vol 1 at para 21-089.
11. By an application dated 18 March 2015 the Ruperti defendants applied for these declarations as to the meaning and effect of the Settlement Agreement:

i) "the Settlement Agreement remains valid and in effect, and that, following payment of the sum of $25,558,345.74 the [Ruperti defendants] are now in compliance with the terms of the Settlement Agreement";

ii) "upon payment of the remaining instalments, the [Ruperti defendants] will be released from all claims by the [Novoship companies] as set out in clause 4 of the Settlement Agreement";

iii) "while the [Ruperti defendants] remain in compliance with the terms of the Settlement Agreement, the [Novoship companies] are not entitled to take enforcement action against the [Ruperti defendants]".

The application also seeks to discharge of the freezing order made by Leggatt J or to vary it so as to reduce the amount frozen under it to $15 million, the amount that the Ruperti defendants accept remains to be paid by way of stage payments under the Settlement Agreement.

12. Before coming to the terms of the Settlement Agreement and the issues between the parties about its meaning and effect, I should refer to a procedural matter. The Ruperti defendants have brought their application for declarations in these proceedings and without starting a new action. They justify this on the basis that Eder J's order permitted the parties to apply in these proceedings to "enforce the terms of the Settlements Agreement without the need to start a new claim". Mr Hunter argued that this covers applications for declaratory relief where there is a dispute as to the effect of the Settlement Agreement. The Novoship companies did not argue otherwise. I am not wholly persuaded of this, and it is, to my mind, certainly arguable that, if they had sought only the declarations, the Ruperti defendants should properly have started new proceedings (and paid court fees accordingly). However, I need not decide this. Undoubtedly the Ruperti defendants are entitled to apply in these proceedings to discharge or vary the freezing order of Leggatt J, and the applications for declarations can properly be seen as ancillary thereto.
13. The Settlement Agreement expressly states that it should be governed by and construed in accordance with English law, and it includes an entire agreement provision in conventional terms: "The Agreement sets forth the entire Agreement between the Parties regarding the subject matters covered herein and supersedes any and all prior oral and written communications between the Parties, …. Any amendments to this Agreement must be in writing and signed by the Parties". It refers to these proceedings as the "London proceedings" and recites that the Ruperti defendants (referred to as Mr Ruperti and the "Ruperti Entities", meaning his two companies, the third and fourth defendants) and the Novoship companies wished "to agree the basis of a full and final settlement of any and all disputes between them, including but not limited to those featured in the London proceedings". I have already explained sufficiently the cooperation paragraph, but I should set out in full paragraphs 2 to 5 (including the headings to them, which can properly be considered in interpreting the agreement if they assist).

Paragraph 2,

"Agreed Settlement Amount.

The Parties have agreed that Ruperti and the Ruperti Entities shall pay to the Novoship Companies the sum of USD 40,000,000 … net of bank charges by instalments payable by way of a bank transfer …

as follows:

The amount of USD2,000,000 … to be paid by 20 November 2013;

The amount of USD8,000,000 … to be paid by 20 December 2013;

The amount of USD5,000,000 … to be paid by 1 July 2014;

The amount of USD10,000,000 … to be paid by 31 December 2014;

The amount of USD5,000,000 … to be paid by 1 July 2015;

The amount of USD10,000,000 … to be paid by 31 December 2015;

(hereinafter, the "Ruperti Payment Obligation"). … To the extent that Ruperti and the Ruperti Entities are able to pay any part of the Ruperti Payment Obligation sooner than the instalment dates, set out above, they may do so. Interest shall accrue and be payable by Ruperti and the Ruperti Entities to the Novoship Companies on any part of the Ruperti Payment Obligation that is not paid in accordance with this clause at the rate of 2.5% above LIBOR per annum on a compound basis, with quarterly rests".

Paragraph 3,

"Enforcement.

Should Ruperti and the Ruperti Entities fail to pay any amount in full when due under the Ruperti Payment Obligation, the Novoship Companies shall be released from their obligations to standstill under paragraph 5 below (Stay of Proceedings), giving credit to Ruperti and the Ruperti Entities only for monies paid or collected".

Paragraph 4,

"Discharge and Release.

(a) Upon receipt by the Novoship Companies of the amounts set forth in paragraph 2 above, said payment shall constitute full and final satisfaction of any and all claims whatsoever, whether known or unknown, or whether or not previously asserted or notified, that the Novoship Companies may have against Ruperti and/or the Ruperti Entities, including their affiliates, agents, representatives, employees or other related persons (hereinafter, the "Released Parties"), including all amounts that may be due from Ruperti and/or the Ruperti Entities as a result of the London Proceedings, and all such claims or disputes shall be deemed to be fully and finally discharged, released and settled.

(b) Likewise, at that point in time, all claims whatsoever, whether known or unknown, or whether or not previously asserted or notified, that Ruperti or the Ruperti Entities may have against the Novoship Companies, including their affiliates, agents, representatives, employees or other related persons, shall be deemed to be fully and finally discharged, released and settled".

Paragraph 5,

"Stay of Proceedings.

Upon execution of this Agreement, save for ongoing proceedings for execution in relation to the property at [address] which may proceed until final sale of the property with proceeds being retained by the Novoship Companies, the Novoship Companies will take no further actions or proceedings of any nature whatsoever in any jurisdiction to execute or enforce any judgment or order issued in the London Proceedings against any of the Released Parties and agree to refrain from acting against any of the Released Parties, provided Ruperti and the Ruperti Entities' comply with the Ruperti Payment Obligation".

I also set out sub-paragraph 12(b), which is part of a paragraph headed "Governing Law and Jurisdiction" that provides for disputes arising out of or connected with the Settlement Agreement to be decided in the High Court in London. Paragraph 12(b) reads:

"Nothing in this paragraph 12 shall limit the rights of the Novoship Companies to issue proceedings seeking to execute or enforce in any competent jurisdiction any judgment or order issues issued in the London Proceedings that is subject to execution or enforcement, provided the Novoship Companies' obligation to standstill under paragraph 5 (Stay of Proceedings) has been lifted pursuant to paragraph 3 above".

14. As Mr Charles Dougherty QC, who represented the Novoship companies, submitted, there are no special rules of construction applicable particularly to settlement agreements: see BCCI v Ali, [2001] UKHL 8 at para 8 (per Lord Bingham) and para 37 (per Lord Hoffmann). The question is what a reasonable person would have understood the parties to have intended by using the language of the agreement, having regard to the background knowledge that they had or that is to be attributed to them and considering the agreement as a whole. If more than one interpretation is properly available, the court will prefer that which is the more consistent with business common sense: see Rainy Sky SA v Kookmin Bank, [2011] UKSC 50 para 21 and paras 29-30 per Lord Clarke. These principles of contractual interpretation were, unsurprisingly, uncontroversial, and both Mr Hunter and Mr Dougherty claimed that their contentions respected and applied them.
15. Mr Dougherty submitted that, if the Ruperti defendants have not paid when due an instalment payable under the Settlement Agreement, then the Novoship companies are entitled to enforce the outstanding judgment debts in full: paragraph 3 releases them from the prohibition in paragraph 5 if the Ruperti defendants "fail to pay any amount in full when due under the Ruperti Payment Obligation". They do not have to do so: they are still entitled to look to the Ruperti defendants to fulfil the Ruperti Payment Obligation (or the outstanding part thereof) and to pay any interest specified in paragraph 2. However, to quote Mr Dougherty's skeleton argument, "If … following default, the [Novoship companies] elect to lift the stay, and/or to enforce the underlying judgments, as happened here, the election is final. The [Novoship companies] are entitled to enforce the full outstanding judgments, without more. Absent any further agreement between the parties, clauses 2 and 4 no longer have any role once the election is made". Thus, as the Novoship companies interpret the Settlement Agreement, if they decide to proceed to enforce the judgment debts (as they say they did), nothing is any longer to be paid by way of the Ruperti Payment Obligation (or interest on it) and the agreement to settle claims (including, but not only, the judgment debts) never takes effect.
16. In oral argument Mr Dougherty went so far as to submit that the Ruperti defendants are not obliged to make the payments specified in paragraph 2: that paragraph 2 merely states conditions that are to be satisfied if the release and discharge in paragraph 4 is to take effect; and that, if the Ruperti defendants do not fulfil the Ruperti Payment Obligation, the only consequences are that under paragraph 2 interest is payable on instalments not paid on time and that the Novoship companies are able to enforce the judgment debts and to pursue other claims, being free of the constraints of paragraph 5. I am unable to accept that: the operative words of paragraph 2 seem to me to state unambiguously that the Ruperti defendants were entering into a contractual obligation to make the specified payments, and this is confirmed by:

i) the recital that the parties agreed on the undertakings set out in consideration of the mutual promises contained in the Settlement Agreement; and

ii) the label of "Ruperti Payment Obligation".

17. I should make clear that, although the Novoship companies claim to have elected to enforce the judgment debts in full, they have not elected, and do not purport to have elected, to terminate that Settlement Agreement on the basis that the Ruperti defendants have repudiated it or are in breach of the Settlement Agreement or on any other basis. Their position is that they are entitled under the terms of the Settlement Agreement and on its true construction to enforce the judgment debts, subject only to giving credit, as required by paragraph 3, for any monies already paid or collected. Indeed, after the Ruperti defendants had defaulted, far from terminating the Settlement Agreement they accepted documents and witness statements provided under the co-operation paragraph. In an affidavit in support of the application to Teare J, Mr Benjamin Ogden, a partner in Ince & Co, said this: "I should confirm that the [Novoship companies] have not waived their rights under the Settlement Agreement. I am advised … that they have exercised forbearance in relation to the Ruperti Defendants' non-payment and although there have been further "without prejudice" correspondence/discussions with the Ruperti Defendants and their legal advisers in relation to the Settlement Agreement the [Novoship companies] have not agreed to any variations to the agreed obligations".
18. Mr Hunter did not dispute that, when before 13 March 2015 the Ruperti defendants had failed to make instalment payments in respect of the Ruperti Payment Obligation, the Novoship companies were entitled to lift the stay on enforcement proceedings, but he submitted that (the Settlement Agreement not having been terminated for breach) they were not entitled to execute for the judgment debts in full (subject only to giving the credit stipulated in paragraph 3) but only to execute for what was payable under the Settlement Agreement, that is to say any outstanding instalments of the so-called "Ruperti Payment Obligation" and any interest payable under paragraph 2. I observe in passing that Mr Hunter did not take a firm position about whether therefore the Novoship companies might execute for the Ruperti Payment Obligation in full together with any interest (except in so far as it had already been satisfied) or whether they could enforce only instalments and interest that had accrued due and were unpaid, but nothing turns on that for present purposes. His central argument was that, once the Novoship companies have received the amount due under paragraph 2 of the Settlement Agreement (whether because the Ruperti defendants have paid it or because it has been recovered in enforcement proceedings), then the provisions of paragraph 4 come into effect and the judgment debts are "discharged released and settled" (along with any other "claims or disputes"). Thus paragraph 4 provides, in effect, a cap on the amount that the Novoship companies can enforce in proceedings that they are free to bring once released by paragraph 3 from their "obligations to standstill".
19. I do not accept either the submissions of Mr Dougherty or those of Mr Hunter in their entirety. As I shall explain, I consider Mr Hunter's submission inconsistent with both the structure of the Settlement Agreement and the wording of paragraph 4 and other provisions. I reject Mr Dougherty's contention that, after the Ruperti defendants have defaulted in respect of an instalment of the Ruperti Payment Obligation, paragraph 4 has no effect if the Novoship companies elect to lift the stay (or to apply to do so) or to enforce the judgment debts.
20. The structure of the Settlement Agreement, as I see it, is this. Paragraph 4 provides that payment of "the amounts set forth in paragraph 2" constitutes "full and final satisfaction of any and all claims … including all amounts that may be due from [the Ruperti defendants] as a result of [these proceedings]", and that such payment brings this about "Upon receipt by the Novoship Companies of the amounts set forth in paragraph 2". It is only then that all claims or disputes that the Novoship companies may have against the Ruperti defendants (and other "Released Parties"), and for that matter all claims and disputes that the Ruperti defendants may have against the Novoship companies (and their affiliates, agents, representatives, employees or other related parties), are "discharged, released and settled". Unless and until this comes about, under paragraph 4 the judgment debts remain outstanding but the Ruperti defendants are protected against them being enforced and against other claims being brought or pursued against them by the Novoship companies by paragraph 5. (Perhaps curiously, the Novoship companies do not have any corresponding protection pending paragraph 4(b) taking effect, but I do not think that this informs anything that I have to decide.) However, they have this protection only if they "comply with the Ruperti Payment Obligation": hence:

i) Under paragraph 3 the Novoship companies are released from "their obligations to standstill" if the Ruperti defendants fail to pay any part of an instalment of the $40 million when due; and

ii) Paragraph 12(b) expressly preserves the right of the Novoship companies to execute or enforce the judgment debts if the standstill obligations have been lifted.

21. Thus, I accept that, when the Ruperti defendants were still in breach of their payment obligations before 13 March 2015, the Novoship companies were entitled to bring proceedings to enforce in full the outstanding part of the judgment debt. Apparently this was also Teare J's view in that, when he was invited to consider whether they were entitled to enforce in respect of the whole of the outstanding judgment debts or only in respect of the $40 million payable under the Settlement Agreement (and, I would infer, interest on it), he accepted that their right was not so limited because "the words seem quite clear". Thus far, therefore, I agree with Mr Dougherty's contentions.
22. Moreover, once the Novoship companies have been released from their "obligations to standstill" because the Ruperti defendants have failed to pay some part of the Ruperti Payment Obligation timeously, those obligations are not revived simply by the Ruperti defendants making late payment of the full amount (with any interest that is due). The Ruperti defendants have still failed to make a payment "when due", and therefore the condition in paragraph 3 for the Novoship companies being released from their "obligations to standstill" remains satisfied. As I interpret paragraph 3, the parties intended that, once a payment of the Ruperti Payment Obligation is not made on time, the Ruperti defendants lose the protection of paragraph 5.
23. What then of Mr Hunter's argument that the effect of paragraph 4 is to limit the amount that the Novoship can recover by way of enforcement proceedings to "the amounts set forth in paragraph 2" notwithstanding they have not discharged in full the Ruperti Payment Obligation? I am unable to accept either that this is the natural meaning of paragraph 4 read in isolation or of the other terms of the Settlement Agreement or that it reflects the structure adopted by the parties in the Settlement Agreement to compromising their differences.
24. Paragraph 4 states that it is the "payment" of the amounts set forth in paragraph 2 that constitutes "full and final settlement of any and all claims", so as to bring it about that all claims that the Novoship companies have against the Ruperti defendants and related parties are "deemed to be fully and finally discharged, released and settled". This raises a question about the meaning of "payment" in paragraph 4 and whether there is "payment" only if and when the Ruperti defendants pay the sums by transferring money or money's worth to the Novoship companies, or whether the expression also covers monies received by the Novoship companies against the Ruperti defendants' liabilities through enforcement proceedings. As Lord Hoffmann observed in Charter Reinsurance Ltd v Fagan, [1997] AC 313, 391C, the meaning of the word "pay" is so much dependent on syntax and context that it is not helpful to seek a "natural" meaning of the word itself (or as Lord Mustill put it at p.384D, its meaning is "slippery"). However, in the case of the Settlement Agreement it does not seem to me natural to interpret "payment" as covering receipts through enforcement or execution proceedings. Paragraph 3 distinguishes between monies that are "paid" to the Novoship companies and monies that are "collected" by them, the word "collected" referring, as both Mr Dougherty and Mr Hunter submitted, to recoveries through enforcement. I find it difficult to give "payment" in paragraph 4 a wider meaning than "paid" in paragraph 3. Further, the payment to which paragraph 4 refers is by way of "receipts by the Novoship Companies of the amounts set forth in paragraph 2", which is specifically about payments made by the Ruperti defendants by way of bank transfers to a specified bank account, and is nothing to do with recoveries by enforcement proceedings.
25. Mr Hunter, however, sought support for his interpretation of paragraph 4 in the reference to monies collected in paragraph 3. He argued that this makes clear that the Ruperti defendants are to be given "credit" for any sums collected and that this refers to them being given credit against their obligations under paragraph 2. He submitted that the parties cannot have intended to stipulate that the Ruperti defendants were to be given credit for recoveries against the judgment debts: that, it was said, was so obvious that the parties would never have thought of expressing it. I am not persuaded: as I understand it, the point of the concluding words of paragraph 3 is not to stipulate that credit is to be given for monies paid or collected – that indeed might not need to be said. Their point is to make clear that those are the only monies that go to reduce the judgment debts that can be enforced. Given this emphasis, it is quite natural that the parties should refer to sums that had been collected: after all, at the time of the Settlement Agreement, monies had already been "collected" against them and the parties contemplated that more might be collected through enforcement against the property to which the Settlement Agreement referred.
26. As for the other terms of the Settlement Agreement, there is nothing in paragraphs 3, 5 and 12(b) (or elsewhere) that apparently alludes to the Novoship companies being entitled to enforce only part of the judgment debts or to a cap on the extent to which the Novoship companies can enforce them. On the contrary, to my mind paragraph 5 in particular indicates that there is no such cap: it states that, if the Ruperti defendants comply with the Ruperti Payment Obligation, the Novoship companies will not do anything to enforce "any judgment or order issued in the London proceedings", which are defined in the preamble to the Settlement Agreement as "Case No: 2006 FOLIO 1267, High Court of Justice Queen's Bench Division, Commercial Court, where Mr Justice Christopher Clarke issued a Judgment on 14 December 2012 and made orders dated 14 December 2012 and 18 January 2013". The inference is that otherwise they may enforce in full any and all such judgments or orders, including the order of 18 January 2013 for pre-judgment interest notwithstanding enforcement of the order of 14 December 2012 had resulted in recoveries of an amount in excess of the Ruperti Payment Obligation, together with the interest thereon for which the Settlement Agreement provides.
27. Mr Hunter's submission is also, in my judgment, at odds with the structure of the Settlement Agreement as a whole. In effect, if his interpretation of it is correct, once the Settlement Agreement was concluded, the amount that the Novoship companies could recover under it was capped at "the amounts set forth in paragraph 2", that is the Ruperti Payment Obligation and any interest on it. However, not only is there nothing in the words used in the agreement that indicates that this was the parties' intention, but they decided to delay comprising or settling the judgment debt pending receipt by the Novoship companies of those amounts. In the meanwhile, the protection that the Ruperti defendants enjoyed was not that their liability for the judgment debt was suspended but it could not be enforced. As Mr Dougherty submitted, the intention in adopting this structure was surely to "incentivise" the Ruperti defendants to pay the agreed instalments by way of the Ruperti Payment Obligation. Otherwise, there is no apparent reason that the parties would not have adopted the more straightforward structure of an agreement immediately to discharge and release their claims and disputes (including the judgment debts). As I have said, the most obvious purpose of the provision in paragraph 2 that the Ruperti defendants might make early payment of the Ruperti Payment Obligation was to enable them to accelerate the operation of paragraph 4. The Settlement Agreement was, after all, not a compromise whereby the Novoship companies were giving up an uncertain claim in consideration of a commitment to pay an ascertained amount, but they were agreeing to accept a smaller amount in respect of judgment debts and were doing so, it seems safe to infer, because of difficulties in bringing enforcement proceedings against the Ruperti defendants despite their established rights. It is readily understandable that they would not be satisfied with the reduced amount if in any case they had to bring enforcement proceedings to recover it.
28. I come to the Novoship companies' case that, if the Ruperti defendants were late in paying an instalment of the Ruperti Payment Obligation, the Settlement Agreement gave the Novoship companies the right to make an election of the kind that Mr Dougherty suggested. If it is right, then the Novoship defendants can make an election that brings to an end the settlement provision of paragraph 4 notwithstanding the Ruperti defendants pay, albeit late, any amount outstanding by way of the Ruperti Payment Obligation together with interest. Nothing in the wording of the Settlement Agreement suggests that the parties intended to confer on the Novoship companies the right to elect to terminate what the parties agreed in paragraph 4 in these or any other circumstances. The potential consequences of this part of Mr Dougherty's contention seem to me surprising: for example, before 31 December 2015 the Novoship companies would have remained entitled to the benefits of the cooperation paragraph notwithstanding that through their election the judgment debts and other claims had not been settled and would never be settled under the Settlement Agreement.
29. I mention other implications of this part of the Novoship companies' case. Mr Dougherty suggested various formulae as to what would constitute an election by the Novoship companies, but in the end he said that they would so elect if they did anything that would have been prohibited by paragraph 5 had the Ruperti defendants complied with the Ruperti Payment Obligation. The election would not have to be communicated to the Ruperti defendants to be effective. Thus Mr Dougherty submitted that here the Novoship companies made their election when they applied to Teare J, albeit the application was made without notice, because they were thereby seeking to enforce the judgment debts and to lift the stay ordered by Eder J, and that during the hearing before Teare J he specifically put the matter in terms of an election by the Novoship companies. (According to the transcript before me, having referred to paragraph 5 of the Settlement Agreement, he continued: "So, again, that's a conditional stay and clearly on the basis that ... there has not been compliance with the Ruperti payment obligation, that is operated as a release and effectively under paragraph three the position is, in my submission, that the applicants have now elected to continue to take proceedings for the full judgment sum".)
30. Mr Hunter said, however, that it was only when Mr Dougherty served his skeleton argument before this hearing that the Novoship companies made clear that, as they interpreted the Settlement Agreement, they had put an end to the Ruperti Payment Obligation (and any claim to interest thereon) and decided that the provisions of paragraph 4 should never take effect. Although the Ruperti defendants did not apparently receive a transcript of the hearing at the time, they would, I infer, have realised from the order of Teare J and what was said at the hearing before Leggatt J that the Novoship companies were seeking to enforce the judgment debts in full. I do accept, however, that it was only later, and after they had paid the $25,558,345.74, that they appreciated that, according to the Novoship companies, paragraph 2 and the Ruperti Payment Obligation had been terminated and the discharge and release could never come into effect. On the face of it, it seems improbable that the parties intended to create uncertainties of this kind in their commercial dealings.
31. I see no proper basis for concluding that there was an implied term of the Settlement Agreement giving the Novoship companies a right of election of this kind, or for interpreting the Settlement Agreement so as to give them such a right. Mr Dougherty did not identify one more specifically than to appeal to business common sense. I can think of only one possible justification for an implied term introducing an election of this kind: if otherwise the Ruperti defendants would have no protection against having both the full judgment debt and the Ruperti Payment Obligation enforced against them. It might then be argued that, in order to avoid this result, a right of election must be implied in order to give the Settlement Agreement business efficacy, that is to say, because otherwise it would not make commercial sense. I accept that the parties to the Settlement Agreement cannot have intended that the Ruperti defendants were vulnerable, if they failed to pay some part of the Ruperti Payment Obligation, to have enforced against them in full both the judgment debts and the Ruperti Payment Obligation as far as they were outstanding. But paragraph 3 expressly covers the possibility of the judgment debts being enforced after payment of some part of the Ruperti Payment Obligation: credit was to be given against the judgment debts for monies paid or collected. The Settlement Agreement does not expressly deal with the position about the Novoship companies seeking to enforce the Ruperti Payment Obligation after enforcing the judgment debts, but I would have thought it readily understood that similarly the Novoship companies would have to give credit for any monies paid or collected in respect of the judgment debts. This is sufficient to deal with the problem of double recovery, and there is, in my judgment, no need to imply the more convoluted "election" provision that Mr Dougherty suggested, and therefore no justification for doing so. I therefore cannot accept that commercial or business efficacy or common sense requires that it be implied or inferred that the Novoship companies had a right of election of this kind. After all, as Lord Hoffmann said in AG of Belize v Belize Telecom, [2009] UKPC 10 at para 17, where an instrument does not make express provision, "the usual inference in such a case is that nothing is to happen". I do not think that a reasonable reader of the Settlement Agreement would understand the parties to intend to give the Novoship companies the right of election that they claim.
32. Mr Hunter had another argument: he submitted that the entire agreement paragraph prevents the implication of a right of election. I reject that submission: an entire agreement provision does not usually prevent the implication of terms and I do not accept that the entire agreement paragraph here does so. As I understand the law, the position is properly explained in Lewison on The Interpretation of Contracts (5^th Ed, 2011), p.141:

"A term which would otherwise be implied as a result of custom or usage may be excluded by an "entire agreement" clause. But a conventional "entire contract" clause does not affect the question whether some matter of fact (whether or not in documentary form) is admissible as an aid to the process of construing a contractual document. On this basis it is considered that an entire agreement clause would not usually preclude the implication of a term because the implication of a term is elucidating what the written contract means."

33. However, for other reasons that I have explained, I reject Mr Dougherty's submission that, because the Novoship companies elected to enforce the judgment debts by making their application to Teare J, thereafter paragraphs 2 and 4 "no longer [had] any role". The Ruperti Payment Obligation in paragraph 2 continued and continues, and once it is met (albeit late), the judgment debts (and any other claims that the Novoship companies might have against Released Parties, and any claims that the Ruperti defendants might have against the Novoship companies, their affiliates, agents, representatives employees or other related persons) are deemed to be fully and finally discharged, released and settled. There are no longer judgment debts that can be enforced.
34. Mr Dougherty submitted that this conclusion should be rejected because it would mean that the Novoship companies might bring enforcement proceedings only to find shortly before execution that the judgment debts are discharged. This point does not persuade me: it is simply an observation that enforcement proceedings will be aborted if a judgment debt is settled. Of course this is so, whether or not the settlement results from the judgment creditor agreeing to compromise for less than the full amount of the debt. Indeed, Mr Dougherty's argument might be said simply to illustrate that the terms of the Settlement Agreement might operate to encourage payment of the judgment debts, which, he submitted, it was designed to do.
35. In my judgment, therefore, when these applications were brought, the Novoship companies were entitled to bring proceedings to enforce in full the outstanding amount of the judgment debts. Subject to any further submissions that the parties wish to make about whether the Ruperti defendants have carried out their professed intention to tender the remaining instalments of the Ruperti Payment Obligation, the judgment debts will have been settled and the Novoship companies cannot enforce them.
36. I should mention another matter since I raised it during the hearing. I invited counsel to consider whether, on the Novoship companies' construction of the Settlement Agreement, paragraph 3 was penal and so unenforceable. It occurred to me that, on the face of it, if the Ruperti defendants became exposed to having the outstanding judgment debts enforced in full as a consequence of failing to pay an instalment of the Ruperti Payment Obligation in full and on time (whereas otherwise they would be liable for only such part of the $40 million as remained unpaid), the consequences of their breach would appear (in the words of Lord Dunedin in Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd, [1915] AC 79, 87) "extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably have been proved to have followed from the breach". Mr Hunter had not initially advanced an argument along these lines, but in his submissions in reply he adopted the point and argued that the court should prefer an interpretation of the Settlement Agreement that did not mean that the parties had agreed upon unenforceable terms, and that this is another reason to reject Mr Dougherty's interpretation.
37. If Mr Dougherty was right in his submission that the Ruperti defendants were not obliged to pay the $40 million, paragraph 3 would not be penal: the rules about penalties apply only to the consequences of breach and not other events: Chitty on Contracts (13st Ed, 2012) vol 1 para 26-184. I have, however, rejected that contention in paragraph 16 above. But Mr Dougherty had another response: he submitted that the paragraph 3 is not penal because in the event of breach it simply allows the Novoship companies to enforce debts owed to them. I am not persuaded of this. Of course, an agreement is not penal if it simply reserves to a creditor the right to have his debt paid in full in the event that his debtor does not pay on a due date a smaller sum that he has agreed to accept in satisfaction: that was decided by the House of Lords in Thompson v Hudson, (1869) 4 HL 1 (see esp p.15 per Lord Hatherley and p.33 per Lord Colonsay), and the principle was recognised and applied by Sir Richard Scott V-C in Society of Lloyd's v Twinn, The Times, 4 April 2000. However, as I sought to explain in Donegal International Ltd v Republic of Zambia, [2007] EWHC 197 (Comm) at paras 509ff, this principle applies where the agreement only preserves existing rights and does not confer new ones on the creditor. Here the Settlement Agreement conferred on the Novoship companies further rights: the settlement of claims against them in paragraph 4(b), and rights under the cooperation paragraph.
38. Although I am not persuaded by Mr Dougherty's arguments, I prefer not to rely upon this point. First, because it was not canvassed before the hearing, counsel did not have a real opportunity to develop their submissions about it. I am reluctant to reach any firm conclusions without fuller argument, not least because of the uncertainty about whether and how the traditional approach to penalties is to be modified in light of the judgment of Christopher Clarke LJ in Talal El Makdessi v Cavendish Square Holdings BV, [2013] EWCA Civ 1539 (and the determination of the appeal to the Supreme Court that I understand is pending) and about what "commercial justifications" will be accepted as a reason for enforcing otherwise penal provisions. Secondly, the argument is not, at least primarily, directed against the submission that there was the implied term giving a right of election, but against the argument that under paragraph 3 the Novoship companies might enforce the outstanding judgment debts in full. As I see it, the words of the Settlement Agreement are so clear that I would interpret them as evincing an intention to allow this even if it means that paragraph 3 is penal.
39. I therefore reach my conclusion in paragraph 35 without regard to any question about whether paragraph 3 be penal. I should be grateful for the assistance of counsel about what order I should make to give effect to this conclusion. I also thank them for their careful and succinct submissions.