England and Wales High Court (Commercial Court) Decisions

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

		Royal Courts of Justice, Rolls Building Fetter Lane, London, EC4A 1NL
		22 March 2016

Introduction

1. This Judgment is concerned primarily with the determination of what was originally an application by the Claimant ("KMR") for summary judgment with regard to an important threshold issue viz whether the Defendant ("Forsters") is entitled to rely on the terms of a Settlement Agreement dated 3 December 2012 (the "Settlement Agreement") by way of complete defence in these proceedings. In support of the application, KMR relies upon two witness statements of Kris Kestetter. Forsters rely upon a statement by Gary Oldroyd.
2. The main factual background is not in dispute and (borrowing largely from the parties' skeleton arguments) can be summarised as follows.
3. Forsters is a firm of solicitors. In that capacity they were instructed on behalf of and acted for a company, Irtysh Petroleum plc ("Irtysh") in relation to the acquisition of an oil exploration opportunity in Russia and, in particular, in a share purchase agreement (the "SPA") entered into on 20 May 2010.
4. Irtysh was in fact incorporated only shortly before the execution of the SPA i.e. on 12 April 2010 for the purpose of acquiring and developing the said oil exploration opportunity. Before the incorporation of Irtysh, Forsters had already been retained in January 2007 by one of Irtysh's directors and shareholders, Rupert Galliers-Pratt (RGP), to carry out work preparatory to the incorporation of Irtysh and the acquisition.
5. The oil opportunity took the form of three oil exploration licences in the Khanty-Mansiysk region of Russia. Under the terms of a privatisation agreement, a Russian company Yugra Balt Invest LLC ("YBI") owned 49% of three companies each holding an oil field exploration licence (the other 51% was owned by the regional government and there was a mechanism in place by which YBI could increase its ownership to 99.9%). By the SPA, Irtysh agreed to buy 100% of the shares in YBI from Interguarantee Limited ("Interguarantee") in return for the allotment of shares in Irtysh. Interguarantee was controlled by Dr Alexander Shadrin.
6. In the period January 2007 to the end of June 2010, Forsters incurred fees and disbursements in respect of this project for which they issued an invoice (Invoice No. 301594 dated 1 July 2010) to Irtysh in the sum of £110,557.61 plus VAT (£19,295.61) totalling £129,853.22 (the "Invoice"). On its face, the Invoice expressly stated that it was in respect of Forsters' "Professional Services" and "Disbursements" for the period "January 2007 to June 2010". As appears below, this sum remained unpaid for some time and eventually became the subject of the Settlement Agreement.
7. In about July 2010, Irtysh/RGP wished to move from Forsters to Fladgate LLP. Forsters insisted on a personal guarantee from RGP in respect of the outstanding fees. In the event, RGP did provide a personal guarantee in the form of a letter dated 12 July 2010 expressed to be executed as a deed and signed by him. The guarantee was in short form and stated simply as follows:

"I hereby guarantee to pay to you on demand the invoices issued by you to Irtysh in respect of your fees and disbursements on or around today but so that the maximum liability in respect of this liability is limited to a total of £74,837.18 plus VAT charged thereon."

8. The figure of £74,837.18 plus VAT is, of course, significantly lower than the total sum of £110,557.61 plus VAT stated in the Invoice and was calculated by reference to the work done by Forsters on the instructions of RGP in relation to the project prior to Irtysh's incorporation.
9. July 2010 marked the cessation of relations between Forsters and Irtysh/RGP. It is Forsters' case that thereafter they did not know what was going on with the project but, unsurprisingly, they continued to press for payment of their outstanding fees.
10. It is unnecessary to set out fully the subsequent email exchanges passing between Forsters and Irtysh/RGP with regard to payment of their outstanding fees. For present purposes, it is sufficient to note that RGP disputed the amount of the Invoice. He complained that much of it represented time allegedly spent by Forsters with Dr Shadrin, the director of Interguarantee who acted on behalf of Interguarantee in the SPA. On 13 April 2012, Forsters emailed RGP seeking confirmation of when Irtysh expected to execute financing facilities and when it would be paying the Invoice. RGP replied the following day copying in Dr Shadrin, saying that "We are scheduled to complete all the documents … on Monday. I will confirm when all done. I am copying Alexander (Dr Shadrin) on this as the vast majority of the time that you have billed relates to the many hours that he spent with your colleagues". There then followed further exchanges (including with Dr Shadrin) and, after some further delay, on 22 June 2012, Forsters chased RGP again for payment on his guarantee, enclosing a draft Claim Form and reminding him that he had assured them that the completion of Irtysh's loan facility had been imminent. RGP replied again disputing the quantum of the Invoice, saying "As you know, I did not see any breakdown of these statements at the time that I was requested by your firm to sign document with Forsters. Since I was not present when the majority of the 'billed' hours were recorded, I have no way of knowing whether they are correct. Alexander Shadrin does not agree with your costings".
11. In early July 2012, Forsters then issued proceedings against RGP (the "Guarantee Action"). The Particulars of Claim endorsed on the Claim Form stated in material part:

"[Irtysh] owes [Forsters] £129,853.22 pursuant to [the Invoice]. By a Deed of Guarantee … [RGP] guaranteed to pay [D] on demand the amount due from [Irtysh] up to a maximum liability of £74,837.18 plus VAT.

"[Forsters'] claim is for £74,837.18 plus VAT pursuant to [the Invoice]. The sum is due in respect of legal services provided to [Irtysh] from January 2007 to June 2010."

On being informed that the Guarantee Action had been issued, RGP responded saying:

"This will be vigorously defended. As you know, your bill relates to time that was allegedly spent by Alexander Shadrin in your offices. He disputes it. I was not present for most of the time and did not see the breakdown until you sent it last week. It is unfortunate that you have decided to take this course of action thus jeopardising the chance for the account to be agreed in quantum and settled from the PSB loan."

12. Thereafter, following negotiations, the Settlement Agreement dated 3 December 2012 was executed. It is important to note that this was an agreement not merely between Forsters and RGP but a tripartite agreement between Forsters, RGP and Irtysh each designated as Party A, Party B and Party C respectively. It consists of 5 typewritten pages which began with these recitals:

"(1) [Forsters] has commenced proceedings … in claim number 2YK73888 ("the Action") … (For the avoidance of doubt, the Action relates in part to the invoice dated 1 July 2010 addressed to [Irtysh] by [Forsters].)

(2) To date [RGP] has not defended the Action to enable the Parties to enter into settlement negotiations.

(3) [RGP] is a director and shareholder of [Irtysh].

(4) The Parties now wish to agree a full and final settlement of the Action in consideration of the mutual covenants and other valuable consideration set out below."

13. The main operative clause, Clause 2, provided in material part as follows:

"2.1 This Agreement and the terms set out herein shall be in full and final settlement of all or any Claims which the parties have, or could have had, against each other (whether in existence now or coming into existence at some time in the future, and whether or not in the contemplation of the Parties on the date hereof).

2.2 In consideration of the abandonment of all or any Claims, the parties hereby agree as follows:

(a) Party B and/or Party C shall pay to Party A by way of bank transfer to the [specified account] as follows:

(i) the Settlement Sum on or before 31 October 2012.

(b) …

(c) …

(d) for the avoidance of doubt, Part B and Party C are jointly and severally liable to pay the Settlement Sum any interest that may accrue."

14. Clause 1 defined the "Settlement Sum" as being £90,000 inclusive of VAT (whether or not chargeable) and costs; and "Claims" as:

"… any claim, potential claim, counterclaim, potential counterclaim, right of set-off, right of contribution, potential right of contribution, right to indemnity, potential right to indemnity, cause of action, potential cause of action or right or interest of any kind or nature whatsoever, whether known or unknown, suspected or unsuspected, however and whenever arising in whatever capacity or jurisdiction, whether or not such claims are within the contemplation of the Parties at the time of this Agreement arising out of or in connection with the Action or the invoice dated 1 July 2010 addressed to [Irtysh] by [Forsters] and referred to in the Action". [Emphasis added].

15. Clause 3.1 provided for a covenant not to sue:

"The Parties to this Agreement covenant in favour of each other that following the execution of this Agreement, they will not, and will procure that none of their subsidiaries shall take any step or proceeding or make or assert any claim (whether by way of litigation or otherwise) against one another in connection with or in relation to (either directly or indirectly) the Claims."

16. The remainder of the Settlement Agreement contained various other provisions which Mr Davenport QC on behalf of KMR submitted were (at least in part) "boilerplate".
17. However, in February 2013, Irtysh found out that there had never been an actual transfer of YBI shares from Interguarantee to Irtysh in Russian law; and that it did not own YBI. Much later, in 2015 Irtysh (by now a private limited company and no longer a plc) was put into liquidation. It is KMR's case that it acquired Irtysh's claims against Forsters from the liquidators by way of a written assignment dated 13 May 2015.

The present proceedings and application

18. The present proceedings were instituted by KMR against Forsters on 23 October 2015. The brief details of claim endorsed on the Claim Form state that KMR claims against Forsters "… damages and interest on damages for breach of contract and/or negligence in relation to the provision of legal advice and services to [Irtysh] in relation to the acquisition by the latter of shares in [YBI]". The detailed Particulars of Claim set out a number of alleged breaches by Forsters including an alleged failure by Forsters to see to it that the SPA was effective to create an enforceable obligation on Interguarantee to transfer the shares in YBI; and a failure to see to it that the transfer took place. The damages claimed are said to be in excess of £70 million.
19. In addition, the Particulars of Claim anticipated the case foreshadowed by Forsters in correspondence prior to the issuance of the present proceedings viz that KMR's claim is, in effect, "caught" by the Settlement Agreement and, for that reason, is inevitably doomed. In response to that case, KMR pleads two main points viz (i) that the Settlement Agreement is not to be construed so as to release Forsters from the present claim (the "construction issue"); and (ii) that if it is wrong on the construction issue, the Settlement Agreement is void because of a fundamental common mistake (the "mistake issue").
20. Forsters served its Defence on 19 November 2015. As there pleaded, Forsters' main case was and remains that KMR's claim is caught by the Settlement Agreement and is, in effect, therefore inevitably doomed. Paragraph 2 of the Defence stated that the effectiveness of the Settlement Agreement in releasing Forsters from the present claim ought to be determined as a "preliminary issue". It defines the preliminary issue as comprising both the construction issue and the mistake issue. However, whilst making no other admissions, Forsters chose not to plead any other positive case as to the substantive claim. Instead, it pleaded (para 5) that it will liaise with KMR with a view to proposing directions toward a prompt trial of the preliminary issue and otherwise reserved its position pending the determination of the preliminary issue (para 6). The failure of Forsters to plead properly to the substantive claim was the subject of considerable criticism by Mr Davenport QC.
21. On 9 December 2015, KMR launched its application for summary Judgment on (i) Forsters' defence based on the Settlement Agreement and (ii) the whole claim. Thereafter, at the insistence of KMR, the listing officer apparently decided that such application should come on first. There has been no order by the Court for the determination of any preliminary issue. Notwithstanding, both parties were agreed that I should, in effect, determine the construction issue as a preliminary issue. Mr Davenport QC's initial position was that if KMR succeeded on that issue, it should be entitled to final Judgment on its claim with damages to be assessed. However, he eventually conceded that this was somewhat over ambitious and that the right course was that the Court should give further directions – in particular, requiring Forsters to serve a "full" Defence within a specified period. The parties were also agreed that if Forsters succeeded on the construction issue, the Court should give further directions although the precise nature of such directions was left open.
22. In my view, the procedural position is somewhat unsatisfactory; and I confess that I was initially extremely reluctant to determine the construction issue as a preliminary issue not merely because there was no order for the trial of a preliminary issue but, more fundamentally, because there was no agreed statement of facts and, as appeared from KMR's skeleton argument, it sought to rely by way of factual matrix on certain matters which seemed "at large" and were not agreed. For example, in paragraph 83 of KMR's skeleton, it was asserted by way of conclusion that the releases given by the parties were in compromise of a narrow dispute between a solicitor and its client over the quantum of the solicitor's bill; and that they are not apt to capture a claim which (i) was unknown to the parties at the time; (ii) was not, in the circumstances, realistically conceivable; (iii) was not knowable to Irtysh precisely because it was relying on Forsters; (iv) arises from a failure by Forsters to fulfil an essential obligation in the transaction in which it was instructed; and (v) arises from a failure to do something which was essential not only to the said transaction but also, in the particular circumstances, to Irtysh's obligations under the Settlement Agreement.
23. However, it was common ground between the parties that the essential facts were not in dispute and that such dispute as existed was limited to the proper inference(s) to be drawn. On that basis, both parties were not only agreed but keen for the court to determine the construction issue as a preliminary issue; and I have accordingly proceeded on that basis.
24. Having explained the procedural background, I turn then to consider the construction issue.

The Law

25. In summary, Mr Davenport QC submitted that the scope of the words of release in the Settlement Agreement are limited by the context and the terms of the agreement taken as a whole and its purpose.
26. With regard to such submission, both parties relied upon the decision of the House of Lords in Bank of Credit and Commerce International SA v Ali [2002] 1 AC 251. In that case, the House of Lords considered the effect of a contract under which a former employee of BCCI agreed to accept terms of settlement "… in full and final settlement of all or any claims whether under statute, common law or in equity of whatsoever nature that exist or may exist …". Their Lordships confirmed that there were no special rules of interpretation applicable to a general release which was to be construed in the same way as any contract (see, for example, Lord Bingham at para 8, affirming the general principles summarised in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896).
27. However, Mr Davenport QC sought to rely, in particular, upon the observations of Lord Bingham (with whom Lord Browne-Wilkinson agreed) at para 17 where he referred to "… a cautionary principle which should inform the approach of the court to an instrument such as this." At para 10, Lord Bingham expressed the cautionary principle as follows: "… a long and in my view salutary line of authority shows that, in the absence of clear language, the court will be very slow to infer that a party intended to surrender rights and claims of which he was unaware and could not have been aware." Thus, Lord Bingham stated that if the parties had intended to exclude claims which they could not realistically have supposed were possible, they should have "… used language which left no room for doubt …".
28. Although Mr Davenport QC accepted (rightly) that each case must turn on the particular form of words used by the parties in the context of the specific case, he also sought to place reliance on the actual decision in BCCI where, notwithstanding the apparent wide wording of the release in that case, it was construed as being not wide enough to cover the claims by the bank's former employees for their "stigmatisation". However, as submitted by Mr Smith QC, it is, I think, important to bear in mind that at least one of the reasons for this conclusion was that, at the time of the release in that case, the relevant claims would not have been regarded as a "possibility" i.e. they were "unknown unknowns". This was because it was only by reason of a later decision of the House of Lords made after the release that the claim for "stigmatisation" was first recognised as a matter of law.
29. For his part, Mr Smith QC relied, in particular upon the observations of Lord Nicholls in particular at para 26:

"[T]here is no room today for the application of any special "rules" of interpretation in the case of general releases. There is no room for any special rules because there is now no occasion for them. A general release is a term in a contract … [and the general approach to contractual construction is] as much applicable to a general release as to any other contractual term. Why ever should it not be?"

Mr Davenport QC accepted that Lord Nicholls did not adopt the cautionary principle in the same terms as Lord Bingham but relied on the fact that he (i.e. Lord Nicholls) agreed in an approach that cut down the general terms of the release, saying that (para 23): "The question is whether the context in which the release was given is apt to cut down the apparently all-embracing nature of the release." While the wording of clauses of general release commonly make it plain that the parties intended to achieve finality and provide for a release of claims which might later come to light (para 27), that approach should not be pressed too far (para 28):

"It does not mean that, once the possibility of further claims has been foreseen, a newly emergent claim will always be regarded as caught by a general release, whatever the circumstances in which it arises and whatever its subject matter may be. However widely drawn the language, the circumstances in which the release was given may suggest, and frequently they do suggest, that the parties intended, or more precisely, the parties are reasonably to be taken to have intended, that the release should apply only to claims, known or unknown, relating to a particular subject matter."

At para 29, Lord Nicholls concluded: "… the scope of general words of a release depends upon the context furnished by the surrounding circumstances in which the release was given. The generality of the wording has no greater reach than this context indicates."

30. Lord Hoffmann dissented from the majority in the result but agreed that the background and context of an agreement can limit the scope of words of general release. One important factor is whether there was a dispute between the parties which was settled by the agreement (para 41):

"The absence of a dispute is important because most of the authorities on the construction of releases concern documents which were intended to settle disputes. In such a case, the scope of the dispute provides a limiting background context to the document. It is easy to infer that although the parties used very wide language – "all claims" and so forth – they meant all claims arising out of the matters in dispute."

31. In addition, Mr Davenport QC referred me to two more recent authorities viz. Kazeminy v Siddiqi [2012] EWCA Civ 1416 and Scottish Premier League v Lisini Pub Management Co [2014] SC 300 but, although of some interest, I do not think that they are of much, if any, assistance in the present context.
32. Mr Smith QC also relied upon the recent decision of the Supreme Court in Arnold v Britton [2015] AC 1619 (UKSC) and specifically the observations of Lord Neuberger as to the right approach to the construction of contracts at paras 15-20. In particular, as stated by Lord Neuberger at para 15, when interpreting a contract, the court is concerned to identify the intention of the parties by reference to "what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean".

KMR's case as to the relevant "background" and "context"

33. As to the present case, Mr Davenport QC submitted that the background and context of the Settlement Agreement include three main factors limiting the scope of any words of general release.
34. First, Mr Davenport QC submitted that the only dispute between the parties was of limited scope which was, in the words of Lord Hoffmannn in BCCI a "limiting background". In particular, he submitted that as appeared from various emails, the dispute between the parties concerned only the quantum of the Invoice - specifically the propriety of including certain time billed and the amount of time billed; that, prior to the execution of the Settlement Agreement, no allegation had been raised that Forsters had failed to carry out its duties with reasonable skill and care still less that it had failed to carry out certain duties at all; and that no damages claim by Irtysh of any kind had been intimated let alone the kind of damage now claimed, relating to the failure to complete the registration of Irtysh's ownership of YBI. I did not understand Mr Smith QC to dispute any of the foregoing and, for present purposes, he was prepared to concede that Irtysh and RGP had no actual knowledge of any lack of proficiency of Forsters' work on the project at the time of the Settlement Agreement.
35. Second, Mr Davenport QC submitted that the relevant background included the fact that Forsters was Irtysh's solicitor and therefore bound by the Solicitors Regulation Authority Code of Conduct including "Outcome 1.8" which requires (i) that solicitors' clients have the benefit of the solicitors' compulsory professional indemnity insurance and (ii) that solicitors do not exclude or attempt to exclude liability below the minimum level of cover required by the SRA Indemnity Insurance Rules; that the effect of Outcome 1.8 was to forbid Forsters from seeking to release itself from liability in respect of claims yet unknown or uncontemplated; that this is an important contextual circumstance which supports the conclusion that the parties are not "reasonably to be taken to have intended" to have provided for such a release; and that therefore the relevant words in the Settlement Agreement should be given a "narrower construction" so that they do not cover unknown claims relating to matters not in dispute. In that context, Mr Davenport QC relied, in particular, on what Lord Hoffmann in BCCI said at para 39 – "… the parties are unlikely to have intended to agree to something unlawful or legally ineffective…"; and also Great Estates Group Ltd v Digby [2011] EWCA Civ 1120 per Toulson LJ at para 98:

"… if the contract is capable of being read in two ways, one of which would involve a contravention of a statute and the other would not, that may be a powerful reason for reading the contract in the sense which is compliant with the statute, even if it is the less natural construction. (This is to put in modern terms the approach expressed in the maxim ut magis valeat quam pereat)."

36. Third, Mr Davenport QC submitted that the relevant background included the fact that the existence of the present claim was outside the circumstances conceivable under the Settlement Agreement. In particular, he submitted that the possibility that Irtysh did not own YBI was not conceivable to the parties still less that this was the result of Forsters failing to carry out its obligations under its retainer; and that the obligations undertaken by Irtysh in the Settlement Agreement are in fact inconsistent with that possibility. In support of that submission, he relied in particular on the evidence of Mr Kerstetter (para 19) and Mr Oldroyd (paras 36-37) to the effect that none of the parties knew or suspected that Forsters had negligently failed to see to it that the shares in YBI were transferred to Irtysh as well as other contemporaneous material that RGP only found this out after the execution of the Settlement Agreement in in February 2013.
37. Further, Mr Davenport QC submitted that such proposition is corroborated by Forsters' professional duties towards Irtysh because if Forsters had had any reason to believe that it had negligently or in breach of contract caused damage to Irtysh it would have had a duty to tell Irtysh and advise it to seek independent advice; that the fact that Forsters did not do so leads to the conclusion that there was no reason for the parties to believe that Forsters had negligently caused damage to Irtysh; and that the limiting effect of the circumstances on the Settlement Agreement goes even further than that in the light of the "background context" viz.

i) Irtysh had been incorporated with the purpose of acquiring YBI and exploiting the oil exploration licenses owned by its subsidiaries.

ii) Irtysh was trying to obtain loan finance the availability of which, of course, was premised on Irtysh's ownership of YBI.

iii) As appears from various emails passing between the parties, it was envisaged that Irtysh would pay Forsters out of the loan funds once they were made available.

iv) It was understood by all the parties that without such finance, Irtysh was not in a position to pay Forsters. That is why Forsters was pressing for confirmation that Irtysh had signed the loan agreements.

In these circumstances, Mr Davenport QC submitted that it went without saying that if Irtysh did not in fact own YBI it would have no means of paying Forsters and meeting its obligations under the Settlement Agreement because it would have had no access to loan finance.

The construction of the Settlement Agreement in the context of the relevant background

38. In considering the parties' submissions, it is convenient to start with the wording of the Settlement Agreement which is, in my view, very wide indeed. In particular:

i) As already stated, the Settlement Agreement is a tripartite agreement i.e. it is concerned with the settlement of claims and counterclaims between not only RGP and Forsters but also Irtysh and Forsters.

ii) Clause 2.1 makes plain that the Settlement Agreement is in full and final settlement of "all or any Claims" which the parties (i.e. RGP, Irtysh and Forsters) have, or could have had, against each other. This is very wide wording. Further, the last sentence of Clause 2.1 states expressly that such settlement covers claims "whether in existence now or coming into existence at some time in the future, and whether or not in the contemplation of the Parties [i.e. RGP, Irtysh and Forsters] on the date hereof". These last words, are, in my view, particularly important i.e. the parties are, in effect, agreeing that Claims which are not yet in existence nor even in the contemplation of the parties fall within the scope of the release.

iii) The definition of "Claims" in Clause 1 is also, on its face, extremely wide. In particular:

a) "any claim" is expanded to include any "potential claim, counterclaim, potential counterclaim" i.e., reinforcing the notion that even a "potential" claim (or counterclaim) is nonetheless a "Claim";

b) the words "whether known or unknown, suspected or unsuspected" make plain that knowledge or even suspicion is not a requirement for something to be a "Claim";

c) the words "however and whenever arising" further make plain that it is not a prerequisite that the "claim" must have arisen by the date of the settlement;

d) the words "whether or not such claims are within the contemplation of the Parties [i.e. RGP, Irtysh or Forsters] at the time of this Agreement" repeat the words in the operative Clause 2.1 and make plain (again) that even (potential) claims and counterclaims outwith the contemplation of the parties at the date of the Settlement Agreement fall within its scope.

39. There is then the additional important wording at the end of the definition of "Claims" viz. "… arising out of or in connection with the Action or the invoice dated 1 July 2010 addressed to [Irtysh] by [Forsters] and referred to in the Action". I readily accept (as did Mr Smith QC) that this last phrase limits the scope of the definition. As a matter of language, I am also prepared to accept that the claim now sought to be advanced by KMR in these present proceedings does not "arise out of" the Guarantee Action or the Invoice. However, Mr Smith QC relied upon the words immediately following i.e. "... in connection with …". In that context, he relied upon the decision of the Court of Appeal Barclays Bank plc v HMRC [2007] EWCA Civ 442 where those same words (in a tax statute) were construed as covering matters indirectly connected (see Lady Justice Arden at [18] to [26]). Mr Smith QC also referred me to Dunthorne v. Bentley [1996] RTR 428 (CA) at 431 per Rose LJ; and the discussion in ARC Capital Partners Ltd v Brit Underwriters Ltd [2016] 4 WLR 18. In passing, I would also refer to the discussion in Ashville Investments Ltd v Elmer Contractors Ltd [1989] 1 QB 488.
40. In my view, reference to earlier authorities as to the meaning of a particular word or phrase is often unhelpful and sometimes dangerous particularly where the context in which that word or phrase may have been used is different from the instant case or wording. Here, it is sufficient to say that, as a matter of language, the words "in connection with" are plainly of wider scope than the words "arising out of". As already noted above, the Invoice was in respect of Forsters' "Professional Services" and "Disbursements" for the period "January 2007 to June 2010"; the claim advanced in the Guarantee Action was expressly stated to be "… The sum is due in respect of legal services provided to [Irtysh] from January 2007 to June 2010."; and the claim now sought to be advanced by KMR in these present proceedings is formulated in the Particulars of Claim as being one for "… damages and interest on damages for breach of contract and/or negligence in relation to the provision of legal advice and services to [Irtysh] in relation to the acquisition by the latter of shares in [YBI]" (emphasis added). In other words, the claim now sought to be advanced is for breach of contract and/or negligence in relation to the very same legal services which were the subject of the Invoice and the Guarantee Action. In my view, it inevitably follows that, as a matter of language, the claim now sought to be advanced by KMR in these present proceedings is properly described as being "connected with" both the Guarantee Action and the Invoice and therefore "caught" by the Settlement Agreement.
41. For the avoidance of doubt, I reach this conclusion bearing well in mind the "cautionary principle" referred to by Lord Bingham in BCCI. Equally, this conclusion is, in my view, unaffected by the "background" or "context" relied upon by Mr Davenport QC. As to these (and taking them in a slightly different order):

i) I do not consider that Outcome 1.8 of the SRA Code of Conduct has any relevance to the proper construction of the Settlement Agreement. There is nothing to suggest that the Code formed part of any relevant factual matrix that "crossed the line"; and, in any event, it seems to me that this provision is not concerned with this type of Settlement Agreement.

ii) I readily accept that the only dispute between the parties leading up to and at the time of execution of the Settlement Agreement concerned the quantum of the Invoice; that no allegation had been raised that Forsters had failed to carry out its duties with reasonable skill and care still less that it had failed to carry out certain duties at all; and that no damages claim by Irtysh of any kind had been intimated let alone the kind of damage now claimed, relating to the failure to complete the registration of Irtysh's ownership of YBI. However, as already noted above, the language of the Settlement Agreement provided expressly that it covered even a "… potential claim … potential counterclaim, right of set-off … whether known or unknown, suspected or unsuspected, however and whenever arising … whether or not such claims are within the contemplation of the Parties at the time of this Agreement." Thus, it is plain that the Settlement Agreement had a much wider scope than the particular dispute which existed at that date.

iii) This is not a case like BCCI where the claim was, in effect, an "unknown unknown". Whilst fully recognising that the present claim was not "suspected" at the time of the Settlement Agreement, the objective bystander could not and would not, in my view, have said that a claim for damages for breach of contract and/or negligence was "impossible". In my view, that conclusion is reinforced by the clear express terms of the Settlement Agreement.

iv) Equally, I do not consider that KMR's case is improved by saying that the claim in these present proceedings is outside the circumstances conceivable under the Settlement Agreement or by reliance on the other matters referred to above. At the risk of repetition and even bearing in mind the "cautionary principle" stated by Lord Bingham and the other observations of Lords Nicholls and Hoffmann in BCCI, it seems to me that this tripartite agreement was, and was objectively intended to be, an agreement by all three parties whereby they expressly agreed that the payment of the Settlement Sum would be in full and final settlement of all other "Claims" (as defined) and that such definition covered, and was objectively intended to cover, even a claim such as the one KMR now seeks to advance in these present proceedings.

Conclusion

42. For these reasons, it is my conclusion that the claim advanced by KMR in these present proceedings is "caught" by the Settlement Agreement; and that Forsters are entitled to a declaration to such effect. I would therefore invite Counsel to agree a draft order for my approval including costs as well as further directions. Failing agreement, I will deal with any outstanding issues.