Summary

In determining the scope of a pre-action settlement agreement that purported to settle "the whole of the claim" where a liquidator had raised a number of disputes against the owners of the company in liquidation, it was appropriate to consider the correspondence leading up to the pre-action offer to establish which issues "the whole of the claim" could properly be understood to encompass.

Facts

The court had to interpret the scope of a settlement agreement arising from a liquidator's allegations against the husband and wife who owned the company in liquidation.

The husband and wife were the director and secretary of the company respectively and were its shareholders. The liquidator believed from the company records that the husband owed the company some £44,000 by way of a director's loan and the wife had received dividend payments totalling £16,100 that were invalid given the company's insolvency. He made formal demands that both sums be repaid. He then discovered what he considered were further questionable payments made at the company's expense for the benefit of the husband and wife and one of their other companies, and three payments made after the winding-up petition. The correspondence between the parties over the next four months discussed the issues and contained offers from the husband and wife in full and final settlement of their liability, and indications from the liquidator that he would be willing to accept a sum that would bring the matter to an end. Ultimately, the liquidator made a pre-action Part 36 offer, addressed to the husband's solicitor and referring to the husband as their client, to settle "the whole of the claim" for £44,500. The offer was accepted. The liquidator then initiated court proceedings against the couple to recover the questionable expenditure, the payments to their other company and the alleged dividend payments.

The liquidator argued that the settlement agreement had covered only the claims he had intimated against the husband concerning the director's loan account and the three post-petition payments. The husband and wife contended that the Part 36 offer to settle "the whole of the claim" meant that the agreement covered all of the liquidator's claims or potential claims against either of them.

Held

The Part 36 offer had introduced the settlement proposal by reference to previous correspondence. That correspondence had to be considered to establish what disputes "the whole of the claim" could properly be understood to encompass. The correspondence had canvassed the issues of the director's loan account, the three post-petition payments, the alleged dividend payments, the payments to the couple's other company and the questioned expenditure. Those issues had been identified as the subject matter of the liquidator's potential claim, which therefore ranged beyond the initial, formal demands in respect of the director's loan account and the alleged dividend payments. Further, the correspondence had included an expression of willingness from the liquidator to accept £50,000 in full and final settlement of the issues. That statement made no distinction between the issues set out in the formal demands and those set out in the correspondence more generally. In context, it would reasonably be understood to mean the matters that had been previously highlighted in correspondence. In addition, the Part 36 offer was drafted by lawyers who could have easily identified a particular aspect of the claim that the liquidator wished to settle. Instead it referred to settlement of the whole of the claim, which, on its ordinary and natural meaning and in the context of the correspondence to which it referred, was apt to include resolution of the disputed issues raised between the liquidator and the husband as a whole (see para.11, paras 38-43 of judgment).

The settlement had not compromised the liquidator's claim against the wife regarding the alleged dividend payments. The offer had been a clear and unambiguous offer to settle the whole of the claim against the husband; it had made no mention of the wife at all. It did not have to be construed so as to include the wife as a matter of business sense: there might be any number of reasons why a liquidator would wish to settle one claim and keep another alive. Further, the settlement with the husband did not fall within the principle that a settlement with one of joint tortfeasors in full satisfaction of the claim would bar an action against the other tortfeasor, Jameson v Central Electricity Generating Board (No.1) [2000] 1 A.C. 455 considered. The claim against the husband in the correspondence leading to the settlement was put on the basis that he had caused or allowed the dividend payments to be made in breach of his duties to the company. It was essentially a claim that he account to or compensate the company for the loss said to have been caused. The claim against the wife was for recovery of the payments themselves on the basis that they were made after the commencement of the winding up of the company and were therefore void under the Insolvency Act 1986 s.127. They were separate causes of action potentially leading to different forms of relief (paras 44-48).

Judgment accordingly