Mon - Fri, 09.00 - 17.00
5 Lloyds Avenue, London, EC3N 3AE
Edesia Law instructed in successful Strike Out of £7.5m Claim against UK Law Firm by Saudi Arabian Investors 09 Jan
Bin Obaid & Ors v RLS Solicitors Ltd (t/a RLS Law) [2023] EWHC 3136 (Ch)
The High Court has ruled that a £7.5m claim against a UK law firm be struck out on the basis that a Settlement Deed (the “Deed”) concluded between the Claimants and certain third parties had the effect of precluding the Claimants from bringing a claim against the law firm.
Background
- The claim arose out of the law firm, RLS Law’s (“RLS”), retainer to act for the Claimants and other third parties (the “KAH Parties”) in connection with a series of multi-million pound property investments. RLS’s instructions came via one of the KAH Parties, who was also a director of one of the Claimants.
- Eventually the Claimants and the KAH Parties fell out and litigation ensued, in which the Claimants alleged that the KAH Parties defrauded the Claimants by using the Claimants’ funds to purchase properties that came to be registered in the name of one or more of the KAH Parties. The KAH Parties alleged that the funds utilised were funds of the KAH Parties, representing monies owed and paid to them by the Claimants.
- The litigation (known as the “English Proceedings”) was eventually settled by way of the Deed, which settled all claims against the other parties “and their respective Affiliates”. “Affiliates” was defined so as to include the professional advisers of the Parties. It was common ground that RLS acted as professional adviser to one or more of the Claimants and also the KAH Parties.
- Having settled the English Proceedings, the Claimants brought a claim against RLS. The claim was based on an argument that RLS should have appreciated that the KAH Parties were acting improperly and potentially defrauding the Claimants. It was alleged that, had RLS flagged up this issue at various points, some or all of the alleged losses caused by the alleged frauds would have been avoided and there would have been no need for the English Proceedings. The Claimants claimed from RLS the costs of the English Proceedings, including overseas lawyers’ fees, in the total sum of around £7.5m.
- RLS argued that the Deed had the effect of settling all claims by the Claimants against the KAH Parties and their Affiliates (which included RLS) and the Claimants were in breach of the covenant in the Deed not to sue the KAH Parties or their Affiliates. RLS therefore brought an application to strike out / for summary judgment on the claim advanced by the Claimants.
- The Claimants contended that the provisions of the Deed had to be interpreted as precluding the Claimants from suing Affiliates of both the KAH Parties and the Claimants only in relation to the Affiliates acting in their capacity as Affiliates of the KAH Parties and not in relation to their acting also in their capacity as Affiliates of the Claimants.
- The matter was heard before Deputy Master Lampert in January 2023, with delayed judgment being handed down in December 2023.
- The Judge ruled in favour of RLS, finding that the clear construction of the Deed was to preclude the Claimants from suing RLS, as it was an Affiliate of one or more of the other parties to the Deed. The judge found that there was no basis upon which to imply into the clear drafting of the Deed that there should be a distinction based on which hat RLS was wearing, such that the Claimants could nevertheless sue RLS in relation to its activities as Affiliate of the Claimants, regardless of the fact that it was also an Affiliate of the KAH Parties.
- The Judge noted that it was open to the parties to have agreed to carve out from the Deed the possibility of the Claimants pursuing a subsequent claim against RLS, but that this had not happened. The parties had drafted the Deed to settle all matters relating to the English Proceedings (save for limited specific carve outs) and one of the benefits of this approach – applying the decision of Lord Justice Newey in Schofield and Maranello Ross Limited v Lohomij BV [2022] EWCA Civ 167 - was that it avoided so-called “ricochet” litigation, whereby, if the Claimants pursued a claim against RLS, RLS would pursue a contribution claim against the KAH Parties based on their alleged fraud, thereby effectively re-opening the English Proceedings.
- The Claimants sought to adduce significant evidence as to the negotiation of the Deed, but, as the proceedings were not rectification proceedings, this evidence was ruled inadmissible by the Judge, again applying the Schofield decision.
- The Court therefore granted RLS’s application and struck out / gave summary judgment on the Claimants' claim against RLS.
- A copy of the full judgment can be found at Bin Obaid & Ors v RLS Solicitors Limited (t/a RLS Law) [2023] EWHC 3136 (Ch) (11 December 2023) (bailii.org).
Edesia Law acted for the successful Defendant, RLS in the proceedings. The Claimants were represented by Baker & McKenzie LLP.