UK: Construction of Termination and Release Agreement; Claims in Fraud

Comment
December 30, 2009


(1) Cavell USA (2) Kenneth Edward Randall v (1) Seaton Insurance (2) Stonewall Insurance [2009] EWCA Civ 1363, concerned the construction of a Termination and Release Agreement, which provided for English law and jurisdiction and, under clause 13, for a full release by Randall from "all actions, causes of action, suits, claims and demands whatsoever, whether at law or equity…save…(iii) in the case of fraud" on Randall's part. The issues before the Court of Appeal were (1) whether, on the proper construction of the Agreement, the English courts had exclusive jurisdiction in respect of disputes between the parties concerning the subject matter of the Agreement, including claims in fraud, and (2) whether a claim brought by Seaton and Stonewall against Cavell and Randall in New York was a claim in fraud under English law.

The Court of Appeal found that, as a pure matter of construction of the Agreement, any claim concerning the subject matter of the Agreement, including a claim for fraud, had to be brought in England. With regard to the second issue, the Court of Appeal found that the concept of 'fraud' set out at clause 13 was, in English law, "wider than the concept of the tort of deceit where a fraudulent misrepresentation (or equivalent) [was] required" and was "not confined to claims in deceit but [extended] to at least some cases of dishonest abuse of fiduciary position". The Court of Appeal declined to comment further on the applicable test for what constituted fraud under clause 13 and referred the matter back to the High Court to determine any further elements of the test and whether, on the facts before the High Court, the claim brought by Seaton and Stonewall against Cavell and Randall constituted fraud under clause 13.

This case illustrates the importance of having clearly worded Termination and Release Agreements. It also highlights the apparent uncertainty as to what constitutes fraud under English law.
 
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