Embezzlement Settlement Agreement

The decision follows another recent ruling on declassification clauses in Khanty-Mansiysk Recoveries Ltd v. Forsters LLP [2016] EWHC 522 (comm) (discussed in the May issue of the Litigation Review) which concluded that a settlement agreement was much broader than the dispute over payment of the invoice between the parties when it was enforced. These two cases are a reminder of the importance of taking into account the drafting of a release clause and the definition of damages when concluding a transaction. When developing settlement agreements, employers should ensure that all forms of potential claims are clearly and unambiguous, where the parties intend to do so. While employees may not be willing to enter into an agreement that could be based on fraud, it may still be interesting to see if you can get them to give up the right to claim that the agreement was fraudulent. Two years later, the insurer received further evidence from the Claimant`s neighbours that the claim was dishonest. The evidence indicated, inter alia, that more than a year before the transaction, the Claimant had fully recovered from his injuries. The insurer requested the cancellation of the settlement agreement (or, in the alternative, damages for deception) on the ground that it had been led to conclude the contract by the fraudulent misrepresentations of the employee in the form of statements on his condition in his memoirs and testimonies. The employer insurer Zurich suspected that the claimant had exaggerated his injuries to increase the value of his claim, but nevertheless requisitioned because of the risk that the judge would believe the applicant at the main hearing. It was only after the agreement that further testimony was revealed, clearly showing that the complainant had been dishonest. Zurich therefore initiated a false presentation procedure in order to cancel the settlement agreement and seek damages for deception. This decision gives insurers the option to reopen a transaction if they can later prove fraud to fraud and clearly warns all claimants that fraud is not tolerated.

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