You have just spent six months negotiating a difficult matter and finally agreed to settle. The lawyers draw up the settlement agreement and one of the clauses says that this is a full and final settlement of all matters between the parties.

I’m sure all lawyers are taught to use this clause in Commercial Law 101. That would explain why it finds its way into nearly every settlement agreement. And it makes sense in a normal commercial settlement. After all, the directors or senior people signing off on the deal on both sides will have a comprehensive knowledge of the entire relationship and therefore a sound understanding of what is given away by including the words “all matters”.

However, the same cannot be said in an insolvency context when the settlement is being signed off by an insolvency practitioner. There is a significant imbalance in the knowledge of what is at risk. The other party is invariably blessed with a complete knowledge of the relationship, but is unsurprisingly unwilling to share anything which may be used against them in the future.

Sure, insolvency practitioners have been granted powers to obtain information, but these are far from perfect and in practice a lack of cooperation from directors, poor books and records, a lack of funding, combined with the limitations of the legislation mean that the prior knowledge that the insolvent had is seldom restored.

The inclusion of “all matters” could and should, in my view, be seen as an opportunistic attempt by the lawyer for the other party to get something for nothing. The insolvency practitioner will not know the value of that ‘something’ because they are not blessed with all the knowledge the insolvent had previously.

The vulnerability and in some cases, desperation, of the insolvency practitioner is exploited by the solicitors for the other party.

Because they probably don’t know what they are giving away, an insolvency practitioner signing off on an “all matters” clause may be taking a big risk. If they have inadvertently given away a significant claim the creditor could raise the issue of negligence.

One day a court is going to be asked to apply its mind to this issue and an insolvency practitioner is going to end up in tears.

A defence of “but everybody does it” won’t cut it.

David Blanchett
31 January 2018