Boyes Turner’s dispute resolution team recently settled a claim on behalf of a client for unpaid invoices. The claim was defended on the basis that the IT equipment supplied by our client was faulty. In this case, a declaration of agreement was obtained using "without prejudice" correspondence and the defendant's application for permission to appeal was rejected.
Our dispute resolution team wrote to the defendant's solicitors stating that our client would be willing to settle the claim on the basis that the defendant pay £10k in full and final settlement of the claim by way of three monthly instalments. The agreement was to be ratified by way of a Tomlin order within the proceedings (a Tomlin order is a special type of consent order that is filed in litigation to stay the proceedings in view of the settlement whilst preserving either party's right to enforce the agreement and/or apply to lift the stay and continue with the proceedings).
The defendant's solicitors accepted the terms of the original offer letter and a Tomlin order was sent to them. Following receipt of the Tomlin order, the defendant's solicitors requested that the words "including costs and interest" to be inserted into the first paragraph which read "the defendant to pay to the claimant £10,000 in full and final settlement". We agreed to this amendment on behalf of our client and sent a perfected Tomlin order to the defendant's solicitors for signature. However, they then sought to amend the terms of the agreement by requesting a further clause be added to clarify that once the first two instalments had cleared, our client would repair the IT equipment to the extent that it provided the function it was intended to.
Our lawyers did not agree to this additional and rather ambiguous clause and alleged that there had been a concluded agreement between the parties. The defendants were informed that if they did not sign and return the consent order, an application would be made to court for a declaration that there was a concluded agreement between the parties. The consent order was not returned.
Application to Court to establish the concluded agreement
An application to court was made in August 2009 and was heard at first instance by Deputy District Judge Horwood in October. In order for her to determine whether there had been a concluded agreement it was necessary to look at the correspondence that had passed between the parties' solicitors. This correspondence was marked "without prejudice save as to costs". Normally, such correspondence would be inadmissible in evidence. However, case law exists (for example Unilver V Proctor & Gamble) which confirms that there are exceptions to this rule. One such exception is when the court is being asked to consider correspondence (marked without prejudice) to determine whether a concluded agreement has been reached.
To determine whether a concluded agreement has been reached, the court looks at the normal principles of contract - i.e. offer and acceptance, consideration and intention to create legal relations.
The Deputy District Judge determined that there had been a concluded agreement when the Defendant's solicitors had accepted the offer and ordered judgment in our client's favour.
Permission to Appeal
The defendant's solicitors applied for permission to appeal on the following grounds:
- The Deputy District Judge had erred when she had looked at the without prejudice correspondence and that this correspondence was inadmissible; and
- That in any event, there had been no concluded agreement between the parties and the Tomlin order had never been signed, therefore the Deputy District Judge had erred when finding that such an agreement had been concluded.
This hearing was heard at the end of March 2010 before HHJ Elly.
On point 1, the Judge found that it was unarguable that the court was not allowed to consider without prejudice correspondence when being asked to determine whether a concluded agreement had been reached. Accordingly, the correspondence was admissible and the Deputy District Judge had not erred when considering the same.
As to point 2, HHJ Elly found that there was a concluded agreement as there had been an offer and acceptance thereof and that even if he was wrong about that there had been a concluded agreement later the same day when the defendant's solicitors approved in writing the draft Tomlin order that had been sent to them subject to inclusion of the words "in full and final settlement" which we had agreed to include.
Accordingly permission to appeal was refused and the judgment in our client's favour was upheld.
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