Nihl Ltd (a company registered in the British Virgin Islands) v Infinite Ltd ((in Liquidation)) (a company registered in Jersey)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Henshaw |
| Judgment Date | 20 November 2020 |
| Neutral Citation | [2020] EWHC 3136 (Comm) |
| Date | 20 November 2020 |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2017-000245 |
[2020] EWHC 3136 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Rolls Building, Fetter Lane,
London, EC4A 1NL
THE HONOURABLE Mr Justice Henshaw
Case No: CL-2017-000245
Alexander Goold (instructed by Ince Gordon Dadds LLP) for the Claimants
Jonathan Gavaghan (instructed by Healys LLP) for the Defendants
Hearing date: 23 October 2020
Approved Judgment
| (A) INTRODUCTION | 2 |
| (B) BACKGROUND | 3 |
| (C) ISSUES FOR DETERMINATION | 4 |
| (D) CONSTRUCTION OF THE TOMLIN ORDER | 5 |
| (1) Express terms | 5 |
| (2) Implied terms | 7 |
| (E) COMPLIANCE WITH THE REASONABLE ENDEAVOURS OBLIGATION | 9 |
| (1) Negotiations between the Claimants and the Adirs | 9 |
| (2) Analysis of the attempts by the Claimants to reach a settlement | 11 |
| (F) ALTERNATIVE CONDUCT-RELATED ARGUMENTS | 15 |
| (1) Repudiatory breach of the Tomlin Order | 15 |
| (2) Specific performance | 16 |
| (G) CONCLUSION | 16 |
(A) INTRODUCTION
The Claimants apply, by a notice dated 30 July 2020, for an order that judgment be entered against the Second to Fourth Defendants, G&T Design Limited, Gal Adir and Tatyana Adir (together, the “ Adirs”) in the amount of £3.3 million pursuant to the terms of the confidential schedule to a consent order dated 27 November 2018 (the “ Tomlin Order”).
The Claimants' application was supported by a witness statement of their solicitor, Mr Gareth Jones, a partner in Ince Gordon Dadds LLP. In response to the application, the Adirs disputed the Claimants' entitlement to judgment under the terms of the Tomlin Order and produced a witness statement of the Third Defendant, Mr Gal Adir, dated 20 October 2020, which gives evidence addressing the steps taken by the parties to agree a full and final settlement pursuant to the terms of § 1 of the Tomlin Order as explained in section B below. The relevance of that issue is discussed in greater detail below. The Claimants objected to the admission of Mr Adir's evidence on the ground that it was filed significantly late without explanation. Mr Jones provided, however, a second witness statement in response to Mr Adir's evidence, providing greater detail and exhibiting relevant email communications as to the steps taken by the Claimants to attempt to settle the claim.
At the hearing of the application, the Claimants' position was that they did not object to the admission in evidence of Mr Adir's statement, provided that Mr Jones's second statement would also be admitted. The Adirs objected to this on the basis that Mr Jones's statement referred to the substance of without prejudice negotiations between the parties. I was not persuaded by the Adirs' objection. The question of whether the Claimants had used reasonable endeavours to reach a full and final settlement had been put in issue by the Adirs in their own responsive evidence. That made it inevitable that the court would need to have regard to the content of the parties' negotiations to reach a decision on that issue. The position is analogous to that where the court is asked to determine whether a binding settlement was reached, which is a recognised exception to the ‘without prejudice’ rule and permits the court to review the without prejudice materials ( Unilever Plc v The Procter & Gamble Co. [2000] 1 WLR 2436 (CA)). I gave a short ruling to that effect at the hearing of the application.
The Adirs also objected to Mr Jones's evidence on the basis that it failed to identify the sources of Mr Jones's knowledge (and Mr Jones was not himself involved in the relevant negotiations). I did not accept that this was sufficient to render the statement inadmissible in its entirety, in particular given the short time available to the Claimants to prepare their responsive evidence following the belated service of Mr Adir's own evidence. This criticism is instead one that goes to the weight attributable to Mr Jones's evidence, and I have therefore taken this factor into consideration.
I have come to the conclusion that the terms of the Tomlin Order did not require the Claimants to use reasonable endeavours to reach a full and final settlement as a condition of becoming entitled to apply to enter judgment under paragraph 2 of the Tomlin Order. In case I am wrong in that conclusion, I have also considered whether the Claimants used reasonable endeavours to reach a settlement and I have concluded that they did. On the basis of that finding, I also reject the Adirs' alternative argument that the Claimants committed a repudiatory breach of the contract by failing to engage in settlement discussions. I have considerable sympathy for the Adirs in the difficult situation in which they find themselves. However, it follows from my findings that the Claimants' application must be granted and judgment entered for the Claimants in the proceedings in the amount of £3.3 million.
(B) BACKGROUND
In these proceedings, the Claimants, NIHL Limited and London Property Asia Limited, seek to recover sums in respect of loans of £1.1 million and £1.5 million (respectively) advanced to G&T John Street Limited (which is not a party to the claim) in June 2014 in connection with a property development in Central London.
Each of the Defendants gave a guarantee of the loans advanced to G&T John Street Limited. The First Defendant, Infinite Limited, is in liquidation and plays no part in the proceedings. The Third and Fourth Defendant are directors of the Second Defendant, a limited company.
Trial of the Claimants' claims was due to commence in this court on 27 November 2018. The principal issues for trial included (i) whether the necessary formalities had been complied with in respect of the loans in order for the guarantees to be enforceable; and (ii) whether, as a consequence of a further agreement that had been entered into between the Claimants, G&T John Street Limited and a third party senior lender, the guarantors had been released from their guarantees. The Claimants claimed that, by the time of the trial, the amount outstanding under the loans (taking account of interest) was around £6.9 million.
On the first day of trial, following negotiations between the parties and their legal representatives, the parties agreed a settlement of the claim, which was embodied in the terms of the Tomlin Order. The Tomlin Order was filed with the court in the usual manner and was approved by the trial judge, Males J.
The terms of that settlement are as follows:
“1. The Claimants and the Second to Fourth Defendants shall use reasonable endeavours to reach a full and final settlement of the Claimants' claims against the Second to Fourth Defendants herein by 26 May 2020.
2. In the event that such settlement is not reached, the Claimants thereafter be at liberty to enter final judgment by consent in these proceedings against the Second to Fourth Defendants for the sum of three million three hundred thousand pounds (£3.3m) inclusive of interest and costs as at that date.
3. The terms of this Schedule remain confidential to the parties and their legal advisers and agents, save that the same may hold discussions with third parties solely for achieving the settlement referred to herein.
4. There be no further applications in these proceedings except pursuant to paragraphs 2 and 3 herein.
5. For the avoidance of doubt, the final judgment referred to in paragraph 2 would then be in full and final settlement of the Claimants' claims against the Second to Fourth Defendants and any other claims against them arising out of the subject matter of these proceedings.”
In the immediate aftermath of the settlement it appears (from a “Chronology of Negotiations” produced by the Claimants, which is disputed to some extent by the Adirs) that the parties initially engaged in some negotiations that petered out around the end of 2018. There followed a period of relative inactivity throughout most of 2019, until the negotiations were revived in late 2019 and continued into 2020.
Ultimately, the settlement deadline of 26 May 2020 in the Tomlin Order passed without full and final settlement being reached.
On 27 July 2020, following a period during which it is said by the Adirs (and apparently accepted by the Claimants) that the Claimants did not seek to engage in further negotiations, the Claimants (through Mr Jones) wrote to the Adirs' legal representative confirming that the Adirs' proposals were considered inadequate and that the Claimants intended to apply to court to enter judgment pursuant to the Tomlin Order. The Claimants then did so on 30 July 2020.
(C) ISSUES FOR DETERMINATION
The Claimants issued their application on the basis that, as no settlement had been reached, they were entitled to apply for judgment to be entered by consent pursuant to paragraph 2 of the Tomlin Order.
In Mr Adir's witness statement and the Adirs' skeleton argument for the hearing of the application, the Adirs raise a number of alternative and overlapping arguments as to why the Claimants should not be entitled to judgment:
i) as a matter of contractual construction, it was an express requirement, alternatively an implied term, of the Tomlin Order that the Claimants must comply with paragraph 1 before being entitled to enter judgment under paragraph 2 (i.e. paragraph 1 is effectively a condition precedent), and the Claimants had not in fact exercised reasonable endeavours to try to reach a full and final settlement with the Adirs. The paragraph 2...
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