Orton v Collins and Others
| Jurisdiction | England & Wales |
| Judge | Mr Peter Prescott QC |
| Judgment Date | 23 April 2007 |
| Neutral Citation | [2007] EWHC 803 (Ch) |
| Docket Number | Case No: HC06C03348 |
| Court | Chancery Division |
| Date | 23 April 2007 |
[2007] EWHC 803 (Ch)
Mr Peter Prescott QC (Sitting as a Deputy Judge)
Case No: HC06C03348
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Paul Marshall (instructed by Shakespeare Putsmans LLP, Birmingham) for the Defendants/Appellants
Mr Geoffrey Zelin (instructed by Blake Lapthorn Linnell, Portsmouth) for the Claimant/Respondent
Hearing date : 30 March 2007
Mr Peter Prescott QC
This is an appeal from a decision of Master Moncaster of 9 January 2007. It raises an important little point of practice: how do you accept a Part 36 offer to settle a case if it involves a disposition of an interest in land?
It arises more often than one might suppose. Take the common case of a dispute between business partners. It is frequently resolved by one of them agreeing to resign in exchange for suitable compensation. But the business has an office and he may have some interest in the lease. The property may be a side-issue, or not an issue at all. But it has to be dealt with.
A Part 36 offer is a written offer to settle a case on specified terms. If wrongly refused, there will adverse costs consequences later. All this is part of a detailed scheme laid down by the Civil Procedure Rules. Its purpose is to encourage the settlement of litigation.
A Part 36 offer may be accepted by sending a notice of acceptance. The way it is commonly done is this. You write out a short document that says you are accepting the Part 36 offer and that identifies that offer, usually by referring to its date; you sign it; and you send it back to the other side. Good practice requires that the notice should refer to the title of the case and its claim number, and that it should also be filed with the court. It also requires that the Part 36 offer should be signed by the party making the offer or by his legal representative, and the same goes for the notice of acceptance. I shall revert to those requirements of the Practice Direction in paragraphs 20 to 22 of this judgment.
However, Mr Geoffrey Zelin, who appears for the claimant in this case, contends that that commonly used method of accepting a Part 36 offer will not work where the settlement would involve the disposition of an interest in land.
The reason it will not work, says Mr Zelin, is that the offer and acceptance will not comply with section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. For present purposes the Act requires a single document that incorporates all the express terms of the contract, signed by both sides. Two documents, one signed by the claimant and the other signed by the defendant, only one of them containing the terms, will not do. They will not create a contract.
What you ought to do, says Mr Zelin, is to take the very pages you have received, write “I accept”, sign underneath those words, and send back those pages. For good measure you ought perhaps to have a covering letter stating that an acceptance of the Part 36 offer is enclosed. It might seem very technical, but it is the law.
He candidly admitted that not everyone is alive to the difficulty. If that is right there must be quite a few litigants who are under the mistaken impression that they have arrived at a binding settlement.
In passing, I am not sure that even Mr Zelin's ingenious solution would work either. The document that contains the Part 36 offer does not contain the words “I accept”. Those words are added afterwards by the acceptor. Therefore the document that was signed by the offeror is not the same document as was signed by the acceptor. The latter is an amended version, and means to be. Furthermore it may have omitted one of the essential terms, namely, the effective date of the contract. The acceptance is not effective until is received by the offeror.
Mr Paul Marshall, who appears for the defendants, contends that the 1989 Act has no application to the settlement of legal proceedings under the detailed mechanism of Part 36 of the CPR. But his main point is that the acceptance of a Part 36 offer need not create a contract at all. Rather, it creates an obligation sui generis that the court can enforce. It can enforce it by requiring the parties to do what is necessary to implement the settlement. If necessary it can enforce that obligation by ordering the parties to enter into a contract that does comply with the formalities of section 2 of the 1989 Act.
To which Mr Zelin ripostes that the Civil Procedure Rules do not confer substantive rights. They merely regulate practice and procedure. Therefore a party cannot be ordered to implement a settlement unless it was a binding contract in the first place.
The Background To This Case
The background to this case can be stated fairly shortly. The parties are members of a firm of solicitors in Bournemouth. I shall call it “the Law Firm”. The Law Firm used to own its own offices but some time ago they were transferred to Walker Properties and leased back. Walker Properties is itself a partnership and its members are some, though not all, of the partners in the Law Firm.
The claimant, whom I shall call Mr Orton, is a member of both partnerships. I say “is” for the sake of convenience. I do not mean to decide whether the partnerships have been dissolved.
Mr Orton's wife was an employee of the Law Firm. In May 2006 it was discovered that she had misappropriated about £75,000 of clients' money, apparently to pay gambling debts. This led to a falling out between Mr Orton and the other members of the Law Firm, who said that Mr Orton could and should have taken steps to prevent the wrongdoing.
A slight complication is that there is a deed of 1 May 1988 by which the then members of the Law Firm entered into a partnership on that date. Since that date some of the names on that deed have retired or resigned in the ordinary way and it is not clear or, at any rate, not before me now, whether the deed continues to govern the partnership constituted by the current Law Firm. That deed makes provision for what is to happen in the event of any partner ceasing to be such. In particular Clause 13(4)(c) provides for the sale of the outgoing partner of his share in any freehold or leasehold property of the partnership at a valuation.
On 30 August 2006 Mr Orton gave notice purporting to dissolve both partnerships. On the next day he started the present proceedings. He sued all those who are or might be the members of both partnerships. Amongst other relief he claimed declarations that both partnerships had been dissolved; an order for the sale of the freehold property; for the appointment of a receiver; for all necessary accounts and enquiries; and that both partnerships should be wound up. For reasons I need not describe no defence was served, nor a counterclaim.
On 19 October 2006 Mr Orton's solicitors made a Part 36 offer to settle the proceedings he had started. The covering letter said: “Please find attached hereto our client's formal offer of settlement under Part 36 of the Civil Procedure Rules. It relates to the whole of our client's claim and is inclusive of interest. This offer will remain open for acceptance for 21 days and after that time the offer may only be accepted if the parties agree liability for costs or the Court gives permission”.
I can paraphrase the relevant terms of the Mr Orton's offer as follows. Mr Orton would withdraw his notices of dissolution. He would retire from the Law Firm and from Walker Properties on a date to be specified by the defendants. He would withdraw the present proceedings. The partnerships would pay Mr Orton his entitlement in respect of the Law Firm and Walker Properties in accordance with the Deed of 1 May 1988: in other words he would dispose of his interests in the office premises at a valuation. As compensation for the loss of his partnerships he would be “indemnified from and against all monies misappropriated by his wife and any consequential losses and expenses” and he would be paid the additional sum of £97,500.
About a week later, on 27 October, the defendants' solicitors, Putsmans (as they were then called), sent the following email:
From: Lipscombe Terry
Sent: 27 October 2006 17:21
To: 'Agnew, Donald'
Subject: Harold G Walker & Co Solicitors (the “Firm”) and Kim Orton
[There follows the address of the defendants' solicitors and their name as it would appear on their letter-head, i.e. “Putsmans Solicitors” in stylised form together with their logo.]
Dear Sirs,
Our clients hereby accept the Part 36 Offer dated 19 October 2006. The date of retirement for the purposes of Paragraph 1 of the Offer will be 31 October 2006 on which date your client will cease to be a partner in the Firm and the property partnership.
Yours faithfully,
Putsmans
Standard wording at the end of the email stated that “Putsmans is the business name of Putsmans LLP which is a limited liability partnership” and its registration number was given.
The Practice Direction that supplements CPR36 requires that a notice of acceptance should be signed by the party who is accepting the offer, or by his legal representative. It also requires the notice should set out the claim number and the title of the proceedings. See PD36 7.7.
Mr Zelin doubted whether simply typing “Putsmans” on the email amounted to a signature that complied with the Practice Direction, citing Nilesh Mehta v. J Pereira Fernandes S.A. [2006] EWHC 813 (Ch), but wisely he did not waste much time on the point. In that case the signature was alleged to be...
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