A recent decision of the High Court decided that terms of agreement contained in a Consent Order did not constitute the full extent of the agreed terms between the parties.
Traditionally, when two parties in litigation settle the claim between them, they would enter into a Consent Order (or 'Tomlin Order') that set out the terms of agreement. The court would (usually) rubber-stamp those terms, which represent the final terms of agreement.
However, the recent decision of the High Court in Adibe v National Westminster Bank plc  EWHC 1655 (Ch) (16 March 2017)has cast some doubt on that by looking beyond the terms of settlement in a consent order to decide what the obligations of the parties are.
Mr Adibe was sued by NatWest for a debt of just over £5,000. During a telephone call between Mr Adibe and NatWest's lawyers to discuss settlement, Mr Adibe set out an offer of £2,000, on the condition that adverse credit entries against his name were removed. NatWest's lawyers said entries could not be removed, but could be marked as 'settled', and they would take instructions on the offer from NatWest.
Mr Adibe then put his £2,000 offer in writing, but he did not mention the removal of credit entries. The bank put a counter-offer to accept £4,000, and the parties eventually settled for a payment to the Bank of £3,000. A Tomlin Order was prepared setting out terms for payment of the £3,000. However, there was no reference in the Tomlin Order to the marking of adverse credit entries as 'settled'. Mr Adibe was sent the Tomlin Order in an email asking him to sign if he agreed the terms, which he did.
The Bank then marked the adverse entries as 'partially settled'. Mr Adibe issued a claim against the Bank on the basis that the Bank had failed to honour its obligations under the Tomlin Order.
The initial decision
At first instant, the court decided against Mr Adibe because it felt that the terms of the Tomlin Order consisted of the entire agreement between the parties. As Mr Adibe had narrowly pleaded his claim, the judge felt that he had no choice but to dismiss the claim.
The judge did agree that, based on the sequence of events regarding settlement offers, Mr Adibe had a real prospect of success in proving that his offer to pay £3,000 had been conditional on adverse credit entries being marked as settled.
Mr Adibe appealed the decision.
Mr Jeremy Cousins QC allowed the appeal. In his judgment, he regarded two things as key to the decision:
- First, the fact that (as the court had decided in the initial decision), Mr Adibe's offer was always conditional on adverse credit entries being removed.
- Second, he referred to the case of Evans and Son (Portsmouth) Ltd v Andrea Merzario Ltd  1 WLR 1078, in which Roskill LJ stated that "The court is entitled to look at, and should look at, all the evidence from start to finish in order to see what the bargain was that was struck between the parties".
Applying the logic in Evans to Mr Adibe's facts, Mr Cousins decided that taking the negotiations as a whole, it was clear that the question of removing or amending adverse credit entries was of real importance to Mr Adibe. Accordingly, there was a real prospect of Mr Adibe proving that there was a collateral contract, and he granted the appeal, giving Mr Adibe the opportunity to amend his claim.
Points to consider
Parties can begin settlement negotiations at any point in litigation. Often that process can be protracted, with offers being made back and forth in writing, over the telephone, and in person. This decision highlights the importance of keeping track of all conditions, requirements and offers that are made, and ensuring that all terms of settlement are included within the written document.
Of course lawyers and clients alike might ask how far one can go in ensuring that a Consent or Tomlin Order contains all of the agreed terms, especially where a condition of an earlier offer ceases to be mentioned in subsequent offers (as with Mr Adibe). One way is to include an 'entire agreement' clause in any settlement agreement where the parties expressly agree that all terms of settlement are contained within the written document. Courts will be less willing to go behind Consent Orders where the Order itself is explicit on this point.
On a wider note and with specific regard to organisations, it is not unusual for customers, as part of settlement negotiations in litigation, to make specific requests for the removal of adverse credit entries. TLT acts in a significant number of cases where customers bring claims based purely on credit referencing. In our experience it is vitally important that where promises or assurances are made regarding the removal or amendment of adverse entries, those promises or assurances are recorded and actioned correctly.