Property Law uk

Maintained by Gary Webber

Tomlin orders

This page contains an article dealing with the general principles of Tomlin Orders and details of a Court of Appeal case on rectification of a Tomlin Order. See also the Charging order page which contains details of a case where a trust created by a Tomlin Order was held to have priority over a subsequent charging order.


General Principles

By William Hanbury, barrister
www.exchangechambers.co.uk

Introduction

What are the consequences that follow for the client who refuses to comply with the agreed terms in a Tomlin Order and what procedure should be adopted by the enforcing party?

In addition, the parties commonly fail to deal with a particular aspect that they would have been expected to have dealt with. What is the court’s role in construing the agreement and if necessary inserting additional terms where these are necessary to make sense of the agreement? If the order is in Tomlin form, in what circumstances may the stay be lifted and does that mean the parties may litigate the matter as if there were no stay imposed?

These points, as well as how to avoid the pitfalls, which beset this area, will now be considered.

What is a Tomlin order?

A Tomlin order is a form of consent order which brings the proceedings to a conclusion save for the purposes of implementing the agreed terms, which are usually referred to in the schedule to that order or sometimes referred to in a separate document or documents. They are only one of a number of possible orders available (set out in Part 40.6 CPR) and should only be used where appropriate. The form of order is prescribed by the Chancery Guide at 9.16.

The important characteristics of this type of order are as follows:
  • Like any other compromise, but unlike court orders “by consent”, i.e. where the parties have not objected to an order being made but have otherwise not reached a binding compromise, a Tomlin order constitutes a binding contract between the parties;

  • The compromise, usually embodied in the schedule to the order, may go beyond the subject matter of the litigation.

  • The court’s jurisdiction is limited to ensuring the correct form of words has been used in the order but, unless, for example, a consenting party lacks capacity, the court is not concerned with the terms agreed in the schedule or other external document. Once the order has been made, the court’s role thereafter is supervisory. The supervisory nature of the order is inherent in the “liberty to apply” provision;

  • After the order has been made the court can only re-open the dispute between the parties that was compromised where it could intervene with any other contract, for example, because there is a lack of certainty as to some or all of the terms. The means by which this should be done will be considered below.
Can I apply for specific performance or should I apply to lift the stay?

Suppose A, who is in dispute with his neighbour B as to the position of their respective boundaries, agrees to move the de facto boundary in return for B building a wall in the new position within three years. B does not build the wall within three years or at all and A wants to enforce the compromise. He seeks advice as to how this may be done.

First of all, an advantage of the Tomlin form of order is that the order may be enforced as a judgment and will not normally require fresh proceedings. Provided the terms are sufficiently clear, the party seeking to enforce the order can apply for specific performance of the compromise, usually found in the schedule of the order, within the original proceedings. This can be by issuing an application with a supporting witness statement. However, to avoid any argument or confusion it is probably sensible to provide in the order or the schedule that enforcement action may taken without the need to issue new proceedings. A, in the scenario described, will issue an application identifying the term which has not been complied with and invite the court to specify a new date by which it should be complied with and the consequences that follow from B’s failure.

Although the court’s role is supervisory, this does not mean it is not entitled to interpret the agreement referred to in the order. However, in practice the scope for implying terms is limited. In circumstances where the terms are insufficiently precise or are contained in a side agreement or agreements which have not themselves been incorporated into the schedule, it is possible for the party seeking to enforce the order to apply for it to be made an order of the court. In addition, if it is desired to issue contempt proceedings against the other party this will always first of all require an order of the court or an injunction order setting out clearly what the defendant is required to do and within what time frame.

The Tomlin order incorporates the terms of a compromise in a schedule to the order not in the order itself. If a breach of the agreed compromise occurs the innocent party has to come back to court first and ask the court to make a specific order for the guilty party to comply with his obligations before they can be enforced, if necessary by utilising the contempt power (see the notes in Atkin at volume 6 (2) para 107).

The circumstances in which the court will lift the stay and allow the claimant to pursue the original application are limited. Although the standard order refers to a “stay” rather than a conclusion to the action or actions, it is in practice an end of the proceedings, save for implementation. See Hollingsworth v Humphrey [1988] CLY 2931 (CA) where Fox LJ said:
    "It was not open to the judge to make an award of damages .. It seems to me that under the terms of the Tomlin order the only jurisdiction that he had in this action to make an order for the purpose of carrying into effect the terms of the compromise. An award of damages is not carrying the terms into effect. It is granting a remedy for breach of contract. In my view any claim by Mrs Hollingsworth for breach of contract must be pursued in a separate action". (As cited in Orton v Collins [2007] EWHC 803 (Ch); see also The Bargain Pages Ltd v Midland Independent Newspapers Ltd [2003] EWHC 1887 (Ch) at paras 39-42).
The enforcing party does not therefore have the option of pursuing the original action. One exception would be where the original compromise embodied in the schedule of the Tomlin order was obtained by improper means. Where the circumstances make it a nullity the other party must surely be able to pursue the original action.

Conclusion

Tomlin orders represent a useful means of compromising an action without continuing to involve the courts. The advantage, where the order is properly drafted, is that the order may be enforced without the need for fresh proceedings. However, it may also be a disadvantage that the original action may not be pursued and in practice it is difficult to draft water tight agreements outside the courtroom shortly before a trial is due to start. On the other hand, if the goodwill of the moment is lost, be it following constructive discussions outside court or following a successful mediation, it is often difficult to regain it. Invariably one party or both parties will have second thoughts. Obviously, the more detailed the terms the scope there is for drafting errors but the less likelihood there will be for the omission of key terms. In practice courts give scant sympathy to those represented by competent lawyers who, perhaps under pressure as to time, omit important details.


Rectification of Tomlin Orders

Rectification to create charge

Lloyds TSB Bank Plc v Crowborough Properties Ltd
[2013] EWCA Civ 107

Summary

A bank was entitled to rectification of a Tomlin Order entered into in settlement of its claims to enforce legal charges. The parties had overlooked that one of the scheduled terms involved the release of a guarantee, which had the unintended effect of discharging the charges entered into by the guarantors.

Facts

CP, a company, owed a bank over £29M. Mr & Mrs K were guarantors up to £25M. The bank had security over various properties – some owned by the company and some owned by the guarantors, and had appointed LPA Receivers.

The company and the guarantors claimed the bank had reneged on a commitment to support a property development. The proceedings were compromised by a Tomlin Order. Part of the arrangement was that the guarantees would be released upon payment of £500,000 with payment being secured over two new properties. The unintended effect of the release was that it would free that part of the development owned by the guarantors from the bank’s charge because there would no longer be any debt due from them. That was acknowledged to be a drafting error. The underlying assumption was that the development, including the properties owned by the guarantors would remain charged to secure the company’s indebtedness. However, it went unnoticed at the time.

The bank sought rectification of the Tomlin Order, effectively to retain security over the properties notwithstanding the release of the guarantees.

First instance

At first instance the High Court refused the claim, holding that what must be shown is a common intention that the bank was to have a separate charge over the guarantors’ properties to secure the company’s debt. However, this was not something it had already and it was not something which anyone had asked for. There was a mistaken assumption that the charge was wide enough to survive the discharge of the guarantees, but no intention (because of that mistake) to grant a wider charge. Rectification was therefore refused. The bank appealed.

Decision on appeal

The Court of Appeal allowed the appeal and found for the bank. The judge had taken too narrow a view. He posed himself the question whether the parties had manifested an objective intention that fresh charges should be granted. That was not the right question. The grant of a fresh charge was not the only way in which the agreed objective could have been achieved. It was equally valid to characterise the bank’s existing right in other, commercial terms – the bank’s right was to sell all the charged properties and apply the proceeds of sale towards discharge of the company’s indebtedness. On the evidence and on the judge’s findings, that was plainly the right that both parties intended the bank to retain.

The fact that the drafting error which led to the release of the charges was an erroneous assumption did not remove the drafting error from the reach of rectification (Swainland Builders Ltd v Freehold Properties Ltd [2002] 2 EGLR 71 applied).

Comment

The schedule to a Tomlin Order is a private contract entered into between the parties. Whilst the court has no jurisdiction over the scheduled terms, as opposed to the body of the Order itself (Noel v Becker [1971] 1 WLR 355), it plainly has jurisdiction to consider rectification of the scheduled terms on normal contractual principles. It can also resolve questions of construction as to the interpretation of the scheduled terms (Sirius International Insurance v FAI General Insurance [2004] 1 WLR 3251; Vickbar Ltd v David Freud Ltd [2006] EWCA Civ 1622).

In drafting more complex Tomlin Orders, it may be appropriate to record contemporaneous notes not only of the terms being negotiated, but the reasons for them, and the underlying basis on which the parties are proceeding.


Protecting the Tomlin Order

Land Registry restriction

Law v Haider
[2017] UKUT 212 (TCC)


Summary

The entry of a restriction under the Land Registration Act 2002 was necessary to prevent a disposition of land in breach of a Tomlin order containing a right of pre-emption.

Facts

A was the owner of two parcels of land: a large house (the House) and an adjoining park (the Park). The Park was acquired from R. R was the owner of four registered titles concerning land in the vicinity of the House and the Park. One of those titles comprised some acres of ancient woodland, which had a boundary with the House and the Park.

R commenced proceedings against A in relation to a number of disputes concerning boundaries. The parties compromised those proceedings by way of Tomlin order which provided that in the event of R ever “selling” the woodland, she would give A the “first option” to purchase it.

A successfully applied to enter a unilateral notice in relation to the title to the woodland, stating that they were interested in the land as an intending purchaser under the order. They subsequently applied to enter a restriction in relation to the same title, alleging they had sufficient interest in the restriction by virtue of the terms of the order. R objected and the matter came before the First-tier Tribunal.

First instance

The FTT ordered that the application by A to enter the restriction should be cancelled. In doing so, it found that the relevant paragraph of the Tomlin order was void for uncertainty because it was not clear what was meant by ‘the event of…selling’. Further that any right of pre-emption was spent as the respondent had invited the appellants to make an offer to purchase the land but they had not done so. It also held that special circumstances which might justify protection of a right of pre-emption being afforded by restriction were not made out in the instant case. A appealed to the Upper Tribunal.

Main Issues
    (1) Was the relevant paragraph of the Tomlin order void for uncertainty?
    (2) If not, whether R had complied with the obligation imposed on them so that the rights vested in A were spent.
    (3) Whether the appellants should be able to enter a restriction in relation to their rights under the relevant paragraph of the Tomlin order.


Decision on appeal

The Upper Tribunal allowed the appeal. The Tribunal held that:

(1) The order was not void for uncertainty. On the true construction of the phrase ‘first option’, the respondent was obliged, after forming an intention to sell the relevant land, to offer to sell the land to A at a price specified by her.

(2) The rights and obligations under the relevant paragraph of the order remained effective. R had never offered any land at a specified price; she had only invited A to make an offer for the land. A were entitled to enter the unilateral notice.

(3) Section 42(1)(c) of the Land Registration Act 2002 permits entry of a restriction where such entry is necessary or desirable to protect a right of claim in relation to a registered estate. However, that is subject to s42(2) which provides a restriction may not be entered for the purpose of protecting an interest which was, or could be, subject of a notice. Section 42(1)(c) could not be relied upon by the appellants to enter a restriction. However, in the instant case, the pre-emption right was drafted so as to refrain from disposal of the land without performing the obligations to give the grantee the rights conferred. As the entry of a notice to protect the priority of a right of pre-emption did not have the effect of preventing a disposition of land in breach of a grantor’s negative obligations, it could be said that the entry of a restriction was necessary to prevent unlawfulness for the purposes of s.42(1)(a) of the 2002 Act.

The Tribunal went on to consider the form of the restriction.


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