Summary

It was clear from the words and context of a consent order that the effect of the compromise was that the parties were to keep the money that they had already been paid and drop any claims against each other.

Facts

The applicants (T) sought a declaration that, on the proper construction of a consent order, the respondent (X) was not entitled to receive any further monies from the proceeds of sale of a hospital beyond those already paid. X and T had orally agreed to enter into a joint venture for the acquisition, possible development and on-sale of the hospital. X and T held equal 50 per cent shares in the company which was the special purpose vehicle used for the joint venture. X provided the funding and T provided the daily management and control and the development expertise. A dispute arose as to the charges that could be made against profits before distribution. X argued that it had been agreed that he could charge interest on the funding he provided but T was not entitled to charge for his management services. T argued that there had never been an agreement about interest or management charges, just that the gross profit would be divided equally. T's accountant sent out a financial statement accordingly. X was unhappy with the account he received and a dispute arose. In the course of mediation additional sums were paid to X who eventually issued proceedings. On the fourth day of trial, the case settled and a Tomlin order was agreed. However a dispute arose as to the meaning and effect of the compromise. X submitted that his claim to be entitled to charge interest was conceded but T had to put back what he had received by way of distribution into the melting pot; whether T was entitled to any management charges was to be determined by accountants; and X was then entitled to 50 per cent of any recalculated profit. T contended that the effect of the compromise was that each joint venturer was entitled to keep that which he had and dropped any claim that his co-venturer should make any repayment for redistribution save only that the development and administration expenses should be audited and any necessary adjustments made to the distributable profit.

Held

(1) The words of the order and schedule had to be read in a practical context. It was useful to refer to four other features of the context within which the compromise was forged. Firstly, the state of the action at the time the compromise was reached. X gave a very poor account of himself in cross-examination and the compromise was reached before that cross-examination was concluded. Secondly, regard was had to the arguments as they were presented at trial. The third element of context was the correspondence that immediately preceded the trial. The final element of context related to the material that was available to be deployed at trial. Reading the words of the order and schedule in that context, upon its true construction the compromise had the effect in law that X and T could keep that which they actually received subject to liabilities such as corporationtax, accountancy costs and adjustments based on audits and reviews (see paras 15-23 of judgment). (2) The reasons for that decision were that the first and final paragraphs of the schedule appeared to define the character of the order as "drop hands". It would appear to the reasonable person that by withdrawing the claim and counterclaim all other possible claims arising out of the arrangements between the parties to the litigation were being foregone. A reasonable person would be surprised if it was suggested that the bargain struck towards the conclusion of X's bad performance in the witness box represented a surrender by T. It was clear from the schedule that X and T were to keep what they had (para.24-25).

Declaration granted