Weston v Dayman

A consent order is construed as a contract. Its meaning is what a reasonable person, with the background knowledge reasonably available to the parties, would understand from its language and context.

A contractual release is governed by ordinary principles of construction. The court nevertheless applies a cautionary principle before concluding that a party surrendered claims which were unknown and could not have been known. Clear language and the commercial purpose of the settlement remain decisive.

A court should exercise particular care before varying a consent order which embodies the parties’ bargain. Justice ordinarily requires a freely negotiated bargain, including benefits and releases forming part of the same settlement, to be upheld.

A court-appointed receiver took possession of the appellant’s assets, including a yacht. A consent order discharged the receivership and provided that the receiver would not be liable for any failure properly to manage the estate “after the discharge of the receiver”. The appellant later alleged that the receiver had failed to care properly for the yacht.

Master Bowles directed the trial of a preliminary issue. Sir Andrew Morritt, Chancellor, construed the consent order as preventing liability from being established after discharge for mismanagement during the receivership. The appellant challenged that construction and the associated costs order. He also applied in the Court of Appeal to vary the consent order under rule 3.1(7) of the Civil Procedure Rules 1998 or the liberty to apply.

The central issues were the proper construction of the release, whether it should be varied, and whether the costs decision disclosed an error of principle.

1. Appeal dismissed unanimously. The Chancellor had correctly construed paragraph 10 of the consent order. Lady Justice Arden gave the judgment, with which Lord Justice Wall and Lord Justice Brooke agreed.

2. A consent order is interpreted as a contract. The court therefore determines the objective, contextual meaning of its language, following Sirius International Insurance Co v FAI General Insurance Ltd [2004] 1 WLR 3251 and Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 898. Although releases are subject to ordinary contractual principles, BCCI v Ali [2002] 1 AC 251 establishes a cautionary principle against readily inferring the surrender of unknown claims.

3. The court’s practice concerning the release of its officers did not determine the construction of this consensual bargain. Inland Revenue Commissioners v Hoogstraten [1985] 1 QB 107 concerned claims of which the court had notice. It did not require investigation of claims for which there was no basis. Nor did the requirement to obtain permission before suing a court officer provide protection equivalent to an absolute contractual release.

4. A literal reading under which paragraph 10 addressed only management after discharge produced an absurd result because the receiver then had no management responsibility as receiver. In context, the words concerning discharge qualified liability. The provision prevented liability from being established after discharge for failures occurring during the receivership. It was not a blanket release because a claim could have been established before discharge.

5. The settlement supplied a commercial reason for that construction. The receiver had a lien over the assets for proper costs and expenses, including after discharge, while the appellant had an interest in recovering possession. The order compromised costs and other matters so that the assets could be returned. The Chancellor’s reference to transposing words did not amount to impermissible rewriting; the disputed phrase was grammatically capable of qualifying liability despite its position.

6. Assuming without deciding that rule 3.1(7) of the Civil Procedure Rules 1998 applied, the order should not be varied. Justice includes upholding a freely made bargain, and the appellant had obtained benefits under the settlement. The Chancellor’s costs decision also disclosed no error of principle.

1. Court of Appeal (Civil Division): The appeal in Weston v Dayman [2006] EWCA Civ 1165 was dismissed. The court upheld the Chancellor’s construction of the consent order, refused to vary it and affirmed the costs decision.

2. Chancery Division: Sir Andrew Morritt, Chancellor, determined a preliminary issue by holding that paragraph 10 prevented liability from being established after the receivership had ended. He awarded the successful receiver her costs. No citation is stated.

3. Earlier proceedings: Master Bowles directed the trial of the preliminary issue. Elias J had previously permitted the appellant to commence proceedings against the court-appointed receiver. No citations are stated.