Jackson & Ors v Thakrar & Ors

A settlement is not binding merely because the parties have agreed a headline figure. The court must construe the communications objectively against their factual background and decide whether the parties intended immediate legal relations.

Where material matters remain unresolved, there is only an agreement to agree. In complex litigation, those matters may include the identity of every necessary party, tax liabilities, security for deferred payment, costs, existing court orders and related insolvency issues. General wording such as “fully secured” will not suffice where the circumstances show that detailed agreement on the form and extent of security remains necessary.

The parties were engaged in long-running consolidated litigation involving claims concerning property ownership, insolvency, costs and alleged misuse of court proceedings. Several defending parties relied on letters exchanged on 26 October and 1 November 2006, received on 2 November, as an offer and acceptance compromising the litigation for £20.1 million.

The claiming parties resisted that application. The dispute concerned whether the letters created immediate legal relations, whether the Trustee in Bankruptcy had agreed, whether HMRC’s tax claim had been resolved, whether “fully secured” was sufficiently certain, and whether the absence of Shantaben Thakrar’s acceptance could be overcome by estoppel.

1. The application was dismissed. The exchange of letters did not compromise the litigation. The court identified five independently sufficient reasons.
2. The letters, construed against the negotiations and the complexity of the proceedings, recorded agreement on a settlement figure as the first stage of a process. They contemplated further negotiations and a detailed compromise agreement or court order. The parties therefore did not intend the exchange itself to create legal relations. This approach was consistent with the pragmatic approach to contract formation in G Percy Trentham v Archital Luxfer [1993] 1 Lloyd’s Rep 25, but the court could not fill material gaps to create an agreement the parties had not reached.
3. The proposed compromise was expressed to resolve all outstanding matters between the parties. It could not be accepted piecemeal or without the Trustee. Before the purported acceptance, the Trustee had stated that she would not be bound unless she signed a written agreement and obtained a court order under section 303 of the Insolvency Act 1986. That communication withdrew her from any prior offer process. Without her participation, the litigation could not be settled.
4. HMRC’s position was a fundamental unresolved matter. The letter expressly excluded provision for tax but did not state who would pay any liability or how it would be dealt with. This was either an uncertainty in the alleged agreement or the omission of a material term. The later discussions also introduced the need to protect the Trustee and provide for HMRC, but the purported acceptance did not accept those modified terms.
5. “Fully secured” was not sufficiently certain in context. The parties had not agreed the form, extent or priority of the security, and the correspondence itself contemplated further discussion. Given the litigation’s history and the defendants’ limited assets, detailed agreement was required before a binding compromise could arise.
6. Shantaben had not accepted the proposed compromise within the stipulated period. Adults were presumed competent unless incapacity was proved, applying Masterman-Lister v Brutton & Co (Nos.1 & 2) [2003] 1 WLR 1512. The alleged uncertainty about her capacity did not support estoppel. There was no communicated shared assumption capable of founding one, and it would be unjust to treat proceedings involving her as compromised without her agreement.

The court declined to determine further points. Costs and the precise form of order were reserved for formal hand-down.