Orton v Collins & Ors

A settlement reached through CPR Part 36 is enforceable under the court’s procedural jurisdiction even where acceptance does not create a contract satisfying section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. Part 36 operates as a self-contained scheme which may create contractual obligations, but does not depend upon contract law. The accepted offer may be enforced by application to the court, including by an order requiring the parties to execute a document complying with the statutory formalities. Procedural defects in a notice of acceptance do not necessarily invalidate the settlement where they cause no prejudice and can be corrected under CPR 3.10. The statutory formalities for land contracts were directed to different mischiefs and do not defeat enforcement of a settlement made through Part 36 machinery.

The defendants appealed from the decision of Master Moncaster dated 9 January 2007. The claimant had made a CPR Part 36 offer concerning the dissolution and reorganisation of two partnerships, including his disposal of interests in office premises. The defendants accepted by email. The Master held that no binding settlement existed because the offer and acceptance were separate documents and did not satisfy section 2 of the Law of Property (Miscellaneous Provisions) Act 1989.

The appeal concerned whether the settlement was defeated by the statutory formalities, and whether acceptance under Part 36 could create an enforceable obligation independent of a contract under ordinary contract law. A separate issue concerning mistake, rectification or rescission was not before the court.

1. Appeal allowed. The Part 36 settlement was enforceable, subject to the separate issue concerning mistake, rectification or rescission.
2. The settlement necessarily involved the claimant’s disposition of an interest in land. However, section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 was directed at uncertainties and technical traps arising in the formation of ordinary land contracts. Those mischiefs had no relevance to a settlement of existing proceedings through Part 36, where the parties knew they were entering a binding legal transaction and were generally represented by lawyers.
3. The court rejected a rigid division between contractual and procedural obligations. Acceptance of a Part 36 offer will commonly create a contract, which may be enforced or sued upon according to ordinary principles. But enforcement under Part 36 does not depend upon the existence of such a contract. Parties using the court’s settlement machinery submit to the consequence that the court may enforce the accepted offer. The resulting obligation is sui generis, arising from the court’s inherent jurisdiction as regulated by Part 36.
4. The accepted offer could therefore be enforced despite non-compliance with section 2. The court had power to order the parties to sign a single document incorporating the settlement terms.
5. The acceptance notice’s failure to state the claim number and title of the proceedings was a procedural error, not a nullity. No one had been misled or prejudiced, and CPR 3.10 empowered the court to correct the defect. The deliberate use of “Putsmans” at the end of the email was capable of constituting a signature by the defendants’ legal representative.
6. The judge considered that the new version of Part 36, which came into force after judgment was reserved, would not have altered the result.

• High Court (Chancery Division): Appeal from the decision of Master Moncaster dated 9 January 2007 allowed. The accepted Part 36 settlement was held enforceable.