Tuscola (110) Ltd & Anorv The Y2K Company Ltd

A settlement offer involving the release of registered charges may constitute a contract for the disposition of an interest in land. It is therefore subject to the statutory writing formalities in section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. A creditor’s offer to accept reduced payment is not necessarily a compromise of a bona fide dispute, particularly where the debtor has no substantial defence to the debt. Where time is expressly made of the essence, failure to comply with an instalment deadline may discharge the settlement. Waiver or estoppel requires a clear agreement, representation or course of conduct establishing that the deadline will not be relied upon.

Olswang LLP held two undated Land Registry Forms DS1 executed by The Y2K Company Ltd in relation to charges securing bridging loans made to Tuscola (110) Ltd and Tuscola (104) Ltd. The forms were held to Y2K’s order pending written release. After defaults, Y2K made settlement offers providing for reduced payment, release of Olswang’s undertakings and eventual release of the DS1s. Tuscola accepted the offers but did not make the first instalment by the stipulated date.

Tuscola contended that a later email released the DS1s, that enforceable compromise contracts had arisen and been affirmed, and that Y2K had waived or was estopped from relying on the deadline. The issue tried was whether Tuscola had become entitled to possession of the DS1s.

1. Construction of the email. The email of 3 September 2015, construed objectively in its factual context, released Olswang from its obligations to Y2K concerning the undertakings. It did not release the DS1s. The Offers treated release of Olswang’s undertakings and delivery of the DS1s as separate matters. Release of the DS1s would have discharged the charges and required a variation of the Offers, which the email did not effect.

2. Compromise and statutory formalities. Tuscola’s acceptance of the Offers did not create enforceable contracts of compromise. There was no substantial or bona fide dispute about Tuscola’s liability for sums substantially exceeding the settlement amounts. The dispute between Y2K and Olswang concerning the undertakings was distinct, and Olswang gave no consideration.

   Alternatively, any contract was caught by section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989. Release of the DS1s would have caused the charges to cease to exist in equity. The agreement was therefore a contract for the disposition of interests in land, and the statutory formalities had not been satisfied.

3. Time, election and affirmation. The Offers made time of the essence for payment. If the instalment option was elected and the first instalment was not paid on time, paragraph E made the settlement void. Tuscola had not clearly and unequivocally elected for that option. Even assuming that it had, Y2K’s later willingness to accept the lump-sum option was an offer to continue performance, not affirmation of the discharged instalment contract.

4. Waiver and estoppel. Neither the conversations, the emails of 3 September, nor the parties’ conduct waived the deadline or represented that payment after the deadline would be accepted under the instalment option.

5. The claimants had not become entitled to possession of the DS1s. The issue was determined in Y2K’s favour.