Tuscola (110) Limited & Anor v The Y2K Company Limited

The claim was a stakeholder application concerning two undated Land Registry Form DS1s executed by Y2K but held by Olswang to the order of Y2K's in-house lawyer. The court held that Tuscola had not become entitled to possession of the DS1s. Key legal principles applied were: contractual interpretation of the in-house solicitor's emails; the nature of Part 36 settlement offers; the requirement in section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989 for dispositions of interests in land to be in writing; and the requirements for establishing affirmation, waiver or estoppel. The judge found (i) that Mr Unett’s email of 15:12 on 3 September 2015 promised release of Olswang from its undertakings but did not, when objectively construed in context, constitute a release of the DS1s, (ii) that Tuscola’s acceptance of the Part 36 offers did not create enforceable contracts because the matters relied on did not amount to a compromise of a bona fide dispute and, in any event, any such agreements would be contracts for the disposition of interests in land caught by section 2(1) and thus required the formalities which were not complied with, and (iii) that there was no effective affirmation, waiver or estoppel by Y2K to prevent it relying on Tuscola’s failure to comply with time conditions.

Background and nature of the claim: Olswang commenced a stakeholder application under CPR rule 86.2(1) in respect of two DS1 forms executed by Y2K that would permit cancellation of registered charges over Bramley Court and Cable House. The DS1s had been delivered to Olswang on terms that they were held to the order of Y2K's solicitors pending written release. A dispute arose as to whether Tuscola (T110 and T104) had become entitled to possession of the DS1s following a series of negotiations and payments.

Parties and procedural posture: The claimants were Tuscola (110) Limited and Tuscola (104) Limited (BVI companies). The defendant was The Y2K Company Limited (an overseas lender). Master Teverson directed trial of the issue whether Tuscola had become entitled to possession of the DS1s; the matter was tried before Mr Justice Arnold.

Issues framed by the court:

• Construction of Mr Unett’s email of 15:12 on 3 September 2015 and whether it effected release of the DS1s.
• Whether Tuscola’s acceptance of Part 36 offers created enforceable contracts of compromise and, if so, whether those contracts were contracts for disposition of an interest in land caught by section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989.
• Whether Y2K had affirmed any contract despite Tuscola’s failure to pay timeously, or whether Y2K had waived or was estopped from relying on Tuscola’s failure to pay the first instalment.

Relevant facts: Y2K had made bridging loans to the Tuscola companies secured by charges over properties. Y2K had provided DS1s to Olswang to be held to Y2K’s solicitor’s order pending written release. Y2K made Part 36 style settlement offers (with a lump-sum and an instalments option). Tuscola accepted the offers late and failed to make the first instalment by the date specified; a payment of £450,000 was made and received by Y2K on 3 September 2015. Disputes arose over whether that payment and subsequent communications obliged Y2K to release Olswang’s undertakings and the DS1s.

Court’s reasoning and conclusions: The judge applied ordinary principles of contractual interpretation (objective construction with background knowledge). He concluded that Mr Unett’s 15:12 email, read in context, promised to release Olswang from obligations but did not constitute a promise to deliver or release the DS1 deeds. The Offers’ terms treated release of Olswang’s undertakings and release/delivery of the DS1s as distinct obligations. Even if acceptance had produced contracts, those contracts would have been contracts for the disposition of interests in land (release of registered charges via DS1), and therefore section 2(1) of the 1989 Act applied; the required formalities were not satisfied and any supposed agreements were unenforceable. The judge rejected arguments of affirmation, waiver and estoppel: there was no effective extension or variation agreed which released the DS1s, and the objective construction of communications did not support the claimant's case. The judge therefore concluded Tuscola were not entitled to possession of the DS1s.

The claim is dismissed. The court held that Tuscola had not become entitled to possession of the two DS1s because (i) the 3 September 2015 email from Y2K’s solicitor, properly construed, released Olswang from its undertakings but did not effect release or delivery of the DS1s; (ii) acceptance of the Part 36 offers did not create enforceable contracts of compromise (no bona fide dispute and any putative agreements would be dispositions of interests in land caught by section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989 and lacked required formalities); and (iii) there was no effective affirmation, waiver or estoppel preventing Y2K from relying on Tuscola’s failure to comply with time conditions.