Tibbs v Tibbs & Anor

A compromise may be binding where the parties reach agreement orally and subsequent correspondence records its terms. A proposed Tomlin order or acknowledgment of the correspondence is not a condition precedent unless the parties made it one. Where pleadings are materially deficient and fail to give credit for substantial repayments, the court should not enter judgment for the pleaded amount merely because a compromise was breached. In an informal family lending arrangement, interest may be recoverable where the borrower knew and accepted the agreed rate. On the facts, interest was payable at 2% per month on the principal sums, calculated simply, with later interest at the refinancing rate. The Consumer Credit Act 1974 did not apply because the loans were non-commercial and were not made in the course of a lending business.

The claimant sought an account and inquiry concerning loans made to his brother and sister-in-law, together with interest. The defendants counterclaimed for alleged overpayment and disputed the loans, the interest arrangements, the authenticity of documents and the claimant’s account of the transactions.

The issues included whether correspondence in May and June 2017 recorded a binding compromise, whether the claimant could obtain judgment for the pleaded claim following non-payment, what sums had been lent and repaid, the applicable interest rate and whether the interim charging order should remain in force.

1. Compromise. The claimant and Robert had agreed to settle the proceedings for £450,000 by instalments. The terms were subsequently varied orally and recorded in the claimant’s solicitors’ letters. The letters were not offers requiring acceptance, and neither the proposed Tomlin order nor acknowledgment of the letters was a condition precedent. The defendants’ payments pursuant to the arrangement supported the finding of agreement. The compromise was binding, but default did not entitle the claimant automatically to judgment for the whole pleaded claim.
2. Pleading deficiencies. The Particulars of Claim contained substantial inaccuracies and omissions, including inadequate detail concerning dates, loan terms, interest and repayments. Entering judgment for the pleaded amount would have caused substantial injustice. The court therefore declined to determine the alleged vitiating factors and proceeded with the account and inquiry.
3. Capital and proof. Applying the balance of probabilities, the court found that £10,500 in cheque loans, £300,000 advanced through the principal transaction, £63,000 in further bank transfers and £107,550 in cash had been lent. A further £34,000 was treated as a later loan. Repayments of £495,000 and £70,000 were to be credited first against interest and then capital.
4. Interest. Robert knew that the borrowing from Tower Bridging attracted interest at 2% per month and agreed to meet that liability. The court rejected compound interest. Simple interest at 2% per month was payable on the £300,000 and £63,000 loans until repayment or refinancing. Thereafter interest was payable at the Canada Life refinancing rate. Interest on the cash advances was limited to the rate available on Katie’s accounts.
5. Regulation and other arguments. The loans were informal, non-commercial family arrangements, not made by way of business, and therefore fell outside the relevant provisions of the Consumer Credit Act 1974. The undisclosed-principal and illegality arguments failed on the facts. The interim charging order remained in force pending calculation of the final capital and interest figures, with a further hearing if the calculations could not be agreed.