The case of Bostani and others v Pieper and another related to the enforcement of a Tomlin order which had been previously entered into by the parties. The court was asked to decide whether the Limitation Act 1980 applied to such agreements. Jacobs J heard the application of the claimants on 4 March 2019.
Background
The proceedings arose out of a debt owed by Mr Pieper under a guarantee. Mr Mann was the sole trustee of a trust known as the Alfred E Mann Living Trust (the trust).
The trust lent US $10 million to a company registered in Luxembourg, ETIRC Aviation SARL (ETIRC). Mr Pieper was the chairman of ETIRC and gave a personal guarantee in favour of the trust for ETIRC’s obligations.
The loan was defaulted upon and Mr Pieper then defaulted under the guarantee. The trust issued proceedings before the Supreme Court of New York in 2009 and judgment was given in the trust’s favour. Those proceedings were then transferred to the UK for enforcement. In addition, the trust obtained an ex parte worldwide freezing order (WFO) in 2010.
Tomlin order
A Tomlin order was entered into in 2011 by the parties, compromising the litigation. The usual clause was included on the face of the order stating that:
“… all further proceedings in the claim shall be stayed except for the purpose of carrying into effect the terms set out in the attached schedule.”
Part of the order also provided for the WFO to remain in force. The WFO was only to be discharged when the trust had received US $5 million.
Period between the Tomlin order and the application
In the period between the Tomlin order and the application before the court, there were a number of discussions held between the parties. Mr Mann died in 2016 and Mr Pieper alleged that several oral agreements had been entered into prior to his death.
The application before Jacobs J
The trust made an application on 4 December 2018 to lift the stay referred to in the Tomlin order.
The defendants raised several arguments, one of which was that the Limitation Act 1980 applied. The Tomlin order had been entered into in 2011, yet the application to lift the stay contained in the Tomlin order was made in 2018. Under a simple contract, the limitation period is for six years (section 5, Limitation Act 1980) the defendants argued that the agreement fell under section 5 of the Limitation Act 1980. They also argued that the application of the claimants to reinstate the litigation was tantamount to making a fresh claim, for which they were similarly time-barred.
Jacobs J’s judgment
Jacobs J considered the position of both parties very carefully. The claimant argued that there would never be a limitation bar to the enforcement of a claim, whereas the defendants argued clearly that Tomlin orders were subject to section 5 of the Limitation Act and that the claimant’s application was a “New claim in pending actions” as per section 35 of the Limitation Act.
Jacobs J considered the previous case of The Bargain Pages Ltd v Midland Independent Newspapers Ltd. He stated:
“I consider that Sir Andrew Morritt was correct to regard the Limitation Act as potentially applicable to a settlement schedule to a Tomlin Order. Such a settlement remained a simple contract for the purposes of limitation. The Court’s approach to the construction of that contract or the assessment of any damages claimed would be in accordance with usual contract principles. I see no reason why the Limitation Act should not also be applicable… the substance of such an application is to enforce contractual rights, and it would be surprising if the consequence of scheduling those rights for a Tomlin Order was to insulate a claim for breach of contract from the Statute of Limitations.”
However, he also went on to say that this Tomlin order was not bringing a new claim as per section 35 of the Limitation Act. There were no fresh proceedings being commenced. He discussed this point in detail:
“There is nothing in the authorities which suggests that the enforcement of the obligations in the agreement schedule to a Tomlin Order requires either the commencement of fresh proceedings, or the amendment of existing pleadings. On the contrary the basic idea of a Tomlin Order is that a party can move easily to the enforcement of these obligations because that party is asking the Court to enforce its own orders… This is the clear effect of the present Tomlin Order. Its express terms provide that any party can apply to the Court to enforce the terms of settlement without the need to bring a new claim.”
Jacobs J stated that the claimants were simply inviting the court to implement clause three of the settlement agreement, which expressly entitled them to enter judgment in the full amount of the claimant’s claim against the defendants.
He made it clear that there was no enlargement of an original action, nor was there a new claim which was being advanced. The judgment which was sought was for the sum claimed in the proceedings in which a settlement agreement was made.
In the circumstances, he stated that he did not consider that limitation at section 35(3) had any application at all.
In relation to the point that although section 5 of the Limitation Act did apply to the schedule, the judge considered very carefully the facts of the case. He states at paragraph 62 of his judgment:
“… in the present case the application was made on 4 December 2018. That application was in my view in time because the right under clause 3 arose if the Defendants failed to make any of the payments on the dates set out in paragraph 1. It is true that a right under clause 3 arose when there was a failure to pay on 9 December 2011 or shortly thereafter, and that the present application was made more than 6 years after this right arose. However further rights arose on each of the subsequent days when payments were not made, including 7 December 2012, when the final payment should have been made. The application to enforce was made within 6 years of the date when the right under clause 3 in respect of that final default arose.”
Accordingly, although Jacobs J did agree with the defendant that the Limitation Act applied to the enforcement of schedules to Tomlin orders, he did not agree that this current application had been made out of time.
Notes to practitioners
It is absolutely vital to diarise ahead in relation to Tomlin orders. This judgment shows that although the reopening of an order does not amount to new proceedings, the schedule attached to a Tomlin order is subject to the time limits contained in the Limitation Act 1980. Any enforcement action should therefore not be delayed.
As always with any kind of enforcement, it is usually sensible to proceed as soon as possible once a default has occurred.
