Jirehouse Capital v. Beller - correspondence headed "without prejudice and subject to contract"

22/12/2009

The main question for the court to determine in a claim for alleged fraud was whether an action had been settled in pre-trial negotations despite emails being marked "without prejudice and subject to contract".

Emails had been exchanged between the claimant companies (J) and the defendants (B) whereby the defendants proposed terms of settlement which the claimants then approved. The emails were marked "without prejudice and subject to contract". Settlement of an associated action ("QBD action") in which J were the defendants was subsequently included within the proposed orders. B responded by email that they would agree to the proposed QBD order provided it was endorsed as a consent order by J. Later that day counsel for both parties negotiated over the phone and agreed the form of settlement. The listing office was indeed informed the following day that the case had been settled. B later argued that the QBD action was not in fact settled, seeking further monies from J to settle the QBD action. Whilst B eventually agreed to settle the QBD action on a drop hands basis, J was no longer willing to settle on those terms.

The question (amongst others) arose as to whether the negotiations which took place under a "subject to contract" umbrella were agreed but not binding. The court applied Cohen v. Nessdale Ltd (1982) 2 All ER 97 CA (Civ Div): a "subject to contract" qualification will only cease to apply to negotiations if the parties expressly or by necessary implication agree that it should be disapplied. It was held that, by implication, the restriction had been lifted at the time of negotation over the settlements. Various factors pointed to this including, for example, that both counsel were anxious to conclude the matter and believed they had done so; all that remained for them to do was to put the oral settlement into written terms. In addition, counsel behaved as if the matter had been concluded by, for example, instructing the listing office to that effect. Given that the "subject to contract" umbrella had been lifted, neither party could unilaterally reinstate it in order to remove the binding nature of the agreement.

(1) Jirehouse Capital (2) Jirehouse Capital Trustees Ltd (3) Buckhead Capital Corporation v. (1)Stanley Sherwin Beller (2) Gwendolen Michelle Owen [2009] EWHC 2538

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