Settlement is not always the end, and breaches of settlement terms are not uncommon. Parties should be aware that limitation periods may apply to claims for breach of a settlement agreement.
In Bostani and others v Pieper and another[1] the Commercial Court held that applications to enforce Tomlin Orders are subject to the 6 year limitation period for simple contracts.
The dispute concerned a settlement agreement scheduled to a Tomlin Order which outlined settlement terms, prescribed a payment schedule and provided that in the event of a missed payment, the claimant was entitled to apply for judgment for the full outstanding amount. Only the first two payments were made. The claimant sought judgment for the balance. , The defendants contended that the Tomlin Order, dating from 2011, was subject to the Limitation Act 1980 (“the Act”) and that the limitation period had expired.
The Commercial Court considered:
- Whether the Limitation Act 1980 applied to Tomlin Orders; and
- Whether the application for enforcement was a new claim, and required fresh proceedings.
Application of the Limitation Act 1980 to Tomlin Orders
S5 of the Act provides that for action founded on a ‘simple contract’ parties have 6 years from the date of the cause of action to bring a claim. When considering whether this applied to Tomlin Orders, Jacobs J acknowledged that seeking an order for the enforcement of terms contained in a Tomlin Order can be described as the enforcement of the court’s own orders and therefore differs from a ‘simple contract’. However, Jacobs J held that as the purpose of a Tomlin Order is to enforce contractual rights it would be ‘surprising’ if the consequence of scheduling these rights to a Tomlin Order was to ‘insulate a claim for a breach of contract’ from limitation.
It was therefore held that the 6 year limitation period applies for a Tomlin Order and begins when a right to enforce occurs, i.e. the point at which the claimant could request the court to enforce the order. The defendants’ failure to make a payment at each specified date of the Tomlin Order constituted a fresh right to enforce the order. As one of these was within the limitation period the defendants’ failure to make a payment per the schedule enabled the claimants to apply to the court for enforcement. Consequently, the claim was within the limitation period.
Application for enforcement as a new claim
The defendants also contended that in order to bring the claim the claimants needed to amend their existing claim, which they could not do because they were out of time.. This argument was rejected; Jacobs J holding that this was simply a matter where the Court was being asked to enforce its own order and fresh or amended proceedings were not required. This was supported by the context of the case, as the Tomlin Order expressly provided that there was no requirement to start a new claim to enforce the order.
[1] [2019] EWHC 547 (Comm)l
