Neutral Citation No. [2009] NICA 46	Ref:     	GIR7618	
			
Judgment: approved by the Court for handing down	Delivered:	28/09/09	
(subject to editorial corrections)			

IN HER MAJESTY’S COURT OF APPEAL IN NORTHERN IRELAND

________ 

ON APPEAL FROM THE HIGH COURT OF JUSTICE IN 
NORTHERN IRELAND

CHANCERY DIVISION

________

BETWEEN:
1. SEAN DEVINE LIMITED
2. SEAN DEVINE
3. MARY DEVINE

Plaintiffs/Respondents
and

1. ROE DEVELOPMENTS LIMITED
2. DANIEL McATEER
3. GAVIN MAGILL

Defendants
________ 

Before:  HIGGINS LJ, GIRVAN LJ AND COGHLIN LJ

________ 

GIRVAN LJ

[1]	This is the judgment of the court.

Introduction

[2]	This matter comes before the court by way of an appeal by the second-named defendant (“the appellant”) from an order made by Deeny J on 13 March 2009 arising out of two separate summonses brought by the parties.  By the first summons which was issued by the appellant on 2 February 2009 (“the appellant’s summons”) the appellant and the third-named defendant (who is not a party to the appeal) sought a declaration that the order dated 17 November 2004 (“the Consent Order”) which purported to settle the proceedings was not in accordance with the handwritten agreement reached between the parties; was void or voidable due to uncertainty or due to a mistake; and was in respect of certain terms unlawful.  The judge dismissed that summons.  By the second summons which was issued by the respondents on 10 March 2009 (“the respondents’ summons”) the respondents sought an order under Order 20 Rule 11 that paragraph 7 of the Schedule to the Consent Order be amended to substitute the appellant in place of Roe Developments Limited.  The judge acceded to that application.

[3]	On the hearing of the appeal the appellant appeared in person.  The respondents were represented by Mr Horner QC and Mr Humphreys.  Mr McGill who attended the appeal in person having made written submissions made no oral submissions.

The proceedings

[4]	There has been a considerable amount of litigation between the parties in recent years.  An action bearing record number 2002 No 3089 related to a dispute about a contract entered into by the respondents or one or more of them to purchase a bar known as the Beechtree bar from Roe Developments Limited (“the Company”).  The second and third named respondents were shareholders and directors of the company.  The appellant and Mr Magill became shareholders and were at one time directors of the company.  The appellant asserts without contradiction that he ceased to be a director of the company in November 2002.  Disagreements arose between the Devines and the appellant the precise details of which are not material in the present context.  Mr Devine had paid a deposit in relation to the purchase of the bar but decided to seek to rescind the agreement and recover the deposit.  The Devines also wished to realise their shares in the company.  They subsequently issued winding up proceedings in respect of the company by a petition 2003 No 1745.  The proceedings relating to the winding up petition came on for hearing on 15 November 2004.  The parties who were all represented by senior and junior counsel on 16 November 2007 compromised the two sets of proceedings and another action and they announced a settlement to the court on that date.  Handwritten terms of settlement which had been drawn up were subsequently typed up and the typed terms were lodged in court. These formed the basis of the consent order as drawn up by the court.

The terms of settlement

[5]	The handwritten terms of settlement as signed by the parties provided:

“Whereas the second named defendant has consented to judgment in the sum of £150,000 and costs with a stay of six weeks in respect of £100,000 and a further stay of 3 weeks (making a total stay of 9 weeks) in respect of the balance.

And whereas the second and third plaintiffs have agreed to the petition being struck out with their costs to be taxed in default of agreement 

And whereas the third named defendant has consented to judgment in the sum of £10,000 and costs with a stay of 9 weeks and whereas the first named defendants and the second named defendants acknowledge that they are jointly and severally liable in respect of the said debt due of £150,000 arising out of the sale of the Beechtree bar to the first plaintiff.

It is hereby agreed between the parties that the above entitled action shall be stayed on terms to be scheduled to an order of this court, all parties having liberty to apply.

Schedule

1.  The first named defendant shall repay to the first plaintiff £150,000 in two instalments in respect of the deposit paid by the first plaintiff to the first defendant as follows –

(a)	£100,000 within 6 weeks from the date hereof.
(b)	£ 50,000 within 9 weeks of from the date hereof.

2. The first named defendant will pay the first plaintiff’s costs such costs to be taxed in default of agreement.

3.  The first named defendant shall purchase the shares of Mary and Sean Devine in Roe Developments Limited for £200,000 to be paid as follows –

(a)	£150,000 within 9 weeks of the date hereof.
(b)	£ 50,000 within 52 weeks of the date hereof.

In default of payment of any or any part of the sums provided above Sean and Mary Devine shall be entitled to petition for the winding up of the first defendant.

4.  The first named defendant will execute a legal charge secured on the Beechtree bar for £50,000 to secure payment of the sum as described in paragraph 3(b) above.

5.  Mary Sean Devine and the first defendant shall be responsible for the legal costs arising out of the said charge the first named defendant shall be responsible for his own legal costs arising out of the mortgage.

6.  On payment of the full sum of £200,000 Mary and Sean Devine shall forthwith execute share transfer forms in favour of the first named defendant or its nominee.

7.  The first defendant shall, if required, consent to an order for costs arising out of action 2002/3089 in favour the plaintiff to be taxed in default of agreement.

8.  Time shall be of the essence of the payment of all sums in this schedule.

9.  All outstanding sums due shall carry interest at the prevailing court rate.

10. All parties shall do all acts and execute all documents necessary to give effect to these terms.

11. The second named plaintiff agrees to waive the debt due in respect of repairs to the Beechtree bar on payment of all sums here and before set forth. 

 These terms are in full and final settlement of all claims arising out of the winding up petition 2003 /1745 and the Beech Tree bar action 2002/3089.

Liberty to apply to all parties

 The first named defendant shall purchase 25,000 shares owned by second named plaintiff (which same were formerly owned by Sean Millar and subsequently transferred to Sean Devine) for £1 with payment to be made on or before fifty weeks of the day hereof 
On payment of the full consideration the second named plaintiff will execute an appropriate stock transfer form.

[7]	The Consent Order which is dated 17 November 2004 sets out the terms agreed in the handwritten terms subject to the modification that the Order actually made provision for judgments for the amounts specified in the recitals.  The appellant consented to an order to pay the first named respondent the sum of £150,000 arising out of the sale of the Beechtree Bar to the first named respondent and to pay the first named respondent’s costs of this action to be taxed if not agreed. It was agreed that in respect of the sum of £100,000 there would be a stay of six weeks and a further stay of 3 weeks (making a total stay of 9 weeks) in respect of the balance of £50,000.  The third named defendant agreed to pay the first named respondent the sum of £10,000 and its costs to be taxed if not agreed with an agreed stay of 9 weeks in respect of the sum.  The Company and the appellant acknowledged that they were jointly and severally liable in respect of the said £150,000 due to the first named respondent.  The typed version that was lodged in court and which was the basis of the Consent Order was drafted by junior counsel on behalf of the Company.  The terms were circulated by e-mail amongst all the other counsel. None of them objected to any of the terms. The Consent Order, accordingly, reflected what was agreed between counsel.

[8]	The terms of the agreement relating to the repayment of the deposit were implemented by the Company subsequently paying that sum to the respondents. This was not before the appellant was threatened with bankruptcy proceedings on foot of his joint and several liability.  Although the winding up petition presented by the respondents was dismissed as agreed  the company was subsequently put into liquidation at the suit of another party on 28 August 2007.  Prior to that the company bought back the respondent’s shares as provided for in the agreement.

The appellant’s summons

[9]	Notwithstanding the apparent implementation of the key terms of the settlement the appellant contended by his summons issued four years after the settlement that the company was not in a position legally to fulfil what it had agreed to do in paragraph 3 of the Schedule that is to say buy out the shares of the Devines.  He contended that Article 153 of the Companies (Northern Ireland) Order 1986 forbade the Company from purchasing its own shares.  He contended that the relevant provisions of the Companies legislation rendered the agreement unlawful and that in the circumstances the respondents should be ordered to return the money that they had received for the shares and be reinstated as shareholders.

[10]	The appellant also contended that the agreement did not reflect the understanding between the parties.  It was his case that it was always understood that his liability to meet the debt due in respect of the deposit was a secondary liability which would only arise in the event of non payment by the company.  The Consent Order failed to reflect that and imposed a joint and several liability on the appellant and the Company.  He alleged that the handwritten document was littered with changes and corrections and the agreement did not, as the judge concluded, “hang together in a coherent fashion.”

[11]	The Consent Order represented the outcome of an apparent agreement between the parties following negotiations to which the parties and their counsel were privy.  The appellant conceded that he signed the handwritten terms of settlement, that he had an opportunity to read them and that he had senior counsel who would have explained the terms to him.  The ordinary principle of law is that if a person of full age and understanding signs an agreement he is normally bound by his signature whether he reads it or understands it.  In Saunders v. Anglia Building Society [1971] AC 1004 Lord Reid stated at 1016 –

“There must be heavy burden of proof on the person who seeks to invoke the remedy (of non est factum). He must prove all the circumstances necessary to justify its being granted to him and that necessarily involves his proving that he took all reasonable precautions in the circumstances.  I do not say the remedy is never available to a man of full capacity. But that could only be in very exceptional circumstances: certainly not where his reason for not scrutinising the document before signing it was that he was too busy or too lazy.”

The appellant has not brought proceedings to set aside the agreement evidenced by his signature on the terms nor has he brought proceedings to rectify its contents.  His summons was not an apt procedure to pursue either of those remedies.

[12]	The appellant contends that the Consent Order did not reflect the handwritten terms.  However, subject possibly to one minor point the Order did reflect accurately what was contained in the handwritten terms.  The only points of distinction were that the first recital in the handwritten terms did not refer to the taxation in default of agreement of the costs which the appellant agreed to pay nor did the handwritten terms refer to the vacating of a lis pendens on the Beechtree Bar.  Such orders would have been obtained for the asking once the parties had agreed the terms they did. There was a judgment for the agreed amount together with costs if the parties could not agree the costs. The order for taxation inserted in the draft order thus did not affect the appellant’s rights. Nor did the agreement to vacate the lis pendens. Apart from that, the draft typed order was circulated for agreement between the parties’ counsel. The clear inference is that the draft order was agreed.  Counsel for the appellant in accepting the insertions would have had the ostensible authority of his client to agree to it.  The appellant has never sought to appeal the Consent Order which remains a valid and effective court order until set aside by the court in properly constitutional proceedings.  The appellant’s summons did not constitute  such proceedings.

[13]	The obligations of the parties, accordingly, fall to be determined by the terms of the Consent Order which falls to be construed and implemented as a contract binding the parties.

[14]	Although the appellant contends that the first recital of the handwritten terms should have referred to the Company it clearly gives rise to an obligation undertaken by the appellant to meet the sum of £150,000 jointly and severally with the Company together with the costs of the proceedings relating to the deposit.  This does not conflict with the company’s agreement also to pay the costs.  Clearly the respondents could recover only one set of costs but could do so from either the company or the appellant or from both.  There is  in effect a joint and several liability not merely for the £150,000 (as expressly agreed) but also in respects of the costs (by necessary implication).  

[15]	In relation to the appellant’s contention that the provisions of paragraph 3 of the Schedule provided for an unlawful act the respondents argued both before this court and before the judge that the prohibition on Article 153 is subject to the qualifications in Article 153(3) and chapter 7 of the 1986 Order and that there is nothing on the face of the Order to show that the agreement was necessarily going to be performed in an unlawful manner. The respondents argued, accordingly, that the terms of the settlement were valid an enforceable and in no way vitiated by illegality.

[16]	Deeny J dealt with the matter in his ruling thus –

“Under Article 153(3) there are a series of situations where a company can buy its own shares including the acquisition of shares or reduction of capital duly made an under chapter 7 which provides for redemption on purchase.  Article 172 gives a wide power to purchase shares in certain circumstances.  There is not an absolute embargo on a company purchasing its own shares.  It is not necessarily illegal for them to do so.  On the face of the document it is not necessarily illegal.  Secondly, the company could have arranged its affairs to comply with that matter.  Thirdly for several good reasons it would be quite inappropriate to make any order with regard to this consent judgment.  Mr McAteer had been a director of the company at the time the company was represented at the proceedings and Mr Magill was a director.  The agreement has been implemented and I think it would be quite extraordinary on the part of the court therefore to grant an application to the former director of the company to set aside the agreement . . .”

[17]	We conclude that Deeny J was clearly right to dismiss the appellant’s summons with costs against the appellant.  The agreement by the company to buy out the second and third respondents’ shares was an agreement which was not inevitably unlawful since it could be lawfully executed provided that the statutory conditions for such a purchase were satisfied.  If they could not be satisfied that would not have invalidated the agreement since the second and third respondents were entitled to petition the winding up of the company in default of the shares being purchased.  Thus provided that the statutory conditions were fulfilled the purchase would be lawful but if the statutory conditions could not be satisfied and the purchase could not proceed lawfully  the second and third respondents had the remedy of applying for a winding up.  There is no evidence presently before the court that the purchase of the shares by the company was in fact unlawful because of the non-compliance of the company with the statutory pre-conditions to be fulfilled for a lawful purchase.  Even if those conditions had not been satisfactorily complied with it would be a matter for the liquidator to take appropriate steps to recover the money paid.  These proceedings are not an apt mechanism for any challenge to the actions of the liquidator in that respect.

The respondents’ summons

[18]	By their summons the respondents sought to modify the terms of paragraph 7 of the Schedule by altering it to refer to appellant rather than the company. Deeny J accepted their argument though the order that was drawn up to give effect to his decision was incorrect and did not reflect what the judge ordered. A corrective order was duly made on 15 September 2009.  

[19] The respondents’ summons was, however, unnecessary and based on a false premise.  As noted the Consent Order was in two parts.  The first part  which was a directly enforceable order related to the obligations undertaken by the appellant.  The second part related to the terms scheduled to what was in effect a  Tomlin order which set out the obligations of the Company. It was not a directly enforceable order since that part of the proceedings was stayed though the parties had liberty to apply to enforce that part of the Order.  By the first part of the Consent Order the appellant submitted to a direct judgment for £150,000 and a direct order for payment of the first named respondent’s costs of the action to be taxed if not agreed.  

[20]	Deeny J concluded that on the face of it paragraph 7 appeared to be a complete replication of paragraph 2 in which the company agreed to pay costs to be taxed in default of agreement.  In fact paragraph 7, if the respondents are correct, is a replication of paragraph 1 of the first part of the consent order which made provision for the appellant paying the costs.  But in fact paragraph 7 is not a complete replication of paragraph 2. Similar though the two provisions appear on first reading there is a significant difference between the two. The difference lies in the inclusion in paragraph 7 of the words “shall if required consent to an order for costs”.  Paragraph 2, being an agreed term in a Tomlin Order Schedule is not a direct order of the court.  The practice of the Taxing Master in the past has been to decline to tax costs in a Tomlin Order in the absence of a directly enforceable order for taxation. This requires the court to make a direct order for taxation outwith the scheduled terms of the proceedings which are stayed.  Paragraph 7 clearly was intended to impose an obligation on the company to consent if it became necessary to obtain a specific order for taxation in the event of the costs having to go before the Taxing Master whose jurisdiction depends on a court order for taxation.  The respondents’ summons was thus unnecessary because the respondents already had an order against the appellant for costs in the first directly enforceable part of the court order.  It was in addition inappropriate because paragraph 7 was not included erroneously.  There was in fact no slip to correct.  Mr Horner QC, correctly conceded this point in argument.  

[21]	To that extent we allow the appellant’s appeal in respect of the respondents’ summons.	We shall hear counsel on the question of costs.