For a dispute to be validly compromised: (a) an actual dispute must exist between the parties for which an accord has been reached; (b) the claim must be made in good faith and reasonably believed to be valid by the party asserting it; and (c) consideration must be given.
In Alnajjar and another v Majeed and others [2023] EWHC 315 (Ch) the High Court was asked to determine whether a binding compromise agreement had been reached between the intervenor, a lender and the applicants.
A partnership dispute arose between the applicants and the first respondent. The aim of the partnership was to purchase, develop, rent and sell properties. In earlier proceedings, the first respondent was found to have failed to properly account for the partnership’s assets. He was ordered to pay the sum of £4,726,089, which included net rents and capital contributions. Orders for sale were also made in respect of five properties. West One Loan Ltd (the lender) had a first charge over three of the properties and a second charge over a fourth – Beaufort Drive, London NW3, owned by the second respondent, the first respondent’s wife. The first and second respondents were ordered to pay the applicants’ costs. Freezing injunctions were subsequently made to prevent the first and second respondents dissipating their assets.
The lender demanded repayment of the loans secured against the three properties for which it had a first charge and sought to appoint receivers when the first and second respondents failed to repay the loans. The applicants also applied to appoint receivers when the first and second respondents failed to pay their costs.
In March 2022, the lender and applicants reached an agreement in respect of the appointment of a receiver and how the net proceeds of sale from the properties should be distributed. In summary, it was agreed that any surplus from the sale of the properties would be paid to the applicants after the lender’s charges and any prior charges had been paid. A dispute arose as to whether the agreement required the lender to pay over the net proceeds of sale to the applicants or whether it could retain the same to discharge the debt owed to it by the second respondent in respect of Beaufort Drive. The High Court found it could not. The terms of the agreement were unambiguous and any surplus had to be paid to the applicants. The parties had reached a valid agreement that satisfied contained all the ingredients required for a valid compromise agreement.
Elizabeth Dwomoh is a barrister at Lamb Chambers
