Sam Petros v George Murray and Another

• Jurisdiction: Jamaica
• Judge: Sinclair-Haynes J
• Judgment Date: 19 July 2013
• Court: Supreme Court (Jamaica)
• Docket Number: CLAIM NO. 2013CD00066
• Date: 19 July 2013

[2013] JMCC Comm. 14

IN THE SUPREME COURT OF JUDICATURE OF JAMAICA

CLAIM NO. 2013CD00066

Between

Sam Petros

Claimant

and

George Murray

1st Defendant

and

Karen Murray

2nd Defendant

Mr. Conrad George instructed by Hart Muirhead Fatta for the Claimant

Mr. Ransford Braham QC and Ms. Carol Davis for the defendants

TOMLIN ORDER — VARIATION OF SCHEDULE TO TOMLIN ORDER — WHETHER VARIATIONS FUNDAMENTALLY ALTER SCHEDULE

Sinclair-Haynes J

1 The defendants and the claimant are shareholders in two companies known as Tensing Pen Limited and Tensing Pen (Cayman) limited. The defendants are husband and wife and they are the owners of 50% of the shares in each company. The claimant owns the remaining 50%. For several reasons the relationship between the defendants and the claimant deteriorated and has become so acrimonious that they are unable to continue together in business.

2 Consequently, the claimant sought the intervention of the court to appoint additional directors inter alia . That action however was compromised by the parties who instead approached the court for a Tomlin Order. Mangatal J acceded to their request and such an order was made on the 28 ^th November 2011.

3 The essence of the schedule to the Tomlin Order was to provide directives for the sale of the properties. The schedule also provided that the hotel and properties were to be sold to a purchaser who was known to the parties. There was an offer for the sum of US$4.2 million. In the event of failure to sell to that purchaser, the properties were to be sold by a broker. The shareholders were entitled to bid for the properties upon the failure of the broker to sell the properties in accordance with the mechanism outlined in the schedule.

4 Consequent on the provisions contained in the schedule to the Tomlin Order:

• (a) the 1st defendant resigned as a director. (Hitherto both defendants and the claimant were directors); and

• (b) Mr. Kenneth Tomlinson was appointed director in place of the 1 ^st defendant and chairman of the company.

5 Paragraph 11 of the schedule provides for bids on behalf of the defendants and claimant in the event of their failure to sell to a third party. A number of bids has been submitted by the parties. They however agreed that the final bidding would be closed on the 6 ^th March 2013. The claimant's bid was accepted. As a consequence of the chairman's acceptance of the claimant's bid, the defendants have moved the court's summary jurisdiction, by way of Re-Issued Amended Notice of Application for Court Orders dated 7 ^th March 2013, for the following orders:

1

Liberty to apply 2. That Kenneth Tomlinson, the Chairman of the Board of Directors, accept the offer of US$1,700,000.00 made by the First Defendant and Second Defendant to purchase the shares owned by the Claimant in Tensing Pen Limited and Tensing Pen (Cayman Islands) Limited, which is : ‘the highest such offer for the Corporate Entities, the shareholder who has made such offer shall be entitled to purchase the other shareholder's interest pro-rated based on such offer price.’ 4. The claimant be barred from making any further offer to purchase the shares in Tensing Pen Limited and Tensing Pen (Cayman lslands)Limited .

6 By way of Amended Notice of Application, filed June 14 2013 the defendants also seek the following orders:

1

That Mr. Kenneth Tomlinson be removed as an independent director and Chairman of the Board of Directors of Tensing Pen Limited, forthwith or at such other time as determined by this Honourable Court . 2. That an independent director be agreed by the parties within 7 days of the date thereof, and in the absence of agreement be appointed by this Honourable Court . 3. That the purported acceptance by Mr. Tomlinson of the offer of the Claimant dated 6 th March, 2013 be set aside . 4. That this Honourable Court direct that the New Board and/or the parties and/or the independent Director Chairman of the New Board accept the offer of Paul Elsener made 8 th May, 2013 in the sum of US$3,750,000 pursuant to clause 11 of the Schedule to the Tomlin Order herein .

7 The court is unclear as to whether the defendants intend that their application to compel Mr. Tomlinson to accept their offer still subsists in the face of Mrs. Messado's evidence that the parties commenced the bidding process prematurely as the price had not fallen below US $3 million, which was required by the schedule. Her evidence is that having belatedly realized the error, Mr. Elsener's bid which was received on the 8 ^th May in the sum of US $3,750.000.00, is currently the best and highest offer.

8 This court is of the view that the defendants' applications are wholly inconsistent. The court is being asked to accept Mr. Elsener's offer because the parties erroneously omitted certain required steps and prematurely began bidding. At the same time, its application of 7th March 2013 requiring the acceptance of its offer subsists. It seems to me to be a classic example of the impermissible approbation and reprobation

Mr. Georges Preliminary objection

9 Mr. Conrad George challenges the defendants' ability to bring this claim. His challenge is two pronged. His first attack is that the proceedings are stayed. In the absence of an application to restore, the court has no jurisdiction. There is no application to lift the stay; there is only an application for liberty to apply which has been granted by the Tomlin Order itself. The schedule to the Tomlin Order is a part of the Order. It is a contract between the parties which is enforceable by way of suit and appended to a Tomlin Order for more efficient enforcement.

10 The court's jurisdiction is limited to the making of orders which ‘carry into effect’ the terms of the schedule. The only remedies which are available to the court are orders for specific performance, injunction or for declaration of rights. Any other order sought can only be enforced by fresh action to enforce the contractual obligations in the schedule, if at all they can be enforced. He further submits that liberty to apply to restore is limited to enforcement of the terms of the schedule. None of the orders sought by the defendants concerns the schedule. There is therefore no right to restore the proceedings.

11 Mr. Ransford Braham QC however, submits that a party to a Tomlin Order may apply to the Court without filing a new suit for an order to enforce the terms of the Tomlin Order. The defendants are entitled to an order ‘giving effect to the terms’ of the agreement contained in the schedule to the Tomlin Order. It is his submission that specific performance and an injunction are not the only means of enforcing a Tomlin Order. The appropriate order will depend on the terms of the schedule, the facts before the court and the nature of the breach complained of. He further submits that the orders sought are mandatory injunction or request for specific performance. He relies on Foskett page 265 para 17–11 and on an extract from Atkin's Court Forms/Compromise and Settlement (Volume 12 (1)) Practice/D: ENFORCEMENT/32. Enforcing a compromise embodied in an order or judgment .

The Law

12 The learned authors, Vanessa and Professor Kodilinye state the law with clarity in their text, Commonwealth Caribbean Civil Procedure 2 ^nd edition at page 165:

‘A Tomlin Order is a consent order staying proceedings upon terms agreed between the parties and which are scheduled to the order. Such an order is particularly useful where (a) complex terms of settlement are agreed or, (b) where the parties wish to avoid publicity of the agreed terms, or (c) where they wish to agree terms which extend beyond the boundaries of action .

The effect of the Tomlin Order is to stay the action whilst at the same time keeping it alive as between the parties for the sole purpose of enabling any party to apply to the court to enforce the agreed terms. It is not part of the judge's function to approve or disapprove the terms of the agreement and he has no power to make such an order in terms other than those agreed, though the court has the inherent power to rectify a Tomlin Order which, by mistake, does not reflect the parties' true agreement .

In the event of a breach of the agreed terms, the action can be restored under the liberty to apply, and an order obtained requiring compliance by the defaulting party. Provisions in the schedule can be enforced even if it extends beyond the boundaries of the original action.’

Ruling on Mr. George's objection in limine

13 The schedule to the Tomlin Order provides that the parties are at liberty to apply. It reads:

‘all further proceedings in this claim be stayed save for the purpose of carrying such terms into effect and for that purpose the parties have liberty to apply’

There is therefore no need to apply to restore. The defendants are not seeking to challenge the Order. The application is to enforce certain terms of the schedule.

14 I am strengthened in this view by the statement of the learned authors of Atkins Court Forms/Compromise and Settlement (Volume12 (1)) Practice/D: ENFORCEMENT/32. Enforcing a compromise embodied in an order or judgment . Page 5 reads:

Tomlin Orders

Generally, in a Tomlin Order the terms of the compromise are set out in a schedule to the order staying the proceedings, and they are not therefore a judgment or order of the court and cannot be enforced as such. The body of the order should include a ‘permission to apply’ provision and the innocent party should use this to apply to the court to convert the contractual obligation into one enforceable by the courts. The application is made by notice of application, supported if necessary by a witness statement. Depending on what provision it is that the innocent party wants to enforce, he may apply for an order that a sum of money be paid,...