In 1927, Mr Justice Tomlin (who was later elevated to the House of Lords as Baron Tomlin of Ash) issued a Practice Note relating to the use of court orders that attached settlement agreements. He specified that any provision that required action by the court, such as staying the proceedings or paying money out of court, must be included in the body of the order; anything else could be included in a schedule setting out the settlement terms. He also noted that the schedule was not directly enforceable, so if the settlement was not carried out there would have to be a second application to the courts for an enforcement order.
While such orders had been in use for some time before this Practice Note, they became known thereafter as Tomlin Orders. They have become a regular feature of English court litigation, and over the last century the ways in which they can be used, enforced and set aside have been worked out through various cases. Recently, the Commercial Court in Heritage Travel and Tourism Limited and another v Lars Windhorst and others  EWHC 2380 considered how to approach an application to set aside a settlement agreement in a Tomlin Order.
Uses of a Tomlin Order
A Tomlin Order brings considerable flexibility to the settlement of a court case. While a simple obligation to pay money can (and should) be recorded in the body of a court order, the combination of a court order and a settlement agreement in a schedule to the order means that a more complex settlement can be recorded – even one that contains terms which have nothing to do with the original claim. The Tomlin Order can also help to keep the terms of the settlement confidential: the court can be asked to direct that the schedule cannot be inspected by the public from the court records; and in some parts of the English court system you can decide not to file the settlement agreement at all but merely refer to it in the order, making it impossible for the public to inspect it (other parts of the court system insist that the settlement be set out in the schedule to the court order).
A Tomlin Order is a hybrid, a combination of a court order and (in the schedule) a contract. The normal principles of contract law apply to the schedule: the courts will interpret the terms of the schedule as they will interpret the terms of any contract, and there is a 6-year limitation period on enforcing any breach. On the other hand, the court order must be treated as such. If the settlement is not carried out the normal course would be to proceed to enforcement by way of a further order, and there would need to be good grounds to do something different. The Commercial Court addressed this point in the Heritage Travel case.
The settlement in Heritage Travel
Lars Windhorst is a German entrepreneur who has been ranked in The Sunday Times Rich List. Starting out in the technology sector, through his company Tennor Holding BV he now has investments in a wide range of industries including natural resources, media, retail and real estate. Tennor also has a majority shareholding in the La Perla fashion company, while a minority stake is held by the Heritage Group, the investment vehicle of Manfredi Lefebvre d’Ovidio (the former owner of the Royal Caribbean cruise company).
In early 2020, Mr Windhorst, Tennor and two of its subsidiaries were in dispute with two Heritage entities. They had entered into a deal involving option repo transactions in the shares of companies connected with Mr Windhorst, in order to make cash available to the Tennor companies. That dispute was originally settled by agreement in February 2020 and then, after the first settlement was not carried out, through a court action and another settlement in June 2020. The second settlement was recorded in a Tomlin Order and the main parts were an obligation to pay €55 million by the end of June 2020, and an obligation to pay €70 million by February 2021.
However, the second settlement was not carried out either: by September 2020 only €15.6 million had been paid. In those circumstances the settlement agreement permitted the Heritage entities to serve a notice declaring all outstanding sums immediately due and payable, which they did in December 2020. They also applied to the Commercial Court to lift the stay of the proceedings in the Tomlin Order and enter judgment for the full amount. Mr Windhorst and the Tennor entities opposed this on various grounds, including that the settlement in June 2020 had been entered into as a result of economic duress, it had not become binding because a condition precedent had not been fulfilled, and it contained a penalty clause.
No real prospects of success
Following the previous High Court decision of Bostani v Pieper  EWHC 547, the judge’s starting-point was that the Heritage entities had a prima facie entitlement to receive an order for enforcement in the terms set out in the schedule to the Tomlin Order. There would have to be a good reason not to do this. Indeed, both parties accepted that the general approach that should be adopted by the court was that the defendants needed to show that they had a real prospect in succeeding in their arguments, as a threshold question, in order for the matter to proceed to a full hearing and cross-examination of witnesses. This was analogous to an application for summary judgment.
The judge examined the defendants’ arguments in light of this test. First, the defendants said that the Heritage entities had pressured them into agreeing the June 2020 settlement because the Heritage entities had said they would otherwise tell potential investors in the Tennor companies about the failure to pay. The judge did not reach a final conclusion on the facts but he ruled that the Heritage entities had no confidentiality obligation in this respect, and were entitled to act in their own commercial self-interest, which included speaking to potential investors. The defendants therefore had no real prospect of showing economic duress.
Secondly, the judge concluded that, taking into account the circumstances in which the June 2020 settlement had been entered into, including the fact that both sides had major law firms advising them, a condition precedent along the lines argued for by the defendants could not be implied into the settlement (nor could there be rectification of the settlement agreement to include this). Finally, the judge took the view that the particular clause in the settlement that the defendants highlighted, which related to a daily payment on top of the main payments, could not be a penalty because it was not a sum payable upon breach; rather, it was another primary payment obligation, just like the main payment obligations.
Overall, the judge decided that the defendants’ arguments had no real prospects of success, and therefore the claimants were entitled to an order enforcing the terms of the settlement in the Tomlin Order.
After judgment has been given in a case, the English courts have a pro-enforcement bias. It does not matter for these purposes whether the judgment has been given after a contested trial or whether there has been a settlement on agreed terms that is recorded in a Tomlin Order. While the settlement is not immediately enforceable via the Tomlin Order, if the claimant applies for enforcement, the defendant has to show that it has a real prospect of succeeding in its arguments in order to persuade the court that it should not proceed to enforce the settlement terms that are set out in the Tomlin Order.