Al-Freah v Thompson

In the matter of Al-Freah v Thompson, the plaintiffs alleged the existence of a binding contract of compromise with the defendants, which arose out of a dispute involving multiple shareholders of certain companies. The defendants were shareholders alongside the plaintiffs and another shareholder, who had initiated proceedings against the companies. In an effort to resolve the claims, the parties participated in mediation, which proved unsuccessful. Subsequent to the mediation, the defendants communicated with the plaintiffs, proposing a settlement offer. The plaintiffs accepted this offer, but no formal deed of settlement was executed. The plaintiffs subsequently brought an action against the defendants, asserting that the correspondence evidenced an enforceable contract of compromise. The defendants denied the existence of such a contract and defended the action on that basis.

The court was tasked with determining whether the correspondence between the parties constituted an immediately binding contract of compromise. The central issue was whether the exchange of correspondence, in the absence of a formal deed of settlement, was sufficient to establish a binding agreement between the parties. The court needed to consider the legal principles governing the formation of contracts, particularly in the context of agreements that contemplate the execution of formal documents.

The court held that the correspondence did not evidence an immediately binding contract of compromise. The court found that the agreement between the parties was contingent upon the execution of a formal deed of settlement, which never occurred. The court emphasised that the exchange of correspondence, while indicative of an intention to reach an agreement, did not amount to a binding contract in the absence of a formal execution of a deed of settlement. The court concluded that the plaintiffs’ claim was without merit and entered judgment in favour of the defendants. The court also ordered that the plaintiffs pay the defendants’ costs of the proceeding on the standard basis.