Chris Ward

Published 15 February 2022

Is Your Settlement Agreement Enforceable?

The recent Court of Appeal decision in the case CFL Finance Ltd v Laser Trust and Moises Gertner [2021] EWCA Civ 228, has cast doubt on whether, in certain circumstances, a settlement agreement that allows an individual time to pay, is enforceable. 

The facts

In 2008, CFL Finance Ltd (CFL) advanced £3.5 million to Lanza Holdings Ltd (Lanza) under a facility agreement. Mr Gertner (whose family controlled Lanza) gave a personal guarantee in respect of the loan.  Lanza defaulted and in 2010, CFL issued proceedings against Mr Gertner under the guarantee. Mr Gertner disputed CFL’s claim.

In 2011, the litigation was settled by way of a Tomlin order. The order provided for all further proceedings to be stayed upon the terms set out in a schedule to the order. Mr Gertner failed to comply with the terms of the settlement and in 2015, CFL served a statutory demand on Mr Gertner alleging he owed more than £11 million. Thereafter, CFL successfully presented a bankruptcy petition. Various subsequent appeals led to the Court of Appeal, where there were two issues to be decided:

  • Does the Consumer Credit Act (CCA) apply to the schedule to a Tomlin order?
  • Did the settlement agreement provide Mr Gertner with “credit”?


A Tomlin order is a form of a consent order, signed by both parties. It often includes obligations for the parties to carry out certain actions within a certain timeframe and Tomlin orders are often used for complex settlements. A Tomlin order constitutes a binding contract between the parties, and the parties can agree to keep certain terms of a Tomlin order confidential (unlike a consent order).

Mr Gertner had alleged that the settlement agreement was in fact a regulated consumer credit agreement. This raised the question, whether a settlement agreement with an individual, where they were given time to pay, is a provision of credit to which the CCA applies.

If an agreement is subject to the CCA, it creates various obligations for the creditor. If the creditor hasn’t met those obligations, the agreement may be unenforceable, and interest and charges will not be payable, until the creditor takes appropriate steps to put the situation right.

Court of Appeal findings

The Court of Appeal decided that the CCA could apply to Tomlin orders. The court also decided that an agreement, by which an individual’s payment obligations are delayed in return for consideration (and where the individual debtor does not dispute the debt), can be a “consumer credit agreement” under the provisions of the CCA.

The Court of Appeal went on to say, the CCA will not apply:

  • To an agreement by which the creditor agrees to “no consideration” to allow the debtor more time to pay. A debtor giving up a defence (which lacked a fair chance of success) does not amount to consideration. In the absence therefore of any other consideration, the CCA would not be applicable.
  • The CCA does not apply to an agreement by which a creditor and debtor compromise a claim which the debtor genuinely disputed in its entirety on substantial grounds. In this situation, because the debt is disputed and the issue hasn’t been decided, it cannot be said that the debtor in fact owed the creditor anything before the compromise. This in turn means, the compromise cannot be described as “deferring a debt” even if it makes provision for payments to be made by the debtor in the future, because the fact of the debt has not been established.

The Court of Appeal decision is currently being appealed to the Supreme Court.


What the above means is that if a debtor does not dispute the debt, and the parties enter into a settlement agreement, and for “some consideration” the creditor agrees to accept installment payments, the CCA may apply because the debtor is being provided with a form of “credit”. That in turn brings it within the definition of a consumer credit agreement within the scope of the CCA.

However, there is likely to be a grey area such as in those situations where the debt either is not disputed or is disputed but on unsubstantial grounds.

What does this mean for those negotiating a settlement?

It is important to bear in mind that in order for the CCA to apply, the debtor must be an individual, sole trader, a partnership of two or three partners who are individuals, or an unincorporated association. What is more, the CCA does not apply if not more than 12 payments are made in a period of less than 12 months (and no interest is charged). This should be kept in mind when drafting any settlement terms. There are also some other limited circumstances in which the CCA may not apply.

That said, parties and practitioners involved in negotiating settlement agreements will need increased vigilance of whether by reaching an agreement (and depending on the terms) they are entering into a regulated consumer credit agreement.

Parties may wish to consider using a simple consent order as an alternative, rather than using a Tomlin order. The CCA does not apply to terms in a standard court order such as a consent order, but this may raise issues of confidentiality and in complex cases, it could present its own problems.

In considering what amounts to providing “consideration”, it could include where the debtor agreed to pay interest on what he or she owes, or if he or she agreed to release a claim against the creditor (but in this situation, the claim must have some merit or a reasonable chance of success).

If you have concerns about a settlement agreement, we urge you to get in touch.

The legal content provided by RSW Law Limited is for information purposes only and should not be relied on in any specific case without legal or other professional advice.

Copyright is owned by RSW Law Limited and all rights in such copyright are reserved. Material is not to be reproduced in whole or in part without prior written consent.