Silver Queen Maritime Ltd v Persia Petroleum Services Plc [2010] EWHC 2867 (QB)
In May 2008, PPS subcontracted SQM to undertake a marine oil exploration survey. SQM began work in August 2008 and invoices were rendered. Invoices for work done between October 2008 and March 2009 were not paid. SQM initiated claim proceedings in February 2009. In July 2009, discussions culminated in a settlement deed. PPS executed the deed and, through its solicitors, emailed it to SQM. The email containing the deed stated that to complete, the deed was to be signed and returned by SQM. The following day PPS purported to withdraw from the deed alleging "non-disclosure" of certain matters by SQM. Later that day, SQM executed and returned the deed. There were other events that had a bearing on the litigation, but one of the questions for decision was whether PPS had validly withdrawn the deed before it came into effect.
The High Court (Lindblom J) held that a concluded settlement agreement was reached. A deed may be delivered in three ways, (a) unconditionally, which means it is irrevocable and takes immediate effect, (b) in escrow, which means it is still irrevocable, but only takes effect when conditions of escrow are fulfilled and (c) to an agent with instructions to deal in a particular way, when it will be revocable until it is so dealt with. On the evidence, by executing and delivering the settlement deed, PPS had delivered the deed in escrow and was not entitled to withdraw it. The only condition of the escrow was that the deed be signed and returned, which happened within a reasonable time. It was clearly intended by PPS to be a deed binding on it, and it reflected the outcome of the settlement negotiations. Being irrevocable from the time of delivery in escrow, the settlement deed could not be recalled by PPS pending its taking effect. The absence of a completion date did not affect the validity of the deed, as a deed takes effect on the date of its delivery.
This case serves as a useful reminder as to how escrow arrangements work and highlights the importance of ensuring that escrow conditions are clearly set out in writing. Where a document is delivered in escrow, it cannot be recalled. However, the document will remain subject to the fulfilment of specific conditions (the escrow conditions) prior to taking effect. If the escrow conditions are never fulfilled, the document will never take effect.
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