DOES A SETTLEMENT OF “ALL FURTHER PROCEEDINGS IN THIS ACTION” BAR ALL FUTURE CLAIMS?
It is important to be careful when settling claims. This is illustrated in the recent England and Wales High Court (Technology and Construction Court) decision of Dawnvale Cafe Components Ltd v Hylgar Properties Ltd [2024] EWHC 1199 (TCC) (the “Judgment”).
Brief facts. In brief, the claimant, Dawnvale Cafe Components Ltd (“Dawnvale”), was engaged by the defendant, Hylgar Properties Limited (“Hylgar”), for the design, supply and installation of mechanical works at The Beacon, Hoylake, Wirral (Judgment [3]).
The dispute was referred to adjudication, and a decision was rendered (Judgment [5]).
Subsequently, enforcement proceedings were commenced (Judgment [6]), but the parties compromised those enforcement proceedings in a Tomlin Order (Judgment [7]).
The Tomlin Order provided as follows:
“ORDER
UPON the parties having agreed terms of settlement as set out in the attached Schedule.
BY CONSENT IT IS ORDERED THAT:
(1) The hearing listed for 16 September 2021 be vacated.
(2) All further proceedings in this action be stayed upon the terms set out in the Schedule hereto except for the purpose of enforcing those terms.
(3) Each party shall have permission to apply to the Court to enforce those terms without the need to bring a new claim.
(4) Each party shall bear its own costs.
SCHEDULE
("the Settlement Agreement")
IT IS AGREED AS FOLLOWS:
1. The Defendant shall pay to the Claimant the sum of £246,170.70 hereafter "the Settlement Sum", inclusive of interest and costs, in accordance with the following provisions:
[There followed seven sub-paragraphs allowing for payment in tranches from 27th August 2021 to 15th February 2022.]
2. The Defendant shall pay to the Claimant the Settlement Sum in accordance with the payment terms set out at paragraph 1, into the following account;
[bank details]
3. Should the Defendant fail to pay the any [sic] instalment of the Settlement Sum on the due date then the remaining balance of the Settlement Sum shall become immediately due and payable to the Claimant.
4. This Settlement Agreement shall immediately be fully and effectively binding on the parties. The payment of the Settlement Sum is in full and final settlement of any and all claims the Claimant may have against the Defendant arising from or in connection with these proceedings.
5. This Settlement Agreement is subject to English law and any dispute arising under or in connection with this Settlement Agreement shall be subject to the jurisdiction of the English courts.” (emphasis added by in the Judgment)
Two years later, Hylgar sought to claim for further losses (Judgment [8]).
This was rejected by Dawnvale who claimed that the Tomlin Order had resolved “any and all claims arising from the dispute between the parties.” (Judgment [9]).
Dawnvale then took up proceedings before the Court to prevent Hylgar from referring those new claims to adjudication (Judgment [10]).
Meaning of “these proceedings”. The Court held at Judgment [21] that the meaning of this phrase found in Paragraph 4 of the Schedule is to be informed by the phrase “all further proceedings in this action” found in Paragraph 2 of the Order.
The Court held at Judgment [22] that applying the case of Plevin v Paragon Personal Finance Limited [2017] UKSC 23, the term “these proceedings” would refer to the action in which the Tomlin Order was made, i.e., the enforcement action, and that “this construction as straightforward and second nature to most lawyers”.
The Court rejected at Judgment [23] that the phrase should include the proposed second adjudication, as it would require the words “these proceedings” in Paragraph 4 of the Schedule to bear a different meaning from “proceedings in this action” in Paragraph 2 of the Order; additionally, such “proceedings” would be different proceedings i.e., a second “set” of proceedings.
“arising from or in connection with”. The Court also rejected the submission that the phrase “any and all claims the Claimant may have against the Defendant arising from or in connection with these proceedings” would be broad enough to capture the proposed second adjudication proceedings (Judgment [24]).
The Court noted that neither party could suggest “an example of a claim or head of loss which could fall within the category of "in connection with" but not "arising out of"” (Judgment [29]), and determined at Judgment [30[ that the new claim was not caught by this phrase as it neither arises from, nor is connected with, the proceedings for the following reasons:
If the Parties, who were legally advised, intended to settle all potentially related future claims, they could have said so such as by referring to “… all claims arising from or in connection with one or all of "the contract", "the works" or "the dispute(s)" …” (Judgment [30(a)];
If Paragraph 4 of the Schedule was to settle all potentially related future claims, it would have expressly bound both Parties, instead of referring only to the Claimant (Judgment [30(b)]);
The Court also agreed that the purpose of Paragraph 4 of the Schedule was to prevent Hylgar from “re-arguing the true valuation of Dawnvale's works by way of a final determination in court proceedings” (Judgment [30(c)]); and
The Court held that the new claim could not be said to “arise from” the enforcement proceedings, though it “could be said to arise from the contract or the works or the dispute between the parties” (Judgment [30(d)]; and
While it was unnecessary to determine what claims could have arisen out of, or in connection with, the enforcement proceedings, an example would be a claim for legal costs (Judgment [30(e)]).
Given the above findings, the Court held that the Tomlin Order therefore does not prevent Hylgar from referring to a second adjudication the claims it sought to advance and dismissed Dawnvale’s application (Judgment [40]).
Conclusion. This case is an important reminder that when settling claims, it is important to pay careful attention to what is being settled, and the terms used to reflect the settlement. For example, if the intention is to only settle an adjudication brought under the Building and Construction Industry Security of Payment Act 2004, and not the underlying contractual dispute, then the terms of the settlement should reflect this accordingly.
Additionally, using the term “full and final settlement” in a settlement agreement does not necessarily mean that all disputes between the Parties had been settled. As this case illustrates, the parties may have only settled a portion of the claims. Hence, if the intention is to fully and finally settle all disputes and claims arising out of and in connection with the underlying contract, then the terms of the settlement should reflect the scope of the settlement in addition to making clear that the settlement is a “full and final settlement”.
This publication is not intended to be, nor should it be taken as, legal advice; it is not a substitute for specific legal advice for specific circumstances. You should not take, nor refrain from taking, actions based on this publication. Chancery Law Corporation is not responsible for, and does not accept any responsibility for, any loss or damage that may arise from any reliance based on this publication.