The Importance of clear wording to reflect the scope of a settlement agreement.

In Dawnvale Café Components Limited v Hyglar Properties Limited [1], the Court highlighted the importance of clear drafting in a settlement agreement. In particular, if the settlement is intended to settle all future claims, the drafting of the agreement must make this clear.

Background

Dawnvale Café Components Limited (“Dawnvale“), was the main contractor. Hyglar Properties Limited (“Hyglar“) engaged Dawnvale in February 2020 to carry out the design, supply and installation of the mechanical works as part of the Beacon Development in the Wirral.

By October 2020 the relationship between the parties had broken down and the contract was terminated in November 2020. Both parties said the other had committed a repudiatory breach.

Hyglar referred a dispute as to the true value of Dawnvale’s work to adjudication in June 2021. Hyglar had already paid Dawnvale £425,251.08 and sought a repayment of £180,322.92.

The adjudicator held that Dawnvale had repudiated the contract, and Dawnvale was required to repay the overpayment to Hyglar plus VAT and interest as well as the adjudicator’s fees.

The dispute

Dawnvale failed to pay Hyglar and Hyglar commenced enforcement proceedings. However, the parties entered into a settlement agreement (via a Tomlin Order) on 24^th August 2021. It was agreed between the parties that Dawnvale would repay the sum awarded by the adjudicator in instalments over a period of seven months. The key provision within the agreement stated:

“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.”

Two years later, on 31 August 2023, Hyglar sought to commence further adjudication proceedings seeking to recover a further £641,584.76 from Dawnvale as a result of losses suffered from Dawnvale’s repudiation of the contract (“the 2023 dispute“).

In response, Dawnvale brought Part 8 proceedings seeking:

1. A declaration that the settlement agreement precluded Hyglar from claiming further or additional relief;
2. An order prohibiting Hyglar from referring the 2023 dispute to an adjudication; and
3. A declaration that the 2023 dispute was ‘the same or substantially the same’ as the dispute already decided in the 2021 adjudication.

Judgement

The judge held that the wording in the settlement agreement “these proceedings” referred to the action in which the agreement was made, which was the enforcement proceedings. While the 2023 dispute arose from the same contract or works as the enforcement proceedings, the 2023 dispute did not arise from the enforcement proceedings and was not the same or substantially the same as the dispute heard by the first adjudicator.

Accordingly, the settlement did not cover the 2023 dispute and the settlement agreement only settled the payment schedule relating to the adjudication award. The wording of the settlement agreement did not affect Hyglar’s right to pursue other money claims under the contract.

Takeaway Points

This decision highlights the importance of the use of clear wording in a settlement agreement. The judge noted that, had a settlement of any and all future claims been the intention of the parties, this could have been easily achieved by using express wording to this affect within the body of the agreement.

Any party entering into a settlement agreement should take extra care when drafting to make sure the wording of the agreement clearly reflects the parties’ intentions.

Further guidance on the scope of the Slip Rule in adjudication proceedings

McLaughlin & Harvey Limited v LJJ Limited [2] concerned whether the power to correct a typographical or clerical error to an adjudication decision under the “Slip Rule” in the Scheme [3] extended to addressing a matter of substance which the adjudicator had not adequately addressed in his decision.

Background

McLaughlin sought to enforce the decision of an adjudicator which directed LJJ to pay £808,000 within seven days, as a result of LJJ failing to meet a number of key dates under the parties’ subcontract.

At the same time as he issued his decision (“the Original Decision“), the adjudicator invited the parties to submit any proposed corrections of clerical or typographical errors in respect of the Original Decision.

Both parties requested corrections. McLaughlin said the corrections requested by LJJ went beyond the power of the slip rule. The adjudicator accepted LJJ’s amendments notwithstanding McLaughlin’s objections and issued a revised decision (“the Revised Decision”) on 4 November 2023.

LJJ resisted enforcement and argued that:

1. The Original Decision was superseded by the Revised Decision meaning that the Original Decision could not be enforced.
2. If the adjudicator had erred in law in issuing the Revised Decision, this was within his jurisdiction and the court should not interfere.
3. McLaughlin could not enforce the Revised Decision.

What is the “Slip Rule”?

Paragraph 22A(1) of the Scheme [3] states that:

“The Adjudicator may on his own initiative or on the application of a party correct his decision so as to remove a clerical or typographical error arising by accident or by omission”

Decision

The TCC held that the adjudicator’s approach to the Slip Rule went beyond its scope. LJJ’s submissions were not of a clerical or typographical nature thus the adjudicator had no power to correct the Original Decision based on those submissions.

The court stated that by seeking to clarify or qualify his Original Decision, the adjudicator was effectively “giving effect to second thoughts or intentions.”

Accordingly:

• The Original Decision had not been superseded by the Revised Decision;
• The Revised Decision was the adjudicator exercising a power which he did not have (rather than being an error of law).
• Accordingly, the Revised Decision was not enforceable.
• The court instead enforced the Original Decision.

Takeaway points

As the court acknowledged, if it had allowed the adjudicator to apply the Slip Rule in this fashion, it would no doubt lead to an influx of parties seeking to materially change the adjudicator’s decision through further submissions. This was never the intention of the Slip Rule, and it would undermine the interim finality of the adjudication process.

Overall, the case serves as a reminder to adjudicators and to parties in adjudication proceedings as to the limits of an adjudicator’s powers under the Slip Rule. The Slip Rule is confined to correcting typographical or clerical errors which are apparent on the face of the decision, rather than correcting something that the adjudicator intended to take account of, but which they omitted in reaching their decision.

Consideration of the High Court in Ireland’s approach to enforcement applications

In McGill Construction Ltd v Blue Whisp Ltd (Approved) [2024] IEHC 205 [4] the High Court of Ireland enforced an adjudicator’s decision.

In Ireland the court’s discretion to refuse to enforce an adjudicator’s decision is a narrow one. An adjudicator’s decision is provisional on the basis that the unsuccessful party is entitled to a full hearing of the underlying dispute in subsequent court proceedings. However, the onus is upon the party resisting an application for enforcement of a decision to demonstrate that there has been a blatant and material breach of fair procedures such that it would be unjust to enforce the adjudicator’s decision even temporarily.

This case is also a reminder of the principle of “kompetenz-kompetenz” i.e. that an adjudicator does not have jurisdiction to make a binding determination in relation to his/her jurisdiction unless the parties give the adjudicator such jurisdiction.

Background

McGill Construction Ltd (“McGill“) referred a payment dispute to adjudication against Blue Whisp Ltd (“Blue Whisp“). The adjudicator issued a decision awarding payment of €1.25million in favour of McGill. Blue Whisp objected to paying this award and enforcement proceedings were issued by McGill.

In these proceedings Blue Whisp raised the following four grounds of resistance to McGill’s application for enforcement:

1. McGill’s notice of intention to refer to adjudication was invalid in that it encompassed a dispute in relation to more than one payment claim notice;
2. The formal referral of the payment dispute to the adjudicator was made outside the seven-day period prescribed by legislation i.e. it was received by email just after the cusp of midnight on the seventh day after the adjudicator was appointed;
3. The adjudicator acted in breach of fair procedures in deferring her decision in respect of a separate claim for defective works (brought by Blue Whisp) to be addressed in two related parallel adjudications before her; and
4. There was a question mark over the ability of McGill to repay the adjudicator’s award in the event that it transpired that those monies were not properly owing to McGill.

In response to Blue Whisp’s challenge to the notice of intention to refer the dispute, the adjudicator had asked the parties to confirm whether they wished to confer jurisdiction on her to decide this issue and both parties had responded in the affirmative.

The court found that Blue Whisp had failed to establish any of the above grounds for refusing the application to enforce the adjudicator’s decision for the following reasons:

1. In relation to ground 1, there is nothing within the Construction Contracts Act 2013 (“CCA“), the relevant Irish legislation, which restricts a payment dispute to only one single payment claim notice and therefore the notice was valid.
2. With reference to ground 2, Blue Whisp’s line of argument that the email serving the referral submission had arrived in the adjudicator’s inbox at one minute after midnight (whilst reaching the adjudicator’s IT system at 23:59) was dismissed on the basis that an email is deemed to have been received at the time it enters the information system, rather than when it arrives in the inbox for the addressee’s attention.
3. In respect of ground 3, no breach of fair procedures was deemed to have occurred in respect of the adjudicator having failed to consider a defence that monies owed should be reduced by way of set-off or damages for alleged defective works. The staggering size of the awarded amounts in the decision meant that Blue Whisp would receive the decisions in the parallel adjudications before the final payment deadline for this one, having a better opportunity to advance its case in respect of the defective works argument.
4. In relation to ground 4, Blue Whisp had failed to provide any credible evidence to support its position that McGill was in financial difficulties and that it would be unable to repay the judgment sum if required.

As the adjudicator had asked the parties to confirm whether they wished to confer jurisdiction on her to decide the first ground of opposition raised by Blue Whisp, and both parties had responded in the affirmative, the judge found that the adjudicator’s decision was therefore binding on that issue.

Takeaway points

Blue Whisp’s failure to discharge the evidential burden of McGill’s alleged inability to repay the judgment serves to highlight whether it would ever be appropriate to refuse to enforce an adjudicator’s decision based upon the claimant’s financial status and having regard to the “pay now, argue later” principle which underpins the CCA.

As this is an Irish case it is not binding on the Courts of England and Wales and is persuasive only. However, whilst the High Court in Ireland retains a discretion to refuse to enforce an adjudicator’s decision, this judgment provides clarity on procedural issues and demonstrates that the courts in Ireland seem to be mirroring the same approach adopted by the courts in England and Wales, Northern Ireland and Scotland, in respect of enforcing adjudicator’s decisions.

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[1] Dawnvale Café Components Limited v Hyglar Properties Limited [2024] EWHC 1199

[2] McLaughlin & Harvey Limited v LJJ Limited [2024] EWHC 1032 (TCC)

[3] Scheme for Construction Contracts (England and Wales) Regulations 1998 as amended by the Scheme for Construction Contracts (England and Wales) Regulations 1998 (Amendment) (England) Regulations 2011

[4] McGill Construction Ltd v Blue Whisp Ltd (Approved) [2024] IEHC 205