黑洞社区

The Facts

In August 2000, Point West London Ltd (鈥楶oint West鈥�) engaged Mivan Ltd (鈥楳ivan鈥�) under a JCT98 Standard Form of 黑洞社区 Contract with Contractor鈥檚 Design (鈥榯he Contract鈥�) to construct a marketing suite, sky lobby and 48 apartments at a development at 116 Cromwell Road. The original contract sum was over 拢10m.

Practical Completion was reached in 2001 and the final account for the Contract was agreed at approximately 拢12.5m in 2002. However, work was carried out after this agreement which included both remedial works for which Mivan was responsible under the Contract as well as additional work outside of the Contract. The works related to both the installation of the curtain walling and the installation of a heating and cooling system.

By October 2007 there were unresolved defects in both the curtain walling and in the heating and cooling system which both parties knew of. The defects were of an unknown scope and extent and it was clear that the attempted repair works for the past six years had not been successful.

In October 2007 Point West and Mivan entered into a Settlement Agreement which comprised an exchange of letters. Mivan first wrote to West Point:

鈥溾��The agreement comprises a further payment of 拢50,000 (including VAT), representing the final assessment of monies due or to become due thus achieving full and final settlement in respect of the above works, together with any and all outstanding matters. We would confirm that this final agreement concludes Mivan鈥檚 responsibilities and obligations in respect of their works at the above project.鈥�

Point West responded and accepted Mivan鈥檚 offer, provided Mivan would assist them in their proceedings in the Country Court against the owner of Flat 1601 (within the development) for outstanding service charges:

鈥溾��The contents of your letter are accepted subject to you being prepared to assist me in the legal aspects of the case on Flat 1601. This may involve some time on the part of Mivan along with the production of necessary documents but I am not looking to you to do any further remedial works鈥︹��

Mivan accepted this condition regarding Flat 1601.

Ultimately, in November 2003 Point West was found liable to the owner of Flat 1601 for damages in relation to both the curtain walling system and the heating and cooling system. In August 2011 Point West then commenced CPR Part 8 proceedings against Mivan seeking a declaration as to the scope of the 2007 Settlement Agreement and Mivan鈥檚 liability of defects.

The Issues

What was the meaning of the phrase 鈥渇ull and final settlement in respect of any and all outstanding matters鈥� in the October 2007 Settlement Agreement? Was Mivan liable for damages in respect of defects which existed at October 2007?

The Decision

Mr Justice Ramsey held that the Settlement Agreement released Mivan from defects which were patent at October 2007. He considered that the Settlement Agreement was intended to bring an end to Mivan鈥檚 responsibilities and obligations in respect of any and all outstanding matters and outstanding defects in Mivan鈥檚 works. The Judge reached this conclusion for the following reasons:

(i) The outstanding matters at the time of the Settlement Agreement included the question of payment to Mivan and the known defects in the curtain walling and heating/cooling system;

(ii) The language and combination of phrases used in the Settlement Agreement intended a full and final settlement in respect of any and all outstanding defects: the payment to Mivan, 鈥渢hus achieving full and final settlement鈥�, was in respect of 鈥渁ll Works carried out鈥� and was intended to achieve full and final settlement 鈥渋n respect of the above works鈥�, that being Works carried out 鈥渢ogether with any and all outstanding matters鈥�;

(iii) Mivan鈥檚 letter to West Point stated that the agreement 鈥渃oncludes Mivan鈥檚 responsibilities obligations in respect of their Works at the above Project鈥� - reading the letter as a whole, this clearly envisaged a full and final settlement in respect of Mivan鈥檚 responsibilities and obligations in respect of defects and, in the context of the letter read as a whole, that meant outstanding defects, namely those which were patent at 18 October 2007; and

(iv) West Point鈥檚 response to Mivan鈥檚 letter was clear when it stated 鈥淚 am not looking to you to do any further remedial works鈥�. Furthermore, the letter did not reserve any rights to recover the costs of any remedial works from Mivan which West Point may carry out.

Commentary

In reaching his conclusion regarding the interpretation of the Settlement Agreement, Mr Justice Ramsey considered the principles which apply to the construction of a contract (Investors Compensation Scheme v West Bromwich 黑洞社区 Society [1998] 1WLR 896. He took into account the background knowledge which would reasonably have been available to the parties in October 2007: it includes 鈥渁bsolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man鈥� (Lord Hoffmann).

Accordingly, this case demonstrates the importance of the language used in settlement agreements, the factual background at the time the agreement is reached and need for parties to be clear about what has been settled and what has not.

Case Details

Point West London Ltd v Mivan Ltd [2012] EWHC 1223 (TCC), 10 May 2012.

Stacy Sinclair

15 June 2012