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Rowan Turrall
Rowan Turrall,
SENIOR ASSOCIATE - SOLICITOR
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In full and final settlement?
24 June 2012

The developer claimant in Point West London Limited v Mivan Limited [2012] found itself in the unfortunate position of trying to argue that a settlement agreement it had entered did not include a full and final settlement of its claim. It wanted a second bite at the cherry and so sought a declaration from the High Court that it was entitled to do so.

Background

Point West, a developer, engaged Mivan as the building contractor for part of a large mixed use development. The phase in question included the design and construction of an apartment, Flat 1601, was purchased by the Rothschild Trust (Bermuda) Limited (“the Bermuda Trust”). There were problems with Flat 1601 from the outset including issues with the curtain walling, water ingress and a defective heating and cooling system.

The issues remained unresolved and in October 2007 Point West contacted Mivan wanting to do a deal which would enable Mivan to “walk away”. It was subsequently agreed during a telephone conversation that Point West would make a further payment of £50,000 to Mivan in respect of the final account. That led to the exchange of three letters which together formed a settlement agreement. The first letter from Mivan to Point West confirmed that the agreement was:

"…in respect of all Works carried out, and any corresponding matters. The agreement comprises a further payment of £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’s responsibilities and obligations in respect of their works at the above project…."

Point West responded in the following terms:

"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. Any time incurred on this would be reimbursed at an appropriate rate."

Mivan responded confirming their agreement to provide reasonable assistance in connection with legal proceedings regarding Flat 1601.

Point West subsequently commenced proceedings against the Bermuda Trust for arrears of service charge, payment of retention and sums in relation to the preparation of notices under the lease. The service charge claim was transferred to the Leasehold Valuation Tribunal but the remainder of the claim and Bermuda Trust’s counterclaim in respect of the building defects were dealt with in the County Court (“the Bermuda Trust proceedings”). Bermuda Trust was awarded damages against Point West.

The proceedings

Point West then commenced Part 8 proceedings against Mivan. It sought a declaration which, by the time of the trial, was to the effect that the settlement agreement did not include a settlement of any liability in respect of the defects which were the subject of the Bermuda Trust proceedings and/or any other defect whose consequences were unknown at the time of the settlement.

Point West submitted the settlement agreement was a quantification of the final account and a release of Mivan from liability to carry out further works. It argued it did not include a settlement of any liability which Mivan had or would have in the future to pay damages in respect of defects. Mivan contended the agreement released it from liability for defects patent as at the date of the settlement, including those in the Bermuda Trust proceedings.

The decision

The judge agreed with Mivan and found that the settlement agreement was intended to bring to an end all of Mivan’s responsibilities and obligations in respect of any and all outstanding matters including defects which were patent as at the date of the settlement.

His findings can be summarised as follows:-

  • In his view the "outstanding matters" included liability for defects in the curtain walling and heating and cooling system which were evidently patent at the date of settlement.

  • The combination of phrases in the letters was intended to take the settlement beyond a financial settlement and was intended to be a full and final settlement of any and all outstanding defects. In particular, the phrase “concludes Mivan’s responsibilities and obligations in respect of their Works” referred to outstanding defects and clearly envisaged a full and final settlement.

  • It was impossible to read into the phrase “I am not looking to you to do any further remedial works” a reservation of any right by Point West to look to Mivan to pay the costs of carrying out further remedial works.

Whilst the judge acknowledged that the approach might be commercially undesirable for Point West it was not for the court to improve or make an agreement which the parties themselves did not make.

Comment and practice points

The amount of the judgment against Point West in the Bermuda Trust proceedings is not clear from the judgment but must have been fairly substantial for Point West to incur the legal costs of embarking on a second set of High Court proceedings. As a result of not recording the settlement in the terms it claimed it had, Point West incurred liability for legal costs in two sets of proceedings and lost its ability to bring a claim against Mivan to pass on its losses from the Bermuda Trust proceedings. This was an expensive mistake for Point West and it reinforces the need to ensure that settlements are recorded accurately. In particular the parties need to be very clear about the scope of any release from future liability. 

For more information about the issues in this article to find out more about how the Dispute Resolution team can help you please contact Rowan Turrall on 0118 952 7206 or email [email protected].

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

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