Whether a settlement order precludes further proceedings depends on the parties’ intention by reference to what a reasonable person having all the background knowledge available to the parties would have understood it to mean (Arnold v Britton [2015] UKSC 36; [2015] EGLR 53).
The High Court has considered this principle, dismissing proceedings in Dawnvale Café Components Ltd v Hylgar Properties Ltd [2024] EWHC 1199 (TCC).
The claimant, Dawnvale, a kitchen and bar fit-out company and the defendant, Hylgar, a property developer, entered into a contract for the design, supply and installation of mechanical works at a property in the Wirral in February 2020 at a contract price of £631,435 plus VAT. The contract was terminated in November 2020 with each party arguing the other was in repudiatory breach.
Having paid more than £450,000 of the contract price, Hylgar referred to adjudication the true value of Dawnvale’s work, seeking repayment of £180,322.92. The adjudicator decided Dawnvale had repudiated the contract and should repay Hylgar the sum claimed. Subsequently, Hylgar brought enforcement proceedings which were compromised in August 2021.
The Tomlin Order provided that all further proceedings “in this action” be stayed upon the terms set out in the schedule. The schedule provided that Dawnvale should pay Hylgar the settlement sum of £246,170.70 including interest and costs, in instalments. Clause 4 stated that payment of the settlement sum was in full and final settlement of any and all claims that Hylgar may have against Dawnvale “arising from or in connection with these proceedings”.
In August 2023, Hylgar sought further losses of £641,594.76 arising from the same repudiatory breach, intimating an intention to refer a claim to adjudication in the absence of a satisfactory response. Dawnvale argued the August 2021 order had settled all claims arising from the dispute between the parties and sought a declaration to that effect.
The court decided the term “these proceedings” referred to the action in which the order was made and not the underlying dispute which was the subject matter of the adjudication including the finding of repudiatory breach.
Both parties were commercial entities with experience of construction dispute resolution and legally advised at the time of the order. If they had intended to settle all potentially related future claims, they would have said so, rather than limiting the settlement to “these proceedings”.
As a matter of language, the new claim did not “arise from” the enforcement proceedings with which there was no causative relationship and neither was it “connected with” them. There was no overlap between the two claims.
Louise Clark is a property law consultant and mediator
