Building contractor John Mowlem is to receive £17.37m in settlement from a £80m claim against the Ministry of Defence in a dispute over a major development project at Bristol.
The High Court has ruled that after the deduction of moneys that have been cross-claimed against Mowlem, the contractor is entitled to £17.37m of the original settlement offer of £20m, and that the MoD was not entitled to set off any further amount against the settlement figure.
Forbes J said that the dispute centred on a “new and very substantial headquarters complex” constructed by Mowlem for the MoD.
The project ran into difficulties almost from the outset, with Mowlem sustaining “very substantial losses”. It claimed that the losses were caused by breach of contract on the part of the MoD, and it consequently lodged a claim for over £80m.
Forbes J said that the core issue in the dispute was the extent of Mowlems liability under the terms of the contract. Mowlem was contractually bound to design the work in accordance with MoD requirements, and a major dispute arose as to which party was to bear the risk of errors or conflicts that allegedly existed within the MoD requirements.
The dispute was referred to arbitration before Mr Michael Milne in July 2001, after the MoD had offered to settle Mowlem’s claim, together with certain of its own claims for £20.02m.
Following an interim decision by the arbitrator in May this year, Mowlem decided to accept the offer. The arbitrator had decided against Mowlem on the issue of design liability.
Forbes J said: “Having regard to the adverse effect this had on the total amount it then stood to recover in the arbitration, John Mowlem decided to accept the offer that had been made,” said the judge.
He added that it was common ground that this acceptance had settled Mowlems claim in the arbitration and the MoD’s claim for liquidated damages for delay.
However, he said that agreement had not been reached on the extent to which the remainder of the MoDs counterclaim had been compromised. He had been asked to decide which aspects of the MoDs counterclaim had been settled and whether the MoD was
He concluded: “I have come to the conclusion that the MoD is not entitled to exercise any further right of set off against the total amount that it is now obliged to pay John Mowlem under the terms of the settlement.”
PLS News 03/12/01
