And that was all they wrote? Precise language is needed to settle future claims

Did the wording of a Tomlin order settling adjudication enforcement proceedings preclude the claimant from starting a second adjudication in respect of further losses arising from the same breach of contract?

This was the point considered in the case of Dawnvale Café Components Ltd v Hylgar Properties Ltd [2024]. The decision highlights the importance of using precise wording to make sure the terms of a settlement agreement actually settle what both parties had intended — not  just what one of them might have assumed.

What happened?

The case involved a contract between Hylgar, a property developer, and Dawnvale, a fit-out company, which was terminated in November 2020. An adjudicator had previously ruled that Dawnvale had repudiated the contract and ordered it to repay c. £180k plus VAT.

When Dawnvale failed to pay, Hylgar issued enforcement proceedings that were settled by a Tomlin order. Paragraph 4 of the Schedule to the order, which later became the focal point of the dispute, said: “…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. (emphasis added)

Fast forward two years, and Hylgar caught Dawnvale off guard by seeking to commence a second adjudication for further losses arising from the same breach of contract (the “New Claim”). Dawnvale responded with Part 8 proceedings for a declaration that the settlement agreement was intended to fully and finally settle any and all claims under the contract and Hylgar’s New Claim was therefore barred under paragraph 4. Alternatively, that the dispute had already been adjudicated and the second referral was an impermissible attempt to re-adjudicate the same or substantially the same dispute.

What did the Court decide?

  • The phrase “arising from or in connection with these proceedings” was narrow and only referred to claims directly related to the adjudication enforcement proceedings, not all potential claims under the contract.
  • Hylgar’s new claim was not the same or substantially the same dispute as the one previously adjudicated. The first adjudication established Dawnvale’s breach and Hylgar’s overpayment in respect of the works to that date, while the second adjudicator was being asked to decide further heads of loss arising from the breach. There was no overlap.
  • Had the parties intended to settle all potential future claims they could easily have said so by referring to claims arising from “the Contract” or “the Works” or “the Dispute(s)” rather than use the more specific wording “these proceedings.
  • On that basis, Hylgar was entitled to refer its New Claim to adjudication.

What can contractors learn from this?

This case serves a useful reminder that every word holds weight in contract law—the Court will not let parties re-write objective reality by reference to what they ‘thought’ they were settling.

For contractors, careful thought must be given to the precise language used in a settlement agreement. Setting out your intentions unequivocally, using language that leaves no room for doubt, is critical to guard against the possibility of future claims.

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This article contains information of general interest about current legal issues, but does not provide legal advice. It is prepared for the general information of our clients and other interested parties. This article should not be relied upon in any specific situation without appropriate legal advice. If you require legal advice on any of the issues raised in this article, please contact one of our specialist construction lawyers.

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