A different settle of fish: Have you really settled what you think you’ve settled?

Many of the readers of this article will have been involved in settlement negotiations at some point. The results of those will often have been recorded in a settlement agreement or (where those arise out of litigation, including adjudication enforcement), a consent order.

It is of course good that parties record their agreement in writing – a failure to do so often leads to other disputes. And by recording a full and final settlement, a party may be forgiven for assuming that its opposing party is now unable to bring a new claim against it in relation to the original dispute.

But in certain circumstances, the opposite is in fact true, and a new claim can indeed be commenced – a scary thought?! In Dawnvale Cafe Components Limited v. Hylgar Properties Limited, this is precisely what happened.

Hylgar was a property developer that engaged Dawnvale’s services for the design, supply and installation of M&E works at a site in Wirral. Unfortunately, the parties’ relationship broke down which led to the contract being terminated. As is often the case, both parties accused the other of repudiating the contract.

Hylgar commenced an adjudication, following which the Adjudicator found that Dawnvale had committed the repudiatory breach. The Adjudicator went on to determine the true value of the works, which resulted in a decision requiring Dawnvale to repay Hylgar, together with the Adjudicator’s fees.

Dawnvale failed to pay, requiring Hylgar to enforce the decision, together with claiming interest and costs in the Technology and Construction Court. In August 2021, the enforcement proceedings were then settled by way of a Tomlin Order (a type of consent order) on the following terms: “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”.

Later, in August 2023, Hylgar issued a letter to Dawnvale which sought to recover further losses of just under £650k arising from the same repudiatory breach of contract that had been the subject of the earlier adjudication and enforcement proceedings. The letter threatened to refer the new claim to adjudication if Dawnvale did not pay.

Dawnvale thought, however, that any such claim was barred by the previous Tomlin Order’s ‘full and final settlement’. It issued Part 8 Proceedings to have the court confirm this.

The Court carefully considered the language of the Tomlin Order, and concluded that the new claim did not arise from the original proceedings, nor was it in connection with the original proceedings. The original proceedings were the enforcement proceedings, effectively a procedural question about the enforceability of the first adjudication decision. The new threatened proceedings were a substantive dispute about the earlier breach – not the same issue. The Court noted that if the parties had intended to settle all future related claims, the Tomlin Order would be expected to have used more precise wording, such as claims ‘arising from the Contract’ or ‘the Dispute’, rather than ‘the proceedings’ as was the case.

While the parties were sensible to record the terms of their agreement in writing, this case should serve as a reminder to all parties involved to use precise language in any resulting settlement agreements, for fear of not actually settling what you might think you are settling.