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RECENT COURT CASES

The court cases summarised below were handed down in the Technology and Construction Court (TCC) in the UK. However the contents and judgments are equally applicable in South Africa.

The two articles below are found in “Adjudication Matters,” a monthly newsletter produced by Walker Morris LLP.

THE IMPORTANCE OF CLEAR WORDING TO REFLECT THE SCOPE OF A SETTLEMENT AGREEMENT.

In Dawnvale Café Components Limited v Hyglar Properties Limited [1], the Court highlighted the importance of clear drafting in a settlement agreement. In particular, if the settlement is intended to settle all future claims, the drafting of the agreement must make this clear.

Background
Dawnvale Café Components Limited (“Dawnvale“), was the main contractor. Hyglar Properties Limited (“Hyglar“) engaged Dawnvale in February 2020 to carry out the design, supply and installation of the mechanical works as part of the Beacon Development in the Wirral.

By October 2020 the relationship between the parties had broken down and the contract was terminated in November 2020. Both parties said the other had committed a repudiatory breach.

Hyglar referred a dispute as to the true value of Dawnvale’s work to adjudication in June 2021. Hyglar had already paid Dawnvale £425,251.08 and sought a repayment of £180,322.92.

The adjudicator held that Dawnvale had repudiated the contract, and Dawnvale was required to repay the overpayment to Hyglar plus VAT and interest as well as the adjudicator’s fees.

The dispute
Dawnvale failed to pay Hyglar and Hyglar commenced enforcement proceedings. However, the parties entered into a settlement agreement (via a Tomlin Order) on 24th August 2021. It was agreed between the parties that Dawnvale would repay the sum awarded by the adjudicator in instalments over a period of seven months. The key provision within the agreement stated:
“This Settlement Agreement shall immediately be fully and effectively binding on the parties. 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.”

Two years later, on 31 August 2023, Hyglar sought to commence further adjudication proceedings seeking to recover a further £641,584.76 from Dawnvale as a result of losses suffered from Dawnvale’s repudiation of the contract (“the 2023 dispute“).

In response, Dawnvale brought Part 8 proceedings seeking:

A declaration that the settlement agreement precluded Hyglar from claiming further or additional relief;
An order prohibiting Hyglar from referring the 2023 dispute to an adjudication; and
A declaration that the 2023 dispute was ‘the same or substantially the same’ as the dispute already decided in the 2021 adjudication.

Judgement
The judge held that the wording in the settlement agreement “these proceedings” referred to the action in which the agreement was made, which was the enforcement proceedings. While the 2023 dispute arose from the same contract or works as the enforcement proceedings, the 2023 dispute did not arise from the enforcement proceedings and was not the same or substantially the same as the dispute heard by the first adjudicator.

Accordingly, the settlement did not cover the 2023 dispute and the settlement agreement only settled the payment schedule relating to the adjudication award. The wording of the settlement agreement did not affect Hyglar’s right to pursue other money claims under the contract.

Takeaway Points
This decision highlights the importance of the use of clear wording in a settlement agreement. The judge noted that, had a settlement of any and all future claims been the intention of the parties, this could have been easily achieved by using express wording to this affect within the body of the agreement.
Any party entering into a settlement agreement should take extra care when drafting to make sure the wording of the agreement clearly reflects the parties’ intentions.

FURTHER GUIDANCE ON THE SCOPE OF THE SLIP RULE IN ADJUDICATION PROCEEDINGS

McLaughlin & Harvey Limited v LJJ Limited [2] concerned whether the power to correct a typographical or clerical error to an adjudication decision under the “Slip Rule” in the Scheme [3] extended to addressing a matter of substance which the adjudicator had not adequately addressed in his decision.

Background
McLaughlin sought to enforce the decision of an adjudicator which directed LJJ to pay £808,000 within seven days, as a result of LJJ failing to meet a number of key dates under the parties’ subcontract.

At the same time as he issued his decision (“the Original Decision“), the adjudicator invited the parties to submit any proposed corrections of clerical or typographical errors in respect of the Original Decision.
Both parties requested corrections. McLaughlin said the corrections requested by LJJ went beyond the power of the slip rule. The adjudicator accepted LJJ’s amendments notwithstanding McLaughlin’s objections and issued a revised decision (“the Revised Decision”) on 4 November 2023.

LJJ resisted enforcement and argued that:

The Original Decision was superseded by the Revised Decision meaning that the Original Decision could not be enforced.
If the adjudicator had erred in law in issuing the Revised Decision, this was within his jurisdiction and the court should not interfere.
McLaughlin could not enforce the Revised Decision.

What is the “Slip Rule”?
Paragraph 22A(1) of the Scheme [3] states that:
“The Adjudicator may on his own initiative or on the application of a party correct his decision so as to remove a clerical or typographical error arising by accident or by omission”

Decision
The TCC held that the adjudicator’s approach to the Slip Rule went beyond its scope. LJJ’s submissions were not of a clerical or typographical nature thus the adjudicator had no power to correct the Original Decision based on those submissions.

The court stated that by seeking to clarify or qualify his Original Decision, the adjudicator was effectively “giving effect to second thoughts or intentions.”
Accordingly:

The Original Decision had not been superseded by the Revised Decision;
The Revised Decision was the adjudicator exercising a power which he did not have (rather than being an error of law).
Accordingly, the Revised Decision was not enforceable.
The court instead enforced the Original Decision.

Takeaway points
As the court acknowledged, if it had allowed the adjudicator to apply the Slip Rule in this fashion, it would no doubt lead to an influx of parties seeking to materially change the adjudicator’s decision through further submissions. This was never the intention of the Slip Rule, and it would undermine the interim finality of the adjudication process.

Overall, the case serves as a reminder to adjudicators and to parties in adjudication proceedings as to the limits of an adjudicator’s powers under the Slip Rule. The Slip Rule is confined to correcting typographical or clerical errors which are apparent on the face of the decision, rather than correcting something that the adjudicator intended to take account of, but which they omitted in reaching their decision.