Settlement of Proceedings Does Not Prevent Second Adjudication

When attempting to resolve a dispute, careful drafting of any agreement is essential to protect your position in the event of further argument. A recent High Court case concerned whether a settlement of adjudication enforcement proceedings prevented one of the parties from referring a claim for additional losses to a second adjudication.

A bar and kitchen manufacturer had entered into a contract with a property developer. After the relationship broke down, each party claimed that the other had repudiated the contract and the property developer referred the dispute to adjudication. The adjudicator found that the manufacturer had repudiated the contract, also finding that it had been overpaid for the work done and should repay more than £180,000 plus VAT to the property developer. After the manufacturer failed to pay, the property developer issued enforcement proceedings.

Those proceedings were later stayed by an order agreed between the parties (known as a Tomlin order) which provided for payment to be made in tranches to the property developer. The order contained a provision that payment would be in 'full and final settlement' of any claims 'arising from or in connection with these proceedings'.

Two years later, the property developer claimed further losses arising from the breach of contract. The manufacturer sought to prevent the property developer from referring the claim to adjudication on the grounds that it was caught by the provision in the order, and that it would involve adjudication of a dispute that had already been determined.

The Court noted that both parties were commercial entities with experience of resolving construction disputes, and had had legal advice when agreeing the order. They would have been aware that the property developer might have further claims arising from the breach. It was also open to the manufacturer to challenge the adjudicator's decision in court.

Ruling in favour of the property developer, the Court found that 'these proceedings' referred to the enforcement proceedings and the new claim neither arose from nor was connected with those proceedings. The claim was therefore not caught by the provision in the order. If the parties had intended to settle all potentially related claims, the order would have said so. The Court also noted that the first adjudication had determined which party had repudiated the contract, and had established the value of work done prior to that time, whereas the second would be concerned with losses resulting from the repudiation. There was therefore no overlap and the second adjudicator would not be deciding the same dispute as the first.