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Where a party seeks to commence a second adjudication against the same defendant of the original adjudication (settled by Tomlin Order) on the same allegations of breach, will the Court refuse the second referral to adjudication?
This point was considered in the case of Dawnvale Café Components Ltd (Dawnvale) v Hylgar Properties Ltd (Hylgar) [24.05.24].
Facts
Dawnvale (the Contractor) was a kitchen and bar fit-out company and Hylgar (the Employer) was a property developer. The parties had entered into a contract for the design, supply and installation of mechanical works. The relationship broke down and the contract was terminated. Each party alleged that the other had committed the relevant repudiation. Hylgar referred the dispute to adjudication. The adjudicator determined that Dawnvale had repudiated the contract and owed Hylgar £180,000 plus VAT. Dawnvale failed to pay and Hylgar issued enforcement proceedings. By a Tomlin Order, Dawnvale agreed to pay Hylgar a settlement sum.
Paragraph 4 of the Schedule to the Tomlin Order stated that “the payment of the settlement sum is in full and final settlement of any and all claims the [respondent/Hylgar] may have against the [applicant/Dawnvale] arising from or in connection with these proceedings”.
Two years later, Hylgar alleged further losses totalling £641,594.76 arising from the same repudiatory breach and intimated an intention to refer a second claim to adjudication. Dawnvale issued Part 8 proceedings seeking a declaration that the Tomlin Order precluded Hylgar from referring to a second adjudication claim and for an order prohibiting Hylgar from referring the dispute.
Legal Arguments
Dawnvale argued that the second adjudication claim is caught by paragraph 4 of the Schedule to the Tomlin Order, preventing Hylgar from referring this dispute to adjudication. Dawnvale further argued that the second adjudication claim is barred because it seeks referral of a dispute which had already been determined in an adjudication.
Hylgar argued that upon proper construction of the Tomlin Order, the second adjudication claim was not settled. Further, the new claim amounts to a fresh dispute and can be referred to a second adjudication. Hylgar made clear that it was not seeking to redetermine whether Dawnvale had repudiated the contract; rather it sought to determine its entitlement to additional heads of loss and their quantum.
Decision
The Technology and Construction Court declined to make the declarations sought by Dawnvale and the proceedings were dismissed.
Construction of the Tomlin Order
The meaning of "these proceedings" in paragraph 4 of the Schedule to the Tomlin Order referred to the enforcement action in which the order was made. The Judge determined that these words should not be construed so as to include the second adjudication claim. As for the meaning of "arising from or in connection with", the critical point was whether the second adjudication claim was "arising from or in connection with" the enforcement proceedings. The words "in connection with" were of wider scope than the words "arising from". The words had to be construed in their specific context. "Arising from" imported a causal relationship and a closer, more proximate relationship with the proceedings than "in connection with".
The second adjudication claim was not caught by paragraph 4 of the Schedule to the Tomlin Order. If the parties had intended to settle all potentially related future claims, they would have said so. First, they would have used wording referring to all claims arising from "the works", "the contract" or "the dispute", rather than "these proceedings". Second, if paragraph 4 of the Schedule to the Tomlin Order was intended to settle all potentially related future claims, it would have expressly bound both parties. Further, as a matter of language, the new claim did not "arise from" nor was "connected with" the enforcement proceedings. There was no causative relationship with the proceedings.
The Second Referral and Whether this was an Attempt to Refer the Same Dispute
The first adjudication had decided that Dawnvale was in repudiatory breach of contract and had determined the true value of the work undertaken prior to that time. The second adjudication was intended to determine the recoverability and value of certain heads of loss consequential upon the repudiation. There was no overlap. The Judge noted that if the position were otherwise, a referring party would be required to bring its entire claim encompassing all heads of loss, some of which may not be apparent for some time. This would delay matters and would obstruct cash flow, which was inconsistent with the overriding objective of the pay now, argue later principle.
Comment
This case is a reminder to all parties to carefully consider the terms of a settlement agreement if it is the intention of the parties to cover all disputes under the contract. Failure to do this can result in a party issuing further adjudication proceedings in relation to the same breach of contract.
Construction and engineering
United Kingdom