A judgment delivered on 23 April 2012 stated that in a Settlement Agreement, inclusion of the phrase "full and final settlement in respect of any and all outstanding matters" was, on the facts, sufficient to exclude liability for defects which were patent at the date of the Settlement Agreement.

Background

Point West, a developer and landlord, and Mivan, a building contractor, entered into a Settlement Agreement in October 2007.  The Settlement Agreement was in relation to the works carried out by Mivan on one of Point West's properties, under a contract entered into on 22 August 2000.

The Settlement Agreement was stated to be "regarding Mivan's Final Account in respect of all Works carried out and any corresponding outstanding matters.  The agreement comprises a further payment of £50,000 (including VAT), representing the final assessment of monies due or to become due thus achieving full and final settlement in respect of the above works, together with any and all outstanding matters."

On 23 April 2012, Point West brought proceedings seeking a declaration as to the scope of the Settlement Agreement and in particular its impact on Mivan's liability for defects.

The declaration was granted in favour of Mivan; the Settlement Agreement released Mivan from defects that were patent at the date of the Agreement.

Judgment

The reasons for this decision were:

  • The first part of the wording of the Settlement Agreement, i.e. that it was in respect of "all Works carried out and any corresponding outstanding matters...[comprising] a further payment...thus achieving full and final settlement" achieved a financial settlement in respect of the works carried out by Mivan and corresponding matters in relation to these works. It was clear that, "corresponding outstanding matters" referred to the persistent, known and unresolved defects in the curtain walling system and the heating and cooling system of an unknown scope and extent, of which the parties were fully aware at the date of the Settlement Agreement, and in respect of which further remedial work needed to be carried out.  The financial settlement was thus in respect of all Works carried out and for remedial works in relation to these defects.
  • The Settlement Agreement, however, was also stated as being in "full and final settlement in respect of the above works, together with any and all outstanding matters". This reference to "outstanding matters" in the second part of the wording was intended to take the settlement further than the financial settlement. The combination of phrases used in the Settlement Agreement was intended to refer to defects, which were "outstanding matters". The Settlement Agreement was therefore intended to form a full and final settlement in respect of any and all outstanding defects. 
  • This conclusion was strongly supported by the wording in the Settlement Agreement: "this final agreement concludes Mivan's responsibilities and obligations in respect of their Works."  That wording clearly intended to bring to an end Mivan's responsibilities and obligations in respect of any and all outstanding matters, including defects which were patent at the date of the Settlement Agreement.   Mr Justice Ramsey's judgment was that the Settlement Agreement therefore released Mivan from liability for patent defects.

Comment

The decision reached in these proceedings suggests that the inclusion of the phrase "full and final settlement in respect of any and all outstanding matters" in combination with wording effecting a financial settlement has the effect of releasing a party from all defects which were patent at the date of the Agreement.

Importantly, however, the judgment leaves open the issue of whether the inclusion of such a wording would release a party from defects which were latent at the date of the Settlement Agreement.

As such, to ensure that a Settlement Agreement will release a party from liability for latent defects, it is advisable to include specific wording to that effect, as it is possible that the phrase "full and final settlement in respect of any and all outstanding matters" may be insufficient.

Point West London Ltd v Mivan Ltd [2012] EWHC 1223 (TCC)

Co-contributor: Rosie Gaisford

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The original publication date for this article was 06/06/2012.