Baris Ltd v Kajima Construction Europe (UK) Ltd.

A settlement offer marked “without prejudice save as to costs” may be admitted to determine whether it was accepted and created a binding compromise. The court construes the offer and acceptance objectively. Where an offer expressly provides for payment of a fixed lump sum in full and final settlement, interest is not included unless the offer says so. A reference to costs of issuing and serving proceedings does not ordinarily include costs incurred after acceptance, particularly where proceedings then serve no purpose. Acceptance of the offer and payment of the specified sum may establish accord and satisfaction.

The claimant subcontractor obtained an adjudicator’s decision requiring payment of £181,895.60. Before proceedings were issued, it offered to settle its rights under the adjudication if that sum was paid within 21 days, together with specified costs. The defendant accepted the offer and paid the lump sum by the agreed date.

The claimant nevertheless commenced enforcement proceedings and claimed interest and costs. The defendant relied on the correspondence as creating a binding compromise and pleaded accord and satisfaction. The court had to determine whether the offer letter was admissible and whether the correspondence constituted a complete settlement, including the treatment of interest and costs.

1. Admissibility. A letter marked “without prejudice save as to costs” is ordinarily considered only after substantive matters have been resolved. However, where a party asserts that the letter contains an offer which was accepted and created a binding compromise, it is admissible for the limited purpose of deciding whether settlement occurred. The judge relied on Walker v Wilsher (1889) 23 QBD 335 and Rush and Tompkins v GLC [1988] 3 WLR 939.
2. Interest. The offer was expressly confined to “£181,895.60 only”. On its proper construction, it did not require payment of any additional sum for interest. The defendant’s written response objectively accepted that offer, and payment of the specified sum confirmed the agreement. The settlement therefore covered all claims arising from the adjudication.
3. Costs. The reference to costs was limited to costs incurred in issuing and serving High Court proceedings. Read with commercial common sense, it could not include costs incurred after acceptance, when the parties had already compromised the dispute and there was no need to issue proceedings. No such costs had been incurred when the offer was accepted.
4. There was a binding compromise by the exchange of letters on 13 and 14 December 2005. The defence of accord and satisfaction succeeded. The offer letter was admissible for that purpose, and the claimant’s claim was dismissed. Costs were to be addressed separately on paper.

First-instance decision. No appellate history is stated in the judgment.