Southern Electric v Mead Realisations

Contractual settlement offers are construed objectively in their factual context. Where a party admits liability and offers staged payments of the final “balance”, the court may construe that balance as including interest, costs and other ancillary relief already claimed, unless the language or context indicates otherwise. Parties may agree a full and final figure inclusive of costs, but the court will assess objectively what was offered and accepted. In adjudication-enforcement proceedings, the court retains discretion to award costs above the fixed-costs regime where the circumstances justify it.

The claimant sought enforcement of an adjudicator’s decision requiring the defendant to pay sums arising from mechanical and electrical works under a construction contract. The defendant admitted liability but proposed staged payments. Correspondence followed concerning whether the final payment included interest and the claimant’s legal costs.

The issue was whether the parties had reached a binding settlement by 28 October 2009 and, if so, whether the agreed final balance included costs. The court also considered the appropriate costs consequences of the enforcement claim.

1. Settlement agreement. The court construed the correspondence objectively, taking account of the factual background known, or objectively ascertainable, to the parties. The defendant knew, or should have known, that the claim expressly included costs and that substantial costs were likely to have been incurred.
2. The offer to pay two instalments followed by a final “balance” payment was, in context, an offer to pay the outstanding amount arising from the admitted liability, including interest and ancillary relief. The claimant accepted that mechanism. The agreement therefore required the balance payable by 15 December 2009 to include outstanding interest and costs.
3. Costs. In adjudication-enforcement proceedings the court retains discretion to award costs exceeding the fixed costs under CPR Part 45. The summary and prompt enforcement of adjudicators’ decisions, the warnings given before proceedings, the documents and evidence required, and the inevitable cost of the TCC procedure may justify a higher award.
4. Judgment was entered for the claimant to the effect that the defendant should pay the claimant’s costs of the claim and application, to be assessed summarily.