Thameside Construction Company Ltd v Arthenella Ltd

An oral settlement agreement is determined objectively by analysing the parties’ words and conduct, including relevant subsequent conduct. An existing offer may be accepted while the parties agree conditionally to increase the settlement sum if specified further material persuades the offeror of the strength of a disputed claim. The increase does not arise automatically merely because the material is supplied. A contemporaneous email may itself constitute acceptance if no earlier agreement was reached. Where an all-inclusive settlement offer states that no additional sums are due, the agreed sum includes costs, interest and any VAT liability.

The parties were engaged in two construction disputes concerning the valuation of works at Frogmore Hall and a counterclaim for liquidated damages. A three-day trial was imminent. Following earlier written offers, the parties’ managing directors discussed settlement by telephone on 9 September 2011. Thameside contended that the discussions resulted in a binding agreement for £275,000, potentially increasing to £300,000 if counsel’s opinion persuaded Arthenella that Thameside’s claim for preliminaries was stronger than believed. Arthenella denied that any settlement had been concluded. Thameside applied for determination of that issue.

1. Settlement agreement. Applying an objective analysis of offer and acceptance, the court found that Arthenella’s offer of £275,000 remained open on 9 September 2011. Mr Harris accepted it by words and conduct during the telephone conversation. The parties also agreed that the sum would increase to £300,000 only if counsel’s opinion persuaded Arthenella, through its lawyers and Mr Rogers, that Thameside’s position on preliminaries was strong (paras 22, 26–28, 39).
2. The agreement was supported by the surrounding circumstances. Thameside’s disclosure of its financial difficulties, the agreement to confirm the arrangement by email, the contemporaneous email recording the settlement, and subsequent communications were consistent with a concluded agreement. Arthenella’s later attempt to reopen negotiations could not undo the agreement already made (paras 29–38).
3. The opinion supplied on 12 September 2011 did not satisfy the agreed condition for the increase. The settlement therefore remained £275,000 (paras 39–40).
4. Alternatively, if no agreement had been reached during the telephone call, Mr Harris’s email of 9 September would itself have operated as acceptance of the £275,000 offer (para 41).
5. The settlement covered both claims and the counterclaim and was inclusive of costs and interest. Since the offer stated that no additional sums were due, any VAT liability was also included within £275,000 (para 42). A declaration was made accordingly, and the parties were directed to submit a draft order (paras 43–44).