Point West London Ltd v Mivan Ltd

Settlement agreements are construed by ordinary contractual principles, having regard to the background reasonably available to the parties and business common sense. There are no special rules for settlements. However, the court is slow to infer that a party intended to surrender rights or claims of which neither party knew or could know. Clear wording may nevertheless release known or patent defects and associated liabilities where the agreement, read in context, is intended to achieve a full and final settlement of all outstanding matters. The court must construe the agreement made by the parties and must not repair omissions or improve the bargain.

Point West sought a declaration concerning the scope of an October 2007 settlement agreement with Mivan, the contractor for part of a residential development. The agreement settled outstanding financial matters, ended Mivan’s obligations to carry out remedial works and provided for assistance in proceedings brought by Point West against the owner of Flat 1601.

Point West contended that the settlement did not release Mivan from liability for defects under the building contract, particularly defects whose consequences were unknown. Mivan contended that it released liability for the defects forming the subject of the county court proceedings and for other defects patent at the settlement date. The central issue was the objective scope of the settlement agreement.

1. The court granted a declaration that the October 2007 settlement included a settlement of Mivan’s liability for, and precluded Point West from seeking damages or specific performance in relation to, the defects forming the subject matter of the county court proceedings and any other defects in the development which were patent on 18 October 2007.

2. The agreement was construed under the ordinary principles stated in Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896, Chartbrook v Persimmon Homes [2009] 1 AC 1101, Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191 and Rainy Sky v Kookmin Bank [2011] UKSC 50. The court considered the language, the relevant background and business common sense, while excluding pre-contractual negotiations and subjective intentions.

3. There are no special construction principles for settlement agreements. The court should nevertheless be slow to infer, consistently with BCCI v Ali [2002] 1 AC 251, that a party surrendered rights or claims of which neither party knew or could know. That caution did not prevent the present agreement from releasing patent defects, because the wording referred to all works, any and all outstanding matters and the conclusion of Mivan’s responsibilities and obligations.

4. The agreement covered defects as outstanding matters, not merely the final account or Mivan’s continuing obligation to undertake remedial work. Point West’s statement that it was not looking to Mivan to do further remedial works could not, in the factual and commercial context, preserve a right to recover the cost of those works as damages.

5. The result was unchanged whether the post-2002 works were performed under a separate contract or as a variation to the building contract. It was also unchanged on the assumed basis that the parties appreciated that the curtain walling might require complete replacement. The court would not rewrite or improve the parties’ bargain.

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