D & K Drost Consult GmbH & Anor v Foremost Leisure (Holdings) Ltd

When parties agree remuneration after services have been provided during negotiations for an anticipated contract, the agreement must be construed objectively to determine whether payment rewards past services or depends on further work. An express term that further performance is unnecessary strongly supports a construction covering work already done, particularly where the parties’ relationship has effectively ended. A claim for payment may be settled even if the claimant had no enforceable right to payment before the settlement. An appellate court should not disturb trial findings of fact or credibility that were open on the evidence.

Drost and SHE provided project management and architectural services while Foremost explored developing a hotel site in Hamburg. No formal remuneration agreement was initially concluded. After Foremost decided to use another project manager, it agreed in June 2006 to pay €150,000 plus VAT, payable when a legally effective building permit was granted, while stating that further performance was unnecessary.

The High Court, before Her Honour Judge Hampton, held that the agreement remunerated work already performed and awarded the agreed sum. Foremost appealed, challenging both the construction of the agreement and factual findings concerning the parties’ relationship and expectations. The central issue was whether the agreed payment was for past services or was conditional upon further work.

The Court of Appeal unanimously dismissed the appeal. Longmore LJ gave the judgment, with which Underhill LJ and Sharp LJ agreed.

1. The remuneration agreement had to be construed objectively in its factual and commercial context. The question was whether the agreed €150,000 rewarded Drost and SHE’s contribution up to the date of the agreement or was payable only if they performed further work.
2. The agreement referred to services described in the unexecuted Hotel Development Service Agreement, which included securing and developing the land and searching for a suitable site. The site had already been found. The express statement that further performances were unnecessary made Foremost’s proposed construction commercially unrealistic. The agreement therefore covered past work, with payment becoming due upon the grant of the legally effective building permit.
3. The absence of an earlier invoice did not assist Foremost. Until shortly before the agreement, Drost and SHE had hoped to agree remuneration for both past and future work. Moreover, settlements concern claims, not merely existing rights. Even if there had been no legal right to payment for the preliminary work, that did not prevent the June agreement from settling a claim for payment.
4. Profit-sharing discussions did not affect the meaning of the June agreement because they were not in the parties’ minds when it was made. The reference to the Hotel Development Service Agreement could include work already performed.
5. The judge’s findings that Foremost intended to end its relationship with Drost and SHE, and that the June agreement arose in that context, were findings of fact supported by documentary and oral evidence. The appellate court could not properly substitute its own view. The agreed sum was accordingly payable.

• High Court of Justice, Queen’s Bench Division: Her Honour Judge Hampton found for Drost and SHE and awarded the agreed sum.
• Court of Appeal (Civil Division): Foremost’s appeal was dismissed unanimously: [2015] EWCA Civ 73 .