Mi-Space (UK) Ltd v Bridgwater Civil Engineering Ltd (BCE)

A binding settlement may arise from an exchange of emails where the parties’ words and conduct objectively demonstrate an intention to create legal relations and agreement on essential terms. A later intention to record the arrangement in a formal deed does not prevent formation unless the parties made signature a condition of being bound. An agreement settling disputed valuations is not necessarily a variation of the underlying construction contract. Acceptance of a repudiatory breach discharges future obligations under the settlement but does not rescind it or reverse performance already completed. Where a court determines that an adjudicator ordered payment exceeding the amount actually due, the adjudicator’s decision ceases retrospectively to bind, and interest is not payable on the overpayment.

BCE sought to enforce an adjudicator’s decision ordering Mi-Space to pay £346,177.54 plus VAT under a construction sub-contract. Mi-Space brought proceedings seeking a declaration that BCE’s claim arising from the December 2014 payment application had been settled by emails exchanged on 3 March 2015.

The settlement contemplated an interim payment, BCE’s return to site, withdrawal of the payment claim and agreement of the anticipated final account. BCE later declined to proceed with the proposed formal deed and repudiated the settlement. The central issues were whether the emails created a binding agreement, whether that agreement varied the sub-contract or was later discharged, and whether the adjudicator’s decision remained enforceable.

1. The court applied the objective approach stated in RTS Flexible Systems Ltd v Molkerei Alois Muller GmbH & Co KG (UK Production) [2010] 1 WLR 753. Contract formation depended on what the parties communicated by words or conduct, viewed objectively, and not on their uncommunicated states of mind.

2. The emails exchanged on 3 March 2015 contained a clear offer and unequivocal written acceptance. They addressed the matters in dispute and provided for prompt performance. The reference to formal acceptance meant a clear and properly recorded acceptance; it did not require a deed or document signed by both parties. The alleged subject-to-contract understanding was unsupported by contemporaneous evidence.

3. The agreement settled the disputed December 2014 application and fixed the value of variation instructions given to that date. It did not renegotiate the original sub-contract sum or vary the sub-contract. The reduction in retention applied to the next payment only, and the provisions concerning future variation instructions were consistent with the existing contractual machinery.

4. BCE’s later refusal to perform amounted to repudiatory breach. Mi-Space’s email accepted that repudiation. That discharged Mi-Space from further obligations under the settlement, but did not rescind the agreement or undo performance already made. The original sub-contract remained in force.

5. Applying Aspect Contracts (Asbestos) Ltd v Higgins Construction plc [2015] UKSC 38, the adjudicator’s decision ceased retrospectively to bind once the court determined that the payment was not due. BCE’s enforcement application was dismissed, Mi-Space obtained the declaration sought, and Mi-Space was not liable for interest on the sum ordered by the adjudicator.

Not stated in the judgment.