WES Futures Ltd v Allen Wilson Construction Ltd

A settlement offer referring expressly to Part 36 should, where possible, be construed as an effective Part 36 offer. The fact that it was made before proceedings began does not invalidate it. An agreement concerning the costs of the proceedings ordinarily concerns the court proceedings and recoverable pre-action costs, not the costs of separate adjudication proceedings. Costs incurred in adjudication are not recoverable through adjudication enforcement proceedings where the governing statutory regime excludes their recovery. The same construction applies where the offer is not technically a valid Part 36 offer but was expressly made by reference to Part 36.

WES Futures Limited carried out subcontract works for Allen Wilson Construction Limited and claimed unpaid sums. Following an earlier unsuccessful adjudication, Futures made a written offer to accept £65,000 plus VAT in full and final settlement, expressly stating that it was made under Part 36. Wilson accepted the offer after Futures obtained a favourable decision in a later adjudication and commenced enforcement proceedings.

The parties accepted that a binding compromise existed but disputed whether it included the costs of the earlier and later adjudications. The central issues were whether the offer was a valid Part 36 offer and, in either event, what costs were covered by the compromise.

1. The court treated the dispute as one of interpretation and construction because both parties accepted that the correspondence created a binding compromise.

2. Following Dutton & others v Minards & others [2015] EWCA Civ 984, an offer expressed to be a Part 36 offer should, if possible, be construed so as to make it effective. The offer was made before proceedings, but CPR 36.7 permits a Part 36 offer to be made at any time. The offer therefore related to the imminent court proceedings and was valid notwithstanding the arguments concerning costs consequences.

3. Under CPR 36.13(1), the reference to the costs of the proceedings covered the costs of the threatened and subsequently commenced court proceedings. It did not include the costs of either adjudication, since those were not costs of the court proceedings.

4. The same conclusion followed even if the offer was not technically a valid Part 36 offer. Its express reference to Part 36, its connection with the contemporaneous threat to commence court proceedings, and its reference to legal costs incurred in the case showed that it concerned the court proceedings rather than separate adjudications.

5. The court also relied on the wider statutory and costs principles illustrated by Lobster Group Limited v Heidelberg Graphic Equipment Limited [2008] EWHC 413 (TCC) and Roundstone Nurseries Limited v Stevenson Holdings Limited [2009] EWHC 1431 (TCC). Adjudication costs were subject to a different regime and were not recoverable as costs of enforcement proceedings. Futures was therefore not entitled to recover its adjudication costs.