FAIRGROVE HOMES LIMITED v MONUMENT TWO LIMITED

A Tomlin order is construed as a contract, using the ordinary principles of contractual construction. Its provisions must be read in their factual and contractual context, with preference for a commercially sensible construction where ambiguity exists.

Where an escrow arrangement requires proceedings to determine contractual liability, those proceedings must seek a final determination of the identified contractual entitlement. Proceedings seeking only to preserve funds pending an indefinite future account do not satisfy that requirement. The contractual construction adopted by the adjudicator was that a payment obligation arose by the specified date, even if the final account remained unsettled.

Fairgrove Homes Limited and Monument Two Limited were parties to construction and settlement agreements. Following an adjudication in which Fairgrove obtained an award of £50,000, the parties entered into a Tomlin order. The sum was placed in escrow, with release dependent on agreement, a final court determination, or Monument commencing proceedings within 120 days to determine its liability under clause 2.1(d) of the Settlement Agreement.

Monument commenced a Part 8 claim seeking to keep the funds in escrow pending preparation of a final account. Fairgrove applied to enforce the Tomlin order and obtain release of the funds. The central issues were whether the Part 8 claim fell within paragraph 3 of the Tomlin order and, if so, whether the court should determine the underlying contractual construction issue.

1. The Fairgrove Application succeeded. The Part 8 claim was not proceedings within paragraph 3 of the Schedule to the Tomlin order. The funds therefore had to be paid to Fairgrove without set-off or deduction.

2. A Tomlin order is construed by applying the ordinary principles applicable to contracts. The court must ascertain the contextual meaning of the language, considering the factual background known to the parties and the agreement as a whole. Where ambiguity exists, the more commercially sensible construction is preferred. These principles applied equally to the Tomlin order and the Settlement Agreement, following Arnold v Britton [2015] UKSC 36, Wood v Capita Insurance Services Ltd [2017] UKSC 24, Purghazi v Kamyab [2019] EWHC 1300 (Ch) and Sirius International Insurance Co v FAI General Insurance Ltd [2004] UKHL 54.

3. The Tomlin order settled the existing enforcement dispute and preserved Monument’s opportunity to obtain a final judgment on the contractual construction issue, subject to prompt prosecution. Paragraph 3 therefore referred to proceedings determining the parties’ strict contractual rights under clause 2.1(d), namely whether Fairgrove was immediately entitled to the £50,000 or whether payment was deferred until the final account.

4. The Part 8 claim did not seek that final determination. It sought to leave the money in escrow pending an uncertain future account. It also did not seek payment of the funds to Monument, whereas the Schedule contemplated release to the party ultimately entitled to receive or withhold them. The claim therefore did not satisfy paragraph 3.

5. Alternatively, had the Part 8 claim qualified, the court would have tried it at the hearing. The issue was one of pure construction and required no further disclosure or evidence. The court would have held that the words “in any event” qualified the obligation to pay by 30 April 2020. If no final account had been agreed by that date, the £50,000 was payable independently. If an account had already been agreed, the sum was to be added or netted off as appropriate.

6. The court would hear the parties on the precise form of order, costs and consequential matters.