Enter your keyword

Settlement agreement covered known but unascertained building defects

Developers, landowners, builders and others entering into settlement agreements to resolve disputes should ensure the agreement makes it crystal clear which matters are covered by the agreement and which are not, the High Court has ruled.

A developer and builder were in dispute over work the builder had done at a development in West London. Certain known defects had not been resolved. The parties also knew there were defects in the heating and cooling system, but these had not yet been ascertained.

The parties entered into a settlement agreement in which the developer agreed to pay the builder £50k “…regarding [the builder’s] Final Account in respect of all Works carried out and any corresponding outstanding matters” and another £50k “…representing the final assessment of monies due or to become due this achieving full and final settlement in respect of the above works, together with any and all outstanding matters”.

Later, a flat owner in the development successfully sued the developer for the defects in the heating and cooling system. The developer claimed damages in turn from the builder, arguing that the settlement agreement did not cover the builder’s liability to pay damages in respect of defects existing at the date of the agreement but were not yet ascertained.

The court disagreed with the developer, ruling that on the wording of the settlement agreement, particularly use of the words ‘outstanding matters’, the builder had no liability for defects which the parties knew of when they signed it, including the unascertained defects in the heating and cooling system.

Recommendation

Developers, landowners, builders and others entering into settlement agreements to resolve disputes should ensure the agreement makes it clear which matters are covered by the agreement, and which are not.

Case ref: Point West London Ltd v Mivan Ltd [2012] EWHC 1223 (TCC)

Jonathan Waters is the founder of Helix Law. Before qualifying as a Solicitor he worked in industry and in investment banking for over a decade. He was also the Partner in charge of Commercial Litigation, Employment Law and Property Litigation at Stephen Rimmer LLP. Jonathan has wide experience of helping and advising businesses to avoid or to deal with commercial disputes and in particular construction disputes.

This article is written to raise awareness of the issues it discusses and it may not be updated after it is first written, even if the law changes. It is not intended to be legal advice and cannot be relied on as such. Helix Law is not responsible or liable for any action taken or not taken as a result of  this article. If you think the matters set out affect you and you wish to apply them to your particular circumstances then we are happy to give you free initial telephone advice. 

Contact Helix Law on 01273 761 990 or email: [email protected]