Aqua Leisure International Ltd v Benchmark Leisure Ltd
[2020] EWHC 3511 (TCC)
This was an adjudication enforcement application to enforce a decision dating back to July 2017. The adjudicator had ordered that Benchmark pay £200,537.35 within 7 days. Payments of £94,139 had been made, leaving a balance of £119,288.25. Benchmark said that the relevant dispute had been determined “by agreement” so that the adjudication was no longer binding.
The adjudication followed the failure of Benchmark to serve a pay less notice against Aqua’s final interim payment application. The sum awarded did not represent the full amount due to the claimant as there was a retention payment of £48k to consider following completion of warranty works. The parties started discussions about a final settlement in August 2017. The negotiations included the following steps:
- Benchmark offered to pay a “fixed and final” payment of £120,000 plus VAT on or before 22 August 2018 “underwritten by a guarantee … to wording written by [Aqua’s] advisers”.
- Aqua proposed by email a “payment resolution” for the total sum over a longer period, with a guarantee. The “payment resolution” was expressed to be “without prejudice and subject to contract” and the email ended with the words “please confirm your agreement to this settlement by return”.
- Benchmark sent a reply saying: “agreed”.
- Aqua replied noting that they would “contact our lawyer to draft the settlement and guarantee wording” and that they would forward this “as the binding agreement once signed by all the parties”.
Benchmark made payment of three parts of the agreed sum, but not the final amount some £110k. In the interim, Aqua sent a “deed of settlement and payment guarantee” to Benchmark for “review and completion”. Whilst payments were made, between December 2017 and May 2018, Aqua chased Benchmark asking it to sign the written agreement on no fewer than six occasions. The issue seems to have been that no guarantee would be provided.
The final position was this. The sums due under the adjudication had not been paid in full and neither had the sums set out in the “payment resolution”. The “payment resolution” itself was never committed to writing and no guarantee was ever signed.
Aqua said that the compromise arrangement was expressly made in the context that it would not become binding until it was reduced to writing. That never happened and so it was never binding. It did not matter that payments were made under the non-binding arrangement or that works were done. If the arrangement was not “subject to contract” it was in any event at best conditionally binding, the condition being the provision of a guarantee. No guarantee was ever given. HHJ Bird said that the key question was whether the parties had agreed to enter into a binding contract without the need for all terms to be reduced to writing.
The Judge agreed that the parties reached an agreement (in the sense that there was meeting of minds) at the end of August 2017. In the normal course of events the agreement would have been treated as binding. That agreement was made on the basis of a common understanding that the agreement would not be binding until reduced into writing and signed as a contract.
Benchmark said that both parties “obviously considered themselves bound by the [payment resolution] Agreement and conducted themselves in reliance on that common understanding being that the Decision was no longer ‘in play’”.
The reduction to writing was a mere formality and it was always intended that the payment resolution agreement would be acted upon. Performance of the warranty works itself is good evidence that the agreement was seen as binding. Aqua banked the payments made and gave credit for them when the deed of settlement was prepared.
HHJ Bird disagreed. In the absence of a compromise, sums were still due under the 2015 contract and under the terms of the binding adjudication award. The fact that monies were paid and “banked” was not evidence that there was a new contract. It was evidence that the parties were working together to try to settle debts that had arisen and move forward.
The evidence strongly pointed to the conclusion that Aqua wanted the original compromise agreement (albeit on slightly different terms) to be finalised. The parties agreed that there would be no binding contract until the terms were reduced to writing and signed off. The Judge therefore entered judgment for Aqua on the adjudication sums.
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