Fairgrove Homes Ltd v Monument Two Ltd

[2021] EWHC 3450 (TCC) 

In September 2020, an adjudicator decided that Fairgrove was entitled to immediate payment of £50k plus interest following a dispute about the construction of clause 2.1(d) of an earlier settlement agreement. 

Monument paid the adjudicator’s fees but failed to pay the £50k. Fairgrove sought summary enforcement of the decision. Monument raised jurisdictional defences and sought a stay because Fairgrove was in a CVA. On the day before the application was due to be heard, the parties entered into a further settlement agreement, or Tomlin Order. 

This Order was in standard form, providing for a stay of the proceedings save for the carrying into effect the terms of a confidential schedule appended to the Order. As part of the agreement, Monument  paid the £50k into an escrow account. 

The Order made various provisions for the release of the escrow monies. Fairgrove said that these provided for three possible outcomes: first, that the parties reach a further settlement; secondly, that the court determined, on a final basis, whether or not Fairgrove was entitled to the £50k; and, thirdly, if Monument failed to commence relevant proceedings to determine its liability pursuant to clause 2.1(d) within 120 days, then the funds were to be released to Fairgrove.

Two days before the end of the 120-day deadline, Monument issued a Part 8 Claim seeking a declaration that the funds held in the escrow account remain there pending the outcome of the final account which was currently being prepared. 

Fairgrove said that Monument had not commenced proceedings “to determine its liability to pay any sums pursuant to clause 2.1(d).”  The Part 8 Claim asked merely that the funds in escrow remain there pending the outcome of a final account process. Monument said that it had commenced proceedings to determine its liability to pay the £50k.

Mr Justice Morris said that the starting point was that the Tomlin Order had compromised the disputed issues in the enforcement proceedings, including Monument’s defence based on jurisdiction and the stay. The Order replaced those issues with the rights and obligations arising under the Schedule. The purpose of the  Order was to settle the then existing dispute (around jurisdiction and stay) and “to hold the ring” to allow Monument to seek to establish by a final judgment that the adjudicator was wrong on the construction of clause 2.1(d). 

Whilst usually Monument might be expected to “pay now and litigate later,” because of the CVA and the risk of non-recovery back, the parties agreed to pay the sum into escrow, pending any prompt challenge by Monument. On the other hand, by entering into the Tomlin Order, the parties did not intend to defer to a later date the issues of jurisdiction and stay raised by Monument in its defence to the Enforcement Proceedings. Contrary to Monument’s case advanced in the Part 8 Claim, it was not open to Monument to run those defences in those proceedings or at all.

The proceedings envisaged by the Order were proceedings to determine - once and for all - entitlement under clause 2.1(d). But the relief sought in the Part 8 Claim did not seek to and would not achieve this. Monument did not seek a final declaration as to liability under clause 2.1(d). Instead, the final relief sought of leaving the £50,000 in escrow “pending the determination of the proceedings” (or “dependent on the progression of the proceedings”) left matters hanging in the balance. 

Therefore, the Part 8 Claim were not “proceedings … to determine liability to pay the Claimant any sums pursuant to clause 2.1(d)” within the meaning of  the Schedule to the Order and the money held by the escrow agent was to be paid to Fairgrove without deduction.

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