| Date | 18 October 2006 |
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| Judgment | Carlo Mantegazza & Anor v Neil Holland Architects & Anor, TCC, 11 May 2006 |
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| The Issue | The wording of settlement agreements. |
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| Implication |
In situations where there remains doubt over the precise terms of the contract, or when work commences in the absence of a formalised agreement it will fall to the courts to interpret the intention of the parties when deciding the extent to which any agreement exists between them. |
printCompromise agreements form a fundamental part of all settlement negotiations but, as the recent case of Carlo Mantegazza v Neil Holland Architects shows, the drafting must be unambiguous. In the late 1990s, Carlo Mantegazza decided to have an extension constructed to his property in Hurstpier Point. Neil Holland Architects (NHA) was appointed as architect and Cheesman was appointed as building contractor. The work was carried out in 2000 and 2001, but before it finished, disputes broke out between Mr Mantegazza and NHA about a payment mechanism, repudiation and alleged defects. Mantegazza instructed solicitors who wrote to NHA in February 2002, making claims of three kinds, the reimbursement of unjustified extra fees, the reimbursement of extra professional fees and what were described as “other losses”. The “other losses” covered NHA’s alleged failure to properly design and administer the contract in respect of the various elements of the project, including the standard of the brickwork. NHA’s solicitors responded to the letter with a general denial of liability accompanied by a Part 36 offer. The letter offered a payment of £35,000 in full and final settlement of all claims made by Mantegazza, inclusive of interest and costs. In March 2002 the offer was accepted by Mantegazza in the following terms: “We thus now confirm that our client accepts your client’s offer of £35,000 on that basis. This constitutes full and final settlement of all claims made by our Client.”In May 2004, some two years later, Mantegazza’s solicitors launched a second detailed letter of claim against NHA. The letter acknowledged that certain claims regarding the brickwork were settled as part of the compromise agreement but went on to state that Mantegazza had since discovered that the limestone mortar used in the building of the brick walls was unsuitable. The letter concluded that NHA had failed in its obligation to administer the contract with the due skill and care, in particular by approving mortar work which was unsuitable. NHA rejected the claim on a variety of grounds but also claimed that the condition of the brickwork (and mortar) was known to Mantegazza at the date of the compromise agreement and was therefore included in the settlement. NHA maintained that these claims were a re-hash of the claims that have already been compromised and as such should not be permitted to proceed. NHA applied to the court to strike out the claims on the basis that there was no reasonable cause of action. In court, NHA submitted that upon proper analysis of the underlying claims, the words “all claims made” should be construed as meaning every claim or cause of action that was brought or could have been brought in relation to the discharge of NHA’s retainer. NHA also suggested that the claims mounted by Mantegazza amounted to an abuse of process. It argued that Mantegazza knew or should reasonably have known, at the time of writing the first letter of complaint, of the existence of the claims and on that basis any attempt to re-litigate those issues would amount to an abuse of process. In his defence, Mantegazza submitted that since the defects and their consequences were not apparent before March 2002 then those defects could not have formed part of the dispute settled in March 2002. In considering the application, Judge Mackie QC noted that the use of the words “all claims made” was not, as one might expect them to be, expressed as an attempt by the parties to secure full and final settlement of all claims either party has or may have against the other. As such, it was clearly not the intention by the parties to finally resolve all present and future disputes between them. The Judge noted, as a general principle, that a compromise represents the end of the dispute or disputes from which that compromise arose and any issues of fact or law that formed the subject matter of the original dispute are buried beneath the surface of that compromise. The courts will not permit them to be raised afresh in the context of a new action. However, in respect of the subject matter of these specific claims, the Judge found that whilst there were similarities of wording or expression, the second claim was quite distinct from the claims made in 2002 and did not form part of the compromise. On the subject of the abuse of process claims, Judge Mackie QC considered the House of Lords decision in the case of Johnson v Gore-Wood in which Lord Bingham observed that: “The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to an abuse of process if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings”Whilst accepting the general position established by Lord Bingham, Judge Mackie QC decided that, in this particular case, the claim of abuse of process had no application to the claims made because they were not included in the compromise agreement and did not become known until much later. He concluded that: “A layman cannot be expected to dig around and spend money on claims which have not occurred to him in order to avoid a claim of abuse of process later.”The application to strike out the claim was dismissed and Mantegazza was permitted to pursue the claims made.
CJ-0641
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