Management

Garry Winter's case notes

5 January 2012

Thameside Construction Company v Arthenella

Technology and Construction Court 20 October 2011

Thameside was employed by Arthenella to undertake the conversion of Frogmore Hall in Hertfordshire into residential units. The work was completed in April 2008, but disputes between the parties continued concerning the value of works on the second phase and whether Arthenella was entitled to liquidated and ascertained damages for Thameside’s delay.

The parties attempted to resolve their differences by mediation, but no compromise was found. Nonetheless, it prompted both parties to make offers to settle. On 22 August 2011 Arthenella offered £275,000 on a “without prejudice save as to costs” basis. The offer was described as a fully inclusive sum to which no further sums over and above the £275,000 would be due. The offer was stated to be open until 9 September.

On 2 September, Thameside made a separate offer to accept a payment of £270,000, inclusive of interest but with the addition of payment of its legal costs and VAT. By 8 September, neither party had responded to the other regarding the offers. Concerned by the costs of litigation Thameside’s MD telephoned Arthenella’s. They discussed the offers, in particular whether Thameside would be successful in its claim for preliminaries amounting to £90,000. Both alleged they had received advice that their positions were strong.

Arthenella telephoned Thameside twice on 9 September 2011, the day on which its £275,000 offer was stated to expire. The content of these calls was disputed. According to Thameside, Arthenella’s stance remained that Thameside would not be successful on the preliminaries issue and as such the offer of £275,000 stood. Thameside said that a deal was agreed at £275,000 if it could not provide a barrister’s opinion supporting its stance on the preliminaries issue, but if they could the sum would rise to £300,000. Thameside confirmed this in an email the same day.

Arthenella’s version of the conversation was different — it claimed its MD said that its existing offer was far too high. Notwithstanding this, both agreed that it was stated if Thameside could convince Arthenella it was wrong regarding the preliminaries issue they would settle at £300,000.

The two agreed to meet a few days later. Following the meeting Arthenella’s MD telephoned Thameside to say he had taken advice and his offer to settle was now £200,000. Thameside responded by letter stating the matter had been settled, the terms being £275,000 or £300,000 if a supporting opinion was provided. Arthenella responded that no agreement had been reached and that the offer of £275,000 had been withdrawn and the new offer would be formally made.

Thameside applied to the court and the court, preferring Thameside’s evidence, decided that the dispute had been settled in the sum of £275,000. The main reasons for siding with Thameside were, first, Arthenella’s version was inconsistent with the terms of the offer made. Second, it transpired that in the phone call of 9 September, Thameside’s MD had revealed that it had problems with its bank and needed to settle before January 2012. The court’s view was that an experienced MD would only disclose such information if an agreement had been reached. Third, there was Thameside’s email of 9 September confirming the agreement, but no serious challenge or reaction to this by Arthenella.

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