Grudge match

The case of Baris vs Kajima highlights the need for settlement agreements to be clearly drafted. In 2004 Kajima employed Baris as a dry-wall partitioning subcontractor at a site for the Health and Safety Executive in Bootle on Merseyside. Disputes arose and, predictably, they were referred to adjudication. The adjudicator, dispensing lightning justice from his fingertips, directed Kajima to pay Baris the sum of £181,895 plus interest. Kajima, unhappy with the decision, did not pay up.

On 13 December 2005 Baris wrote to Kajima and made an offer of settlement prior to initiating enforcement proceedings in the High Court. The offer was headed "without prejudice save as to costs" and stated: "Baris hereby offer to fully and finally settle their rights given by the adjudicator if Kajima Construction Europe (UK) pay the total sum in the decision, namely £181,895.60 only within 21 days of this letter, that is 3 January 2006, plus the costs to be taxed if not agreed on a simple basis incurred by Baris in issuing and serving proceedings in the High Court."

On 14 December 2005 Kajima responded to the offer, stating: "We acknowledge receipt of your letter dated 13 December 2005, and confirm that funds will be in your account on or before 3 January 2006." Kajima duly paid the sum into Baris' bank account on 3 January 2006.

However, on 19 December 2005, after Kajima had made the payment, Baris did a very strange thing. They commenced proceedings in the High Court for summary judgement of the adjudicator's decision in the sum of £181,895.60 plus interest and costs. Even stranger was the fact that Baris made no mention of the letters exchanged on 13 and 14 December.

Was this dispute not screaming out for a dose of old-fashioned negotiation?

Kajima (no doubt in a state of shock) explained in their defence that, at least as far as they were concerned, the matter was the subject of a separate agreement and was closed. Kajima included a copy of the letters exchanged in support of their case.

Baris objected to Kajima's inclusion of Baris' offer letter within their defence on the grounds that it was covered by ‘without prejudice' protection. They also contended that the exchange of letters did not constitute a binding agreement between the parties.

His Honour Judge Coulson QC was duly dispatched and quickly grappled with the two principal matters in hand. Firstly, whether the ‘without prejudice' communications were admissible and secondly, whether the parties had formed a binding agreement by the exchange of correspondence.

It is sometimes necessary for certain cases to be decided
in court, irrespective of the financial sum involved

On the first issue of admissibility, Baris' objection was advanced on the basis that the offer was marked "without prejudice save as to costs" and as such should not have been disclosed. In general, a letter marked ‘without prejudice', or for that matter conversations within ‘without prejudice' meetings such as mediation, would not normally be admissible as evidence in legal proceedings. However, in cases where an offer made within a ‘without prejudice' letter has been accepted, then the ‘without prejudice' protection is removed and the letter can be included as part of the evidence. In the case of Baris vs Kajima, HHJ Coulson QC found that Baris' offer letter was indeed admissible because "denying the court a sight of the offer letter would be absurd... it would effectively deprive the defendant (Kajima) of the opportunity of raising the compromise point as a defence to the claim".

On the second point, Baris contended that there was no binding agreement because Kajima had not agreed, or paid, for any interest and had not agreed to liability for their costs. Once again HHJ Coulson QC was unsympathetic to Baris' case. He concluded that: "There was a binding compromise between the parties as a result of the exchange of faxed letters... That is what the defendant agreed to do on 14 December and that is what happened. The agreement was not subject to the payment of any additional sums - by way of interest or anything else - because it was expressly agreed that a fixed lump sum of ‘£181,895.60 only' was sufficient to settle all the matters arising out of the adjudication." Baris' case was duly dismissed.

It is sometimes necessary for certain cases to be decided in court, irrespective of the financial sum involved. These cases usually involve either a delicate point of law, a matter of principle or a change in social policy. This was not one of those cases; the sum of interest actually in dispute here was £2,482.

Was this dispute not screaming out for a dose of old-fashioned negotiation or has the new ‘adjudication' culture made us all a bit trigger happy?