England and Wales High Court (Technology and Construction Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice
		16th December 2008

MR. JUSTICE AKENHEAD:

1. In this case the claimant, Stewart Milne Group Limited ("Stewart Milne") sue Protex Corporation Limited ("Protex") for the sum claimed to be due under a settlement agreement reached in June of this year. The background is that the defendant was carrying out a development at 120 Long Road, Canvey Island, and employed the claimant to provide timber frames for the development. There came a time when there were some disputes between the parties as to payment, and possibly also defects. Shortly before the settlement meeting, Stewart Milne had submitted a statement of sums outstanding, and the sum said to be outstanding was £161,562. That was exclusive of VAT which was not applicable to this particular development.
2. There was then a meeting on 6 June 2008, attended by Mr Bye for Stewart Milne and Mr Taylor for Protex at which the parties signed a settlement agreement which had clearly been typed before but additional terms were agreed. The relevant terms of the agreement were that:

"(2) Protex shall pay the further sum of £110,000 inclusive of interest and costs within 28 days of the date of the Agreement…

(3) This sum is in full and final settlement of all Protex claims against Stewart Milne and any claim Stewart Milne has against Protex arising under and in connection with the Agreement.

(5) Part D to be signed off within the 28 days, Architectural Services to provide SMTS and all relevant details by 11 June 2008."

There was an "NB" at the bottom of the agreement which said:

"If Part D not signed off within 28 days 50 per cent will be paid on the 28^th day from this agreement and balance on issue of Part D."

The reference to "Part D" was to a certificate necessary and required by the NHBC under whose auspices this housing development was being carried out. It was necessary for Stewart Milne to provide that certificate in relation to Parts C and D and, as a matter of fact, that was done on 9 July 2008, just over a month after the settlement meeting. None of the £110,000 was paid by Protex.

3. Proceedings were commenced by Stewart Milne on 22 August 2008 and Particulars of Claim served on the Protex. Protex submitted a Defence on 29 September 2008 in effect claiming that there had been undue influence by Mr. Bye, who had attended the settlement agreement on behalf of Stewart Milne. Essentially that undue influence on the pleadings was encompassed by Paragraphs 5 to 8 of the Defence, which read as follows:

"5. Mr. Bye told Mr. Taylor that he was leaving the Claimant within the week and that if a settlement agreement was not signed proceedings would be commenced against the defendant immediately for over £160,000.

6. The Claimant's last filed accounts show a profit before tax in excess of £25 million and net assets in excess of £116 million. By comparison the Defendant is a small 2 man company with small profits and low net assets…

7. Mr. Taylor again asked Mr. Bye for a week to consider the offer but Mr. Bye again refused because he was leaving the Claimant. Mr. Bye said: 'You either sign now or there is no deal and it will go legal; after I leave no one else will deal with this problem.' (In fact, Mr. Bye did not leave the Claimant for a further six weeks).

8. A further discussion took place during which Mr. Bye acknowledged to Mr Taylor there were serious shortcomings in the Claimant's agreement and that if Mr. Taylor signed the settlement agreement the defects would be made good by the Claimant. On the basis of Mr. Bye's assurances Mr. Taylor signed the settlement agreement. Notwithstanding the agreement of Mr. Bye on behalf of the Claimant and Mr. Taylor on behalf of the Defendant, in spite of a letter sent by the defendant to the Claimant on 12^th June the Claimant has not returned to site to remedy the defective workmanship."

After an assertion in paragraph 9 that the Claimant had not returned to remedy defects, the undue influence was pleaded at Paragraph 10:

"10. By virtue of the threats made by Mr. Bye to Mr. Taylor and the respective bargaining positions of the parties, Mr. Taylor acting under the influence of Mr. Bye and without independent advice was induced to enter into the settlement agreement on behalf of the defendant."

There is a further defence at Paragraph 11 which is further and in the alternative:

"The terms of the settlement agreement were and were made conditional upon the claimant returning to the site to remedy the defective workmanship."

4. There was an procedural meeting before the Judge assigned to this case, His Honour Judge Thornton QC, at which directions were given on 30^th October 2008. It was then appreciated that there was going to have to be a trial but that it was a trial which could be brought on very promptly given that there was at that stage a very narrow issue between the parties relating to whether there was undue influence, and whether there was a condition of the agreement that Stewart Milne should return to carry out the remedial works. The Claimant has complied in substance with all the requirements of that order whilst the defendant has not.
5. Protex filed a draft amended defence for which it has not obtained permission to amend and therefore I do not propose to deal with it. Suffice it to say, Protex sought to abandon the alternative claim that the settlement agreement was made conditional upon the claimant returning to the site to remedy the defective workmanship and plead what is in effect a fraudulent misrepresentation assertion that Mr. Bye represented that his company would return to carry out remedial works when it had absolutely no intention of doing so. This was a very serious charge and is not one that I propose to, or should, deal with in the absence of an application on the part of Protex for leave to amend.
6. Yesterday, it became clear that Protex's solicitors on the record were not instructed to attend and on their instructions Protex was unlikely to attend. The case was called on at 10.30 this morning and Protex has not appeared in any shape or form. I therefore heard the evidence of Mr. Bye and Mr. Bassett which appears to be wholly believable and I accept it. I am wholly satisfied that a full and final settlement was achieved in this case whereby Stewart Milne reduced what it believed was its entitlement down to £110,000 in full and final settlement of all claims and cross claims between the parties arising and/or in connection with the agreement. Thus, any claim that there was an obligation or a liability with regard to remedial works would have been caught by that full and final settlement.
7. The only matter to address, even in the absence of Protex, is the assertion that there was in some way undue influence. The matter has not been pleaded well or clearly. If it is a plea that there was some form of commercial duress, that which has been pleaded simply does not give rise to commercial duress. All that is being said in the Defence, whether it is true or not, but taking it at its highest, is that the Claimant was saying "there is a settlement agreement, if you do not sign we will commence legal proceedings" as it was entitled to do. Whether or not that was said at all, and whether it was said emphatically, amounts to no more than the rough and tumble of commercial bargaining between the parties, and in those circumstances it is a defence which, on the face of the Defence, would have been bound to fail; certainly, it would have been a defence which would have been bound to fail in the absence of any evidence from the Defendant. Mr. Bye has given evidence and nothing that he has said in his statement, or he as told me, suggests that there was anything approaching improper pressure or improper influence by him on Mr. Taylor of the Defendant.
8. It would be most unlikely that between two commercial organisations such as this, even if one was of a greater net asset value and turnover than the other, that that which has been asserted could give rise to a genuine charge of undue influence; undue influence often arises in circumstances where there is a fiduciary relationship between parties and the party acting in the fiduciary capacity brings improper pressure to bear on the other party – it usually applies in family, probate, solicitor/client relationships and the like – but it does not usually apply as between commercial companies settling a construction contract dispute.
9. Therefore I am satisfied not only has the Claimant proved its case but that the Defence as pleaded is bound to fail and does fail. Accordingly there will be judgment for the Claimant in the sum of £110,000 and I will hear counsel so far as interest and costs are concerned.
10. There is one small matter of procedure which it seems to me is worth bringing out. As soon as those acting for the Claimant heard that the Defendant was unlikely to attend, it wrote to the Court yesterday afternoon saying that Counsel for the Claimant would be making an application to strike out the Defence under CPR 39.3(1)(c) and enter judgment for the Claimant. The main problem with that approach, which has not in fact been pursued, is that it would be necessary for notice of that application to be given to the other party (the Defendant in this case) and that of course would have delayed the matter. The Defendant has notice that the trial of this matter was to go ahead today, and therefore it would always be more appropriate in those circumstances for the Claimant, as it has now done, to prove its case before the Court.
11. CPR 39.3 says:

"1) The court may proceed with a trial in the absence of a party but –

(a) if no party attends the trial, it may strike out the whole of the proceedings;

(b) if the claimant does not attend, it may strike out his claim and any defence to counterclaim; and

(c) if a defendant does not attend, it may strike out his defence or counterclaim (or both)."

What has happened here is that the Defendant has not attended and the Court could strike out the Defence in effect on its own motion, albeit that fairness would demand that the non-appearing defendant is given an opportunity to deal with that possibility. However, even if that was an appropriate course to adopt, the Claimant would still have to prove its case because even without a Defence, that is still necessary, and it would be necessary in the ordinary course of events for the witnesses, who are needed to prove the case, to attend to prove their witness statement. That is what has happened in any event. It is unnecessary for me to strike out the Defence as such because I have been able to address it insofar as it purports to give rise to any defence at all, which it does not.

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