Settlement: not as easily inferred as you might think.

It’s a fact of life that most cases settle. But establishing a settlement isn’t as straightforward as it looks, as Males J’s judgment in Goodwood Investments Holdings Inc v Thyssenkrupp Industrial Solutions AG (The M/Y Palladium) [2018] EWHC 1056 (Comm) shows. Goodwood appeared as purchaser of the Palladium, a futuristic 300-foot superyacht built by ThyssenKrupp for Russian billionaire Mikhail Prokhorov. The paint proved troublesome, and arbitration commenced.

Following settlement attempts, ThyssenKrupp wrote:

Offer in Full and Final Settlement

In view of the foregoing, the Builder’s offer is as follows: 1. The Replacement Works; and 2. Costs – €… Accordingly, the total net payment to be made by the Builder, in addition to performing the Replacement Works at its own cost will be €…

Additional Settlement Terms

The conclusion of a final settlement will remain subject to the following terms: 1. A full release of any existing or future (known or unknown) claims arising out of or in connection with the SBC, whether against the Builder, B+V, or any other sub-contractor ….  3. Return and cancellation of all outstanding guarantees. 4. Conclusion of a formal settlement agreement to include, prior to signature, formal approval of the settlement by the competent corporate body of the Builder.

A couple of days later Goodwood replied:

… the Further Offer is accepted by the Purchaser, subject only to the following points of clarification that are needed for logistical reasons:
1. The Further Offer does not say at which yard the work will be carried out. Can you please state which yard the Builder proposes to use? For the avoidance of doubt, the Purchaser would be prepared for that to be Blohm + Voss, or its new owner, Lurssen, or another European yard of comparable standing and quality.
2. The Further Offer is unclear about a start date for the work. For your information, the Purchaser’s preferred start date is about October 2018, after the next summer cruising season. We suggest, therefore, that the parties liaise about an exact date convenient to both parties.
3. Whilst the Purchaser is content for the work to be overseen by Wrede, the Purchaser must have the right to send its own consultants to assist Wrede, and receive reports and updates from Wrede, as it is in the interests of both the Purchaser and the Builder that any further dispute be avoided.
4. We understand that the settlement requires approval from the Builder’s board. Whilst that is understood by the Purchaser, your and Mr Bracker’s recommendation ought, we assume, [sc. to] ensure it is forthcoming. Regarding the arbitration hearing, our view is that it should be adjourned sine die pending formal board approval.
5. The Further Offer, taking account of the foregoing points, should be set out in a formal short settlement agreement to be executed by both the Purchaser and the Builder (once board consent is obtained) and that settlement agreement must expressly provide it is in full and final settlement of all disputes and differences arising out of or in connection with the subject matter of the Arbitration, and all the further matters that you mention in your Further Offer. It must be common ground that neither party is ‘buying litigation’ in order to end this long running paint dispute.”

ThyssenKrupp sought to continue the arbitration: Goodwood argued that the claim had been compromised. Males J had no doubt that ThyssenKrupp were right. Paragraph 4 of their Additional Settlement Terms put two obstacles in the way of there being an immediately binding offer to settle: a need for a formal agreement, and for the approval of ThyssenKrupp’s management. Furthermore, although expressed to be for ‘clarification’ the extra points in Goodwood’s response prevented this from being an unequivocal acceptance.

One further point. Goodwood argued, one suspects in some desperation, that an offer to settle subject to management approval, once accepted, gave rise to a concluded contract with a duty to use best endeavours to get that approval. Males J without hesitation rejected this argument: such an obligation, even if intended (a point that he did not have to decide), was an unenforceable agreement to agree.

In short, copy and paste the wording from this offer by ThyssenKrupp and you can be fairly safe in suggesting settlement with virtually no danger of inadvertently giving up your client’s case. Useful to know.

 

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