In the recent decision of Dragados UK Limited v Port of Aberdeen [2025] CSOH 37, Lord Sandison dismissed parts of a claim brought by Dragados UK Limited ("Dragados") against the Port of Aberdeen (the "Port"). The judgment highlights the importance of understanding the terms of your settlement agreements.
Background
Dragados sought to recover £1,247,542.00 plus interest from the Port under the terms of a Settlement Agreement. This agreement allowed Dragados to claim back certain costs related to their design sub-consultant, Ove Arup & Partners Limited (“Arup”). However, the Port argued that much of the claim was legally irrelevant and fell to be dismissed without enquiry.
Key Facts
On 20 December 2016, the Port appointed Dragados as the main contractor for the design and construction of an extension to Aberdeen Harbour at Nigg Bay under a modified NEC3 Engineering and Construction Contract (Option A).
The following day, Dragados engaged Arup to carry out various design services.
By June 2020, the parties had encountered difficulties and entered into a Settlement Agreement to resolve ongoing disputes. Under this agreement, Dragados:
- Would receive a payment in settlement of its claims.
- Was released from further construction or management obligations.
- Remained responsible for work already completed and had to ensure certain remaining design work was completed, being the “Contractor Design to Complete” (CDTC) section.
- Could instruct Arup to carry out additional design work beyond the CDTC, with potential reimbursement by the Port.
After reaching a separate settlement with Arup regarding some of that additional design work and other unrelated items, Dragados sought to recover the sums for the additional design work from the Port. The Port argued that the claim was unfounded, noting that:
- Dragados entered into a global settlement with Arup and did not advise the court of what part of that settlement figure represented sums in respect of the additional design work.
- The claim relied heavily on an indemnification at clause 7.8.4 of the Settlement Agreement, but the conditions for that clause to apply had not been met.
The Court’s Decision
Lord Sandison summarised the argument regarding general irrelevance. He stated that to present a relevant claim, Dragados simply needed to show that it incurred a liability to Arup which was covered under clause 7.8, or that Arup had reasonably required fees for verifying design drawings. The fact that the settlement with Arup was not itemised did not, on its own, make the claim irrelevant.
The more complex issue was the interpretation of clause 7.8.4. Lord Sandison emphasised that the wording of section 7 of the Settlement Agreement was key. The rest of the contract, including the original construction agreement, offered little assistance in clarifying this clause.
He stated that the correct approach was to ask what the clause would reasonably mean to someone familiar with the background. In this case, he found that clause 7.8.4 only applied if the Port or Project Manager had instructed Dragados to manage Arup’s ongoing design work beyond the CDTC.
Since there was no evidence that such an instruction was given, the court ruled that Dragados could not rely on clause 7.8.4. Accordingly, that part of the claim was irrelevant and could not proceed to proof (evidential hearing) at the next stage of the proceedings.
Key Takeaways
- Where an indemnification or similar clause is present in a settlement agreement, ensure you are aware of any conditions to be met for reimbursement of costs before those costs are incurred. Seek legal advice if you are unsure.
- Where there is scope for reimbursement of part of a settlement sum from another party, ensure the settlement agreement includes a comprehensive breakdown of the settlement sum.
