England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE MAYOR'S AND CITY OF LONDON COURT
HIS HONOUR JUDGE MARR-JOHNSON
5MY01862

		Royal Courts of Justice Strand, London, WC2A 2LL
		17th October 2006

Lord Justice Lloyd:

1. The Respondent firm of solicitors acted on the instructions of the Appellant in two separate proceedings: one brought by her late husband's brother against a company called Barex Brokers Ltd, in which the firm acted for the company, and the other a probate action relating to the estate of the Appellant's late husband, claiming the revocation of a grant of probate made in common form to the Appellant, and therefore brought against the Appellant herself. In the Barex action the claimant had some success, but each party had to bear its own costs. In the probate action the Appellant was unsuccessful in the High Court, before Lightman J, in July 2004, but she appealed successfully to the Court of Appeal, with judgment in her favour on 22 March 2005: [2005] EWCA Civ 326. She had dispensed with the services of the Respondent firm for the probate action after the decision of the High Court, but she was liable to pay their professional fees for acting in both sets of proceedings.
2. The parties entered into negotiations about the payment of the fees claimed by the Respondent. The question before the circuit judge was whether they had reached an agreement or not. He decided against the Appellant's claim that there was a binding agreement as to what was to be paid. However, he considered that English law was unclear on a relevant point of the law of contract, and accordingly he gave permission to appeal. The proceedings having been commenced by a Part 8 Claim Form, an appeal would have lain to the High Court but for the fact that, by an order dated 6 December 2005, District Judge Trent expressly allocated the case to the multi-track.
3. The relevant facts can be stated shortly.

i) After some months of correspondence, the Respondent wrote a letter dated 20 December 2004 to Mr Goldkorn, the Appellant's solicitor, expressed to be without prejudice. By this letter the firm offered to write off unbilled time in respect of both the Barex action and the probate action, to write off the outstanding invoice for the Barex action and to accept £45,000 in full and final settlement of the invoice dated 8 July 2004 for the probate action. The letter specified three further terms of the offer. (1) The sum of £45,000 was to be payable within 28 days of agreement being reached. (2) The Appellant was to agree not to pursue an assessment of the firm's invoice, or complain to the Consumer Complaints Service, or to pursue any action for negligence or breach of duty against the firm arising out of its conduct of the two proceedings, any such claims and causes of action being irrevocably released. (3) Mr Goldkorn's firm was to agree to be responsible for the outstanding fees of Counsel who had been instructed in the probate action, having been incurred when he was instructed by the Respondent, written confirmation being required from his Clerk that the Respondent was relieved of responsibility which it would otherwise have for payment of those fees. The offer was stated to remain open for acceptance until 4 January 2005.

ii) That offer was extended for a time, at Mr Goldkorn's request, but was not accepted within that extended time. Mr Goldkorn put forward a counter-offer, which was rejected in a letter of 4 March 2005. At the end of that letter Mr Rose, of the Respondent firm, said that "the proposal set out in our most recent correspondence" remained open for acceptance at present. That can only refer to the offer in the letter dated 20 December 2004.

iii) On 10 March 2005, Mr Rose wrote again, in response to a separate enquiry from Mr Goldkorn. At the end of this letter he said:

"For the avoidance of doubt, I should perhaps add that at present our offer to accept the sum of £35,000 remains open. If the appeal judgment is adverse to Mrs Sherrington, then we will review whether or not the offer should continue, but if judgment is in Mrs Sherrington's favour then the offer is automatically withdrawn, and we will be seeking a greater sum in settlement."

iv) On 17 March, Mr Goldkorn wrote to Mr Rose as follows:

"I am replying to the last paragraph of your without prejudice letter of 10 March 2005. The offer is accepted. For that reason this letter is not marked without prejudice. An agreement has now been reached. Will you please confirm that upon payment all your firm's files will be delivered up."

v) On 22 March Mr Rose replied, relevantly as follows:

"I think it must have been quite apparent to you that the letter dated 10 March contains a typographical error where the reference is to £35,000 and not to £45,000. There has been no proposals by us to vary that figure. The letter dated 10 March 2005 does not make an offer; it seeks to reiterate use of the terms of an existing offer, but does not do so accurately.

The letter dated 20 December 2004 sets out the terms on which we were prepared to settle the claim for costs, and that remains our position. Your letter dated 17 March does not purport to address other matters referred to in that letter, and is therefore not capable of being an acceptance as such."

vi) Mr Goldkorn's response, in a letter dated 23 March, asserted that, if there was a mistake in the letter of 10 March, it was a unilateral mistake by Mr Rose. Mr Goldkorn said that he and the Appellant interpreted the letter as constituting a variation proposal in three parts: it was an offer to accept £35,000 instead of £45,000, but one which would be reviewed if the result of the appeal was unfavourable to the Appellant and would automatically be withdrawn if the result was in her favour. He claimed that the offer had been accepted on that basis, and that by such acceptance the other terms in the letter of 20 December 2004 were also accepted.

vii) The parties were unable to reach agreement on the matter. Mr Goldkorn tendered a cheque for £35,000 which Mr Rose refused to accept on the basis on which it was proffered. The Appellant therefore started proceedings under CPR Part 8 in the Mayor's and City of London Court seeking a declaration that the claim for fees had been settled on the terms of the 20 December 2004 letter but with the sum of £35,000 replacing that of £45,000 mentioned on that letter.

4. The claim came on for hearing before His Honour Judge Marr-Johnson on 13 February 2006, with witness statements from the Appellant and from Mr Rose, but without cross-examination, Mr Goldkorn and Mr Rose acting as the advocates. Mr Rose sought to raise three points in opposition to the claim, one of which had not been foreshadowed until delivery of Mr Rose's skeleton argument, and which depended on questions of fact which were not the subject of evidence. The judge refused to allow Mr Rose to rely on that point. He rejected a second point, that the Defendant had not accepted the offer in such terms as to create a binding contract (if it was open for acceptance at all). Neither of those points arises on the appeal.
5. In her first witness statement, the Appellant stated that, having been shown the letter dated 10 March 2005, she understood that one of her alternatives was to accept £35,000 instead of the £45,000 previously stipulated, together with the other terms of the 20 December 2004 letter. Later in the witness statement she said that she genuinely believed that the Defendant had altered its position in the light of the various matters that she had raised. In his witness statement in answer Mr Rose stated that the figure of £35,000 was a mistake, and that there was no intention on the part of the Respondent firm to change the proposed settlement figure.
6. In my judgment, on the facts of this case, no question arises on which the subjective understanding of either party is relevant or admissible. The case depends on the true construction of the Respondent firm's letters dated 20 December 2004 and 10 March 2005, in the context of such surrounding circumstances as are relevant and admissible on ordinary principles. If on the proper reading of those two letters, they amounted to an offer to settle the matter on payment of £35,000, together with the other terms stipulated for in the 20 December letter, then the Appellant is right. If, on the other hand, they cannot properly be read in that way, the Respondent is right.
7. It seems to me that the point can be tested by postulating an offer made in a single document. By the hypothetical letter one party offers to the other to settle certain disputes between them on payment of a sum of money and agreement to some other terms. Suppose that one term in the offer letter were formulated (as in the 20 December 2004 letter): "we will accept the sum of £45,000 in full and final settlement" of a particular liability, that other terms not involving monetary payment were also described, and that later in the letter it said (modifying the letter of 20 December slightly): "the said sum of £35,000 would be paid to us within 28 days of agreement being reached". That offer letter would be internally inconsistent and self-contradictory. The recipient could not accept it as it stood, but would have to ask whether the sum intended to be referred to was £35,000 or £45,000. A purported acceptance would not create a binding contract.
8. Mr Leabeater submitted that the present case is, in effect, the same, although two documents have to be considered, not just one. The letter of 20 December 2004 is clear in itself. The sum required is £45,000. The letter of 10 March 2005 says that the Respondent's "offer to accept the sum of £35,000 remains open". He contended that those words can only refer to an existing offer. That is clear, if from nothing else, from the words "remains open". Those are not words describing a new offer made for the first time in the letter of 10 March. They prompt the question: what offer to accept the sum of £35,000? The only offer made by the Respondent, so far as relevant, was to accept the sum of £45,000, and it also stipulated other terms. The Appellant does not contend that those other terms were not part of the offer which she claims to have accepted. She therefore admits, inevitably, that reference back to the 20 December letter is necessary, in order to ascertain the terms of the Respondent's offer to which reference was made in the later letter. Such reference, however, also shows that the offer was to accept £45,000 rather than £35,000. On what basis can that element of the earlier letter be ignored?
9. Mr Fitzgerald for the Appellant argued that the use of a different figure in the later letter superseded the earlier figure, and that the terms as to the review or withdrawal of the offer when the result of the appeal was known also showed that it was a new offer. As to the latter point, plainly it was necessary to start afresh on the question of the duration of the offer, since the time specified in the earlier letter had long since expired. The offer could have been reiterated on an open-ended basis (as in the letter of 4 March 2005), or with some new stipulation as to the time within which it was open for acceptance. With the outcome of the appeal expected to be known shortly, it is not surprising (particularly in the context of some of the previous correspondence) that a new provision as to its remaining open was set out. That provision did not affect the substance of the offer. Its inclusion qualified, but did not contradict, the proposition that the Respondent firm's existing offer remained open for acceptance. But for the inclusion in the later letter of a different figure, nothing would turn on the point about the duration of the offer. Even with that figure, it takes the matter no further.
10. The essential question is whether the two letters can properly be read together, in the context of the relevant surrounding circumstances, as amounting to the making of a new offer by the Respondent to accept £35,000, rather than as an inaccurate reference back to an existing offer to accept £45,000 which was to be regarded as still open for acceptance, within a limited time. That question depends on the terms of the documents, above all, and not at all on the subjective understanding or intention of the parties. It does not seem to me that the decision of the case depends on the question of law which the judge identified, on which he noted that there were differences within the common law world. It is unnecessary, and inappropriate, to embark on a review of the theme of mistake in the law of contract, in order to decide this case.
11. Furthermore, if I am right in regarding the case as one turning on the construction of the two relevant documents, other decided cases are of little, if any, assistance. I do not propose to refer to any, although several were cited in the skeleton arguments.
12. Mr Fitzgerald submitted that the use of the words "remains open" was not inconsistent with the 10 March letter being read as the making of a new offer: one which was on the same terms as the 20 December 2004 letter except that the amount payable was £35,000, and that the offer was to remain open as specified in the last sentence of the later letter. He said, fairly, that the offer was to be interpreted in the sense in which it would appear to a reasonable person, reading it as that of a partner in a well reputed firm of solicitors. He said that there were objective reasons why the amount of the offer might have been reconsidered and revised, in the light of the intervening correspondence. He argued that the letter could be read in the light of the circumstances as they existed on 17 March, the date on which it was (purportedly) accepted, and on which, in accordance with its terms, it was still open for acceptance.
13. As to those points, I do not see that the interpretation of the offer as such, to see whether it is capable of being accepted so as to constitute a binding contract, can be affected by the passage of time after the date of the offer. But nothing seems to turn on that, because Mr Fitzgerald was unable to point to any particular factor occurring by 17 March which could have affected that interpretation, even if it were admissible in principle. I agree that the two letters can be read in the light of the intervening correspondence in the course of negotiation. However, the fact that the Respondent might have had reason to put forward a revised offer does not affect the question whether they did, or whether their later letter is to be read as doing so. I also agree that a solicitors' letter, and in particular one which appears to have been carefully drafted by a partner of a firm such as the Respondent, can be taken at face value, but that does not absolve the reader from thinking about what is said, and from observing a conflict in the letter if it is there to be seen.
14. On Mr Fitzgerald's first point, that the words "remains open" do not by themselves indicate that the previous offer is unaffected, I disagree. It seems to me that the words "our offer ... remains open" not only show that reference has to be made back to the terms of the previous offer in order to see what its terms are, but also indicate that, subject to one point, those terms have not been altered. Mr Fitzgerald placed much reliance on the fact that, plainly, the duration of the offer was covered by a new provision in the last sentence of the 10 March letter. So, he said, the reader can expect that there may be other changes to the offer, and is not put on the scent of any possible mistake or confusion by the reference to £35,000 instead of £45,000. I have dealt with the new provision as to duration in paragraph 9 above. It does not bear the weight of the significance which Mr Fitzgerald sought to attach to it.
15. By contrast, if the amount payable was to be £35,000, the letter was, to that extent, inconsistent with, and contradicted, the earlier letter as to the terms of the offer. It seems to me that on no ordinary use of language could the writer of the later letter say at one and the same time that the earlier offer remained open and that it was altered so as to require payment of only £35,000. The latter would have been a new offer, which could not be described as "remaining" open, because it would not previously have been open, for acceptance.
16. Mr Fitzgerald made submissions on the merits, suggesting that it was unjust that the Appellant had been deprived of the opportunity to accept the offer at £45,000 at a time when that offer (if contrary to his submission, that was intended to be the offer in March) was still open for acceptance. I do not find such considerations of any assistance.
17. He raised the question whether, on the judge's reasoning, the course of events ought not to have been construed as resulting in a binding agreement at £45,000. The Respondent never contended for that result, and nor did the Appellant as a fall-back in her Appellant's Notice. It may be that the judge's reasoning for holding that there was no binding agreement, at paragraph 32 of his judgment, strayed off limits into an area of subjective intention and understanding. But in my judgment his decision that there was no binding contract was correct, on the basis that the combination of the two letters produced a contradiction which was equivalent to the internal conflict in the hypothetical single document described in paragraph 7 above.
18. For those reasons it seems to me that the judge's conclusion was right. I would not myself adopt all of the reasoning in his judgment, but I would pay tribute to the clarity and succinctness of that judgment, delivered extempore immediately after hearing argument from the two advocates, in the course of which he had been taken to a fair amount of decided authority. I would dismiss this appeal.

Lady Justice Arden

19. I agree with the judgment of Lloyd LJ with respect to the question whether, on its true interpretation, the offer contained in the letter dated 10 March 2005 was an offer to settle for £45,000 or £35,000, and there is nothing that I wish to add on that point.
20. The defendants do not seek to enforce any contract of £45,000. It has not therefore been argued before us whether Mrs Sherrington's acceptance of the offer in the letter dated 10 March 2005, as interpreted by this Court, was binding on her.
21. For my own part, I doubt whether Mrs Sherrington was under any legal obligation to seek clarification of the offer in that letter, though this would clearly have been a sensible and courteous step. She accepted the offer in the letter dated 10 March 2005 in the mistaken belief that it was an offer to settle for £35,000. If it was sought to enforce a contract for £45,000, it may well have been difficult for her to have satisfied the court that she made a fundamental mistake of the kind required in law to negate her acceptance of the offer.
22. On the other hand, if on its true interpretation her acceptance was of some different offer than that contained in the letter of 10 March 2005, on its true interpretation, then her acceptance would not be of the offer to settle for £45,000. Lloyd LJ has set out the terms of her acceptance in paragraph 3(iv) of his judgment. That letter from her solicitors studiously makes reference only to the last paragraph of the letter of 10 March 2005 and not to any earlier correspondence, as if the last paragraph of the former letter contained a self-standing offer. Although it may be doubtful whether any subsequent conduct of Mrs Sherrington or declaration of her subjective intent could, as the law stands, be deployed to identify what offer she was accepting, it would have been arguable that, on its true interpretation, that letter was not an acceptance of an offer of £45,000, but only of an offer to settle for a lesser amount, which was not in fact made to her.
23. However, it is unnecessary to express any final view on these questions as the defendant's solicitors have with due caution chosen not to assert any agreement to settle for £45,000 and Mrs Sherrington likewise does not seek to uphold her acceptance as an acceptance of that offer. In those particular circumstances, the interesting questions as to the law of mistake do not arise for decision.

Lord Justice Tuckey

24. I agree that this appeal should be dismissed, for the reasons given by Lord Justice Lloyd.