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Cite as: [2003] ScotCS 187

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Kane v. Pearl Assurance Plc [2003] ScotCS 187 (03 July 2003)

OUTER HOUSE, COURT OF SESSION

OPINION OF LORD JOHNSTON

in the cause

JAMES ALOYSIUS KANE (Assisted Person)

Pursuer;

against

PEARL ASSURANCE plc

Defenders:

________________

Pursuer: Ellis, Q.C.; The Anderson Partnership

Defenders: Truscott, Q.C.; MacRoberts

3 July 2003

[1] This action arises out of a dispute between the parties upon the termination of the pursuer's employment with the defenders as relating to the terms of a reference which was offered by the defenders. The dispute between the parties was settled prior to a hearing before the employment tribunal by a discharge Form COT3 dated 22 May and 3 June 1998 which is number 6/5 of process. That agreement was preceded by certain correspondence namely a letter of offer between solicitors dated 13 May 1998 (see 1 of process), an acceptance dated 15 May 1998 and an acknowledgement of that acceptance of even date, numbers 6/3 and 6/4 of process. Also passing between the parties at that time was a letter dated 14 May 1998 sent by fax containing a copy of the reference being proffered (6/2 of process). There is no recorded reply to that letter.

[2] The debate before me comprised two issues, quite separate, firstly, whether or not the discharge agreement excluded the claim now being made for damages in respect of the terms of the reference ("the first issue") and secondly, and quite separately whether or not in any event the pursuer's averments of duty to disclose a relevant case ("the second issue").

The first issue
[3] In this respect counsel referred me to a number of authorities namely Investors Compensation Scheme v West Bromwich Building Society 1998 1 WLR 896, Glasgow City Council v Caststop Limited 2002 S.L.T. 47 in the Division 2003 S.L.T. 526, Bank of Credit and Commerce International SA v Ali &c 2002 1 AC 251, Royal National Orthopaedic Hospital Trust v Howard 2002 IRLR 849, Bovis Construction v Watlings 1994 S.C. 351, Bank of Scotland v Dunedin Property Company 1998 SC 657.

[4] The essential proposition submitted on behalf of the defenders was that standing particularly Investors supra and in particular the proposition enunciated by Lord Hoffman at page 912 construction of the terms of the discharge agreement had to be an independent exercise quite separate from the negotiations that had proceeded it. He submitted that the most succinct expression of the law was to be found in Royal National Orthopaedic Hospital Trusts supra at paragraph 9 where the EAT says:

"In our judgement the law as to contracts for release is pretty straightforward. The law does not decline to allow parties to contract that all and any claims whether known or not shall be released. The question in each case is whether objectively looking at the compromise agreement that was the intention of the parties or whether in order to correspond with their intention some restrictions have to be placed on the scope of the release. If parties seek to achieve such an extravagant result that they release claims in which have or can have no knowledge, whether those claims have already come into existence or not, they must do so in language which is absolutely clear and leaves no room for doubt as to what they are contracting for. We see no reason why as a matter of public policy a party should not contract out of some future cause of action but we take the view that there will be extremely clear words for such an intention to be found."

[5] In essence counsel's submission was that the terms of the discharge were sufficiently wide to include every claim and in any event did not exclude a claim relating to the reference issue expressly when such must have been in the contemplation, it was submitted, of the pursuer's solicitors having regard to the terms of the letter 6/2. For this simple reason the present claim for damages was therefore barred as no further issue arose.

[6] The response by counsel for the pursuer was rather more sophisticated. He submitted that the letters comprising the offer and acceptance were properly to be regarded not as negotiations but as the basis for the contract epitomised by the discharge agreement. It by no means followed accordingly that the discharge agreement was intended to cover the issue of the reference since the offer and acceptance were entirely related to money. In any event counsel submitted that the discharge agreement should be read narrowly so as not to include a peripheral claim relating to the reference but only essential claims on the issue of the termination of the employment. Counsel relied particularly on passages in Bovis supra particularly at page 363 and in Bank of Scotland supra at pages 665, 670 and 679. There being, in any event, an issue as to what was intended the matter should not be determined at this stage but only after proof.

[7] I was initially attracted by the argument submitted by counsel for the defenders given the scope of the discharge agreement and particularly the use of the word "all" as being sufficient to embrace the claim relating to the reference which was at least on the table having regard to the contents of number 6/3.

[8] However, having considered that the authorities generally are reflected by the succinct statement by the EAT in Royal National Orthopaedic Hospital Trust it seems to me that the issue is to some extent one of objective discovery of the intention of the parties and this cannot be determined as a matter of relevancy. While it may be at the end of day that the argument on behalf of the defenders may succeed I am not prepared to sustain it at this stage of the process. That seems to me to be going too fast too soon. Accordingly I consider that this issue should go to proof before answer, all other things being equal.

The second issue
[9] In this respect I was referred to four cases with regard to the proper approach to the issue of references and any claims for negligence arising therefrom as being the agreed authorities. These were Spring v Guardian Assurance plc &c 1995 2 AC 296, Kidd v Axa Equity and Law Life Assurance Society plc 2000 I.R.L.R. 301 and Cox v Sun Alliance Life Limited 2001 IRLR 448 and Bartholomew v London Borough of Hackney 1999 IRLR 246.

[10] These authorities analysed the relevant cases in some detail particularly in Kidd against the background of a general duty to references being provided that it should be fair and accurate. Burton J. states in paragraph 14:

"In the course of argument I called Spring based upon a negligent provision of false information, a stage 1 case, a Bartholomew case based on negligent misleading information, a stage 2 case and the case referred to by Walker L.J. in paragraph 22 of Bartholomew being an assertion of a duty of care to give a full and comprehensive reference whose existence of that case the Court of Appeal did not accept, a stage 3."

The issue raised in this context was purely one of pleading.

[11] Counsel's first submission was that the averments in condescendence 2 relating to the history of the employment dispute between the parties which led to an initial application to the employment tribunal which was not pursued was relevant to the matter. When it came to the issue of the reference which is giving rise to the claim he said there was no content in fact and irrelevant in law against the tests set out by Burton J. supra. More significantly however counsel submitted that the averments on pages 16 and 17 of the record were hopelessly confused as to the proper annotation of the required duty and did not give fair notice of the case being taken against the defenders. There was, he submitted, an intermingling of all three stages as enunciated by Burton J. and in any event a quite separate question of investigation which was stated to be separatim and should, he submitted, be the forerunner of the whole exercise.

[12] Counsel for the pursuer replied to the effect that the averments, although not very elegant, effectively based the case claiming only that the reference had to be fair and accurate in so much as there was an averment which called for a full and frank reference that was not an attempt to make a stage 3 case but rather narrative. It was proper, he submitted, to make the investigation issue a separate question. The matter should go to a proof before answer.

[13] I consider there is considerable force in the submissions of counsel for the defenders in this question. I am impressed by the formulation of Burton J. in Kidd against the background of an overall duty to provide a fair and accurate reference if one is being proffered. I recognise that stage 1 and stage 2 cases are merely two different aspects of the general basic duty not to mislead whether deliberately or accidentally in the sense of negligence but what is much more important is that the law clearly as presently defined excludes a stage 3 case, that is to say a general duty to provide a full and frank or comprehensive reference.

[14] In so far as in this case the pursuer's averments jumble up all three of these aspects there is a real question of doubtful relevancy and also a question of fair notice.

[15] The issue of fair notice is compounded by the fact that in my opinion, as counsel for the defenders submitted, the first stage in the process should be proper averments as to an adequate investigation with particular reference to averments as to what such an investigation would have revealed bearing upon the issue of either fairness or accuracy, or more importantly, on the whole question of misleading. It is, in my opinion, wholly misleading in the pleading to concentrate on the issue of investigation as a separate question particularly when there are averments which might suggest a stage 3 case was being attempted to be made.

[16] For these reasons I consider that the averments being criticised by counsel for the defenders on both pages 16 and 17 are as presently framed irrelevant for want of precision and specification. I do however consider that the averments in condescendence 2 as to the past history are relevant so long as the case as to investigation is also being made provided such is made properly.

[17] As counsel for the defender readily accepted it is quite possible that the criticisms which I have supported can be rectified by amendment but such will have to be proffered by the pursuer.

[18] In these circumstances I will put this case out By Order to ascertain whether the pursuer is willing to amend. If he is, the amendment process can be initiated. If he is not the action will be dismissed.