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Sharp v. Wardrope & Ors [2004] ScotCS 234 (28 October 2004)

OUTER HOUSE, COURT OF SESSION

OPINION OF LORD EMSLIE

in re

Issue of settlement raised by Minute and Answers

in the cause

CATHERINE SHARP or CHISHOLM and ANOTHER

Pursuers;

against

COLIN WARDROPE and OTHERS

Defenders:

________________

Act: Buchanan; The Anderson Partnership for the Minuters (1^st to 3^rd Defenders)

Alt: Summers; Drummond Miller for the Respondent (2^nd Pursuer):

28 October 2004

Introduction
[1] The present action of damages arises out of a serious road traffic accident on

5 October 1993 in which the two pursuers were passengers in a car driven by their sister, Mrs Agnes (Nancy) Wardrope. The latter was killed and both pursuers were injured. They now sue the next-of-kin of the deceased, cognitionis causa tantum, as first to third defenders, and formerly also sued the driver of the other vehicle. The action was raised in 1996. In 1997 a Minute was lodged on behalf of the first to third defenders admitting liability to make reparation to both pursuers. From then on, however, the action was sisted for long periods and little progress was made. No proof has yet taken place in respect of either pursuer's claim.

[2] In August 2003 the first to third defenders (hereinafter referred to as "the minuters") lodged a Minute contending that, by virtue of certain correspondence in 1998 and 1999, the claim at the instance of the second pursuer (hereinafter referred to as "the respondent"), had been settled extra-judicially and should therefore now be dismissed. Answers to that Minute were lodged on behalf of the respondent, and by interlocutor of 15 June 2004 a hearing was appointed to take place on the adjusted Minute and Answers. That hearing has now taken place before me, and I have heard submissions from counsel on both sides as to the proper construction of the correspondence in question, and as to its effect on the subsistence of the respondent's claim. Two issues in particular are raised for my decision, namely (i) whether the relevant correspondence constituted a binding contract for the extra-judicial settlement of the claim; and (ii) whether the respondent's initial settlement offer in correspondence was accepted by the minuters within a reasonable time. In that context, parties were in agreement that I could properly leave out of account the substantial lapse of time since the date of the relevant correspondence, and that I should simply determine the specified issues as if they had been expeditiously brought before the Court.

[3] By letter dated 16 December 1998, the respondent's agents wrote to those acting for the minuters in inter alia the following terms:-

"You will recall that in April last year, you submitted a Tender in relation to Sandra Rodgers in the sum of £10,000..... We discussed the Tender with our client and our advice to her and that of Counsel subsequently is not to accept the Tender.

Unfortunately this case has been somewhat halted in its progress and we are taking immediate steps to bring the case back to Court and to secure all of the outstanding information with a view to progressing the case. The substantial bulk of the work relates to Catherine Chisholm rather than Sandra Rodgers. .....

With regard to Sandra Rodgers' claim, as indicated, our position is that we are not prepared to accept the Tender. Effectively our claim comprises solatium ..., wage loss.... which we understand is £1700, .... services, as provided by her husband.... together with miscellaneous losses and expense.

Clearly the position since the Tender has changed in that liability is now admitted. We are anxious to try and get Sandra's case out of the way and she would be prepared to settle her claim in the sum of £15,000 plus expenses. Can you please confirm as soon as possible whether you would be prepared to settle her claim on this basis....

.... If the offer is not to be accepted and you wish to maintain the Tender, then our Edinburgh Agents will simply have the various reports prepared and lodged in process.

.... In the event that matters require to proceed, our Edinburgh Agents will enrol a specification of documents for recovery of Sandra Rodgers' entire wages records. We presently do not have these.

We have a previous CRU certificate indicating that there was nothing to be repaid by Sandra Rodgers and no doubt you may wish to obtain an up-to-date certificate."

[4] In February 1999, the minuters' agents wrote apologising for the delay in responding, and explained that the file had just been mandated to them following a change of agency. On 10 March 1999, the minuters' agents again wrote to the respondent's agents in the following terms:-

"Further to our letter of 19 February 1999, we now have our clients' instructions to agree settlement of Sandra Rodgers' claim at £15,000 in spite of the missing medical evidence and documentation to substantiate the loss of earnings.

This figure is inclusive of interest and is subject to our obtaining an up-to-date CRU certificate which has been applied for. Naturally we would also meet your reasonable costs in the circumstances. As soon as we have the CRU certificate we shall revert to you and in the meantime perhaps you would be good enough to let us have a note of your costs and outlays.

Settlement on this basis is without admission of liability on the part of Crowe Insurance Group or their insured."

[5] On 6 May 1999, the minuters' agents sent a further letter to the respondent's agents as follows:-

"We have now belatedly received the Nil certificate from our insurers allowing us to agree settlement at £15,000. We look forward to receiving a note of your costs and outlays to allow us to settle this claim."

Thereafter nothing happened until March 2000, when certain further communications took place. The minuters' agents queried the lack of a note of the respondent's expenses whereas the respondent's solicitors for the first time sought to dispute that the action had been effectively settled.

[6] In the foregoing circumstances, according to counsel for the minuters, a valid and enforceable contract of compromise was constituted by the letters of 16 December 1998 and 10 March 1999, failing which by these letters taken together with the minuters' letter of 6 May 1999. The action had accordingly been settled extra-judicially, and now fell to be dismissed. For the respondent, on the other hand, it was contended that no such contract had ever been concluded, first on the ground that the terms of the respondent's initial offer of 16 December 1998 had never been met by an unconditional acceptance, and in any event, second, because that initial offer had not been accepted within a reasonable time. There was accordingly no question of the action having been extra-judicially compromised, and the Court should therefore refuse the crave of the Minute and allow a proof before answer restricted to quantum.

The Parties' Submissions
[7] In a succinct and well-ordered presentation, counsel for the minuters considered each of the significant letters in turn. The letter of 16 December 1998, he said, contained a clear and unequivocal offer to settle the respondent's claim on a simple and straightforward basis, namely upon payment of £15,000 and expenses. The reference at the beginning of the principal paragraph to liability having been admitted was not part of the offer as such, but merely an accurate statement of the position which had existed since 1997. Significantly, the letter also bore to proceed on the understanding that a Nil CRU certificate was obtainable, and that the minuters would wish to take that step. Against this background, the letter of 10 March 1999 could be seen as a full acceptance of the respondent's offer. The middle paragraph concerning an up-to-date CRU certificate was no more than the author of the letter of 16 December 1998 had implicitly agreed and expected in advance, and was therefore not in the nature of a counter-offer. Esto it amounted to a suspensive condition, its intended effect was merely to delay the time for performance, and not to preclude the immediate formation of a contract. Similarly, the final sentence on the subject of liability did not preclude final consensus at that stage. In counsel's submission, it was merely a factual assertion akin to the one contained in the earlier letter. It happened to be wrong, which might owe something to the recent change of agency or to the non-availability of relevant files. More importantly, however, the subject-matter was merely ancillary or collateral to the narrowly confined scope of the accepted offer. Applying the tests of severability and relevance, that final sentence did not detract from the unconditional acceptance of the respondent's offer. It did not call for any action or further acceptance on the part of the respondent or her advisers, from whom no communication was received for approximately one year thereafter. On a proper construction of the relevant correspondence, therefore, the Court should hold that a binding contract of compromise was constituted by the letters of 16 December 1998 and 10 March 1999 alone.

[8] Counsel's secondary argument was that in any event the letter of 6 May 1999 constituted a full and final acceptance of the initial offer. It confirmed that the anticipated Nil CRU certificate had been obtained, thus purifying any suspensive condition introduced two months earlier. Significantly, this letter was silent on the issue of liability. The minuters' erroneous statement in their letter of 10 March 1999 could now be seen for what it was, and the conclusion of an enforceable contract of compromise was no longer in doubt. While counsel accepted that the terminology of the letter of 6 May 1999 was at least consistent with an understanding that contractual relations were being created at that date rather than in March, his primary position remained that it was the letter of 10 March 1999 which constituted a valid and qualified acceptance of the respondent's initial offer.

[9] As regards the period which elapsed between the initial offer and its acceptance, whether in March or May 1999, counsel for the minuters submitted that in the particular circumstances of this case it could not be said that a reasonable time for acceptance had been exceeded. In that context, he drew my attention to the slow pace of this claim from the outset, and listed multiple factors in support of his argument. These included, in particular, the lapse of time without significant progress since the initial accident and the raising of the action; the lapse of 20 months between the minuters' tender in April 1997 and the date of its rejection by the respondent on 16 December 1998; the broad and unvouched nature of the respondent's proposal for settlement; the fact that the offer envisaged that the minuters would have to take instructions from their insurance clients, and would also wish to obtain an up-to-date CRU certificate; the limited consequences of non-acceptance which were spelled out in the letter of offer; the absence of any reference in the correspondence to a pressing Court date or other material time constraint; the fact that the action was sisted for negotiations between 1997 and 2000; the interposition of the festive season shortly after the date of the respondent's offer; the change of agency affecting the minuters at around that time; and the respondent's failure to react to any of the minuters' letters in February, March and May 1999. Against that background, the initial offer of 16 December 1998 had clearly been accepted within a reasonable time, and the Court should be slow to take any different view.

[10] In an equally clear and well-argued reply, counsel for the respondent maintained that no contract of compromise had ever been concluded. Through her agents in the course of 2000, his client had repudiated any question of an extra-judicial settlement, returning the minuters' cheque for £15,000 tendered at that time, and on a proper construction of the key letters on which the minuters now relied it could be said with confidence that that repudiation was justified. There were, according to counsel, two principal reasons why no contract of compromise came into being in March 1999. First, the minuters' letter of 10 March 1999 fell to be regarded as a qualified acceptance and counter-offer, since beyond purporting to accept the two main elements of the respondents' initial offer it introduced two new and significant terms into the negotiations. At least one of these (concerning liability) had never been accepted by the respondent, and the minuters' further letter of 6 May 1999 could not alter that fact. Second, and in any event, the respondent's initial offer of 16 December 1998 had not been accepted within a reasonable time.

[11] Dealing with each of these reasons in turn, counsel focused attention on the important stipulations which were additional to (but closely connected with) the subject-matter of the respondent's offer. In the second paragraph, any bargain was expressly made "subject to" the minuters obtaining an up-to-date CRU certificate, and the contractual terminology used there was significant. More importantly, in the final sentence, any bargain was made conditional on there being no admission of liability on the part of the minuters or their insurers. So far as the CRU stipulation was concerned, counsel's primary position was that even if it did not qualify as a counter-offer requiring consent or acceptance on the respondent's side, it could not sensibly be understood as merely postponing the date for performance of an otherwise unconditional and effective contract. On the contrary, the obtaining of a Nil CRU certificate was self-evidently a precondition of the minuters' willingness to make payment of a principal sum of £15,000. Had any CRU certificate disclosed substantial benefits repayable by the minuters, the level of the principal sum payable to the respondent would inevitably have been affected. It could not reasonably be inferred from the correspondence that the minuters had unconditionally accepted an obligation to pay the respondent £15,000 irrespective of what any CRU certificate might disclose. On any view, therefore, the CRU stipulation was suspensive in nature, and on a proper analysis its inclusion precluded the formation of any binding contract at that stage. The earliest possible date on which the respondent's offer could have been accepted was accordingly 6 May 1999, when receipt of a Nil CRU certificate was confirmed.

[12] The final sentence of the letter of 10 March 1999 was, counsel submitted, of even greater significance. It clearly introduced into the negotiations a stipulation which, viewed objectively, called for action and agreement on the part of the respondent. The sentence could not just be ignored, as if inserted for no reason, and on any view it raised a matter of substance for the respondent to address. It bore to depart from the previous admission of liability which the respondent's agents had felt important enough to mention in their letter of 16 December 1998, and in practical terms that would have been seen as affecting, not only the legal position of the respondent herself, but also the position of her gravely-injured sister, the first pursuer. The supposed materiality or otherwise of such a stipulation was not the issue here, but rather the question whether the stipulation was of such a nature as to require action or acceptance by the original offeror. If it was, then a counter-offer had been made, and no concluded bargain could come into existence unless and until that counter-offer was met by an acceptance of its terms. This was, on a proper analysis, the situation here, and by the time the respondent repudiated the suggestion of a concluded bargain in the following year, the counter-offer had never been accepted.

[13] Finally, counsel for the respondent submitted that, in any event, the initial offer of 16 December 1998 had not been accepted within a reasonable time. That letter expressly called for a response as soon as possible; correspondence in early 1999 disclosed how quickly instructions were obtained from the minuters' insurers once the change of agency took place; and these considerations illustrated the sort of timescale which the Court should regard as reasonable in the present case. The minuters could not use a decision to change their own agents to extend the reasonable time available for acceptance of the initial offer; still less could they rely on the two months it took to obtain a current CRU certificate after 10 March 1999; and the apparent silence of the respondent's agents throughout 1999 could not be prayed in aid either. Accordingly, even assuming (contrary to counsel's primary argument), that the terms of the letter of 6 May 1999 constituted an unequivocal acceptance of the respondent's initial offer, that letter came several months too late to be effective.

[14] In support of their respective submissions, counsel referred me to the well-known principles governing the formation of contract by offer and acceptance. Since I did not understand the law in this area to be materially in dispute between them, the following brief summary may conveniently be given, together with a note of the illustrative authorities which were cited during the course of the debate:-

(1) To achieve consensus, an acceptance must meet the offer, although exact verbal correspondence is not required:- Gloag on Contract, 2^nd Ed., p. 39; McBryde, The Law of Contract in Scotland, 2^nd Ed., para. 6-88/9; Treitel on the Law of Contract, 11^th Ed. p. 19.

(2) No contract is concluded where the response seeks to vary the terms of the offer or introduces a new term or condition requiring the consent or agreement of the original offeror. In such circumstances, the qualified acceptance is in law treated as a counter-offer which must itself be accepted before a binding contract can come into existence:- Gloag, pp. 39ff; McBryde, paras. 6-95ff; Treitel, pp. 18/19; Chitty on Contracts, 29^th ed., para 2-030.

(3) The difficulty in any given case may lie in determining whether new terms contained in the response to an offer have that effect, bearing in mind that in certain situations the conclusion of a bargain may not be precluded. For example, there may be no counter-offer where an apparently new term merely stipulates what the law would have implied anyway; where it is in the nature of a mere request for indulgence; where it concerns the mechanics for performance of the transaction; where it is plainly collateral to, and severable from, the ambit of an unconditionally accepted offer; or where (in a case of acceptance by performance) a de minimis variation from the initial offer or order occurs:- Gloag, pp. 41ff; McBryde, paras 5-34 and 6-90ff; Treitel, p. 19; The "Master Stelios" 1983 1 Lloyd's 356; Rhodes v Boswell, 1993 SC 325; Irving v Hiddleston 1998 SC 759; and Lloyds v Twinn 2000, EWHC Admin. 308 (esp. at paras. 48/51).

(4) Against that background, the question is always whether, on a proper analysis of the relevant communications, the original offer is unconditionally accepted, as opposed to the parties effectively remaining at the stage of negotiation. In this context, the supposed materiality of a new term in the response to an offer is not determinative. What really matters is whether, viewed objectively, the new term is such as to require the consent of the original offeror as a pre-condition of a concluded bargain:- cf. Stobo Limited v Morrisons (Gowns) Limited 1949 SC 184; McBryde, para. 5-34.

(5) A new suspensive condition attached to an acceptance may have the effect of precluding the formation of a contract until that condition is purified. Alternatively, where a suspensive condition is agreed between the parties, it may possibly bar locus poenitentiae pending purification, or it may merely delay the time for some aspect of performance:- McBryde, paras. 5-35ff; McQueen & Thomson on Contract, paras. 3-56/7; The Consolidated Copper Company of Canada (Limited) & Another v Peddie & Others 1877 5R 393; and John G Murdoch & Company Limited v Greig 1889 16R 396.

(6) What is a reasonable time for the acceptance of an offer can only be determined by reference to the particular facts and circumstances of a given case. Where volatile commercial markets are involved, for example, a reasonable time may not exceed a matter of hours or days. Alternatively, it may be set by express stipulation. However, in the absence of such stipulation or special circumstances, an intention to permit considerably greater latitude may be capable of inference from the parties' communications and conduct, and from the whole surrounding circumstances:- Gloag, pp. 36/7; McBryde, paras. 6-47 and 6-51ff; The Glasgow & Newcastle & Middlesboro' Steam Shipping Co v Watson 1873 1R 189.

Discussion
[15] For convenience, I propose to consider the issues raised for my determination in a slightly different order. First, on the question of a reasonable time for acceptance, I am not persuaded that the period which elapsed between 16 December 1998 and even 6 May 1999 was so long as to preclude a valid acceptance of the initial offer. The action had been in court for a considerable period without noticeable urgency being shown by either party, and was currently sisted. The offer itself, dated just before Christmas, envisaged that the minuters would wish to take certain steps before acceptance. The respondent's agents (who had themselves only recently been instructed) made no complaint or protest when advised of the minuters' change of agency in February 1999, nor when they received the subsequent letters of 10 March 1999 and 6 May 1999. Indeed, even on 9 March 2000, the respondent's agents referred only obliquely to the passage of time, acknowledging their own fault in that context. Moreover, as it seems to me, the subject-matter of the principal correspondence did not call for any special degree of urgency. As was made clear on 16 December 1998, non-acceptance of the initial offer would merely lead to certain evidential preparations being made, and in addition it has to be remembered that the respondent's claim was relatively insignificant by comparison with the substantial claim of her sister, the first pursuer. As the nature of the initial offer demonstrates, the respondent's agents did not want to have to embark on detailed preparations unless they had to, and in my view their conduct thereafter implied a willingness to wait for what they hoped would be a compromise agreement in the fullness of time. In such circumstances, I am unable to agree with counsel for the respondent that there was anything in the correspondence, or in the surrounding circumstances, to restrict the reasonable time for acceptance of the initial offer to a period shorter than that which elapsed between 18 December 1998 and 6 May 1999.

[16] Second, turning to the legal effect of the second paragraph of the minuters' letter of 10 March 1999, I can at once reject the proposition that it amounted to a counter-offer requiring express acceptance on the respondent's behalf. On the contrary, the need to obtain an up-to-date (satisfactory) CRU certificate was expressly raised in the initial offer of 16 December 1998, and in my opinion that must be seen as part of the basis on which the initial offer proceeded. Accordingly, the minuters' letter of 10 March 1999 introduced no new term on this score. On the other hand, since there can in my view be no doubt as to the suspensive character of the second paragraph of the letter of 10 March 1999, the real question is whether the obtaining of a satisfactory CRU certificate should be seen as suspensive of any bargain (as the respondent maintained) or merely (as was contended for the minuters) of the time for performance. This issue is not altogether straightforward but, on balance, I have reached the conclusion that the former approach is to be preferred. The main reason for this is that the content of any CRU certificate would be liable to affect the level of the principal sum payable by the minuters' insurers to the respondent, and on an objective reading of the correspondence I cannot accept that the minuters were, at that stage, committing themselves to payment of a principal sum of £15,000 irrespective of what any CRU certificate might disclose. Significantly, in this context, the second paragraph of the minuters' letter of 10 March 1999 provides that "This figure..." (ie the principal sum- my underlining) "is subject to our obtaining an up-to-date CRU certificate...", and the following sentence is in the conditional tense. In these circumstances, I do not consider that any binding contract came into existence between the parties at a time when the "CRU" stipulation remained to be purified. In my opinion, the earliest date at which any binding contract could have been concluded was the date of the minuters' subsequent letter of 6 May 1999.

[17] This leaves for consideration the third issue canvassed during the debate, namely whether the final sentence of the letter of 10 March 1999 constituted a counter-offer which, by virtue of its subsequent non-acceptance, prevented any binding contract from coming into existence. The real problem for the minuters, as I see it, is that the relevant sentence was there at all. I am not prepared to accept that its inclusion served no purpose whatsoever, nor that it was so self-evidently a mistake that it could simply be ignored. On the contrary, that sentence appeared in the context of an initial letter of offer in which the recent admission of liability was expressly narrated as part of the justification for the respondent's proposal. Against that background, the only reasonable content which can in my view be given to the final sentence of the minuters' letter of 10 March 1999 is that of a counter-stipulation which, if accepted, would materially alter the previously-understood legal relations between the parties. Indeed, the inclusion of the sentence in question may also be thought to have had some material bearing on the legal relations between the minuters and the first pursuer, and in the whole circumstances I am unable to accept that any binding contract could have come into existence between the parties unless and until the "liability" stipulation was either expressly accepted by the respondent or expressly clarified as an error and (consensually) departed from by the minuters. So far as appears from the correspondence before the Court, neither of these things happened. The minuters left the stipulation in place without explanation or withdrawal, and it was never accepted on the respondent's behalf. I therefore conclude that the minuters' letter of 10 March 1999 constituted a qualified acceptance and counter-offer which effectively prevented any contract of compromise from being concluded between the parties in the course of 1999. In the following year, of course, the present dispute began to be focused in correspondence; the minuters' cheque for £15,000 was returned; and steps were taken to progress the action in court.

Decision
[18] For the foregoing reasons, I reject as unsound the minuters' insistence that the respondent's claim was effectively settled by compromise in 1999 and thus fell to be dismissed. It is not necessary for me to rely on any technical considerations of onus in this context (although I believe that onus to lie on the minuters), since the parties have invited me to dispose of this matter as a matter of construction of their correspondence in the prevailing circumstances disclosed during the debate. I shall therefore sustain the plea-in-law for the respondent in her Answers, repel the pleas-in-law for the minuters, and refuse the craves of the Minute. The matter will now be put out By Order for discussion of outstanding issues including expenses and further procedure.