Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION

[2017] CSOH 24

A61/14

OPINION OF LADY STACEY

In the cause

CHRISTOPHER BRITS

Pursuer

against

KILCOYNE & CO

Defenders

Pursuer:  Grahame QC, McGregor;  Digby Brown LLP

Defenders:  Paterson;  Clyde & Co

16 February 2017

[1]        I heard a procedure roll discussion in which Ms Grahame QC for the pursuer moved her first plea in law, that the defenders’ pleadings relating to waiver are irrelevant and should not be remitted to probation.  Mr Paterson for the defenders opposed that motion and sought a proof before answer. 

[2]        The background to the case is that the pursuer suffered an accident at work on 9 April 2009.  He instructed the defenders, a firm of solicitors, to raise an action for damages.  They failed to raise any such action by 9 April 2012, thereby missing the triennium.  Shortly afterwards the pursuer instructed a new firm, Digby Brown.  The present action is by the pursuer against his former solicitors for loss caused to him by their failure to raise an action in time. 

[3]        The averments to which the pursuer’s first plea in law are directed are found in answer 3.  In that answer, the defenders admit that they were instructed to pursue a personal injury claim against the pursuer’s former employers.  They admit that when an action was raised, after the triennium, by the pursuer’s new solicitors, the employers took a plea of time bar.  They admit that that having been done, a telephone discussion took place between a representative of Digby Brown and a representative of the defenders’ insurers.  They admit that during that conversation there was a discussion about the merits of a plea under section 19A of the Prescription and Limitation (Scotland) Act 1973 which had been made by the pursuer.  They admit that it was agreed that its prospects of success were poor.  The defenders then make averments that they do not know nor admit the precise circumstances of the pursuer’s accident.  They go on to make positive averments that on 26 April 2012, Mr Hotson, representative of the insurers of the employers sent an email to Digby Brown.  He stated in that email that his client would “not be taking the time bar defence”.  The defenders aver that ex facie that email is an unequivocal waiver of the employers’ right to plead a limitation defence, upon which the pursuer was entitled to found in the pursuit of his claim.  The defenders aver that the pursuer did not do so and instead pled a case under section 19A of the Prescription and Limitation (Scotland) Act 1973.  No reference was made by the pursuer to Mr Hotson’s email.  The defenders aver that the pursuer failed to plead that the email constituted a waiver of the employers’ right to plead a limitation defence.  They aver that that failure was unreasonable.  They state that it broke any causal connection that existed between the defenders’ failure to raise proceedings prior to 9 April 2012 and any loss sustained by the pursuer.  They aver that esto the causal chain was not so broken, by not pleading waiver the pursuer failed to mitigate his loss.  The defenders aver that Digby Brown did not tell their insurers about the terms of Mr Hotson’s email.  In those circumstances, they aver that the insurers agreed that if the pursuer settled his claim with his former employers, the defenders would not argue that he had failed to mitigate his loss by not insisting on his section 19A plea. 

[4]        The pursuer’s pleadings in response to the pleadings from the defender admit the existence of the email and its terms.  The pursuer argues that the email does not amount to an unequivocal and irrevocable waiver of the employer’s right to plead a limitation defence. 

[5]        Counsel for the pursuer submitted that the defenders’ averments were not sufficient to allow them a proof on the existence of an unequivocal and irrevocable waiver.  She noted that their averments did not include the word irrevocable and she argued that that was necessary.  She turned firstly to the case of Gordon v East Kilbride Development Corporation 1995 SLT 62 in which Lord Caplan sitting in the Outer House stated as follows:

            “Prior to the commencement of the action there was an exchange of correspondence between the pursuer’s solicitors and the defenders’ insurers.  The discussion before me on procedure roll centred on the effect of this correspondence (which is admitted by both parties).  On 17 August 1988 the pursuer’s solicitors wrote to the defenders intimating that the pursuers had a claim.  Although the amount of the claim was not specified some features of the pursuer’s loss were set out.  It was recommended that the letter be passed on to the defenders’ insurers.  The letter was apparently passed on to these insurers and on 22 September 1988 they wrote to the pursuer’s solicitors enquiring ‘entirely without prejudice’ when the pursuer returned to his employment.  …They said that they were investigating the matter and were unable to comment on liability at that time.  …On 3 February 1989 the insurers’ claim manager wrote to the pursuer’s solicitors… as follows:  ‘In the interim we confirm we have no objections for you carrying out the inspection.  However we would point out to you that liability in this case is not in dispute.’” 

The reply from the pursuer’s solicitor was in the following terms:

“Thank you for your letter of 3 February.  We are pleased to note that liability in this case is not in dispute.  In the circumstances we see little point in proceeding with our inspection of the machine at this time.”

[6]        In June 1989 the insurers made a payment of interim damages and correspondence between the solicitors and the insurers continued in 1990 with the solicitors seeking further interim payments and reminding the defenders’ insurers that they had admitted liability. 

[7]        The pursuer gave details of the correspondence in his pleadings.  He argued that the letter of February 1989 constituted a unilateral obligation by the defenders which removed their entitlement to dispute liability.  He averred that he had desisted from making certain enquiries including inspecting a machine and precognoscing witnesses because of the admission of liability. 

[8]        The defenders pled that the letter was written in the course of discussions carried out with a view to settling the claim.  As settlement did not happen, the defenders wished to proceed with the court action and they pled in the case that the pursuer’s averments relating to unilateral obligation and personal bar should be excluded from probation as irrelevant. 

[9]        The argument for the defenders was that any admission of liability was plainly made in the course of negotiation for settlement and should accordingly be excluded from probation.  Counsel for the pursuer argued that the statements were not part of any negotiation proposals but rather preceded any entry into negotiations.  He argued that the admission of liability was binding on the defenders.  He argued that it could be regarded as a unilateral contract or a waiver of the right to dispute liability.  In any event it was a representation which could give rise to personal bar. 

[10]      His Lordship decided that our law accords a measure of confidentiality to admissions or concessions that may be made by parties in the course of abortive negotiations preceding litigation.  Such material cannot generally be referred to or founded on in the subsequent litigation.  He decided that the theory is that these admissions are not meant to be absolute in their terms but must be taken as qualified.  There is a public interest in giving parties an opportunity to negotiate freely without fear that their representations could later be used against them to their prejudice.  He noted that if a party wants a written communication to be regarded as part of a negotiation process this can be signified by the use of the phrase “without prejudice” or some other formula. 

[11]      His Lordship decided that the admission was offered gratuitously and was not tendered as being conditional on any particular response by the pursuer.  He therefore did not regard the admission of liability as attracting the protection available to communications which are part of a negotiation process.  However, his Lordship went on to state as follows: 

            “However my view on that matter leaves open the question of just what effect the admission had.  I do not think that in admitting liability the insurers were intending to bind their clients to an irrevocable contractual commitment.  One has to look at the whole background circumstances.  The pursuer had not even quantified his claim nor was any information on the prognosis for the pursuer’s injuries available.  It was conceded by pursuer’s counsel that if the defenders had admitted liability in their pleadings after litigation had begun they could have withdrawn such admission by way of adjustment before the record closed.  If the pursuer is correct in suggesting that the admission is equivalent to an irrevocable contractual commitment, then even if the pursuer’s injuries had proved more serious than anyone could have anticipated… the defenders could not have modified their stance on the question of liability.  If a new witness had become available then likewise they could not have withdrawn their admission.  I do not think that it can be inferred that the defenders’ insurers were intending to bind the defenders contractually to the pursuer.  At the time when they made their admission they were expecting no consideration in return.  Whereas a party can enter into a gratuitous obligation I do not consider it likely that the insurers intended to contract such an obligation when I view their letter against the whole background circumstances.  In my view the insurers were not offering a contractual commitment but were merely representing the posture the pursuer might expect them to take with regard to his claim.  They did not either expressly or by implication preclude themselves from changing their mind.  It is difficult to see why the insurers would have intended to commit themselves to a degree different from what would have arisen had they reserved their admission until stated in initial defences after the action had begun… Like any extrajudicial admission the admission contained in that letter would not be conclusive in the subsequent litigation but may have to be explained away. 

I do not regard the letter of 3 February 1989 as incorporating a waiver.  A waiver is the giving up of a right.  But it is more than that, for it generally involves the irrevocable abandonment of the right.  The pursuer argues that the defenders have waived their right to dispute liability.  For the reasons I have already detailed I do not consider that it was the intention of the insurers to enter into an irrevocable commitment.  Whereas they were prepared to disclose their hand on the question of liability they had no particular reason for giving the kind of commitment the pursuer seeks to establish.  Indeed the pursuer’s solicitors themselves appear to acknowledge the qualified nature of the admission.”

[12]      Counsel argued that there were parallels with the current case.  The defenders averred that Mr Hotson stated in an email that his clients would not take the time bar defence, but they did not aver that that was an unequivocal and irrevocable abandonment of his right.  What he said happened before litigation commenced.  No settlement was achieved and his clients did take the time bar point once the action was raised.  Counsel argued that this was similar to an extra judicial admission, and was not binding.

[13]      The next case to which counsel made reference was of James Howden & Co Limited v Taylor Woodrow Property Co Limited 1998 SC 853.  That case concerned a contract between the parties for development of property.  The court found, with an approving reference to the case of Gordon referred to above, that a waiver is the irrevocable abandonment of a right.  The court further decided that it was necessary for the other party to establish that they conducted their affairs on the basis that a waiver had been made, but it was not necessary for them to aver prejudice. 

[14]      Counsel then referred to the case of Van Klaveren v Servisair UK Limited 2009 SLT 576.  The pursuer had raised an action of damages against his employers for personal injuries following an accident at work.  Prior to the commencement of the action there had been an exchange of correspondence between the solicitors and the defenders’ insurers in the course of which the insurers admitted liability for the accident.  The pursuer sought a restriction of proof to quantum and the defenders successfully argued that the letter relied on disclosed a mere extrajudicial admission and was not a binding contract.  At first instance, the court had held that the admission was binding but in a reclaiming motion the Extra Division held that the letter amounted to a mere extrajudicial admission which might be withdrawn by the defenders at any time prior to the closing of the record:  the terms of the letter were exactly what would be expected for an extrajudicial admission.  There was neither a suggestion that it was an offer requiring acceptance nor was there any wording to suggest that the defenders were undertaking a binding obligation to pay damages;  the rule that any admission of liability made before the parties’ positions were finally set out had to normally be provisional, open to modification if new material emerged, supported the court’s construction;  in the ensuing correspondence, nothing was said by the pursuer’s representatives that could reasonably be construed as an acceptance of any offer that might have been contained in that letter but instead focused on questions of quantification of the pursuer’s loss;  and the letter left open two critical matters, namely the assessment of damages and expenses.  At page 578 the court quoted the textbook Walker and Walker, The Law of Evidence in Scotland at pages 28 to 29 as follows:

“An extrajudicial admission, when proved, does not preclude the party making it from stating a case which contradicts it.  Its probative effect depends upon its terms and its importance in relation to the facts in issue in the cause, and to some extent on whether the cause is civil or criminal.  In a civil cause the party who made the admission is entitled to establish that it was made for some secondary reason and was not true, and the whole circumstances in which it was made are relevant to qualify or explain its terms… it is thought that an admission shown to have been made under a mistake in view of the facts may be of little importance, if the true facts are established.”

[15]      The court then went on to refer to the case Gordon referred to above and at page 579 stated as follows: 

            “We agree with those statements of the law.  An extrajudicial admission of liability may have contractual force, but for that to occur the admission must be constituted either by a bilateral agreement or by a unilateral undertaking that is intended to bind the party giving the undertaking.  If an extrajudicial admission does not have contractual force, it may be withdrawn at any time prior to the closing of the record.  This rule has an obvious rationale.  An extrajudicial admission is made in the course of the preparation and presentation of the parties cases.  At that stage the facts have not been conclusively determined, and investigation may disclose additional information which indicates that the existing view of the facts is incorrect.  Similarly, the opinion of a party's legal advisors on the law can change; that may occur as a result of the decisions in other court cases or may simply be the result of reflection on the case which results in the modification of the legal advisors’ views.  In a similar fashion, expert opinions may change as the case develops.  In these circumstances it would be unreasonable to hold a party to an admission made at a relatively early stage in the case, before it had been fully investigated and before the other party’s final position was known.”

The court went on to say, at paragraph 8 as follows:

            “Moreover, in relation to admissions made in pleadings before the closing of the record, the same rule applies.  The law on this matter is stated in Dickson on evidence at paragraph 282: 

‘It is only those admissions to which a party commits themselves in a closed record, or by a formal judicial admission of the nature above described, which are conclusive against them.  Admissions made in defences, but retracted in the answers to the pursuer’s condescendence, were held not to be conclusive, although the circumstance that they had been made and retracted might be used against the party, and might be material, if not satisfactorily explained.’

If an admission in an open record is not conclusive, the position of an extrajudicial admission would appear to be a fortiori.” 

[16]      At paragraph 9 the court said as follows: 

            “Parties can, of course, agree to settle a case, in whole or in part, and in doing so they can agree that liability will be admitted by the defender.  In Scots law, differing from the common law systems, it is also possible for a defender to undertake a unilateral obligation not to contest liability.  The leading case on unilateral obligations is Morton’s Trustees v The Aged Christian Friend Society of Scotland.  The relevant principles were explained by Lord Kinnear as follows (at (1899) 2F page 85)

‘If a promise is intended… as a final engagement it is binding, but it is not binding if it is a mere expression of a probable intention which the promisor might or might not fulfil.  It is a familiar doctrine in the law of Scotland, differing in that respect from the law of England, that an obligation is binding although it may not proceed on a valuable consideration, or may not be expressed in a solemn form, such as a deed under seal.  What is necessary is that the promisor should intend to bind himself by an enforceable obligation and should express that intention in clear words.’

The requirement that the intention of the promisor to bind himself should be expressed in clear words is plainly important, because a unilateral obligation is normally gratuitous and a clear intention must be shown if a gratuitous obligation is to be undertaken.  That view was also accepted by Lady Paton in Ballast Plc v Laurieston Properties Ltd at [2005] CSOH paragraph 141.  If, however, parties reach a binding agreement that the defender admits liability, or if the defender enters into a binding unilateral promise to the same effect, that agreement or obligation is binding, and there is no room for the principle that an extrajudicial admission may be withdrawn at any time.”

[17]      Counsel for the pursuer argued that the averments made by the defenders were insufficient to allow them to prove that the statement by the defenders’ insurer was binding. 

[18]      Counsel for the defenders argued that a proof before answer should be allowed on the pleadings as they stood.  He argued that his pleadings were clear as the term “waiver” implied that it was both unequivocal and irrevocable.  He noted that the defenders in this case had two arguments, relating to causation firstly and secondly to failure to mitigate loss.  He argued that he had sufficient pleadings and that it was necessary for the court to hear about the circumstances in which the statement was made before the court could decide that it was not an unequivocal and irrevocable statement.  He referred to The Law of Contract in Scotland, McBryde paragraphs 2515 to 2520.  He argued that the background picture in which the court would discover the context in which the words were uttered was of importance.  He said that the modern authority on waiver was the case of City Inn Ltd v Shepherd Construction Ltd 2011 SC 127 and in particular paragraphs 67, 70, 71, 73 and 74.  He also referred to the doctrine of personal bar and referred me to the book on that subject by Blackie and Reid in particular paragraphs 38 to 315 and 1935.  He referred also to the case of Regus (Maxim) Ltd v Bank of Scotland Plc 2013 SC 331 at paragraph 37.  He made passing reference to the case of Royal Bank of Scotland v Carlyle 2015 SC 93.  As I understood counsel, his point in referring me to all of these cases was to show that the court should hear evidence before it decided whether what happened in the current case amounted to either a unilateral promise or waiver.  He argued that what happened in this case was not an admission as in an admission of liability, but rather was a statement.  He reminded me of the well-known case of Jamieson v Jamieson 1952 SC(HL) 44,while acknowledging that case was usually referred to by pursuers, arguing that it was necessary that I hold that his pleadings could not bear the implication which he sought before I should exclude them from probation. 

Decision
[19]      I prefer the argument for the pursuer.  As a matter of pleading, the defender has stated that the insurer for the former employers made an extra judicial statement that he would not take a plea of time bar.  He then proceeded to take that plea.  I have found the opinion of Lord Drummond Young in the case of Van Kalveren to be of particular assistance.  It seems to me that counsel for the pursuer is correct to argue that the pleadings state that the statement was made by the insurer at an early stage of the action. The pleadings only state that it was an extra judicial statement of intention and do not offer to prove that which is required, which it was either unilateral promise or a waiver of the insurer’s clients' rights. 

[20]      The difficulty for the defenders is that they have averred all that they can aver about the statement that was made by Mr Hotson:  he indicated at an early stage, extra judicially, that his client, that is the firm he insured, would not take the plea of time bar.  He then changed his mind and the plea was taken.  The authorities show that in those circumstances he was entitled to act as he did.  There are no averments that support a plea that the right to take that plea was waived.  

[21]      Consequently I will uphold the first plea in law for the pursuers and delete from probation the averments in answer 3.