OUTER HOUSE, COURT OF SESSION

 

 

 

 

 

 

 

 

 

 

 

 

OPINION OF LORD OSBORNE

in the cause

STEPHEN ANTHONY TENBEY

Pursuer;

against

STOLT COMEX SEAWAY LTD

Defenders:

MACGREGOR ENERGY SERVICES LTD

Third Party:

 

________________

 

 

Pursuer: Grant Hutchison; Thompsons

Defenders and Third Party: D. I. MacKay, Q.C.; Simpson & Marwick, W.S.

14 February 2001

[1] In this action, the pursuer seeks damages in respect of personal injuries said to have been sustained by him on or about 20 September 1997, when he was engaged in the course of his employment with the third party, as a rigger. The circumstances in which the pursuer is said to have been injured are set forth in Condescendence 2. As disclosed in a letter from the solicitors who originally acted for the defenders to the Deputy Principal Clerk of Session, dated 28 September 1999, the third party has confirmed the terms of an indemnity conceived in favour of the defenders, in consequence of which responsibility for the conduct of the litigation on behalf of the defenders has been assumed by the third party.

[2] Following the commencement of this action, it followed a normal course. On 9 October 2000 on behalf of the pursuer, there was lodged a minute, No. 18 of process, in which it was stated that the pursuer:

"offered and hereby offers to compromise the present action, and that for payment by the defenders to him of the sum of 15, 000 sterling, inclusive of interest to 9 October 2000", subject to certain stated conditions.

This minute for the pursuer had been intimated to the solicitors for the defenders, by letter dated 3 October 2000, which is part of the file of correspondence 6/2 of process. Following the lodging of the pursuer's minute, by letter dated 10 October 2000, the defenders' solicitors wrote to the pursuer's solicitors in the following terms:

"Thank you for your letter of 3 October. We have discussed your Minute with our clients. However, they are not prepared to offer your client 15, 000. They will, however, offer him 12, 000 plus the CRU and Court of Session expenses and a tender for that amount will be lodged and intimated by our Edinburgh office in early course".

Thereafter, on 19 October 2000, a minute of tender for the defenders was lodged in process, in which the defenders did indeed tender to the pursuer the sum of 12, 000 net of any liability which the defenders might have under Section 6 of the Social Security (Recovery of Benefits) Act 1997, together with the taxed expenses of process to the date thereof in full of the conclusion of the summons. By letter dated 17 November 2000, the solicitors for the pursuer wrote to the solicitors for the defenders in connection with certain other matters, with which I am not at present concerned, in which they observed, in connection with the possible settlement of the action that: "It might be that something over 20, 000 would be of interest but we cannot even say that at the present moment". That letter is part of 6/2 of process. There then followed certain inconclusive correspondence between the solicitors for the parties relating to the possible settlement of the action. On 30 January 2001 what was described as a minute of acceptance for the defenders of minute of offer to settle for the pursuer was lodged in process. It is No. 20 of process. In it the defenders purported to accept the offer by the pursuer to compromise the present action by payment by the defenders to the pursuer of 15, 000, inclusive of interest to 9 October 2000, on the conditions set forth in that offer. Finally, on 31 January 2001, there was lodged in process on behalf of the pursuer, as No. 21, what is described as a minute of withdrawal of minute for the pursuer, in which it is stated that the pursuer thereby withdrew the minute for the pursuer in the sum of 15, 000 sterling.

[3] On 2 February 2001 there came before me two motions, both of which were opposed. The first of these, enrolled on behalf of the defenders, was for decree in terms of minute of offer and acceptance thereof. The second, enrolled on behalf of the pursuer was to allow the minute of withdrawal by the pursuer of his minute of offer, No. 18 of process. Senior counsel for the defenders invited me to grant the defenders' motion and refuse the pursuer's motion. He drew my attention to the background, which I have just described, and also to certain correspondence which passed between solicitors around the time of the lodging of the minute of acceptance of minute of offer to settle and minute of withdrawal of minute for the pursuer. Thereafter he proceeded to make submissions on the law which he contended was applicable to the situation. He recognised that, under the ordinary law of contract, if an offer was refused, it fell. However the ordinary law of contract did not apply to judicial tenders, which were the subject of custom and usage peculiar to them. In particular, it was recognised that a tender properly so-called was open to acceptance at any time until decree was pronounced in the action concerned, unless it had been expressly or impliedly withdrawn. Implied withdrawal might occur in consequence of actions by the offeror, or a material change of circumstances, or if it had been made subject to a time limit which had expired. It was of course recognised that the present motion did not concern a tender properly so-called, but a pursuer's offer to settle. However, the custom and usage applicable to tenders fell to be applied to a pursuer's offer to settle.

[4] In developing his argument, counsel for the defenders' drew my attention to Taylor v Marshalls Food Group Ltd 1998 S.C. 841. In that case it had been held that the then Rule of Court 34A.6(2) was ultra vires. That rule had purported to provide for certain pecuniary consequences of failure to accept an offer to settle, in certain defined circumstances. Despite that decision, the use of pursuers' offers to settle had survived. Cameron v Kvaerner Govan Limited 1999 S.L.T. 638 showed that they still possessed significance in relation to matters of expenses. It had there been held that the absence of a specific Rule of Court authorising a minute by the pursuer containing an offer to settle did not render such a minute incompetent; further, any step which might clarify the position of a party in a reparation action, or limit the areas of dispute between the parties, or focus the issues between them more clearly, ought to be encouraged, and that such a minute was clearly identifiable as a document which might achieve those objects. In particular, it was made clear that such a pursuer's minute might be relevant in relation to the issue of whether an additional fee should be allowed on the basis of steps taken with a view to settling an action. Reference was also made to Laing v The Scottish Arts Council 2000 S.L.T. 338, at page 341, as demonstrating the circumstances in which a tender might be accepted, and to Sheriff Court Practice, Macphail, Second Edition, paragraphs 14.35 and 37, in relation to the practice regarding minutes of tender. In paragraph 14.44 of the same work it was made clear that a tender could be withdrawn at any time prior to acceptance. Furthermore, a tender made without any limit of time being stated within which it had to be accepted might become inoperative by reason of any important change of circumstances, without any formal withdrawal of the tender having been made. In the present case there had been no important change of circumstances which would have rendered to pursuer's minute of offer to settle inoperative. The issue of implied withdrawal of a tender, by virtue of an important change of circumstances, had been considered in Leask v City of Glasgow District Council 1993 S.L.T. 674. There the Court had held that a tender had been impliedly withdrawn by virtue of a material change in circumstances, in particular, the expiry of the deadline for acceptance, the indication on the pursuer's behalf that the tender was unacceptable, the physical withdrawal of the minute of tender from process and the pre-proof discussions between counsel. These factors, in combination, had been held to have made plain to the understanding of both parties that there was thereafter no tender capable of acceptance. Returning to the circumstances of the present case, while it was accepted that the letter of the defenders' solicitors, dated 10 October 2000, contained a statement to the effect that the defenders were not prepared to offer 15, 000 to the pursuer, such a refusal was a factor comparable with only one of the several factors which were held in Leask City of Glasgow District Council to have constituted an important change of circumstances. Counsel for the defenders went on to draw my attention to a number of other cases in which the issue of a material change of circumstances had been considered in relation to the validity of a tender. These included Sommerville The National Coal Board 1963 S.C. 666, and Bright v Low 1940 S.C. 280. Reference was also made to McMillan v Meikleham 1934 S.L.T. 357, as showing that the step of lodging a document in process was determinative, as opposed to the intimation of that step. In the present case, the defenders' minute of acceptance of the pursuer's offer had been lodged in process prior to the lodging of the pursuer's minute of withdrawal.

[5] Counsel for the pursuer invited me to refuse the defenders' motion for decree in terms of the minute of offer and acceptance. He submitted that the analogy sought to be drawn between tenders and pursuers' offers of the kind made here was flawed. The situation which had come into being in the present case had to be resolved by the application of the ordinary law of contract, which did apply to such matters. In any event, in the present case there had been a material change of circumstances before the defenders had purported to accept the offer. The result was that, on any view, the offer had not been available for acceptance when they had purported to accept it. It was submitted that certain rules had been recognised in relation to judicial tenders and the acceptance thereof, which derived from custom and practice. To the extent that they might differ from the ordinary law of contract, those rules were inapplicable to a pursuer's offer of the kind involved in this case, which required to be treated according to the ordinary law of contract. Not one of the cases cited by the defenders had involved a pursuer's offer to settle having being used to conclude a litigation.

[6] It was illuminating to consider the origin of pursuers' offers to settle. That had been the Act of Sederunt (Rules of the Court of Session Amendment No. 4) (Miscellaneous) 1996, which had come into force on 23 September 1996. A Chapter 34A had been added to the Rules of the Court of Session by that means. The scheme created by the Act of Sederunt by virtue of Rule 34A.2 provided for the circumstances in which a pursuer's offer to settle might be made and for the requirements of such an offer. Rule 34A.5 provided for the acceptance of such offers and Rule 34A.6 provided for the consequences of failure to accept an offer to settle. However, all of these provisions had been repealed by Act of Sederunt (Rules of the Court of Session Amendment No. 6) 1996, which came into effect on 14 November 1996. Thereafter, pursuers' offers to settle had had no standing conferred by the Rules of the Court of Session. It appeared that, nevertheless, they had continued to be used to a limited extent and in Cameron v Kvaerner Govan Limited they had received some level of judicial approval as being useful for the purposes there described. In this connection reference was made to paragraph 34A.1.1 of the commentary on the Rules of the Court of Session. Thus, if a pursuer's offer were to be made and accepted, the resulting situation was to be considered according to the ordinary law of contract. If the defenders contended otherwise, it was for them to show, which they could not, that a judicial settlement had been effected in the present case. In this connection reference was made to the Practice of the Court of Session, Maxwell, page 245. The distinction between a judicial settlement and other forms of settlement of an action was explained in Ramsay's Trustees v Souter (1864) 2M.891 by Lord Justice Clerk Inglis at page 892. The pursuer here had made an offer to settle, which had been rejected in the defenders' solicitors letter of 10 October 2000, in which a counter proposal to offer the pursuer 12, 000 had been expressed. Subsequently that sum had been formally tendered. Furthermore, the defenders repudiation of the pursuer's offer to settle had been made clear in a letter of the defenders' solicitors to the pursuer's solicitor dated 17 November 2000. In these circumstances, when the defenders had purported to accept the pursuer's offer to settle, that offer had not been available for acceptance. There were three factors which had brought about that situation, firstly the defenders' refusal of the offer on 10 October 2000, secondly their making of a tender in the sum of 12, 000 on 19 October 2000 and thirdly their repudiation of the pursuer's offer in the letter of 17 November 2000. Lawrence v Knight 1972 S.C. 26 showed the correct approach which had to be taken to an offer to settle, which was not a tender. In that case, the Court had held that an extrajudicial offer, made prior to the calling of a summons, had fallen because (1) the pursuer by calling the summons had impliedly intimated to the defender that it was rejected and by continuing with the various steps in the action had continued to intimate to the defender that it was unaccepted; (2) the pursuer had not accepted within a reasonable time; and (3) it would be unjust, as a matter of fair dealing, to hold that the defender was bound by it in the state of affairs existing at the date of the purported acceptance, which had been shortly before a proof in the action concerned. That case confirmed the opinion expressed in Gloag on Contract, Second Edition, at page 37, to the effect that an offer falls if it is refused, as had happened here. Further support for that view could be obtained from Wolf & Wolf Forfar Potato Company 1984 S.L.T. 100, where it had been held that, on the making of a qualified acceptance and counter offer, an original offer fell and that, on the failure to obtain the terms requested in the counter offer, the party concerned could not fall back on and accept the original offer. That view was also supported by Butler Machine Tool Company Limited v Ex-Cell-O Corporation (England) Limited [1979] 1 ALL E.R. 965. In all of these circumstances, treating the pursuer's offer to settle and the subsequent events in the light of the ordinary law of contract, the offer to settle had not been available for acceptance when the defenders had purported to do so. On the assumption that the defenders' submissions to the effect that the pursuer's offer to settle was to be equiparated to a tender, for which proposition there was no authority, was correct, it was submitted that, because there had been a material change of circumstances, the offer had not been available for acceptance when the defenders had purported to accept it. By that time the pursuer's offer had been refused and, following that refusal, there had been unsuccessful attempts to negotiate a settlement of the action for sums of money which were different from that indicated in the pursuer's offer. By the time of the defenders' purported acceptance of the pursuer's offer, there could have been no clear understanding on the part of both parties that there existed an offer capable of acceptance.

[7] In reply, Senior Counsel for the defenders argued that the pursuer's offer to settle and its acceptance amounted to a judicial settlement. The pursuer's offer had been lodged in process, which step made the document a public document cognisable by the Court. In any event, it was in the interests of justice that the same rules should apply to pursuers' offers as applied to judicial tenders. While it was true that the correspondence which had passed between the parties indicated that further negotiations had taken place following upon the making of the pursuer's offer to settle, the situation was no different from that which often occurred following upon the making of a judicial tender, which was then subsequently accepted.

[8] The system of pursuers' offers was established by that part of the Act of Sederunt (Rules of the Court of Session Amendment No. 4) (Miscellaneous) 1996 which added to the Rules of the Court of Session a Chapter 34A. As I understand it, that well-intentioned scheme was intended to encourage the early settlement of actions in which the summons contained a pecuniary conclusion. Where a pursuer's offer had been made, which had not been accepted, a sanction or penalty was attempted to be introduced by the provisions of Rule 34A.6.(2)(b). However, Chapter 34A of the Rules of the Court of Session was quickly seen to be flawed, as a result of which it was revoked less that three months after its introduction. The wisdom of that revocation was made quite clear in Taylor Marshalls Food Group, in which it was held that the Court did not have the power to provide for payment of such a sum as was specified in Rule 34A.6.(2)(b), the issue having arisen when it did by virtue of the saving provision contained in paragraph 3 of the Act of Sederunt (Rules of the Court of Session Amendment No. 6) 1996. Accordingly, following the enactment of the latter Act of Sederunt, which came into force on 14 November 1996, pursuers' offers were without specific authorisation in the Rules of Court. Perhaps surprisingly, sporadic use has continued to be made of such offers, although plainly there existed a school of thought to the effect that they had ceased to be competent, as appears from Cameron v Kvaerner Govan Limited. Nevertheless, in that case it was held that the absence of any specific Rule of Court authorising a minute containing a pursuer's offer did not render such a minute incompetent. Indeed Lord Bonomy decided that any step which might clarify the position of a party in a reparation action, or limit the areas of dispute between the parties, or focus the issues between them more clearly, ought to be encouraged and that a minute containing a pursuer's offer was clearly identifiable as a document which might achieve those objects. The context of that decision was an application on behalf of the pursuer for an additional fee in terms of Rule of Court 42.14, upon the basis that a factor to be taken into account in determining whether such a fee should be allowed was "the steps taken with a view to settling the cause, limiting the matters in dispute or limiting the scope of any hearing". While it is easy to see that a pursuer's offer could have significance in the context of an application under Rule 42.14, in relation to factor (3)(g), I have difficulty in envisaging what further usefulness such an offer might possess in relation to the matter of expenses, in the event of it not being accepted by a defender. In normal circumstances, the issue of expenses in a litigation involving a pecuniary conclusion will be determined in the light of the sum ultimately awarded and the amount of any tender which may have been made. In the absence of a tender, it is difficult to see what significance a pursuer's offer would have, beyond that which I have recognised and the giving to the defender of an indication of the pursuer's position generally. In all of these circumstances, my conclusion is that a pursuer's offer cannot properly be equiparated with a tender, as recognised in our law and practice. It follows from that conclusion that any law and practice which may be specifically applicable to the system of judicial tenders, distinct from the ordinary law of contract, cannot properly be regarded as applying to a pursuer's offer. In this situation, in my opinion, a pursuer's offer, which could, of course, if accepted, result in a binding contract to settle a litigation on particular terms, is to be treated simply as an offer to which the ordinary law of contract would apply. Although in the arguments before me the position of counsel for both parties was that there did exist a body of law and practice applicable to the system of judicial tenders, distinct from the ordinary law of contract, I have some doubts about the correctness of that position, based upon what was said by Lord Justice Clerk Aitchison in Bright v Low. However, in the circumstances of this case, it is not necessary to decide the question.

[9] Having reached the foregoing conclusions, I now consider the effect of the application of the ordinary rules of the law of contract to the pursuer's offer in the circumstances of this case. As I understand it, there is no doubt about the law as regards the effect of the refusal of an offer. The matter is put in this way in Gloag on Contract, Second Edition, at page 37:

"An offer falls if it is refused. If the refusal is not peremptory, but combined with a request for better terms, the general construction is that the offer is gone, and that the party to whom it was made, on failure to obtain the terms he requests, cannot fall back on an acceptance of the original offer".

Lawrence v Knight appears to me to be an example of the operation of that principle in relation to an extrajudicial offer of settlement, which had impliedly been rejected by the pursuer. The same principle was applied outwith the context of litigation in Wolf & Wolf v Forfar Potato Company. Turning to the circumstances of this case, as revealed in the correspondence, 6/2 of process, it is quite clear to me that the pursuer's offer to settle at 15, 000 on the conditions there described, which the defenders have purported to accept, was refused on their behalf in their solicitors' letter of 10 October 2000, the terms of which I have already quoted.

[10] In my view, that letter contains a clear refusal of the pursuer's offer, in association with the making of a counter offer. As matters progressed, in their letter of 17 November 2000 the pursuer's solicitors made it quite clear that they regarded the original pursuer's offer as dead when they said: "It might be that something over 20, 000 might be of interest but we cannot even say that at the present moment". Accordingly my conclusion is that when the defenders purported to accept the pursuer's offer by lodging their minute of acceptance on 30 January 2001, that pursuer's offer was no longer available for acceptance. In this situation I shall refuse the defenders' motion for decree in terms of the pursuer's minute of offer and acceptance thereof.

[11] Upon the assumption that I might be wrong in declining to equiparate the pursuer's offer in this case with a formal judicial tender, I now proceed to consider the situation on the basis that the two can properly be equiparated. Once again, I do not think that there is any doubt about the legal principles which must be applied. It is interesting to note that, in Bright v Low, Lord Justice Clerk Aitchison considered that the ordinary rules of law as regards offer and acceptance were applicable to a judicial tender. He there quoted Lord President Inglis in Macrae Edinburgh Tramways Company (1885) 13 R. 265 at page 269 where he said:

"It may, in my opinion, as a general rule in the law of offer and acceptance, be stated that, when an offer is made without a limit of time being stated within which it must be accepted, it may become inoperative by reason of any important change of circumstances, without any formal withdrawal of the offer being made".

In Bright v Low a judgment by the court of first instance was held to involve so material a change of circumstances that, after the judgment, an earlier tender could no longer be regarded as operative, although not formally withdrawn. In Sommerville The National Coal Board, the principle was applied in a situation in which the pursuer in the action had died prior to the acceptance of a tender made before his death. The death, which had extinguished a claim for further loss of earnings, which was a material element in the claim, had brought about a material change in circumstances, in consequence of which the tender no longer remained operative. Once again in Leask v The City of Glasgow District Council the principle was applied, the Court holding that there had been a material change in circumstances where the deadline for acceptance of the tender had expired, there had been an indication on the pursuer's behalf that the tender was unacceptable, the minute of tender had been physically withdrawn from the process and that there had been pre-proof discussions between counsel concerning the settlement of the action.

[12] Looking at the circumstances of this case, as revealed in the correspondence to which I have already referred, it is plain that the pursuer's offer was declined and that there followed inconclusive negotiations for the settlement of the action on a basis different from that advanced in the pursuer's offer. In my opinion, having regard to the clear refusal of the pursuer's offer by the defenders and the indication in the subsequent correspondence that that offer could not be the basis for the settlement of the action, particularly in the letter by the pursuer's solicitors of 17 November 2000, I am persuaded that, prior to the purported acceptance by the defenders of the pursuer's offer, there had occurred a material change in circumstances which rendered that offer no longer available for acceptance. Accordingly, on this basis also, I consider that the defenders' motion must be refused. Having regard to the conclusions which I have formed, the pursuer's motion will be refused as unnecessary.