NOTE (2)

McEwan v East Dunbartonshire Council
(Tender, etc.)

This application for a determination of the amount of compensation recoverable under Section 11 of the Flood Prevention (Scotland) Act 1961 did not proceed to proof because the applicants accepted a Tender by the respondents. An unfortunate and regrettable disagreement has, however, arisen as to the meaning of the tender, which made no explicit reference to a pre-application payment to account of the claim. The applicants have moved the Tribunal to grant decree reflecting their contention that the prior payment was not to be deducted from the sum specified in the tender. Having heard oral submissions, however, the Tribunal prefers the respondent’s view that the correct interpretation of the tender is that the prior payment falls to be deducted.

The tender (which was a second tender) was in the following terms:-

“Waddell for the Respondents stated and hereby states to the Tribunal that, without admitting liability and without prejudice to the Respondents’ rights and pleas, the Respondents tendered and hereby tender to the Applicants the sum of ONE HUNDRED AND FORTY THOUSAND POUNDS (£140,000.00) STERLING with their expenses to date, in full satisfaction and settlement of their claim.”

The acceptance read:-

“The Applicants hereby accept the sum of One Hundred and Forty Thousand Pounds (£140,000.00) Sterling with expenses as tendered by the Respondents in their Second Minute of Tender.”

The claim concerned damage to two warehouse units. It appears to have been accepted from the outset that the applicants were entitled to compensation under Section 11. It is a matter of agreement that they applied to the respondents for an interim payment of some £57,000 and that the respondents made an interim payment of £15,075. Subsequently, the parties having failed to reach agreement on the full amount of the claim, the applicants applied to the Tribunal for determination, under the jurisdiction conferred on the Tribunal by Section 11(4), of the question as to the amount of the compensation recoverable. In their application, they stated that they were seeking compensation of £165,145, a figure which they presented under three heads. The pleadings made no mention of the prior payment. After some earlier procedure, which included a hearing of arguments about the correct measure of compensation under the particular statutory provisions, the application was set down for hearing on 21 November 2005 and the relevant tender was accepted on 18 November. The respondents thereafter paid the applicants £124,925. The applicants subsequently enrolled a motion for decree for £140,000 less that payment. The motion also covered matters of interest and expenses, the resolution of which upon determination of the main part of the motion was essentially agreed.

At the hearing, the applicants were represented by Jonathan Brown, Advocate, instructed by Messrs Miller, Beckett and Jackson, and the respondents by Douglas Ross, Advocate, instructed by East Dunbartonshire Council. It should be recorded, firstly, that counsel were agreed that the Tribunal should rule on this disagreement, although it is perhaps a contract dispute over which the Tribunal has no specific jurisdiction, and the Tribunal was prepared to proceed on that basis; and secondly, that neither counsel advanced the position that the agreement to settle the compensation claim was vitiated by error or lack of consensus in idem. The Tribunal was simply asked to decide what the tender which was accepted meant – a payment of £140,000 in addition to the prior payment, or £140,000 less the prior payment – and thus either grant the motion for decree for £15,075 or refuse it.

Authority referred to

McKenzie v H. D. Fraser & Sons 1990 S. C. 311 (First Division)

Submissions

For the applicants, Mr Brown referred to the background as described above. He said that it was clear that the prior payment was in respect of compensation under the Act, although not necessarily under which of the heads the interim payment had been requested. The request for the interim payment had been accompanied by certain quantifications in relation to remedial work, value of the land and loss of amenity, but the interim payment had not been ascribed to any of the heads claimed. At no stage of the pleadings had there been any mention of the prior payment. An earlier tender of £126,000 had been rejected.

Mr Brown suggested that since the settlement was around the middle of the range of possible outcomes, there would not necessarily be double counting on the applicants’ approach. If the respondents were correct, it would have the curious result that if the applicants went to proof and obtained an award of, say, £127,000, they would not have beaten the tender. It was not for the applicants to look behind an unequivocal tender. Rather, it was for the respondents, if they wanted the prior payment to be set off, to make clear what they meant: they could have pled that there was an amount to be set off and/or tendered explicitly on that basis. There was no ambiguity in the tender.

For the respondents, Mr Ross drew particular attention to the terms of the correspondence in which the interim payment had been sought and paid. In their letter of 8 May 2002, the applicants’ solicitors had made clear that they were applying for ‘Interim Compensation’ and in the accompanying schedule twice referred to ‘Interim Payment To Account’. In their letter of 28 February 2003 accompanying the payment of £15,075, the respondents had used the expressions, ‘interim payment of compensation’, ‘this first interim claim’ and ‘assessment of your final claim for compensation’. It was plain that that was a payment to account against the full and final payment to be made either by agreement or under a decision of the Tribunal. ‘Interim payment’ to what? The minute of tender had to be read as a whole, the key being in the final words, ‘… in full satisfaction and settlement of their claim’. There was only one claim, for compensation under the Act. The words naturally meant that the claim was being settled at that amount, so that the interim payment to account of it was to be deducted. No implication was necessary. If the tender had been rejected, its figure was the figure which the applicants would have had to beat. Reference was made to McKenzie v H. D. Fraser & Sons, per L. P. Hope at 321, on the underlying principle that the purpose of a tender was to offer a specific sum with expenses so that, if accepted, the pursuer would be in the same position as if, at the date of the tender, he had obtained a decree for the amount tendered. On Mr Brown’s approach, they would have had to beat a figure in excess of £155,000.

Tribunal’s Consideration

There is a superficial attraction in the idea that if one tenders, or offers, a particular sum of money that is the sum which is to be paid. However, when the fact that an interim payment towards exactly the claim advanced in the litigation had been sought and paid, we are satisfied that that prior payment falls to be deducted, either as a matter of the natural meaning in the circumstances or in any event by necessary implication.

Mr Brown did not ask us to read the tender in isolation, and it seems clearly legitimate to read it in the context of obviously the claim itself but also the circumstances of the prior payment. These are surrounding circumstances, sometimes referred to as the ‘matrix of fact’, which it is legitimate to consider. When the terms of the claim as advanced to the Tribunal, i.e. without deduction of the interim payment to account, are considered, it is in the Tribunal’s opinion clear that the tender was of a figure to settle the claim, leaving the payment to account of the claim to be deducted. It seems clear that to beat the tender the applicants required to achieve a figure for the claim of in excess of £140,000, not £155,000, and that if the Tribunal fixed the amount of the claim at any figure less than £140,000 the applicants would (subject to any possible argument about timing and the effect of interest) have failed to beat it.

We appreciate that it was not necessarily clear under which heads of claim the interim payment was being made, but what is not in doubt is that it was all a payment to account of the same claim.

The main part of the applicants’ motion therefore fails. In that situation, it is agreed that no question of interest arises. The tender also of course carried expenses, and in the absence of any suggestion that these should be qualified at all, the tribunal will award the expenses of the application to the applicants. The second part of the motion, seeking certification of expert witnesses, was not opposed and will be granted. Further, the parties agreed orally at the hearing that there should be certification of the case as suitable for the involvement of junior counsel, and that also will be ordered.

This Note was issued with Order dated 7 March 2006

Member: J N Wright, QC

LTS/COMP/2004/03