Scottish Sheriff Court Decisions

SHERIFFDOM OF NORTH STRATHCLYDE AT GREENOCK

 

[2016] SC GRE 47

Judgment of

W.M.D. MERCER, Advocate, Sheriff

in causa

DWS

Pursuer;

against

RMS

Defender:

Act: Malcolm, Advocate

Alt: S.E. Bell, Advocate

 

Greenock, 29 March 2015

The Sheriff, having resumed consideration of the cause, makes the following findings in fact:

1.   The parties are designed in the instance. They were married on 12 August 2005. They have one child aged seven years.

2.   In August 2012 the pursuer raised an action of divorce against the defender.

3.   Parties had tried unsuccessfully for two years to negotiate a fair division of the matrimonial property.

4.   The parties’ marriage has broken down irretrievably.

5.   The pursuer instructed Mr C of P & P LLP, solicitors (‘P&P’).

6.   The defender instructed two solicitors, latterly Mr Y of P, P, N & W, solicitors (‘PPN&W’).

7.   Proof was set down for April 2013. This was discharged due to valuations of investment property not being available.

8.   On 10 June 2013 Mr C and Mr Y met to discuss the case.

9.   By letter dated 19 June 2013 Mr C wrote to PPN&W ‘without prejudice.’  He was concerned that parties had inadequate information in advance of proof.

10. By letter dated 15 August 2013 Mr C again wrote to PPN&W. He requested further information of Mr Y.

11. By e-mail dated 23 August 2013 Mr C told Mr Y that Birmingham Midshires had ‘given a positive response to DWS’s application for transfer of equity’.

12. He detailed what Birmingham Midshires would accept and what DWS would agree to.

13. Mr C and DWS discussed a broad proposal. DWS would allow his name to remain on the standard security and the defender would organise funds and a transfer into her name.

14. RMS is self-employed. She could raise loan funds of £35,000 in her own right.

15. The matrimonial home had borrowings of £135,000, the investment properties £173,000.

16. RMS was receiving income from the investment properties. She used that income to service her debt.

17. On 26 September 2013 Mr Y telephoned Mr C. They discussed the proposal. RMS would transfer her interest in the investment properties to her husband for no consideration. He would transfer his interest in the matrimonial home to her.

18. By letter dated 26 September 2013 Mr C sought RMS’s valuation of and equity in the matrimonial home and investment properties.

19. Said letter proposes: ‘If your client is willing to transfer her interest in the various investment properties he is willing to allow the matrimonial home to remain in joint names and subject to the existing mortgage facility on the strict understanding he will convey his interest to the property for no consideration once your client secures his release from the mortgage.’

20. Said letter continues: ‘He will need an undertaking that she will indemnify him in relation to any cost that may be incurred by him in relation to his continued obligation to Birmingham Midshires.’

21. Said letter concludes: ‘We also insist on agreeing a reasonable timescale for his release. At this stage [DWS] is willing to remain on the mortgage product for at least twelve months or so and possibly longer.’

22. Said condition had not previously been proposed between parties. It is a material condition in the contract.

23. Mr Y obtained counsel’s Opinion on Mr C’s proposal.

24. On 21 October 2013 at Greenock Sheriff Court the divorce case called for a pre-proof hearing.

25. On the morning of 21 October 2013 Mr Y telephoned RMS. They discussed the proposal and Counsel’s Opinion.

26. During said conversation RMS instructed Mr Y to agree to the transfer of properties as proposed by Mr C in his letter of 26 September 2013.

27. RMS did not instruct Mr Y as regards a reasonable timescale for DWS’s release from the Birmingham Midshires mortgage.

28. By File Note dated 21 October 2013 Mr Y noted his instructions. He did not ask RMS to confirm these instructions in writing.

29. Mr Y approached Mr C before the court sat. He suggested that the proof be discharged. He said he had instructions to settle the case as set out in the letter of 26 September 2013.

30. Mr C did not agree to discharge the proof.

31. Mr C was surprised at the defender’s change in position.

32. Mr C wanted to discuss what had been agreed and how matters should proceed. He had questions about how and when the transfer would go ahead. He wanted to sort out the ‘finer details’.

33. Mr Y asked Mr C to write to him to record heads of agreement.

34. The pre-proof hearing was continued one week, to 28 October 2013.

35. At this stage no Minute of Agreement giving effect to the proposed settlement had been drafted.

36. On 22 October 2013 Mr C faxed PPN&W. Said fax did not agree a reasonable timescale for DWS’s release.

37. Witnesses and the shorthand writer for proof were cancelled.

38. RMS changed her mind about settlement. She told Mr Y she no longer wanted to settle the action.

39. By fax dated 25 October 2013 Mr Y intimated he was withdrawing from acting because his client was not accepting advice.

40. No timescale for DWS’s release from the Birmingham Midshires mortgage was agreed between parties.

 

Finds in fact and in law that parties’ solicitors did not agree an essential term of the contract of compromise.

 

THEREFORE SUSTAINS the seventh plea in law for the defender, REPELS the fifth plea in law for the pursuer, REFUSES decree of declarator and implement, CERTIFIES the cause as suitable for the employment of junior counsel and quoad ultra RESERVES all questions of expenses.

 

NOTE

Introduction

[1]        This is a preliminary proof on whether this divorce case was compromised by solicitors by written offer dated 26 September 2013 and oral acceptance the following month. Evidence was led on 28 and 29 January 2015 and submissions on 17 February 2015. Miss Malcolm, Advocate appeared on behalf of the pursuer (the husband) and Mr Stephen Bell, Advocate on behalf of the defender (the wife).

 

Competency of Proceedings

[2]        Normally where dispute arises as to whether action has been compromised a Minute and Answers are lodged. The Sheriff may then dispose of the matter on the admitted facts: Macphail, Sheriff Court Practice, 3^rd ed., paragraph 14.70. Such procedure is to establish and resolve matters plainly and quickly: Welsh v Dyce & Others [2009] CSIH 102. If the matter cannot be determined proof or debate may be necessary: Dixon v Van de Weterfing 2000 GWD 12-409.

[3]        In the present case craves, averments and pleas in law dealing with this matter have been amended into the pleadings. Is such procedure competent? In NB Railway Co v Bernards Ltd (1900) 7 SLT 329 the Lord Ordinary held that “the form of procedure to be adopted was within the discretion of the court.” Parties submitted the court should proceed on that basis. That appears a sensible approach. Pleadings sufficient to focus issues exist. Progress should be made and “churn” avoided. I agreed to proceed on the amended Record and not order a separate Minute and Answers.

 

Preliminary Objection to Admissibility

[4]        Almost at the outset of proceedings counsel for the defender objected to the admissibility of evidence of oral acceptance of the contract. Having heard submissions I reserved judgment and heard this evidence under reservation of all questions of admissibility.

 

Submissions on behalf of the Defender

[5]        Counsel for the defender submitted the pursuer seeks to prove a contract for the transfer of heritage which requires writing for its constitution: Requirements of Writing (Scotland) Act 1995 section 1 and section 2(a)(i). Binding, submitted counsel, was the Inner House case of Cook v Grubb 1963 SC 1 where a claim for personal injuries was compromised by an oral agreement. In the absence of rei interventus a contract of service for more than a year contained in a compromise, of which it formed a major and fundamental part, could not be constituted or proved except by probative writing.  He quoted widely from the case but identified the ratio in Lord Strachan’s judgment at page 23 lines 6 and 7.

[6]        Counsel considered the Outer House judgment of McFarlane v McFarlane [2007] CSOH 75 especially paragraph [41] in the following terms:

“Actions which are pending in Scottish Courts are settled routinely by the most informal methods. Frequently actions in this court involve large sums of money (and often involve heritable property) are settled by means of verbal agreement between counsel or between solicitors, or by means of an informal exchange of correspondence … There is no requirement in our law for a particular formality or method of concluding a contract for the compromise of a court action.” (emphasis added)

 

[7]        Counsel submitted that McFarlane was wrongly decided for two reasons. First Cook had not been cited to or considered by the court and second the case proceeded by way of a concession improperly made by counsel: paragraph [34]. Of the cases considered, Love v Marshall (1872) 10 M 795 is of little assistance. Murphy v Smith 1920 SC 104 is an action of damages and involved no compromise agreement. Gloag on Contract predates Cook.

[8]        Finally counsel considered Torbat v Torbat’s Trustees (1907) 14 SLT 830, referred to in both McFarlane and Cook. In Cook Lord Mackintosh suggested Torbat proceeded upon a misunderstanding of prior caselaw and the decision was disapproved.

 

Submissions on behalf of the Pursuer

[9]        Counsel for the pursuer submitted such evidence is admissible. A compromise agreement is not a creation, variation or transfer of an ‘interest in land’: Reid, The Requirements of Writing (Scotland) Act 1995, 1^st ed., 1995. The heritable interests involved are incidental, not fundamental. The agreement pleaded is compromise, not of itself altering rights in land, simply agreement that property will be divided in a particular way. It does not change the rights in heritage. Section 1 is not engaged. Proof need not be in writing.

[10]      Counsel submitted that the 1995 Act abolishes the old common law rules: Walker & Walker, The Law of Evidence in Scotland, 3^rd ed., paragraphs 22.2.1, 22.2.3. An agreement between separating spouses dealing with distribution of respective interests in land arguably falls within section 1(2)(a)(i).

[11]      Counsel referred to a trilogy of cases illustrating instances where ‘verbal’ proof in some form was allowed to prove the existence of a verbal agreement. These cases were Denvir v Denvir 1969 SLT 301 (itself citing Govan New Bowling Green Club v Geddes (1898) 25 R 485 and Galloway v Galloway 1929 SC 160), Mulhern v Mulhern 1987 SCLR 252 per the then Sheriff Principal Caplan QC at page 257, paragraph 4 and Walker v Flint (1863) 1 M 417 at pages 421, 422.

[12]      Counsel noted that Cook pre-dates the 1995 Act. In Cook the contract founded upon is an obligatio litteris, and can be distinguished. It involved damages for breach of contract and enforcing a contract of service. Here the pursuer is not seeking to enforce a contract; only to establish whether there was an agreement. Cook relates to enforcement of the contract of compromise, not declarator.

[13]      Counsel cited Gloag on Contract, 2^nd ed., page 164 in the following terms: “Thus the compromise of an action, though relating to heritage, does not require a probative writing.”

 

[14]      Counsel concluded by considering McFarlane v McFarlane. She submitted it dealt with compromise, not a real right, taking it outwith the ambit of section 1. Although not bound by this decision the court should follow it because it is directly in point. Love v Marshall is more directly in point than Cook because of what was compromised. The objection should be repelled.

 

Reply on behalf of Defender

[15]      Counsel reiterated that Cook is binding. There is nothing specific about contracts of service and no reason for any difference has been explained. Although Cook pre-dates the 1995 Act the latter “re-enacts” the existing common law. A contract for compromise is a contract for the “transfer of land” and therefore requires writing. Cook has never been doubted. The present case is a fortiori because the pursuer seeks implement rather than damages. Denvir was an agreement to constitute trust and distribute proceeds of sale. Mulhern and Walker deal with rei interventus which is not pleaded. McFarlane only deals with whether the contract contained all essential elements.

 

Discussion

[16]      The logical starting point is Cook v Grubb, said to be binding authority and determinative of the question of admissibility. Superficially it is highly persuasive being, unusually, a reclaiming motion from the decision of Lord President Clyde sitting in the Outer House. It appears to be more widely reported on a separate issue of employment law (Rowan v Action Group 1997 SLT 506) and not subsequently considered judicially although Professor Walker cites it as authority for the bald proposition that compromise agreements fall within the category of contracts litteris: Walker, The Law of Contracts and Related Obligations in Scots Law, 3^rd ed., 1995, paragraph 13.23.

[17]      The ratio of Cook is to be found within the judgment of Lord Justice-Clerk Grant at page 16, viz.:

“[I]n the absence of rei interventus, a contract of service for more than a year contained in a compromise of which it forms a major and fundamental part cannot be constituted or proved except by probative writ.”

 

Further discussion about obligationes litteris is obiter.

[18]      That being so, Cook can easily be distinguished. It relates to a contract of service which the present case does not. Even dealing more broadly with obligations litteris I accept the pursuer’s submission that that class has been abolished: Requirements of Writing (Scotland) Act 1995 s.11(3)(a); Rennie & Cusine, The Requirements of Writing, 1995, paragraph 3.28.

[19]      Furthermore, I reject the suggestion that the 1995 Act effectively “re-enacts” the common law. The 1995 Act had a long gestation, “came about because of a feeling that some of the law on the execution and proof of obligations was out-of-date or unclear and, in some cases, could work unjustly” (ibid., Preface) and provided an entirely new statutory regime.

[20]      Section 1 of the 1995 Act provides that, subject to subsection (2) and any other enactment, writing shall not be required for the constitution of a contract. Section 1(2) as originally enacted, was in the following terms:

“(2) Subject to subsection (3) below, a written document complying with section 2 of the Act shall be required for-

(a) the constitution of-

            (i) a contract or unilateral obligation for the creation, transfer, variation or    extinction of an interest in land.”

 

Section 1(3) introduces a new statutory form of personal bar. Section 1(7) defines “interest in land” as “any estate, interest or right in or over land, including any right to occupy or to use land or restrict the occupation of land” subject to certain exceptions.

[21]      At this legislative stage, the view was expressed that an “interest in land” meant a real right in land and did not include a personal interest which may arise under missives (Margie Holdings v Commissioners of Customs and Excise 1991 SLT 38 dub. Sharp v Thomson 1995 SC 455, 1997 SC (HL) 66) but the matter was not authoritatively decided.

[22]      However, section 1 of the 1995 Act was itself subsequently amended by the Abolition of Feudal Tenure &c. (Scotland) Act 2000, Schedule 12, Part 1, 58. Section 1(2)(a)(i) now reads “a contract or unilateral obligation for the creation, transfer, variation or extinction of a real right in land.” Substitution of the phrase “real right” for “interest” would appear to remove dubiety as to whether a personal right is included: McBryde, The Law of Contract in Scotland, 3^rd ed., paragraph 5-76.

[23]      The question of law determinative of admissibility of evidence is whether a compromise agreement relating to heritage constitutes a “contract … for the … transfer of a real right in land.”

[24]      Counsel for the pursuer’s submissions began with an analysis of the 1995 Act. However she was working from the pre-2000 version ‘interest in land’. (The legislation.gov.uk version of the 1995 Act remains unamended some fifteen years on. The Westlaw version is up-to-date.) For that reason her introductory comments are of limited assistance.

[25]      Denvir is one of a small number of cases in which oral evidence or informal writing was held to be admissible in a matter involving heritage. These cases have very recently been described as “exceptional”, the common factor being that the contract related only incidentally to heritage: Walker & Walker, 4^th ed., 2015, paragraph 23.3.1. Mulhern and Walker are clearly distinguishable as involving rei interventus which is not pleaded in this case.

[26]      Of more interest is the Outer House decision in McFarlane which concerned two litigious brothers. The latest action was one of declarator that correspondence between legal agents and a subsequent telephone conversation constituted a binding contract for extrajudicial settlement of an earlier Court of Session action. I suspect Cook was not cited because it was thought to have been rendered irrelevant by the 1995 Act. Yet it is difficult to see why other older cases such as Love v Marshall and Anderson v Dick were considered.

[27]      One obiter comment has relevance. In paragraph [42] the Lord Ordinary observes:

“[I]t is important to bear in mind that what is being considered in the present case is not a contract for the transfer of title to heritable property, nor for the transmission of any real right; this is a contract for the compromise of a court action, conferring only personal rights.” (emphasis added)

 

This, as far as I am aware, is the only statement as regards the nature of rights conferred by a compromise agreement.

[28]      No authority is given for that statement and parties informed me that there was a paucity of authority as regards compromise agreements. Maybe it is trite law. However, upon investigation the broad principle can be amply vouched: Erskine, An Institute of the Law of Scotland, III, I, 2; Gloag & Henderson 11^th ed., 2001, paragraph 4.10; 13^th ed., 2012, paragraph 1.10. The matter is best explained by Sir Thomas Smith, A Short Commentary on the Law of Scotland page 280:

“In short, a real right (jus in re) is asserted by vindication, that is the power to recover by action a specific thing (other than money) from any person whatsoever in lawful possession. By contrast, a personal right, including claims for delivery of a specific object (jus ad rem), is asserted by an action directed against a particular individual who is bound to pay or perform. In this connection it is important to stress the distinction between Contract, on the one hand, and Conveyance or traditio, on the other. The former creates only a personal right, while the latter transfers jura in re.”

 

[29]      Accepting this line of authority allows me to answer the question of law posed in paragraph [23]. A compromise agreement, if proved, confers only personal rights. It is therefore not a contract for the transfer of a real right in land. It does not require to be in writing. Evidence of alleged written offer and oral acceptance is admissible.

 

Assessment of Witnesses

[30]      Both Mr C and Mr Y are professional witnesses who spoke to events in a protracted divorce. Both appeared straightforward in their evidence. Both acknowledged where things could have been done better. Both stood up well to cross-examination. Both were credible and reliable.

 

[31]      By contrast I was not impressed by RMS. Her demeanour was dogmatic. Her position was opposite to that of Mr Y, to the extent that she alleged he was lying. Both could not have been right. Mr Y had a contemporaneous File Note to back up his version. I do not accept that Mr Y would have communicated a settlement to Mr C had that instruction not been given. I accept counsel for the pursuer’s submission that she was not credible. Where dispute arises as between the evidence of Mr Y and RMS, I prefer that of Mr Y.

 

Submissions on behalf of the Pursuer

[32]      Counsel for the pursuer submitted that three issues arose from proof: Were settlement terms agreed? If so, what were they? Did the defender’s agent have authority to settle?

 

Were settlement terms agreed?

[33]      Counsel submitted that the evidence was not overly complicated. An objective view should be taken. Solicitors were involved. A written offer was made on 26 September 2013 (5/4/23 of process) the final paragraph of which sets out the details. The solicitors’ File Notes (5/4/24 and 5/5/33 of process respectively) confirm this. There was no evidence they did not fully understand what they were agreeing to. Mr C had been quite clear that his 22 October 2013 letter (5/4/25 of process) was not a proposal. Nothing conditional was being put forward. Only peripheral matters, the mechanics of settlement, remained outstanding. Both solicitors were clear there had been agreement to dispose of financial matters. It was understood that no expenses were to be due to or by. Mr Y had committed his client. Both parties engaged in the process and understood what they were doing.

 

What was agreed?

[34]      Counsel addressed the general approach to be taken to the construction of contracts. She cited the recent Inner House decision in Grove Investments Limited v Cape Building Society [2014] CSIH 42 especially the approach taken to the Supreme Court decision in Rainy Sky SA v Koomin Bank [2011] UKSC 50; [2011] 1 WLR 2900 at paragraphs 14 and 20 to 30. It was clear in the present case what the terms of the offer were and what was being accepted. Even if “broad principles” they were sufficiently concise as to be determinative.

 

Authority to settle?
[35]      Counsel submitted that Mr Y understood he had authority to settle. The issue is whether this is actual or ostensible. On the evidence and File Note (5/5/33 of process) he had actual authority.

[36]      Counsel considered the authorities. The ratio of Mowbray v Valentine 2004 SC 21 is that a solicitor is in no different position to counsel as regards possessing ostensible authority to compromise an action (paragraph 19). Mazur v Primrose & Gordon WS [2015] CSIH 8 is recent Inner House authority which followed Mowbray. In Turner v Turner 2009 FamLR 124 the Sheriff held, on the facts, that the pursuer’s agent had implied, ostensible and actual authority to enter into an agreement binding on his client.

[37]      Finally, counsel emphasised that the court’s analysis should be performed from the standpoint of the reasonable person with all background knowledge. She noted that both solicitors would likely know the custom and usage of matters such as expenses. This was extrajudicial settlement.

 

Submissions on behalf of the Defender

[38]      Counsel for the defender submitted it was plain that there was no concluded agreement on 21 October 2013. The best evidence is Mr C’s letter written after the discussion (5/4/25 of process). On any view the content of that letter is inconsistent with a prior concluded agreement. The pursuer’s case is periled on Mr C, especially his contradictions of his own correspondence. He should be treated with caution. There is a risk of subconscious bias. He would not be deflected from his stated position. Evidence about concluded agreement was equivocal; there had been reference to “stage whispers” on 21 October 2013 and it was intended there would be further correspondence.

[39]      Counsel noted that the letter of 22 October 2013 (5/4/25 of process) stated “Our client remains willing to honour this commitment but subject to certain assurances.” Although Mr C conceded it could have been better phrased, counsel submitted it was clear even at that stage Mr C’s client did not feel bound to do anything. A whole host of factors were consistent with Mr Y’s position being “in principle” only. For example, in cross-examination Mr Y would not accept any agreement beyond that in principle. On the evidence details had to be clarified, especially as regards how long DWS would remain on the mortgage. Mr Y had no instructions to agree a timetable for the pursuer to remain on the mortgage. His instructions were limited to the transfer of the investment properties in return for exchange of the matrimonial home. 5/4/25 of process should be construed objectively. Counsel identified ten separate provisos identified in the final two paragraphs of the letter of 22 October 2013. As at that date locus poenitentiae existed.

[40]      Counsel addressed the failure to agree essentials: McBride, Contract, supra paragraph 5-11. Mr C had agreed that a timescale for mortgage finance was critical. That had not been discussed on 21 October 2013. The “at least twelve months or so and possibly longer” in the letter of 22 October 2013 was hopelessly vague. Counsel questioned whether that would be capable of enforcement. There is no scope for implication. The first reference to “full and final settlement” was on 22 October 2013. Not all craves had been dealt with. No court could interpone authority. There was no agreement about periodical allowance. Mr Y conceded that could have become controversial. There was no agreement on expenses, which is essential to settlement: Macphail, supra paragraph 14-69, Miller v Campbell’s Trustees 1965 SLT (Notes) 57.

[41]      Finally, counsel submitted that even if there was properly constituted agreement, Mr Y had no authority to conclude it. He had given the defender - who was very upset during their phone call - the benefit of the doubt. The question is whether Mr Y had ostensible authority to conclude extrajudicial settlement. Counsel submitted there was a distinction between judicial and extrajudicial settlement: Macphail, supra, paragraph 14-35 and referred to Hendry v Hendry 1916 1 SLT 208 at 211 and Brodt v King 1991 SLT 272 at 274 G-H and 276F.

 

Discussion

[42]      First, I am satisfied on the evidence that Mr Y did have express authority to compromise the action, at least in broad terms. I hold on the balance of probabilities that during the telephone discussion the defender instructed him that she would agree to the transfer of properties as proposed by Mr C. I also hold that during that conversation she did not give Mr Y instructions about agreement of a reasonable timescale for her husband’s release from the mortgage. I do not doubt that she was upset or anxious. She may well have felt that she had no alternative but to settle. However she was responding to an offer made almost a month previously and upon which she had had the advice of both a solicitor and counsel.

[43]      Were RMS’s evidence to be correct, Mr Y immediately indicated acceptance of an offer in the face of clear instructions not to do so. He then dictated a File Note, effectively to cover his tracks. I can discern no motivation which he could have for such a course of action. I assessed him as a truthful man.

[44]      I pause, however, to note that the best evidence of instructions would have been written confirmation from RMS. Mr Y may be criticised for failing to arrange that.

[45]      What was agreed? Counsel for the defender cited authority for the proposition that “A concluded contract requires agreement on the essentials for that type of contract.” As Viscount Dunedin put it in May & Butcher Ltd v R [1934] 2 KB 17:

“To be a good contract there must be a concluded bargain and a concluded contract is one which settles everything that is necessary to be settled and leaves nothing to be settled by agreement between the parties. Of course it may leave something which still has to be determined, but then that determination must be a determination which does not depend upon the agreement between the parties… As a matter of the general law of contract all the essentials have to be settled. What are the essentials may vary according to the particular contract under construction.”

 

[46]      Counsel informed me they had been unable to find any statement, authoritative or not, narrating the essential elements of the contract of compromise. This may well be because each such a contract will turn on its particular facts. That analysis is consistent with Lord Menzies’ approach in McFarlane where he observed obiter:

 ‘It would be neither possible nor fruitful to attempt to provide an exhaustive list of the essential terms of the contract for compromise of a court action – each case must depend on its own facts and circumstances.’

 

[47]      Counsel for the defender submitted that agreement on the length of time DWS would remain on the mortgage was, in these particular circumstances a material or essential term. Is that supported by the evidence?

[48]      By way of background, Mr C explained that the principal issues in the divorce were financial. Parties had spent the previous two years unsuccessfully negotiating the fair division of matrimonial property. As late as June 2013 he was worried about the lack of preparedness. He wrote to PPN&W on 19 June 2013 (5/5/27 of process). Parties had borrowings of £135,000 on the matrimonial home and £173,000 on the investment properties. RMS may be in financial difficulties. 

[49]      On 23 August 2013 Mr C e-mailed Mr Y informing him that Birmingham Midshires would allow DWS to take over the borrowings (5/5/29 of process). Three days later Mr C had been instructed by DWS to put forward a broad proposal namely that he would allow his name to be on the mortgage of the matrimonial property to allow that property to be transferred to RMS. This offer was confirmed in writing (5/4/23 of process). I note that paragraph 3 of that letter states:

“[DWS] is willing to allow the matrimonial home to remain in joint names and subject to the existing mortgage facility on the strict understanding he will convey his interest to the property for no consideration once your client secures his release from the mortgage. He will need an undertaking that she will indemnify him in relation to any costs that may be incurred by him in relation to his continued obligation to Birmingham Midshires. We also insist on agreeing a reasonable timescale for his release. At this stage DWS is willing to remain on the mortgage product for at least twelve months or so and possibly longer.” (emphasis added)

This is the first occasion upon which this condition has been stipulated.

[50]      To Mr C’s surprise this was accepted. There had been no discussion about the timescale and he had issues about how and when the transfer would go. The File Note of their meeting (5/4/24 of process) is silent as regards agreeing a reasonable timescale for DWS’s release. The follow-up fax (5/4/25 of process) again brings up the matter but no agreement is recorded.

[51]      In cross-examination Mr C identified the indemnity by RMS in favour of her husband and the timescale for DWS’s release as the two difficulties. This “opening gambit” of a letter would, he thought, lead to negotiations requiring further instruction. It was not in full and final settlement. He agreed that a precise timescale was absolutely essential to his client, even more so for RMS who required to source finance, a pressing issue for both. The key was persuading a heritable lender to give her funds. Agreement was to “at least twelve months or so and possibly longer.”

[52]      Mr Y agreed that, pre-proof, financial issues were in dispute. At the time of Mr C’s letter of 19 June 2013 (5/5/27 of process) RMS could not get the consent of a heritable creditor. Her prime concern was to preserve occupation of the matrimonial home. Once counsel’s Opinion was obtained instructions were given to settle. The File Note (5/5/33 of process) is silent on agreeing a timescale for release.

[53]      Mr Y explained his understanding was that RMS would take over the mortgage “in the future … twelve months minimum”. There was no conditional aspect, but the mechanics had to be arranged. He conceded, however, that he would have to speak to his client about the mortgage on the investment properties. He agreed with counsel’s proposition that that would require to be canvassed and agreed.

[54]      RMS indicated that she had had discussions with Mr Y about a timetable for her husband remaining on the title to the matrimonial home. As far as she was aware he would stay on it for “twelve months or longer”. When asked if she’d given Mr Y instructions to agree to that she said absolutely not.

[55]      On the evidence, agreement of a precise timescale for DWS’s release from the Birmingham Midshires mortgage was an essential term of this contract of compromise.

[56]      It is clear that the financial position generally had been contentious for years prior to the proof. This was reinforced in the letter initiating discussions (5/5/27 of process) where “Matrimonial Home” including borrowings and equity is the first heading raised.

[57]      Central to my conclusion is my reading of the 26 September 2013 (5/4/23 of process) letter from Mr C. The wording used is “We also insist on agreeing a reasonable timescale for his release.” An objective analysis of these words, in context, shows plainly that this is an essential part of the offer spelled out in the letter. It also put Mr Y on notice of that fact. In addition Mr C gave oral evidence that agreement was ‘absolutely essential’ to his client.

[58]      Was there agreement on that essential term? I judge not. I accept Mr Y’s evidence that he did not have instructions on this point. He did not have any discussions on it with Mr C. He made no effort to negotiate. The offer “at least twelve months or so and possibly longer” was sufficiently imprecise that it could not be accepted de plano.

[59]      I also accept counsel for the defender’s observation that it is difficult to see how this, as it stood, could have been incorporated into a Minute of Agreement without at least further discussion. What time period would have been included? Twelve months? Twelve months or longer? Applying Viscount Dunedin’s approach in May & Butcher to this point, it is necessary to settle this point, and that still requires agreement between the parties.

 

Conclusion

[60]      For these reasons I am satisfied that, considering the evidence, there was no agreement on a term essential to this particular contract of compromise. The action necessarily fails.