Resiling from admissions

In 2002, insurers wrote to the claimant’s solicitor: “We have now completed our preliminary investigations and can confirm we are prepared to concede primary liability, although we will be alleging a degree on contributory negligence. Your client was familiar with the correct procedure when closing the stable top door, and should have sought assistance. We would argue for a 25 per cent reduction in respect of contributory negligence.”

The claimant’s solicitors replied: “We confirm that our client is prepared to accept your offer to deal with her claim on a 75 per cent basis in her favour. Please ask your client to provide the usual earning information.”

The insurers replied “We note your client accepts 25 per cent contribution. Please may we have a schedule of special damages?”

Some two years later the defendants applied to the court to resile from the admission. The Judge ruled that, even if there had been a compromise, it was not binding because the general philosophy behind the Civil Procedure Rules demands maximum flexibility, and also Part 14 principles apply i.e the application must be made in good faith, there must be good reasons for supposing that the defendants have an answer to the claim and there would be no irremediable prejudice to the claimant.

On appeal, the claimant submitted that CPR has not changed the law on compromise; that the offer and acceptance documents were never challenged as such by the defendants; and that the compromise satisfies the test for such agreements. This was not a fast-track case. The claimant’s argument was that there was a dispute between the parties; there was consideration; the agreement was complete and unambiguous; there was an intention to create legal relations; and therefore there was a binding compromise.

The defendants argued that, although binding compromises still are capable of existing, they run counter to the spirit and in some instances the letter of CPR; the correspondence should be looked at in the context of the Pre-Action Protocol and CPR, and that it was not possible to construe a binding compromise to the wording of the correspondence.

No authority could be found on the relationship between Part 14 of CPR and the law on binding compromise. The Appeal Judge found that the use of the word “preliminary” in the insurers letter was very significant. It suggested that the defendants had not completed their investigations but were even so prepared to offer a settlement based on a 25 per cent reduction in respect of contributory negligence. This is in essence an offer of a compromise to save both sides the trouble of spending more time and money on the question of primary liability. He found it was perfectly in order for the claimant’s solicitors to interpret the letter in that way and to say that the claimant was prepared to accept that offer. He allowed the claimant’s Appeal.

Burden -v- Harrods Limited. High Court 18 January 2005.

Mediation advised in stress cases

In the unsuccessful stress case of Vahidi referred to above in the liability section, the Court of Appeal also raised the issue of mediation saying that the principles of work related stress cases have been settled and litigants should now adopt mediation as early as possible to settle disputes and avoid escalating costs. The trial had lasted nine days and it was a great pity that it did not go for mediation. Lord Justice Longmore said: “one shuddered at the costs of the trial and of the appeal.”

Mediation before trial was infinitely preferable to mediation before appeal, but regrettably neither had taken place in this case.

Vahidi -v- Fairstead House School Trust Limited. 24 June 2005 Times Law Report.