Ross v McGrath

JUDGMENT

Wednesday, 14 July 2004

1. LORD JUSTICE TUCKEY: I will ask Lord Justice Clarke to give the first judgment.

LORD JUSTICE CLARKE:

Introduction

2. This is an appeal from a determination of a preliminary issue made by Grigson J on 26 January 2004. The appeal is brought by permission of the judge.

The claim

3. The preliminary issue arises in an action brought by the respondent to recover sums alleged to be due from the appellant since about 1990 or 1991 when the parties had a business relationship. The sum claimed, as set out in the amended particulars of claim, amounts to £83,339.39, plus interest made up as follows: (1) £4,945 and £8,394.39, the price of building work and material supplied to the appellant between October 1990 and May 1991; (2) repayment of a loan of £40,000 made to the appellant in May 1990; and (3) repayment of a loan of £30,000 also made in May 1990.

The issue

4. The claim form was issued on 29 April 2002. It is common ground that since the action was commenced, more than six years after the causes of action accrued, all the claims are time-barred by reason of sections 5 and 6 of the Limitation Act 1980 ("the 1980 Act") unless a letter dated 1 May from the appellant to the respondent amounts to an acknowledgment of indebtedness within the meaning of sections 29 and 30 of the 1980 Act.

5. Sections 29 and 30 provide so far as relevant as follows:

"29(5) ... where any right of action has accrued to recover -

(a) any debt or other liquidated pecuniary claim

and the person liable or accountable for the claim acknowledges the claim or makes any payment in respect of it shall be treated as having accrued on and not before the date of acknowledgment or payment.

(7) ... a current period of limitation may be repeatedly extended under this section by further acknowledgment or payments, but a right of action, once barred by this Act, shall not be revived by any subsequent acknowledgment or payment.

30(1) To be effective for the purposes of section 29 of this Act, an acknowledgment must be in writing and signed by the person making it.

(2) For the purposes of section 29, any acknowledgment or payment -

(a) may be made by the agent of the person by whom it is required to be made under that action; and

(b) shall be made to the person, or to an agent to the person, whose title or claim is being acknowledged or, as the case may be, in respect of whose claim the payment is being made."

6. The letter of 1 May was in writing and was signed by the appellant and addressed to the respondent. It follows that in the case of each claim the sole question is whether by the letter the appellant, as the "person liable or accountable for the claim", "acknowledges the claim" or, more grammatically, "acknowledged the claim" within the meaning of section 29(5) of the 1980 Act. The letter reads as follows:

"WITHOUT PREJUDICE

1 May 1996

Dear Mr Ross

Further to our conversation when you asked me to confirm that I would pay you monies owed to you due to various ventures which we were involved in from 1989, I confirm that I am prepared to do this as and when the funds are available to me.

As you know, I am involved in a major dispute with the Midland Bank plc which looks likely to settle by agreement and also a dispute with the chief constable of Lancashire whereby I have already been awarded damages to be assessed.

I am also aware of our agreement dated the 3 September 1991 when I ceased to be involved in Naventi's.

In the circumstances I am happy to confirm that you suggest the following amounts are owed by me to you:

1. £4,535 for materials supplied to Clifton Drive and booked to Singleton Street.

2. £7,500 which I agreed to pay you at the same time that I paid Russell Howarth.

3. £40,000 for the property in the Isle of Man.

4. £30,000 which you paid to John Lowe.

5. £10,784 outstanding for materials supplied to Clifton Drive from October to December 1990.

Yours sincerely."

- and the letter is signed by the appellant.

The judgment

7. The first issue argued before the judge was whether the letter was privileged so that the respondent could not rely upon it. The appellant relied upon the fact that it was marked "without prejudice". The judge held that the letter would attract privilege only if, expressly or by implication, it contained an unequivocal offer of settlement of the claim, which it held that it did not. There is no appeal against that finding.

8. The second issue argued before the judge was whether by the letter the appellant had acknowledged the claim within the meaning of section 29(5) of the 1980 Act. The judge held that he did. The sole question in the appeal is whether he was correct so to hold.

9. The judge made a number of findings of fact, including the following. On 12 April 1991 the respondent wrote to the appellant saying that he had no alternative but to write and make the following requests for money:

"i) £4,535 for materials supplied to Clifton Drive.

ii) £7,500 which I agreed to pay you at the same time that I paid Russell Howarth.

iii) £30,000 I paid to John Lowe as half of the £60,000 which you agreed you would pay the following day if I paid your £30,000.

(iv) £40,000 - the Isle of Man property.

(v) There is still £10,784 outstanding for materials supplied to Clifton Drive from October to December."

Although the judge did not refer to these paragraphs there are three further claims in which the respondent was requesting what he called "outstanding money in that letter, namely:

"vi. The deposit for Naventi's which has been 'on the way' since 10th October, 1990.

vii. A cheque for £10,000 given to me by yourself for Clawthorpe Hall. ...

viii. The amount of monies from membership fees should all be going to a D Ross bank account. ..."

The judge observed that there was no reply to that letter.

10. On 7 April 1992, 24 June 1992 and 13 August 1992 the respondent wrote to the appellant with particular regard to the £40,000. Again there was no response.

11. In April 1996 the respondent sent two draft letters to the appellant in the hope that he would sign them and thereby acknowledge his indebtedness. It was in response to these draft letters that the appellant wrote the letter of 1 May 1996.

12. The first draft letter sent in April 1996 was dated 3 April, and said.

"To: Frank

From: David

Re: Suggested wording

If you have any query with the same please do not hesitate to contact me.

Dear Mr Ross

I hereby agree to pay to you the money I have loaned from you as soon as I am in funds.

The amounts are as follows:

1. £4,535 for materials supplied to Clifton Drive and booked to Singleton Street.

2. £7,500 which I agreed to pay you at the same time that I paid Russell Howarth.

3. £40,000 for the property in the Isle of Man.

4. 30,000 which you paid to John Lowe.

5. £10,784 outstanding for materials supplied to Clifton Drive from October to December 1990.

Yours sincerely.

FJ McGrath."

13. The second draft letter was dated 24 April but the draft was sent to the appellant under cover of a fax timed at 13.35 on 29 April, which was of course only two days before the date of the letter of 1 May. The terms of the letter are identical to the terms of the draft letter of 3 April, which I have already quoted. The letter, it appears, was sent by fax to the appellant's secretary, since it contains a manuscript note to the appellant's secretary, Karen, from David (who is the respondent), which says:

"Can you get Frank to sign this as no doubt he will 'do a runner' tomorrow when I am down."

Those draft letters provide the immediate context for the letter of 1 April.

14. The judge held that the appellant never sought to advance any sort of set-off or counterclaim and never wrote disputing the debts. The judge said that the appellant was an experienced businessman who knew that had he acknowledged specific debts he would, as the judge put it, in effect have been putting a loaded gun into the appellant's hand. The judge thought that he was seeking to appease the respondents so as to forestall legal action, while preserving, so far as he could, his own position: hence the device of marking the letter "without prejudice".

15. The judge's further conclusions may be summarised as follows. The letter was in response to the draft letters to which I have referred. The letter itself contained no denial of liability, no set-off and no cross-claim. Read as a whole and in its context the letter constituted an acknowledgment of each of the debts which the respondent sought to recover in the action. Alternatively, if (contrary to that view) the last paragraph could be read as any sort of qualification, then it was simply a qualification as to the exact amount to be recovered under those heads of claim. The exact amount of each could be proved by extrinsic evidence.

The relevant legal principles

16. Mr Uff, who appeared before the judge and appears before us on behalf of the appellant, submits that the authorities support these propositions:

1. The debtor must acknowledge his indebtedness and legal liability to pay the claim in question: see Spencer v Hemmerde [1922] 2 AC 507 at 516 and 532; Good v Parry [1963] 2 QB 418 at 423; Surrendra Ltd v Sri Lanka [1977] 1 WLR 565, 575 per Kerr J.

2. An acknowledgment need not identify the amount of the debt so long as the amount is capable of ascertainment by calculation, or by extrinsic evidence without further agreement of the parties: see Good v Parry 423; Dungate v Dungate [1965] 1 WLR 1477 at 1483.

3. Extrinsic evidence is admissible to identify the acknowledgment with the debt: see Dungate v Dungate at 1483.

6. The debtor must acknowledge his indebtedness and legal liability to pay the claim in question: see Surrendra Overseas Ltd v Government of Sri Lanka at 575.

17. I accept that the authorities do indeed support those propositions, subject to this. I refer to two further cases which illustrate the propositions. The first is Kamouh v Associated Electrical Industries International Ltd [1980] 1 QB 199, where Parker J said this at page 209D:

"It is clear that an acknowledgment in the statute does not have to say in terms 'I acknowledge that a certain sum is due,' but it does have to get as far as being an admission that something is due and that something must be ascertainable by extrinsic evidence."

The second case is Dungate v Dungate . The judge relied upon this statement of Diplock LJ at 1487E:

"There is clear authority that an acknowledgment under this Act need not identify the amount of the debt and may acknowledge a general indebtedness, provided that the amount can be ascertained by extrinsic evidence."

18. That statement must, however, be put in its context. The facts of that case were briefly these. The parties were brothers. The alleged debtor, George, asked his brother, Vic, who was the plaintiff, to write to him, and his brother wrote asking for repayment of £870, without specifying how the sum was made up or in respect of what loans. George subsequently wrote to Vic on 23 February 1962 as follows:

"Dear Vic, Herewith postal order value £2 10s. You will be able to pay them into bank and will save poundage on fresh PO. I will save my PO from now on and send them to you";

- as Diplock LJ put it -

"and here come the important words: 'Keep a check on totals and amounts I owe you and we will have account now and then.' ... 'Sorry I cannot do you a cheque yet - terribly short at the moment. If you can collect cash from Issacs you can hang on to it. Yours sincerely, George.'"

Diplock LJ then said this, with regard to the letter, at page 1487E-G:

"This then was in writing; it was signed by the debtor; and it was made to the person whose title or claim is being acknowledged.

There is clear authority that an acknowledgment under this Act need not identify the amount of the debt and may acknowledge a general indebtedness, provided that the amount of the debt can be ascertained by extraneous evidence. It has been possible in this case to ascertain by extraneous evidence what the indebtedness was, and the only question here is whether those words, 'Keep a check on totals and amounts I owe you and we will have account now and then. ... Sorry I cannot do you a cheque yet - terribly short at the moment,' amount to an acknowledgment by George of his indebtedness to the plaintiff.

In my view they plainly do amount to such an acknowledgment."

Thus the letter was held to be an acknowledgment of the indebtedness in respect of the claim for £870, even though the claim included several causes of action. It did not matter that the precise amount of the indebtedness was not stated in the letter relied upon as the acknowledgment. It could be ascertained by extraneous evidence.

19. Finally under this head, there is a further principle of some importance. It is that the letter must be construed as a whole and in its context. As Kerr J put it in Surrendra v Overseas Ltd v Government of Sri Lanka at 575, "...the statement relied upon as an acknowledgment must be taken as a whole", and a party "is not entitled to pick out parts and ignore others": see also Re Flynn (Deceased)(No.2) [1969] 2 Ch 403 per Buckley J at 411-412.

Application of the principles

20. It is common ground that the first paragraph of the letter of 1 May amounts to an acknowledgment of some general indebtedness. It is not, however, suggested by Mr Barnard that if paragraph 1 of the letter had stood alone it would amount to an acknowledgment of all the debts in respect of which the respondent might make a claim against the appellant. So for example it is not suggested that there was here an acknowledgment of the claims in claims no (vi, (vii) and (viii) of the letter of 12 April 1991, to which I referred earlier. That is because it is correctly accepted by Mr Barnard that the letter of 1 May must be read as a whole and in its context.

21. The question is what would reasonably be understood by the respondent as the recipient of the letter in the light of its language construed in its context. I would accept Mr Barnard's submission on behalf of the respondent that the first paragraph of the letter contains:

(1) a confirmation from the appellant that he was

writing the letter following conversations with the respondent in which the respondent asked him to confirm that the appellant would pay monies owed to the respondent;

(2) an express statement by the appellant that he

was prepared to provide such confirmation;

(3) an express confirmation by the appellant that

he would pay the respondent 'monies owed to you due to various ventures which we were involved in from 1989'; and

(4) an express promise that such payment would be

made 'as and when the funds are available to me'."

The second paragraph of the letter is a reference to the source of the funds referred to at the end of the first paragraph. That is a further indication that the letter acknowledged an indebtedness to the respondent. The third paragraph is not said to be of any real relevance to the question for decision in this appeal.

22. The principal debate between the parties, and indeed before us, has centred on paragraph 4 of the letter. The key part of the letter relied upon by Mr Uff is in the first two lines, where the appellant writes:

"In the circumstances I am happy to confirm that you suggest the following amounts are owed by me to you."

I see the force of the submission made by Mr Barnard, which was accepted by the judge, that construed in its context, and in particular having regard to the fact that the appellant was writing in response to the suggestion that he should sign one or other of the draft letters quoted above, which referred to specific debts, the letter acknowledged those specific debts. However, I prefer the judge's alternative approach. I do so because his preferred approach seems to me to give no effect to the changes from the draft letters which promised to pay the amounts set out as soon as the appellant was in funds. In short, the judge's preferred approach gives no effect, as it seems to me, to the form of the first two lines of the fourth paragraph which I have just quoted. In short, it gives no effect to the addition of the words "you suggest" in the letter of 1 May 1996 which was the only letter actually sent. The reasonable recipient of the letter would, as I see it, have concluded that the writer intended to achieve a different result from that which would have been achieved if the appellant had signed one of the draft letters.

23. On the other hand, I would not accept Mr Uff's submission that the first paragraph does not make reference to the claims set out in the last paragraph when set in the context of the earlier draft letters. It is to my mind clear that the respondent was acknowledging indebtedness under those heads. Indeed, as I see it, he was promising to pay his debts in respect of them as soon as money was available. Jackson J suggested in the course of argument that the circumstance referred to in the last paragraph were a reference back to the "various ventures referred to in the first, paragraph in respect of which there was a plain acknowledgment". I agree. The particular aspect of those ventures in respect of which the appellant was acknowledging indebtedness were the five particular matters referred to in the last paragraph.

24. The only reservation which, to my mind, the appellant was making in the last paragraph was as to the amount of the indebtedness in each case, not as to its existence; hence the reference to the "following amounts" in the opening lines of paragraph 4. I recognise that the respondent subsequently decided not to proceed with the claim for the £7,500, which was the second item in the fourth paragraph of the letter, but in my view that has no bearing on the meaning of the letter or what was acknowledged in it.

25. For these reasons, I agree with the judge that the letter at the very least acknowledges liability under each head, only reserving the appellant's position as to the amounts due. I would therefore hold that the judge was correct on the second of the two alternative grounds of his decision, but not the first.

26. I would therefore dismiss the appeal.

27. MR JUSTICE JACKSON: I agree.

28. LORD JUSTICE TUCKEY: I also agree.

(Appeal dismissed; the Appellant do pay the Respondent's costs which is summarily assessed at £7,168.68 by 4.00 pm on 16 August 2004).