Last year, the case of Bracken vs Billinghurst examined this issue. Mr Bracken and Ms Trickett entered into a contract with Mr Billinghurst for construction work on their property. The matter found its way to adjudication, not once but twice, on issues concerning the cost of additional work. Both adjudicators found in favour of Mr Bracken, and he was awarded a total of £43,984. Before commencing court action to enforce payment, Mr Bracken offered to settle at just £6000 – basically because he was fed up with the whole affair and life was just too short for this carry on. You might have thought that Mr Billinghurst, with enforcement proceedings for £43,984 looming, would have grabbed the offer and kissed Mr Bracken on both cheeks.
However, Mr Billinghurst was clearly a gambling man. He sent Mr Bracken a cheque for only £5000 "on the strict understanding that the sum is offered to you in full and final settlement". The letter stated that the settlement "will be deemed to have been accepted by you, and therefore contractually binding, if it is presented to your bank and cleared for payment". It was, indeed, presented and cleared. However, within the week, Mr Bracken withdrew his original offer and demanded £38,984, being the full amount awarded by the adjudications, less the £5000 cheque that he had cashed. Apparently, life appears even shorter when you are £38,984 down. They saw each other in court after all.
His Honour Judge Wilcox examined the earlier case of Stour Valley Buildings vs Stuart, where it was stated that "cashing a cheque is always strong evidence of acceptance [of a settlement offer], especially if it is not accompanied by immediate rejection". Nothing too surprising there. However, the case also emphasised that the court will consider whether the words and conduct of the creditor would cause the debtor, as a reasonable person, to believe the matter was final. It does not matter what the creditor had actually intended. It matters more what bystander Joe Bloggs would have made of it all.
In trying to dot all the i’s and cross all the t’s, the defendant had poked himself in the eye with his pencil
Judge Wilcox concluded that Mr Bracken could not pursue the balance. The finality of the offer would have been clear to Joe Bloggs, was probably clear to Mr Bracken and was certainly clear to Judge Wilcox. The fact that the offer had come via a third party (Mr Billinghurst's company) made no difference.
Note the words "strong evidence" in Stour Valley. They mean no more than that. Cashing the cheque is not conclusive as to finality. Indeed, in the case of Day vs McClea, the defendant requested that the claimant return to him a receipt confirming that the cheque was accepted in full and final settlement of the claim. The claimant cashed the cheque, did not return the receipt, and claimed the shortfall. The court confirmed he could do so. The defendant left that option open. In trying to dot all the i's and cross all the t's, he had poked himself in the eye with his pencil.
Melinda Parisotti is an in-house barrister at Wren Managers, which manages a professional indemnity mutual for architects.