Extra-Judicial Admission Or Binding Agreement?

The importance of the distinction between extra-judicial

admissions and binding agreements was emphasised in the recent case

of Jeroen Van Klaveren v Servisair UK Limited [2009] CSIH

37.

Background: In the course of negotiating

settlement of a personal injury claim, Servisair's insurers

wrote to JVK's solicitors advising, "We accept that

our Insured is liable for the purposes of this claim, and will pay

damages, to be assessed when we receive details of the claim. We

will also be paying your costs in accordance with the Civil

Procedure Rules." Thereafter, the parties continued

to correspond with a view to settling the claim. Seven months

later, the insurers wrote to JVK's solicitors advising that

their previous letter admitting liability was written under the

mistaken belief that early compliance with certain English

procedures was needed and without the benefit of a fuller

investigation, which investigation had now been carried out.

Consequently, liability was to be disputed.

Issue: The critical question to be determined

by the Court was whether the insurer's letter admitting

liability constituted an extra-judicial admission or a binding

agreement, the distinction being of importance since an

extra-judicial admission does not have contractual force and so may

subsequently be withdrawn, whereas a binding agreement is just that

and cannot be revoked.

Decision: It was held in these circumstances

that the admission of liability was an extra-judicial admission for

the following reasons:

The wording of the letter did not indicate a binding

undertaking to pay damages;

The letter was not intended to operate as an offer that might

give rise to a binding agreement;

In the correspondence that followed the letter there was no

acceptance by JVK's solicitors that accepted any offer that may

have been contained in the insurer's letter;

Any admission made before the parties' positions are

finally set out must normally be provisional, open to modification

if new material emerges;

The letter left open two critical matters – the

assessment of damages and expenses.

The insurers were accordingly allowed to withdraw their

admission of liability, and JVK's solicitors were precluded

from relying on it.

Conclusion: Any party seeking to rely on an

admission of liability should be aware that if such an admission is

made in the course of the preparation and presentation of the

parties cases, at the stage where facts have not been conclusively

determined and...