Outer House case in which Fordell sought £338k from Deloitte it said was due under an alleged agreement relating to a dilapidations claim in respect of a lease of property at 18 Charlotte Square and 4 Charlotte Lane in Edinburgh.

The lease came to an end in March 2012 and before that a schedule of dilapidations was served. A dispute then took place as to the scope and cost of the remedial works required following which surveyors liaised on behalf of each of the parties with a view to reaching a negotiated agreement.

Fordell argued that a binding agreement had been reached between the parties that Deloitte would pay £338k in full and final settlement of the claim. Deloitte argued that there had been no concluded contract because:

1.     the communications did not record an intention to be bound by the exchange of emails;
2.     there was no evidence that Fordell would use the money for the dilapidations works;
3.     the phrase “without prejudice” was used in Deloitte’s surveyor’s emails;
4.     there was a need for a formal legal document; and
5.     there was no agreement on a date for payment.

After considering the authorities[1] Lord Malcolm found that the proper approach in such cases was well settled:

“In summary, both parties must have manifested an intention to be immediately bound to all the legally essential elements of the bargain. In assessing this, the court adopts an objective approach, based upon what an informed reasonable person would have understood by the words and conduct of the parties or their agents.”

Lord Malcolm held that the negotiations had not resulted in a concluded contract between the parties. One of Deloitte’s emails contained a condition that Fordell would use the money for the dilapidations works which was not withdrawn and remained unmet. An email which Fordell argued had concluded the bargain did not waive or abandon that requirement. Fordell contended Deloitte were not entitled to require such evidence. However, Lord Malcolm took the view that, whatever the law on dilapidations claims, Deloitte were entitled to insist on such evidence as they wished, and to make it a condition for payment.

Lord Malcolm also took the view that the use of the words “without prejudice” and the need for a formal agreement reflected a shared understanding that neither of the surveyors could bind the parties. That was made clear in the correspondence. At each stage, before making a binding offer, or counter offer, the surveyors had required direct instructions from their respective clients and the words “without prejudice” required to be seen in that context[2]. Lord Malcolm described the lack of agreement regarding a date for payment as a “loose end” but saw it as further demonstration that the parties’ minds had not met on the key aspects of the deal.

Fordell’s claim for payment was dismissed.

The full judgement is available from Scottish Courts here.

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