Naylors Timber Recovery Limited v Reginald Jones (t/a Ark Pallets)

An agreement that settles a running account is a compromise, not merely an acknowledgment of whatever balance later proves accurate. Consideration is supplied by each party accepting the compromise figure and abandoning any right to pursue further claims arising from the transactions. The court should not reopen the account to discover which party was ultimately in credit. Whether the agreement has that effect depends on the parties’ intention as inferred from the wording and circumstances. An unqualified acknowledgment, payment terms and no reservation of a cross-claim may support the conclusion that the parties intended to draw a line under their dealings.

Naylors Timber Recovery Limited v Reginald Jones (t/a Ark Pallets) concerned a running account arising from rent, electricity and informal trading dealings. After the defendant agreed in writing to repay £11,000, the claimant sued for the unpaid balance. The defendant alleged duress and undue influence and brought a counterclaim, asserting that the account was actually in his favour.

His Honour Judge Hawkesworth rejected the allegations of duress and undue influence, treated the £11,000 agreement as a compromise settling the parties’ mutual claims, gave judgment for the claimant and dismissed the counterclaim. The defendant sought permission to appeal. The central issue was whether the agreement settled the account as a whole or merely acknowledged a debt for rent and electricity.

Disposition

The renewed application for permission to appeal was dismissed. The County Court judgment therefore stood.

1. The finding that the defendant was not under duress or compulsion when he signed the agreement was not challenged. Although pressure had been applied on the previous day to induce him to return and sign, the judge found that his equipment had left the yard and that he was free when he signed.
2. The judge was entitled to conclude that the parties intended to draw a line under their commercial relationship. The defendant’s unqualified acknowledgment of £11,000, his agreement to repay it by instalments under the stated consequence of legal action, and the absence of any reservation or reference to a cross-claim supported that construction.
3. A settled account or compromise is supported by consideration because each party accepts the compromise figure and gives up whatever rights it may have to sue for further sums arising from the transactions covered by the account. The court must not investigate the account to determine whether the true balance favoured one party or the other, since that would defeat the purpose of settling it.
4. Having heard and seen the witnesses, the judge reached a conclusion open to him on the evidence. There was no realistic prospect that the Court of Appeal would interfere or reopen an account more than seven years old.

1. Huddersfield County Court: His Honour Judge Hawkesworth gave judgment for the claimant in £13,217.60, including interest, and dismissed the defendant’s counterclaim.
2. Court of Appeal (Civil Division): The renewed application for permission to appeal was dismissed under [2001] EWCA Civ 1809.