Following the Braer oil tanker wreck, the pursuers, who were in partnership as fishermen, claimed compensation from the International Oil Pollution Fund (the defender) for loss of income as a consequence of being unable to fish. The pursuers claimed GBP 30,852.40 for the period of 27 June-17 October 1995 and GBP 93,356.76 for loss of income from 20 October 1995 onwards.

The defender made interim payments to the pursuers in the amount of GBP 270,746.22. While the final value of the claim was being negotiated, a claims officer of the defender sent two letters to the pursuers dated 2 and 4 September 1997 which stated that the defender had accepted the pursuers’ remaining claims as admissible in the sums of GBP 30,852.40 and GBP 93,356.76 respectively. The pursuers’ solicitors sent the defender two letters on 18 June 1998 which treated the letters of 2 and 4 September 1997 as offers and purported to be acceptances of them. The defender averred that the first letter contained a time limit of three weeks. Therefore, the offer had lapsed on expiry of the three week period and was not open for acceptance on 18 June 1998. In relation to both the offers, the defender averred that as the offers were not accepted for over 9 months, the pursuer had failed to accept the offers within a reasonable time and therefore no contract existed between the parties.

Held: Action dismissed. Where a claimant alleges that the owner of the vessel is liable to pay compensation under s 1 of the Merchant Shipping (Oil Pollution) Act 1971 (1971 Act), s 12(1) gives the claimant direct recourse against the insurer. In that event, the insurer may limit its liability in accordance with s 4 of the Act (s 12(3)). When the insurer pays its limitation fund into court, as happened in these cases, that fund constitutes the total sum available under the 1971 Act to meet all valid claims. The court must then determine the amounts that would, apart from the limit, be due in respect of valid claims. If the total of the amounts so determined exceeds the amount of the limitation fund, those amounts are abated pro rata (s 5(2)).

If the insurer's limitation fund is inadequate to meet all valid claims against it, the liability of the defender will be triggered by 4(1) of the Merchant Shipping Act 1974 (1974 Act). Each claimant whose compensation has been pro-rated in the insurer's limitation proceedings will then have recourse against the defender for the amount of the deficiency. But the defender will in turn be entitled to limit its liability in terms of s 4(10) of the 1974 Act in accordance with art 4 of the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage 1971 (the Fund Convention 1971). If the amount of all valid claims against the defender exceeds the limit of its liability, those claims too will be pro-rated (Fund Convention 1971, art 4.5).

The two points to be decided are: (1) whether the first offer was subject to a time limit of three weeks and therefore lapsed on the failure of the pursuers to accept it within that time; and (2) whether if the first offer, like the second offer, was not subject to a time limit, both offers lapsed on the failure of the pursuers to accept them within a reasonable time.

The first offer did not impose a time limit. In the context of the whole letter it appears to be no more than a courtesy on the part of the writer indicating the time scale within which she would like to receive the pursuers’ acceptance. Therefore both offers fall to be construed on the same footing and the question is whether they were accepted within a reasonable time.

The law of Scotland is that an offer that is not subject to a time limit lapses if it is not accepted within a reasonable time. Whether an offer has been accepted within a reasonable time must be determined objectively on a consideration of all the circumstances.

The request made in the first offer for an answer within two or three weeks, while not imposing a time limit, at least indicated the offeror expected an early response. A period of more than nine months is unreasonably long for the acceptance of offers such as these. The pursuers have failed to set out any reason why their delay in accepting the offers was reasonable.

The pursuers were not entitled to hold the offers open for an indefinite period to see how the other claims were likely to pan out. When the process of determining many claims on a limitation fund nears its end, several years will have elapsed from the dates of these offers. It is impossible to predict at what date any claimant will be in a position to reliably assess the probable amount they will recover. If this course of action were open to all other claimants to whom similar offers have been made, there might be no end to the limitation process.