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Inland Revenue Commissioners v Barbara Jane Fry (2001)


The mere banking of a cheque by the Inland Revenue did not give rise to any contract whereby it accepted the amount of that cheque in full and final settlement of the amount of tax due from the taxpayer.


Claimant's action for £113,082 odd plus interest in respect of income tax, self-assessed tax and surcharges due from the defendant ('D') in respect of monies paid to her by the Lloyds Hardship committee. D did not dispute the amount of the assessments, but claimed that the Revenue had agree, or were to be taken as having agreed, to accept a sum of £10,000 in full and final settlement of her liability. Following unsuccessful negotiations between the Revenue and D's husband ('H') in 1998, H sent a cheque for £10,000 to the Revenue's Enforcement Office under cover of a letter that stated that the payment was offered in full and final settlement of the debt due from D, which offer could be accepted by presentation of the cheque for payment. The Revenue gave evidence that: (i) the procedure within the postroom of the Enforcement Office was for all cheques received in the post to be separated from any correspondence to which they were attached, with the cheques being immediately presented for payment and the correspondence being passed on to the appropriate case worker; (ii) as a consequence, H's cheque had been presented for payment before the terms of his offer had been considered; (iii) as soon as H's letter was read, he was immediately advised that his offer was not acceptable, and that he could either allow his cheque to be treated as part payment or he could have his money back. D nevertheless contended that a binding compromise had come into effect.


(1) For any contract to come into existence, there had to be a meeting of minds. Here, the Revenue had banked H's cheque without any knowledge that an offer had been made, let alone as to what the terms of that offer were. In such circumstances there could not be said to have been any act of acceptance. (2) Even if the matter fell to be dealt with on the basis of the "reasonable observer" test, this court did not consider that such a person would inevitably conclude, without some knowledge as to the Revenue's internal procedures, that the mere banking of H's cheque was an acceptance of his offer.

Judgment for the Revenue.

Chancery Division
Jacob J
Judgment date
30 November 2001

​LTL 10/12/2001 : (2001) STC 1715 : Times, December 10, 2001

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