#16052 - Recording Negotiated Settlements - BPC Alternative Dispute Resolution

Recording Negotiated Settlements (re negotiation & mediation)

Reaching agreement

• Once a settlement has been agreed, it needs to be recorded.

• Recording settlement = the final part of ADR process.

• Client ownership

  • In exam, ‘recording negotiated settlement’ will come from either NEGOTIATION OR MEDIATION.

  • Point about negotiation & mediation non-adjudicative, they provide the client with ownership over the outcome.

  • HENCE: it must be for the client to determine whether to settle, and, if to settle, on what terms.

• Suppose that you reach agreement:

  • VITAL FOR EXAM: IDENTIFY THE PRECISE POINT at which you on the litigation pathway when you reach settlement

  • i.e. have proceedings yet begun?

• Best practice dictates that: A settlement that is reached should be

  • (1) final

  • (2) clear

  • (3) comprehensive

  • and (4) recorded.

  • If not final or comprehensive: a new dispute can arise, can end up back in court.

  • A settlement must contain provision as to costs

• Lawyer’s responsibilities re recording a settlement, should ensure that:

  1. The terms are comprehensive, covering everything at issue

  2. Each term is clear and sufficiently detailed

  3. The client understands the agreement; lawyer should explain to client what each side must do/not do under the agreement

  4. The client accepts the agreement.

  5. The terms are appropriately recorded [[see options below]]

  6. The terms are appropriately enforceable. Lawyer should explain to client what steps may be taken if either side does not comply with the agreement.

• And professional obligations to protect client’s interests, without regard to the lawyer’s own interests: solicitors under SRA code, barristers under BSB Code of Conduct.

• Where any party is a child or lacks mental capacity: will probably be necessary to appoint a litigation friend under CPR 21; and necessary to seek court approval of the compromise (21.10).

Forms of recorded outcome:

• The form is often governed by the original agreement to enter ADR.

• Arbitration should result in an award.

• Mediation agreement may include a statement that any compromise binding only if made in writing.

• In the absence of an express provision:

  • An adjudicative process will lead to a written decision, eg an arbitration award.

  • A non-adjudicative process -> can lead to a written report from a 3^rd party (eg ENE), but this will not provide a final outcome, but will inform further discussion between the parties.

  • Ombudsman, produces a letter.

  • Mediation and negotiation normally result in an oral agreement

Enforceable terms for recording settlement:

• Record outcome that is legally enforceable.

• (1) an oral contract: non-adjudicative ADR processes often lead to an oral contract UNLESS there is a ‘subject-to-contract’ clause.

  • Once both parties say they have reached agreement and the basic requirements of a contract exist there is an enforceable contract.

• (2) a written contract:

  • Non-adjudicative processes also commonly lead to a written contract, either because: (a) the process was conducted in writing (wholly/partly); or (b) because the oral agreement is reduced to a written contract.

  • An oral agreement where parties state they will only be bound on signing a written agreement only becomes binding when doc is signed.

• (3) an award with statutory authority: because the ADR process is governed by statute/regulation.

• (4) a court order:

  • an ADR process can be wholly or partly incorporated into a court judgment, but only where proceedings have been issued (see below, court order).

• (5) other legal docs: terms could be incorporated into some other appropriate form, eg a deed or conveyance.

• Where a court is involved (once proceedings have started) the terms can normally be enforced by returning to court within the existing proceedings.

• Where a court is not involved it may be necessary to issue new proceedings for breach of contract to enforce the settlement.

Methods of recording settlement agreements

• (1) Exchange of letters: used where proceedings have not been issued; so court order is not an option.

• (2) Contract or deed: may be desirable to have a contract in a separate doc rather than an exchange of letters. Eg where the terms are complex, or parties want a formal separate legal doc, or where there will be an ongoing commercial relationship. Deed may be more appropriate in relatively limited circumstances.

• (3) settlements where there are existing court proceedings, several ways of recording settlement:

  • Judgement entered for immediate payment of sum agreed with costs

  • Judgement entered for the agreed sum and costs, subject to a stay of execution pending payment by stated instalments.

  • Court informed that the case has been settled upon terms endorsed on counsel’s briefs (informal)

  • Court informed that case has been settled, the terms being recorded in a contract.

  • Entry of a consent order, setting out the agreement in the form of undertakings by both parties.

  • Consent order staying all further proceedings upon the agreed terms.

  • Consent order providing for ‘no order’ save as to costs, but setting out the agreed terms in recitals.

  • Tomlin Order.

• (4) endorsement on briefs: terms are written onto the backsheet of the barrister’s brief. In very simple settlement cases, no additional written record may be needed. Normally, lawyer for each party signs the other’s endorsement. Parties may also sign. Same wording should be used on both briefs.

  • The effect of endorsement on briefs: the endorsement is evidence of an oral agreement.

• (5) Interim order:

  • Only possible once proceedings have been issued, and if there has been an application for an interim order.

  • Negotiations prior to interim applications may result in the settlement of the whole case rather than just the interim injunction.

  • When the application is called on before the judge, an order may be made staying, adjourning, or dismissing the claim, on the basis of the terms agreed by the parties.

  • Only applies in very limited circumstances.

• (6) Consent Order

  • Only where proceedings have been issued;

  • Can only be made with consent of the parties.

  • Main benefit: can be enforced with the full range of court enforcement powers, without need to start a new claim to enforce a separate contract (the settlement agreement).

  • Administrative consent orders: very limited circumstances, consent order by a purely administrative process.

  • Drafting of consent orders:

  • normally drafted using the wording agreed in the settlement agreement;

  • Must be expressed as being ‘by consent’ and must be signed by legal reps of both parties.

  • can only make an order within the court’s jurisdiction (eg for damages/costs/declaration; court cannot make an order it does not have the power/jurisdiction to make, even if the terms are agreed by the parties. Eg, cannot order the parties ‘to agree’ or ‘to accept’ or ‘to discontinue’ a claim.

  • Court can only make an order based on the issues in the case; parties may need to ask for permission to amend the Statements of case.

  • If the settlement agreement includes matters outside the powers of the court or outside the issues in the case use a Tomlin order.

  • Should contain provision re costs if no provision for costs made in the Order, each side will bear their own.

  • True consent orders: is based on a contract between the parties; the court order is evidence of the contract arrived at by settlement.

    • A true consent order, which is based on a real contract, can only be set aside on grounds which would justify setting aside a contract (eg fraud/misrep/mistake).

Where proceedings have not yet started record settlement using a SETTLEMENT AGREEMENT:

• There is no need to tell the court

• This is a contract between the parties the usual rules of contract law apply

• If there is a breach the settlement agreement that is a straightforward breach of contract, and usual rules of remedy for breach of contract apply.

Settlement agreement (a form of contract)

• The consideration = agreeing not to litigate. It is best to state expressly that the right to litigate is being given up.

• In construing a settlement agreement, courts will determine what the parties meant by the language used. What a reasonable person, with all background knowledge available to the parties, would have understood the parties to have meant.

• Should include provisions re costs.

• Should be in writing & signed by both parties themselves.

• A settlement that is reached should be

  • (1) final

  • (2) clear

  • (3) comprehensive

  • and (4) recorded.

• Settlement agreement should (all forms of written settlement should):

  • Terms should be comprehensive and accurate;

  • All essential terms should be agreed;

  • All practical details should be included;

  • Should deal with costs (if it doesn’t, both sides will bear their own costs).

  • Should ensure the terms are enforceable (eg do not seek to affect 3^rd party rights, unless the 3^rd party agrees to be bound).

  • Some enforcement options can be built in, eg that a payment will carry interest if not made on time. Or one term can be made a pre-condition to another.

  • Avoid any vagueness or ambiguity.

  • May bear in mind any foreseeable future events that may affect them, so that eg there will be a continuing relationship, so the agreement covers foreseeable changes.

• ‘In full and final settlement’ the whole of dispute is fully settled, cannot be litigated:

  • where the whole dispute is settled, this is normally stated in the agreement, meaning that the whole of the dispute can no longer be litigated.

  • if the written settlement contains such a phrase, the courts will probably not entertain a claim arising out of that dispute, and will be difficult to...