Recording Settlement

Question 1

What must the lawyer ensure when reaching agreement?

Answer 1

• The terms are comprehensive
• Each term is clear and detailed
• The client understands the agreement
• The client accepts the agreement
• The terms are appropriately recorded
• The terms are appropriately enforceable

Question 2

What are the lawyer’s professional obligations?

Answer 2

• To protect the client’s interests when advising on a settlement, without regard to the lawyer’s own interests or consequences
• Report to the Legal Aid Agency when a client refuses to accept an offer to use ADR/to settle
• Where one of the parties lacks capacity, to appoint a litigation friend under Part 21
• Mental capacity for this is the capacity to conduct the claim

Question 3

What are the forms of recorded outcome?

Answer 3

• Written decision – adjudicative & ED
• Written report from a third party - non-adjudicative. Will not provide a final outcome, but will inform further discussion
• A letter
• Oral agreement (e.g. mediation/negotiation)
• The outcome is not set (e.g. conciliation)

Usually provided for in ADR agreement.

Question 4

What is a compromise agreement?

Answer 4

• A contract compromising the dispute
• Agreeing not to litigate is good consideration
• Better to state expressly that the right to litigate is being given up (but it can be inferred by the court if the circumstances are clear)
• Has the same effect as a contract

Question 5

Full and final settlement

Answer 5

• If the whole dispute is settled, the compromise agreement is stated to be ‘full & final’
• Be careful - these words will make it difficult to rectify
• There are two problems in using this phrase:
  
  • the settlement may affect related claims by other persons
  • they may result in other disputes between the parties also being settled
• If the words are used, whether related claims are barred on the basis that they are included depends on the proper construction of the compromise agreement
• A party who wishes to preserve their right to sue on other causes of action should expressly reserve that right

Question 6

Subject to contract

Answer 6

There is no concluded agreement until a written contract is signed

These exact words must be

Question 7

HOW SHOULD RECORDS BE MADE DURING THE ADR PROCESS

Answer 7

• Vital to keep a clear, detailed and accurate record of what is agreed or provisionally agreed
• At the end of mediation/negotiation, write final terms on a fresh sheet of paper.
• A copy may be made and handed over straight away

Question 8

WHO SHOULD PRODUCE A FORMAL RECORD?

Answer 8

• This should be agreed
• The lawyers for one side can produce a draft and send it to the other side
  
  • It should also be agreed when the draft should be sent to the other parties and who should pay the costs
• Note: the wording of a draft order is subject to the discretion of the judge

Question 9

What is the main difference between the different methods of recording?

Answer 9

• Where a court is involved, the terms can normally be enforced by returning to court within the existing proceedings
• Otherwise, it may be necessary to issue new proceedings for breach of contract

(Some settlements may take a few forms)

Question 10

How should a written settlement be drafted?

Answer 10

• Terms must be comprehensive and accurate
• All the essential terms should be agreed, or machinery provided for establishing them (failure to do this may render the settlement unenforceable for lack of certainty)
• All practical details should be included
• Interest and costs should be dealt with
• Some expressions make it difficult to avoid further proceedings and should be used with care (e.g. a term that one party would pay ‘damage for trespass’ to be determined by a surveyor, inevitably requiring proceedings to interpret the phrase)
• Some enforcement options can be built in (e.g. interest for late payment) or one term can be made pre-condition to another
• Ensure the terms are enforceable
• Avoid vagueness or ambiguity
• Bear in mind any foreseeable future events that may affect the terms

Question 11

An oral contract

Answer 11

• Once the basic oral contract requirements exist, there is an enforceable contract
• Once made, may be difficult to vary or challenge it
• Any condition must be stated

Question 12

Exchange of letters

Answer 12

• Common with non-adjudicative
• One solicitor to set out the terms in a letter, the other side replies to agree
• Cost effective
• Can form a contract without face-to-face ADR
• NB: A chain of letters on a single issue does not necessarily amount to a settlement
• If there has been a face-to-face process, the letters evidence the oral agreement

Question 13

Contract/Deed

Answer 13

• Is a contract appropriate?
• Common with non-adjudicative
• May be appropriate where the terms are complex
• Or where parties want a formal separate legal document for later reference
• May be appropriate with an ongoing relationship
  
  • If there is already a contract, it will be need to be clearly varied/replaced
  • Some of the terms may go into the contract, and others in letters
• A deed may be more appropriate than a contract in limited circumstances

Question 14

How is a contract agreement drafted?

Answer 14

• One solicitor drafts and sends to the other in the normal style
• This will take longer and is potentially the most expensive method of recording
• Common to include a preamble setting out that the contract is to resolve a dispute and summarising the dispute, to ensure clarity

Question 15

What settlement recordings are available where there are existing court proceedings?

Answer 15

Will deal with terms of settlement, disposition of the proceedings, and costs

• Written contract
• Endorsement on counsel’s briefs
• Entry of final judgment
• Judgement with a stay of execution pending payment of instalments
• Court order with discontinuance of claim
• Consent order
• Tomlin order

Question 16

How is an endorsement on briefs made?

Answer 16

• The terms of a simple agreement can just be written onto the backsheet
• Essential that the same wording is used on both briefs

Question 17

Effect of an endorsement on briefs

Answer 17

• Evidence of an oral agreement
• Only appropriate where clients have confirmed the terms, not where the they are still subject to client approval
• Court order may stay, adjourn or dismiss on the basis of the terms agreed outside
• No enforcement
  
  • unless it relates to an interim matter, where it may be possible to go back to court to ask that an undertaking be given

Question 18

What are the characteristics of a consent order?

Answer 18

• Can be enforced with full range of court’s powers without need to start a new claim
• Judge’s discretion whether he makes an order in the terms sought
• Settlements restricted to common law relief (money, delivery of goods), a stay or dismissal, can be made as a consent order without involving a judge (CPR r.40)

Question 19

How can proceedings be dealt with after settlement is reached?

Answer 19

• Judge makes an order consent/Tomlin order terms, which ends case
• Claim discontinued at the request of C (C will pay D’s costs)
• Judge stays proceedings (can be indefinite) – no further steps can be taken, but it does not end the case. May be appropriate where there is concern about implementation

Question 20

Administrative consent orders

Answer 20

• Settlements restricted to common law relief (money, delivery of goods), a stay or dismissal, can be made as a consent order through a court officer without involving a judge
• The order should be drawn up and sent to court with letters expressing parties’ consent
• If there are any doubts or concerns, draft order may be referred to judge, which may be dealt with without a hearing

Question 21

Drafting of consent orders

Answer 21

• Court can only make order within its jurisdiction (i.e. order that it can normally make)
• Court can only make order based on issues in the case
• Consent orders must be expressed as being ‘by consent’ and must be signed by the legal representatives
• Terms should cover all costs, including previous costs (otherwise each side bears their own)
• Order should state whether claim is being stayed, discontinued etc.

Question 22

Where is a Tomlin order particularly useful?

Answer 22

• The agreed terms go outside the scope of litigation, or
• The parties want to keep the agreed terms confidential

Question 23

What do Tomlin orders provide?

Answer 23

• Will provide that proceedings be stayed, except for the purpose of carrying out the terms of the compromise
• Will also provide for each party to have liberty to apply if necessary to compel compliance

Question 24

What three things must be dealt with on the face of the Tomlin order, and where are the other terms agreed?

Answer 24

1. Further proceedings be stayed, except for the purpose of carrying out the terms,
2. Each party to have liberty to apply to the court if necessary to compel compliance
3. Payment of costs, if not agreed (but if amount agreed, can go in the schedule)

The other terms go in the schedule or in a separate contract.

Only issues in the litigation can be on the face.

Question 25

What are the advantages of a Tomlin order?

Answer 25

• Privacy –the court may direct the schedule only be released to the parties
• Schedule is not limited to the orders that judge needs jurisdiction for
• Better suited to record long or complex terms

Question 26

What are the disadvantages of a Tomlin order?

Answer 26

Enforcement powers for the terms of the schedule are more limited than for the face

• Party must apply to court to have the matter brought back

Any application to vary the terms on the face of the order will be governed by CPR

• By contrast, the terms of the schedule are contractual so can only be rectified on the same grounds as any other contract

Question 27

Interim order

Answer 27

• Only a possibility if there has been an application for an interim order
• Agreement outside the court may be recorded as undertakings or in a consent order
• May be recorded in the court’s order, or as a schedule, or by separate agreement
  
  • Only relevant in limited circumstances, primarily where there has been an application for a specific order and one party is prepared to give an undertaking rather than having an order made

Question 28

Relitigating after settlement

Answer 28

• Attempting to relitigate after a consent order is likely to be met with an application to strike out proceedings as an abuse of process
• It is said that there could be no estoppel after a Tomlin order, because the stay imposed is not a final decision
• Whether the new proceedings are an abuse of process depends on different factors, including the extent of any overlap with issues in the old proceedings

Question 29

What are the difficulties in reaching a clear costs agreement?

Answer 29

• Amount incurred won’t be known yet at settlement
• The agreement reached on costs may be too vague and may not constitute an enforceable contract, which may threaten the validity of the whole settlement
• If costs agreement is deferred, the agreement could be undermined when costs are finally discussed
• In litigation, costs usually follow the event (unsuccessful party pays). In ADR, the default is that each party pays their own. If C’s costs are high, this can be difficult
• If litigation has been commenced, there may already be some interim orders as to costs to be picked up as part of the settlement
• If there are no existing court proceedings and the parties cannot agree, special proceedings under Part 8 must be used in order for the court to assess costs

Question 30

How should costs terms be written on the face of an order?

Answer 30

• Say costs are on the ‘basis of assessment’
• ‘To be agreed’
• Failing agreement, to be assessed on a detailed assessment

Question 31

If the parties cannot agree on costs and the court must decide, what are the possible agreements?

Answer 31

• Each side bears their own costs
• One side contributes a stated sum towards other side’s costs
• One side pays a percentage, or costs on specific issues
• One side pays costs of the other side

Question 32

How should the court be informed of settlement?

Answer 32

• Once proceedings have been issued, the court must be informed, even if it is not being asked to make a consent order
• Where a case is settled in advance of hearing, each party must inform the court
• Any order giving effect to the settlement should be filed with the listing officer
• If the court is informed at least seven days before trial, all or part of the hearing fee is refunded (if more than 28 days’ notice, there is a 100% refund)

Question 33

How are the methods of recording enforced?

Answer 33

Contract - sue on the contract

Endorsement on briefs - sue on the contract

Provisions on the face of an order - use court enforcement methods

Tomlin order (2 stage process):

1. restoration under the liberty to apply
2. enforcement of new order

Alternatively, enforce through insolvency