Don’t get burned – get your settlement right

Pay attention to detail! A Court considers whether an exchange of emails between solicitors inadvertently constituted a settlement agreement. 
 This case looks at how easy it is to make a simple mistake in writing and the possible consequences. In Bieber and others v Teathers Limited (in liquidation)(2014), the court considered whether the parties had reached a binding settlement by an exchange of emails between their respective solicitors.

Although Solicitor firms generally should be expected to know better and maintain “without prejudice” or “subject to contract correspondence”, mistakes and omissions do on occasions occur. As a result, a solicitor’s email correspondence constituted a binding settlement without the need for a subsequent detailed settlement agreement. If solicitors can inadvertently achieve this, it is certainly not impossible for companies or individuals to face a similar outcome.

The story

Shortly before the trial, the claimants accepted by email a settlement offer from the defendant which focused on a sum to be paid to the claimants. In the acceptance email the claimants indicated that they would be circulating a draft consent order to which the defendant replied “Noted, with thanks.” On receipt of the draft consent order, the defendant sent a long-form settlement agreement to the claimants which provided for an indemnity to the defendant in the event of third party claims. The claimant refused to sign the agreement.

Upon a review of the exchange of emails the Judge held in considering the whole course of negotiations, the parties had intended to reach a final and binding settlement without the need to agree further terms. The agreement was not subject to contract. It was expressed to be in full and final settlement of all claims between the parties, counterclaims and costs. During the course of negotiations, the defendant had made no attempt to reserve its position in relation to third party claims and such a reservation was immaterial to whether a binding agreement had been reached.

The offer made by the defendant and accepted by the claimant was not expressed to be subject to contract and did not include any such qualification. The response of the defendant: “Noted, with thanks”, suggested that no further terms had to be considered.

Don’t get burned

This decision is a stark reminder that, even in the absence of seeking legal advice, the use or reference to “Without Prejudice” or “Subject to Contract” can enable a party to ensure that all terms of agreement have been concluded, the t’s crossed and i’s dotted and any omission or oversight properly addressed before final commitment.

This article was written by Stephen Eccles, Partner and Head of the Dispute Resolution Department at Pinney Talfourd Solicitors. This article is only intended to provide a general summary and does not constitute legal advice. Specific legal advice should be taken on each individual matter. This article is based on the law as at August 2015.