Ensure all important terms are set out in a settlement agreement

Failure to do so may result in the agreement being incomplete for uncertainty: Western Broadcasting Services v Seaga [2007] UKPC 19 and Brown v Rice and others [2007] EWHC 625 (Ch).

Background

In both these cases the court had to consider whether a binding settlement agreement had been reached.

Western Broadcasting concerned defamation claims brought by a former Prime Minister of Jamaica against five defendants. One of the terms alleged to have formed part of the settlement agreement was that the appellant would publish an apology, to be drafted by the respondent's lawyers, for broadcast on two specified media. The respondent's lawyers would also decide how many times the apology would be published on each.

Brown v Rice concerned an application by a trustee in bankruptcy to set aside a property sale as a transaction at an undervalue. Shortly before trial, the parties agreed to mediate. The mediation agreement contained various standard confidentiality provisions and a clause providing that any settlement reached in the mediation would not be binding until it was reduced to writing and signed by, or on behalf of, the parties. Close to the end of the mediation, the defendant had put forward an offer to settle for the payment of £55,000 within 28 days, which the claimant had purported to accept by fax the following day.

Decision

In both cases the court found that there was no binding settlement.

In Western Broadcasting, the Privy Council (Lords Bingham, Rodger, Carswell and Brown, and Baroness Hale) said that although parties may reach agreement on essential matters of principle, if important points were left unsettled their agreement would be incomplete. In their Lordships' view, the content and publication of the apology remained incapable of resolution. It could not have been intended that the respondent's lawyers would have carte blanche over the content of the apology and the number of publications, but if these terms remained for agreement then this was an important matter remaining still to be agreed. The terms of the apology could not be regarded as a peripheral matter. Its content and publication were crucial and the failure to settle this essential term left the agreement incomplete for uncertainty.

In Brown v Rice, the judge (Mr Stuart Isaacs QC sitting as a Deputy Judge of the High Court) held that the defendant's settlement offer was incomplete as it did not deal with the manner of disposal of the proceedings (e.g. by Tomlin order or by judgment being entered). The purported acceptance of that offer therefore did not give rise to a complete agreement. Further, no binding agreement was reached because it was never reduced to writing and signed by or on behalf of each of the parties as required by the mediation agreement. (In this context the court noted that an offer which is "left on the table" after the formal mediation hearing is to be treated as if it were made in the mediation itself.) This requirement had not been varied or waived by the parties.

Comment

These cases appear to run contrary to the court's usual willingness to give effect to settlement agreements where it is possible to do so, implying a term if necessary to give effect to a settlement. They illustrate the importance of ensuring that all major terms of a settlement agreement are pinned down sufficiently to ensure that the agreement as a whole will be enforceable. It will of course depend on the facts of the case which of the terms are crucial, and which can be considered of such subsidiary importance that the failure to agree them does not negative the parties' intention to be bound by the more significant terms.

In Western Broadcasting, in the context of a defamation case, the terms and publication of the apology were considered a crucial matter. Where an apology is included as part of a settlement of a more mainstream commercial case, it may well not be seen to take centre stage in the same sort of way. All will come down to the facts.

The Brown v Rice decision, that the settlement offer in question was incomplete because it failed to deal with the manner of disposal of the proceedings (eg. by Tomlin order or judgment being entered), is particularly surprising. There seems no reason why an agreement to accept, say, £100,000 in full and final settlement of a damages claim should not amount to a binding settlement, without anything further needing to be said. If the claimant accepted payment but then proceeded with the claim, the defendant should be able to have the claim struck out. This decision appears to throw this in doubt. As a first instance decision (of a Deputy Judge) it is however not binding and it is not clear whether the same approach would be adopted in future.

The court's other conclusion in Brown v Rice, that there was no binding agreement as the mediation agreement in question required the settlement to be in writing and signed by the parties (which it was not), is also of interest. The judge said that this in effect made the negotiations "subject to contract". Such a term should not be relied on too heavily, however. It is implicit in the judgment that this term could have been waived or varied by the parties – including, presumably, orally – though it was not in this case.