Legal update - Email exchange between solicitors binds settlement agreement

22 December 2014

The applicants (B) had invested in a series of film and television production partnerships formed by the respondent (T). The schemes failed commercially and B brought proceedings against T, which was, by that point, in insolvent liquidation. The claims were valued at £20 million in total, with approximately £10 million available in assets to meet them.

On 18 June 2014, B's solicitor emailed T's solicitor indicating willingness to compromise. A discussion took place the next day between the parties’ solicitors, during which T claimed to have said that agreeing quantum was the key to progressing discussions. According to T, B had said that agreeing figures was the key to settling the case.

Over the next few days discussions between the parties continued, during which both sides made Part 36 offers. Eventually B accepted T’s most recent offer, to which T’s solicitor responded "noted, with thanks". B’s solicitor indicated that he would send a draft consent order the following day; however when it came to agreeing the formal terms of settlement no agreement could be reached in respect of indemnities against third party claims.

B applied for a declaration from the court that the exchange of emails between solicitors amounted to a binding settlement of the proceedings.

The court held that B's evidence was to be preferred to that of T concerning the content of the conversation on June 19. There was nothing to suggest that the parties had anticipated that negotiations would be conducted in a two-stage manner whereby a figure was agreed before all other terms. Moreover, what T claimed to have said on that date was not supported by the terms of his attendance note, and the letter written by B on the day after the conversation was not consistent with T's account of the conversation.

The court adjudged that the effect of the proposal contained in the letter of June 20 was entirely clear: it was a proposal to settle all the claims, counterclaims and costs by a net payment to B collectively on behalf of T in a specified sum. That was an offer capable of acceptance, notwithstanding the difference of positions on third party indemnities.

Further, it was noted that parties’ preparedness to negotiate the terms of a settlement agreement did not necessarily lead to the conclusion that the parties had not earlier entered into a binding agreement to settle the dispute.

This case serves as a stark reminder to lawyers of the importance of ensuring that where any settlement agreements are made only in principle and depend on the agreement of further issues then this fact must be made clear throughout communications, especially when the main issue has been agreed.  Failure to do so presents a very real risk of inadvertently binding clients to terms which may not be in their best interests.

This decision also highlights the need for lawyers to maintain good practice when it comes to recording details of conversations in attendance notes and on the file. This case is a clear example of where findings of fact have been made by the court based on inconsistencies between oral evidence and the contents of contemporaneous documents.

By Katie Allard, Paralegal, Dispute Resolution

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