During complex litigation, an issue arose in Bieber and others v Teathers Limited (in liquidation)  EWHC 4205 as to whether a settlement agreement had been made between the parties in email correspondence.
HHJ Pelling QC, sitting as a judge in the Chancery Division, held that the parties had settled their litigation by an agreement contained in, or evidenced by, an exchange of emails between their solicitors that had not been conditional to further agreement and was not ‘subject to contract’.
Shortly before the trial, the claimants accepted a settlement offer from the defendant by email which focused exclusively on quantum.
In their acceptance email, the claimants indicated that they would be circulating a draft consent order and the defendant had replied to this to say "Noted, with thanks”, which suggested that no further terms had to be considered.
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.
When it came to agreeing the formal terms of settlement, no agreement could be reached in respect of these indemnities.
It was noted that the parties’ willingness 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.
The claimants refused to sign the agreement and applied for a declaration from the court that the exchange of emails between the solicitors amounted to a binding settlement of the proceedings.
The Court held that the parties had intended to reach a final and binding settlement on the exchange of emails, without the need to agree further terms.
During the course of negotiations, the defendant had made no attempt to reserve its position in relation to third party claims and there was nothing to suggest that the parties had anticipated that negotiations would be conducted so that a figure was agreed before all other terms.
Points to note
This case serves as a 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 be accurate when it comes to recording details of conversations in attendance notes and on file.
The practical consequence of this judgement that it will be necessary to make it expressly clear if a further agreement to be entered into is anticipated (for example, to add the words “subject to contract” to correspondence), otherwise parties may find themselves in the position whereby they unwittingly prematurely settle claims ahead of a fully negotiated subsequent, additional or more detailed settlement agreement.
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