Law

Alternative Dispute Resolution – Settlement Agreements

By 27 September, 2019 No Comments

Of the disputes referred to the Supreme Court of Western Australia, less than 2% of matters make it to trial. According to former Chief Justice Wayne Martin AC QC, this is a fairly typical statistic across Australian courts.

When an in-principle settlement is reached it is important to ensure the settlement is properly documented and the following matter are considered to protect your interests regarding any settlement reached.

Signed, sealed and delivered

While both Deeds and Agreements can be used to record a settlement and impose legally binding obligations on the parties, it is important to consider the advantages and disadvantages of each. Specifically, agreements are only enforceable once executed by both parties. In the alternate, a deed becomes enforceable at the time it is delivered to the opposing party, hence the catchphrase ‘signed, sealed and delivered’. Furthermore, a deed does not require consideration. That is, the price paid in return for the promise. Deeds therefore work to avoid further disputes later down the track if the existence of consideration within the settlement is unclear.

Choosing your draftsman

A document recording a settlement is usually interpreted having regard to its text, context and purpose. Where there is ambiguity, it is important to consider the Contra Proferentem rule. This provides that when a clause is ambiguous, it will be interpreted by the courts with a meaning that is most in favour of the party who did not request nor draft the clause. Getting sound legal advice before executing a deed or agreement ensures both parties understand the terms they agree to, that it accurately represents those terms and ensures that matters that may not have considered have been properly addressed.

Litigation

It should be clear on the face of the agreement whether formal proceedings are to be dismissed and who will bear onus of paying any outstanding court fees.

Considering any ongoing relationship

When a settlement agreement is drafted, it is important to consider whether there is any desire to maintain an ongoing (business or otherwise) relationship between the parties executing the agreement. This can be incorporated into the settlement to ensure parties are able to continue working together, while being on the same page in regards to the applicable terms. Alternatively, when the settlement is a means to a finalisation of a relationship it is important to consider broader aspects including commercial confidentiality and non-disparagement clauses. Non-disparagement clauses can be included in settlement agreements, especially between commercial parties. The inclusion of these clauses minimise the likelihood of any further reputational damage following a settlement being reached.

Indemnities

While including indemnities may appear to be a straight forward process, it is important to remember that the words you choose to express the scope of the indemnity will affect the loss recoverable under it. In drafting such clauses, one must have in mind the probability of the indemnified event occurring along with the further consequence that may result. Indemnities work to limit the direct loss caused by a breach of the agreement, making it important to give appropriate consideration during the drafting phase.

Confidentiality

Inherent in most settlements is a clause protecting the confidentiality of the terms of the settlement. In circumstances where parties to a settlement are not bound by confidentiality, there is no obligation on a party to disclose the terms of the settlement. This can have severe detrimental effects on a party, particularly if the terms become public knowledge.

Closing Remarks

Settlement agreements will never be one in the same although, there are often common drafting mistakes. If you are leaning towards a means of alternative dispute resolution, Pragma can be of assistance. Feel free to reach out to Luke Davies or Nick Malone at luke@pragma.law, nick@pragma.law or on (08) 6188 3340.

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