Settlement Negotiations

If you can settle a dispute by agreement rather than risking starting (or continuing) litigation, that is generally a good thing. In most cases a dispute can be formally settled without needing the court's/tribunal's approval. In some types of cases you might still need the court/tribunal to make an order but, even then, if all known affected parties reach agreement, that makes the court/tribunal process much easier and less expensive. 


Introduction


Even if court/tribunal proceedings have already started it is not too late for a settlement to be agreed. If the parties can agree on a settlement at any time before (or even during) the trial, the case is essentially halted (although in some cases the court/tribunal may need to make a formal order “by consent”). A settlement can be on any terms which the parties are able to agree on. That might mean agreeing a settlement in which the Claimant gets most (but not all) of what they are seeking, or a settlement which means that the Claimant gets very much less than they are seeking, or the parties might meet roughly in the middle.

Nobody can be forced to settle: everyone is entitled to have their disputes decided by a judge, but it is worth considering what (if anything) you might be prepared to settle for. Generally the advantage of settlement is that whilst you might not have exactly the outcome you want, you have certainty rather than proceeding to trial and running the risk (whether a large risk or a small risk) of the judge finding against you.

So the first thing to consider is whether there are any terms on which you might be prepared to settle or whether nothing less than a complete win will do. Most people who are claiming money would be prepared to settle for, say, 90% of what they are claiming in order to have certainty rather than take the risk of getting less or even losing completely at trial, as nothing is absolutely certain in litigation and even what seem like the strongest cases do sometimes fail for various reasons. But there may be some situations where people feel that only a complete win will do and they are not prepared to compromise. This might be the case where

  • You are claiming an injunction to prevent somebody doing something (such as constructing a building near your home in breach of a restrictive covenant) and you do not want money as an alternative: you want the injunction. A court always has a discretion to refuse an injunction and grant monetary compensation instead but if what you want is an injunction and do not want to voluntarily settle for money, then there may be no room for negotiation (indeed if you offered to accept money the court might be less likely to grant an injunction). 
  • You want to avoid setting a precedent. If you are a business and you have provided perfectly good services or goods, you may want to resist an opportunistic claim by a customer – rather than make even a small offer – so as not to encourage future opportunistic claims.   

If, however, you are willing to consider a settlement in principle – providing the terms are right - then there are two main ways of attempting to reach a settlement


  • Mediation
  • A formal written offer

Consider mediation

A Mediation is a meeting, usually lasting half a day or a day, attended by the parties and their barristers, and conducted by a professional mediator whose fees are split between the parties. You can suggest a mediation to the other side at any time and, if they agree, you can jointly appoint a mediator. Because of the cost of the mediation it would not be worthwhile unless both parties are prepared to consider compromise, and if you propose a mediation, and the other side agree, that almost certainly means they are serious about trying to reach a settlement. Mediations generally have a high success rate - much higher than "round table" meetings where the parties and their lawyers meet with no mediator. If the parties are going to have to pay their lawyers to attend for half a day or a day then having a professional mediator there as well increases the chances of success by a much higher percentage than the increase in cost (each party only pays half the mediator's fee). 

Everything said in a mediation is "without prejudice". If the mediation does not result in settlement, so that the matter proceeds to trial, the trial judge can be informed that there has been a mediation but the judge cannot be told anything about what happened at the mediation itself nor about any offers made during the mediation. However after  an unsuccessful mediation, there is nothing to stop you, if you wish, asking a barrister to draft a without prejudice except as to costs offer simply repeating the offer you made in the mediation (or any other offer you wish to make) and that offer can then be seen by the judge when considering costs orders after trial, in the usual way as explained below.

A mediator should not be confused with an arbitrator. An arbitrator looks at the documents, hears witnesses, and decides who wins according to the law (in much the same way as a judge). A mediator does not do this. Rather the mediator tries to facilitate a pragmatic settlement which both parties can live with. It is usual for each party to be accompanied by their barrister so that the barrister can advise them about making or accepting particular offers during the mediation. Also, if the mediation is successful, the barristers can draft and agree the detailed wording of the formal legal agreement to give effect to the settlement terms which, when signed by both parties, are legally binding. The mediator will normally ask to see the key legal documents - and view the site if it is a dispute about land or building works - but this is not in order to decide independently who is legally right but rather for pragmatic reasons to understand where each side "is coming from".

Making the arrangements for a mediation 

One advantage of mediation is that it is possible for you (and the other side) to say things to the mediator in confidence (i.e. not to be communicated to the other side without permission). This is useful if you have some particular concern or vulnerability which you do not want the other side to know about lest they exploit it. The mediator can take your concerns into account when proposing solutions without revealing the extent and precise nature of your concerns. The finally agreed terms of settlement can include matters which are outside what a court/tribunal could order and a mediation is usually the best way of exploring creative solutions. Because of the flexible nature of mediation it is generally best, when proposing mediation, to keep the letter/email proposing mediation simple, avoiding the temptation to say anything which could be taken as imposing pre-conditions or as excluding in advance anything from discussion. Your email can simply say "I would like to propose mediation to try to come to a mutually acceptable solution to our dispute. If you can confirm that you are agreeable to mediation, we can then discuss who to jointly appoint as mediator". If the other side respond positively you can find a mediator at www.directaccessportal.co.uk/Mediators A common way of selecting a mediator is for one side to select a shortlist of three mediators and pass details to the other side, and for the other side to then select one of the three. Three rooms are needed for a mediation. In large cities there are companies which specialise in providing rooms specifically for mediation but in most civil disputes the mediation can take place anywhere convenient where three rooms are available. If the dispute involves land or building works it is usual for the parties, their lawyers, and the mediator, to view the site first, and often a nearby hotel with three meeting rooms available is chosen for the mediation.  

Once a mediator has been appointed they will probably ask to be given, in advance of the mediation, some basic documents which explain what the case is about, such as the pleadings if litigation has already started. Sometimes the parties prepare "position statements" but usually no extra documents need to be written just for the mediation and documents already in existence for litigation purposes can be used. Although a mediator is not a judge it is, nevertheless, usual to prepare a "bundle" of documents for the use of everyone at the mediation in much the same way as a trial bundle would be prepared for a trial before a judge. In a Bundle every page has a page number and there is an index at the front - really a table of contents - listing every document and its page number. Sufficient identical copies are produced for everyone at the mediation.         


It is possible to make "without prejudice except as to costs" offers

It is possible to make a written offer which will not be seen by the trial judge until after the judge has given judgment (i.e. announced who wins). Legal rules allow this because the courts and tribunals want to encourage settlement and do not want a party to be put off making a realistic offer for fear that that might subconsciously influence the judge's decision about who wins. After judgment the offer can be seen by the judge and may affect the costs order the judge subsequently makes. In many (not all) court and tribunal cases the judge normally orders the loser to pay most of the legal costs of the winner but a without prejudice except as to costs offer can affect the normal costs order. 

Example: You start a court case, claiming £100,000, in late January. In early February the other party makes a without prejudice except as to costs offer of £95,000. You do not accept that offer. At the trial in November, you win, but not completely, and the judge decides you are owed £93,000. The judge might then order the other party to pay your legal costs but only up to February, and order you to pay your opponent's costs incurred from February to November, on the basis that you ought to have accepted the £95,000 offer in February because it is more than you eventually got at trial.

If the case is not primarily about money – e.g. a dispute about ownership of land or rights of way – the same general principle applies: if the Claimant is not completely successful the court will decide whether, broadly speaking, they have done better or worse than any offer made, and make costs orders with that in mind. 

Because without prejudice except as to costs offers are immediately binding if accepted, and also because if not accepted they may (eventually) be seen by the judge, it is important to ask a barrister to draft them so that they are correctly worded (as well ask asking the barrister to advise on what might be a reasonable settlement amount). There is a certain cost involved because a without prejudice except as to costs offer has to be carefully drafted and watertight. It is unusual for there to me more than one of two without prejudice except as to costs offers made in the lifetime of a case. This is because the primary motivation for such offers is often to try to reduce the risk of an adverse costs order, rather than to actually achieve settlement (though of course a settlement is welcome if it occurs). Statistically settlements are much more likely to be made at mediations than by without prejudice except as to costs offers being accepted, and you can, of course do both.    
       
Note about terminology: A without prejudice except as to costs offer is sometimes called a without prejudice save as to costs offer or occasionally it may be called a Calderbank offer. In court cases subject to the Civil Procedure Rules, offers are normally in the form of Part 36 offers. A Part 36 offer is a particular type of without prejudice except as to costs offer.
 

Be careful how you make and respond to offers

As explained above, many offers are in a form which, if accepted, is immediately and irrevocably binding on the parties. If you want to make such an offer, get a barrister to make sure it is correctly worded and watertight and deals with costs in the appropriate way (e.g. are you offering to pay the other side's legal costs, are you expecting them to pay your costs, or is each side to bear its own costs) and has adequate verification and enforcement mechanisms built in. In a case involving land, consideration may have to be given to a lasting solution which will apply not just to the current parties but to future owners of the land so that there are no problems when a party comes to sell.

If you want to accept a formal written offer you receive from the other side, get advice from a barrister before replying as there may be technical problems in the wording and it may be advisable for a counter-offer, which is in substance the same but properly worded, to be made.


Note: It is possible to negotiate subject to contract

As explained above, mediation, conducted by a trained mediator, is generally the best way to reach a settlement. An alternative is simple one-to-one negotiation but this is statistically less likely to succeed. Sometimes people think that they will try one-to-one negotiation first and then move to mediation if negotiation fails. Whilst this is a theoretical option it can backfire because one-to-one negotiation can end in acrimony or at least it can make one or both parties feel that "there is no more to be said" and be then less likely to agree to mediation.

If, however, you do decide to have a one-to-one negotiation you should head each offer (or response to an offer) "subject to contract". This means that if accepted it is still not binding but is, at that stage, only agreement in principle. You can then ask a barrister to draft the final precisely detailed agreement which will be binding when signed by both parties. If you don't head each offer "subject to contract" then offers when accepted may become immediately binding possibly with undesirable consequences because they have not been worded with the precision that a lawyer would have used.  

If you compose your own offers and responses in this way you would normally head them "without prejudice" as well as "subject to contract" (so that they cannot be shown to the judge if agreement is not reached) so you would word it like this:



WITHOUT PREJUDICE AND SUBJECT TO CONTRACT

I would like to make the following offer to settle this matter...

If you agree I will ask my barrister to draft a detailed formal agreement which, when signed by both parties, will be binding. 


Note 1. An oral offer - by telephone or face to face - which is accepted can in some circumstances be a binding agreement even before anything is put in writing. In order to make sure this does not happen, start the conversation by saying "This is without prejudice and subject to contract". If you are having a discussion and you need to write something down to explain something - such as how a figure has been calculated or a rough plan with a proposed boundary - make sure that the first thing you write on the piece of paper is "without prejudice and subject to contract" if that is what the discussions are.  

Note 2. If you have been negotiating on a without prejudice and subject to contract basis without success, it can be important to ask a barrister to put your final offer in a without prejudice except as to costs offer without too much delay because it is only the without prejudice except as to costs offer which will be seen by the judge when considering costs orders, not the earlier without prejudice and subject to contract correspondence which is never seen by the judge. 

Note 3. A table giving basic facts about different types of offer can be found here.

Note 4. As well as heading any offer or response appropriately  - e.g. WITHOUT PREJUDICE - it is usual to give any PDF file containing the offer/response a file name which also indicates its status such as 2016-09-15   Letter Smith to Jones (WOP) This helps to prevent anyone accidentally including the offer among documents put before a judge - e.g. in a Trial Bundle. Likewise when offers/responses are sent by email it is usual to include in the subject field an indication of the status of the communication.

Note 5. It is good practice to head each offer and response without prejudice, without prejudice except as to costs, etc. as appropriate but even if not headed like this an offer might still be regarded as "without prejudice" simply because it is an attempt at settlement, so if you want to make an open offer (i.e. an offer which can be shown to a judge even before judgment) that should be actually headed with the words OPEN OFFER to make that clear (ask a barrister to draft any open offer you wish to make).

Don’t count your chickens before they are hatched

Sometimes there are settlement negotiations actually on the day of the trial -something may happen part way through the trial which makes one or both parties keen to try to settle the matter. In this case is may be less than half an hour between deciding to try to settle and a binding settlement agreement being signed. But if settlement is being considered earlier on, well before the trial, it is usual for the settlement process to take some weeks.

A mediation usually takes a day and if the mediation results in a settlement acceptable to both sides, the barristers for each side will, there and then, jointly draft an agreement which is signed by both sides and is binding. However although the mediation itself only lasts a day, before the mediation can take place one side has to suggest mediation, the other side has to respond, there then needs to be selection of which mediator to appoint and then the date for the mediation has to be arranged taking account of both side’s availability, the availability of each side’s barrister and, of course, the availability of the mediator. So it may be several weeks between when mediation is proposed and when the mediation takes place.

If a written without prejudice save as to costs offer is sent by one party, the other party will need to take time to consider it and take advice. In fact in some courts/tribunals 21 days is considered a reasonable time for a party to take when considering a formal written offer.

So you can see that trying to agree a settlement is normally a process which can easily take several weeks. It is important that during those several weeks that a settlement is being pursued that you do not stop doing the normal things you need to do to complete each pre-trial step by the court/tribunal ordered deadline. Otherwise you may find that in the end there is no settlement after all and you have missed a deadline, or in order to meet a deadline you may have to cut corners which may reduce the prospects of success at trial. If the other party misses a deadline normally the court/tribunal expects you to bring that to the court’s/tribunal’s attention (e.g. by making an application) promptly - if you do not you may get little sympathy from the court/tribunal if the effect of the other side’s delay is to make it difficult for you to meet another deadline - so you should not delay just because you are in the middle of a settlement process. In fact if you do delay the normal work of carrying out each pre-trial step because you are in the middle of a settlement process, the other side, seeing that you are doing that, may take advantage of that by stringing things out so that you miss a deadline or have difficulty meeting a deadline, and then they may ask the court/tribunal to impose a sanction of you for missing the deadline! 

So treat the ordinary work of carryIng out the pre-trial steps as separate from any settlement process and just carry on with it at the usual pace unless and until a binding settlement agreement is actually signed. 


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This page was lasted updated in October 2017. Disclaimer