Lockton - late court settlements

Lockton share its latest article on the topic of managing risks in eleventh-hour settlements.

All too often, litigation practitioners will find themselves negotiating settlement of an action at the doors of court as a substantive hearing looms. Late court settlements are a feature of litigation. An evidential hearing focuses the minds of parties because litigation risk raises the stakes for clients. Consequently, it also increases the risk of a dispute arising between a firm and their client.

Litigation by its nature is high risk

Where settlement is reached at the last minute, clients may be left unsatisfied with the eventual outcome that is reached between parties. This may lead to disputes over remaining fees to be paid or a claim under the Master Policy for professional negligence.

Whilst it is not always possible to avoid a late court settlement, there are various ways in which the risk of a complaint or indeed a claim arising can be mitigated.

Recording instructions

In the course of fast-paced negotiations with a hearing approaching, time is of the essence. It is essential that clear instructions are obtained from a client to facilitate settlement negotiations. The extent and detail of the discussions between agents and clients will vary depending on a variety of factors, such as the client's availability, the level of engagement from the other parties, the proximity of a court hearing or a pre-arranged meeting with an opposing party.

Instructions may be provided in person outside the courtroom or during the course of a hearing itself. Despite time pressures, it is essential that thorough advice is communicated to the client detailing the merits of any offer of settlement. It is important that a clear and accurate account of the discussions with a client is recorded in a file note. It is also important to obtain confirmation from the client that they understand the advice that you have provided and clarify any outstanding queries that they may have. Claims and complaints can arise when a client feels pressured into providing instructions on an urgent basis. Ensuring that verbal advice is recorded in a note or email ensures that the practitioner is well placed to respond to any suggestion from the client that they did not understand the terms of the settlement, or the advice being given. 

Where instructions are received by way of text or phone call, practitioners should take care to ensure that they understand their client's wishes. Under pressure of time and provided with instructions in shorthand text language, it can be easy for a practitioner to misunderstand their instructions. Whether instructions are obtained in person, by phone call or text, it is good practice to follow up with an email to the client detailing the nature and extent of the advice and instructions provided.

Remember to manage a client’s expectations throughout the course of an action. This will often assist in avoiding a dispute should a compromise figure be agreed shortly before a substantive hearing.

Use of formal offers

A clear hurdle to avoiding a late court settlement can be the unwillingness of an opposing party to come to the negotiating table. It is not always possible to control the process or persuade an opponent to engage at an earlier stage of the litigation. A useful tactic that can be deployed to encourage settlement discussions at an early stage is the lodging of a Minute of Tender or Pursuer's Offer. Both formal offers of settlement have their respective implications regarding an adverse award of expenses against the party that fails to "beat" the formal offer. They force an opposing party to consider the offer carefully. Whilst their efficacy will be dependent on the offer of settlement being pitched at an appropriate level, it is an inexpensive mechanism to increase pressure on an opposing party to meaningfully engage.

Whilst Tenders and Pursuer's Offers are ways to prompt early settlement discussions, they both present risk management issues for practitioners to consider.

As an action approaches a substantive hearing the costs incurred escalate, as does a client's exposure to an adverse award of expenses. This is particularly exacerbated where there is a historic Tender or Pursuer's Offer in play. If an agent previously provided advice that a Tender or Pursuer's Offer should be rejected, practitioners should ensure that they revisit that advice with their client throughout the existence of the action. This will avoid a scenario whereby a Tender or Pursuer's Offer is accepted too close to an evidential hearing, resulting in an adverse award of expenses for their client.

Pay attention to the detail!

When negotiating settlement under time pressure, the focus of agents can naturally be drawn to headline damages figures. This can lead to a failure to consider the remaining settlement terms properly.  Factors such as the manner of disposal of the action; an agreed period for payment; certification of witnesses; sanction for counsel; expenses; and the level of interest applied thereon can all be crucial details to a client. All elements of a settlement require to be agreed with a client and a failure to do so can leave practitioners open to criticism and, in turn, a complaint or professional negligence claim. It may be helpful to create a settlement checklist listing the key aspects of the settlement agreement that have been discussed with the client and which require to be addressed as part of any settlement agreement. This sounds basic but is a simple way to ensure that matters that are important to the client are not overlooked during fast paced settlement negotiations prior to a hearing.

Less speed more haste?

The reality is that late court settlements are here to stay. On a positive note, they can often provide an environment where the best possible settlement can be negotiated on behalf of a client. The risk, and fear, generated by an evidential hearing ultimately focuses minds. However, the risk management issues are clear. Agents can mitigate these risks by ensuring that they have clear instructions, providing full advice, accurately recording all discussions with a client and managing expectations throughout.

Written by Conor Kenny, Solicitor, and Lindsay Ogunyemi, Partner, both of DWF. Article provided as part of the work Lockton conducts with the Society.