THE LAW AND PRACTICE OF COMPROMISE

Transcription

1 LITIGATION LIBRARY THE LAW AND PRACTICE OF COMPROMISE WITH PRECEDENTS by The Hon. Sir David Foskett, LL.B., EC.I.Arb., F.K.C. A Justice of the High Court, Queen's Bench Division Bencher of Gray's Inn and contributors Seventh Edition SWEET & MAXWELL igj$ THOMSON REUTERS

2 Foreword to the First Edition Foreword to the Fourth Edition Foreword to Settlement under the Civil Procedure Rules Preface Table of Cases Table of Statutes Table of Statutory Instruments vii ix xi xiii xxxi Ixxxv xci PART 1: LEGAL FOUNDATION AND CONSEQUENCES OF COMPROMISE (David Foskett QC) para. 1. Introduction Nature of a dispute Must be a dispute before a compromise 2-01 Actual dispute 2-02 Potential dispute 2-08 The unarticulated dispute? 2-12 Law or fact 2-15 Must be bona fide Essential Requirements of a Valid Compromise Introduction 3-01 Consideration 3-02 Promised or actual forbearance to sue 3-03 Compromise proper 3-07 No consideration 3-10 An identifiable agreement 3-22 xv

3 General Some examples Presentation of cheque sent in settlement A complete and certain agreement General principle Failure to agree all material terms Terms too vague Agreement to agree and the "future document" Problem of the "conditional" compromise Compromise of part of dispute Agreement reached in "without prejudice" negotiations Intention to create legal relations Formalities Land Guarantee Deeds 4. Impeachment of a Compromise Incapacity Children Persons with impaired mental functioning Legal advisers Non-legal advisers and representatives Expert witnesses Companies Local authorities Partners Representative parties Representated parties acting personally Mistake General Relief sought or given Mistake in compromise Misrepresentation General Are compromises contracts uberrimae fidei? Some examples Relief available Duress and undue influence General Examples in the context of compromise Effect Illegality General XVI

4 Compromise of disputes involving issues of illegality 4-72 Illegal compromises Terms of a Compromise Preliminary 5-01 Construction 5-02 General problems and approach 5-02 Subjective intentions of understandings, negotiations and extrinsic evidence 5-10 Post-compromise words and deeds 5-17 "Rules" of construction 5-18 Releases 5-22 The "contra proferentem" rule 5-34 Relevance of jurisdiction of court when construing consent order or judgment 5-36 Implied terms 5-42 General 5-42 Implications as to time 5 43 "Permission to apply" omitted 5 45 No implication of consent order or judgment 5-47 Implied term pending agreed order? 5-48 Costs Effects of a Compromise Effects as between the parties 6-01 End of dispute 6-01 Identifying the disputes resolved 6-03 Matters left out 6-07 Other effects of a compromise 6-18 Financial accounting involving other parties following a settlement 6-55 Preservation of rights against other parties in partial settlements of multi-party litigation some illustrations 6-59 Effects upon and in connection with third parties 6-62 Imposition of liability 6-63 Acquisition of rights 6-64 Impeachment by or on behalf of third parties 6-74 Effects of impeachment by parties on third parties 6-82 Effects in connection with assignment Satisfaction and Discharge of Obligations Under a Compromise Performance 7-02 Payment by cheque 7-03 XVII

5 Payment by instalments 7-04 "Entire" compromise 7-05 Agreement collateral to compromise 7-06 Mutually dependent obligations 7-07 Discharge other than by performance Effects of a Breach of a Compromise General 8-01 Promised or actual acts 8-03 Anticipatory breach of a compromise 8-11 Renunciation 8-12 Self-created impossibility 8-13 Implied term as to co-operation 8-14 Innocent party's choice if available 8-15 PART 2: MACHINERY, PRACTICE AND ENFORCEMENT OF A COMPROMISE (Sir David Foskett) 9. Means by which Compromises are Effectuated General and preliminary 9-01 The aim 9-02 Costs 9-03 The methods of compromise 9-07 Exchange of written communications 9-07 A deed or memorandum of agreement 9-08 Making an agreement an order or rule of court 9-09 Simple consent judgment for the payment of money 9-10 Consent judgment providing time for payment 9-13 Payment of money without judgment 9-16 Consent judgment or order involving terms other than mere payment of money, including Tomlin order 9-18 Other cases Practice of Compromise General Attitude of the courts to compromise Reality of the consent Recording of the consent Indorsement of counsels' briefs Jurisdiction xvin

6 Practice of obtaining consent order Information required by court Settlements reached just before or during trial Settlements requiring approval of the court Notification of settlement to court Settlement of appeals Confidentiality Enforcement of a Compromise General Where the compromise is entirely contractual Where there is a consent order or judgment Where an agreement is filed and made a rule of court Where the terms are incorporated in a Tomlin order Where the terms are part of an order that does not reflect finality Agreed order that recites the terms of agreement Injunction by consent or undertaking PART 3: PRACTICE ON IMPEACHMENT OF A COMPROMISE (Sir David Foskett) 12. Practice on Setting Aside a Compromise Setting aside a compromise agreement Setting aside a compromise embodied in a consent order or judgment Interim order Tomlin order Costs when agreement or order set aside PART 4: THE SETTLEMENT PROCESS IN CIVIL JUSTICE (Sir David Foskett) 13. Present Landscape in Civil Litigation Negotiation Exchange of information Pre-action costs Indemnity costs xix

7 14. Structure of CPR Part 36 Introduction Not a complete code for effective offers of settlement Freedom of contract Privileged nature of offers within Part Inadvertent disclosure to trial judge Exceptions to the rule as to non-disclosure provided for in rules Application to accept or withdraw a Part 36 offer before or during trial The Making, Acceptance and Consequences of an Effective CPR Part 36 Offer Introduction Form Matters to which a Part 36 offer can relate "The whole of the claim" Interest Personal injury claims Interim payments Time for acceptance The making of the offer Clarification of the offer Acceptance of a Part 36 offer The effect of acceptance of a Part 36 offer The Court's Supervisory Role in CPR Part 36 Introduction The test applied to the withdrawal or late acceptance of a Part 36 offer The revised version of Part The costs when such an application is successful Other instances where the court's permission to accept is needed The Effect of a CPR Part 36 Offer After a Trial Introduction The withdrawal or altered offer The effect of failing to match or beat an extant Part 36 offer An extant Part 36 offer xx

8 The general position Claimant achieves no advantage over defendant's offer Defendant fails to achieve advantage over claimant's offer Unjust to make the order? The "tactical offer" Offers outside CPR Part 36 A "without prejudice" offer A Calderbank offer An open offer The "Without Prejudice" Rule Introduction The issues that arise for consideration When are negotiations without prejudice? Express stipulation Implied stipulation "Opening shots" "Parting shots" and responses to "without prejudice" communications Acknowledgments and admissions When will the without prejudice veil be lifted or disregarded? The fact of agreement The interpretation of the agreement Delay and adverse inferences from apparent lack of communication Where a without prejudice document would prejudice the recipient Matters independent of or collateral to the subject matter of the dispute? "Unambiguous impropriety" Estoppel Waiver and mutuality When will the disclosure of documents be protected by operation of the rule? When can without prejudice material be referred to at interim applications? Want of prosecution Security for costs Interim payment applications xxi

9 At what stage in proceedings may objection be taken to a proposal to adduce evidence of the content of without-prej udice negotiations? PART 5: ROLE OF LEGAL ADVISERS IN COMPROMISE (Sir David Foskett) 20. Professional Ethics and Responsibilities General "Confidential" matters disclosed by client or opponent Conflicts of interest Unfounded claims Informing client of offer of settlement Overall duties to client in compromise Keep court informed Authority to Compromise and the Liabilities of Legal Advisers Arising from Compromise Authority to compromise general The law Actual authority and ostensible (or apparent) authority to compromise Ostensible (or apparent) authority Misunderstandings between client and legal adviser Liabilities of legal advisers arising from compromise What constitutes negligence in this context? Legal advisers in the investigation of negligence PART 6: INSURANCE INTERESTS AND COMPROMISE (Sir David Foskett) 22. Insurance Interests and Compromise Introduction Settlements with third party the effects for the third party The general principle Insured and uninsured losses Settlements with third party the effect as between insurer and insured Settlement with third party the effect on a co-insurer xxn

10 Reinsurance and "follow the settlements" clauses Nature of the "settlement" of an insured's claim PART 7: CHANCERY LITIGATION (His Honour Judge David Hodge QC) 23. The Settlement of Chancery Litigation Insolvency Companies Individuals Appeals Liquidators and trustees in bankruptcy Unfair prejudice Restoration of a company to the register Disqualification orders Court-appointed receivers Trustees and personal representatives Charities Probate claims (1) By obtaining an order for the claim to be discontinued or dismissed under CPR r.57.11(2) (2) By means of an order under section 49 of the Administration of Justice Act 1985 (3) Following a trail of the claim on written evidence Practice and procedure Agreed orders Tomlin orders Appeals Declarations Interim applications Masters Release from undertaking PART 8: MATRIMONIAL, FAMILY AND INHERITANCE DISPUTES (Jonathan Cohen QC and Sir David Foskett) 24. Compromise of Disputes between Husband and Wife Agreements not necessarily involving divorce or judicial separation Compromise of proceedings under Married Women's Property Act 1882 section Maintenance (and separation) agreements xxiii

11 Agreements concerning disposal of divorce or judicial separation suit itself Agreements involving interim stages of divorce or judicial separation proceedings including interim financial provision Interim applications proper Interim financial provision Agreements relating to final disposal of financial and property applications Preliminary Nature and relevance of an agreement in this context Securing an order reflecting a prior agreement Disregarding agreements and setting aside consent orders Agreements made "a rule of court" and variations Agreements relating to children 25. Settlement of Inheritance Act Disputes Preliminary Contracting out Effect of previous compromise or consent order Effect and variation of previous "maintenance agreement" Compromise proper of claims under the Act Setting aside and enforcement Practice Tax considerations 26. Offers of Settlement in Matrimonial Finance Cases Preliminary General approach to costs Making an offer that may affect the costs order Children's cases PART 9: SETTLEMENT OF SERIOUS PERSONAL INJURY CLAIMS INVOLVING CHILDREN OR PROTECTED PARTIES (William Edis QC) 27. Settlement of Serious Personal Injury Claims Involving Children or Protected Parties Introduction Consequences of failing to obtain approval XXIV

12 Effect of approval and setting aside consent orders on the basis of a change of circumstances Court of protection Various principles in settlement in personal injury cases A. Provisional damages B. Orders for periodical payments C. The recoupment of benefits D. Costs E. Exaggeration PART 10: EMPLOYMENT CONTRACTS AND COMPROMISE (Adrian Lynch QC) 28. Employment Contracts and Compromise CONTENTS Introduction Contractual claims General release Stress-related personal injury References Statutory claims Settlement achieved through intervention of conciliation officer Compromise agreements Independent advisers The particular complaint or proceedings Statutory compromise agreements, ACAS conciliation and continuity of employment Transfer of Undertakings (Protection of Employment) Regulations Mechanics of settlement in employment tribunals Setting aside an agreed settlement 28^3 Setting aside a consent order Statutory arbitration scheme Conclusion PART 11: LANDLORD AND TENANT DISPUTES OVER LAND (Michelle Stevens-Hoare) 29. Landlord and Tenant Business tenancies Introduction XXV

13 Contracting out and surrendering of 1954 Tenancies Act Parties agree upon the grant of a new tenancy or surrender of a current tenancy Parties agree that a business tenant will vacate Residential tenancies Introduction No contracting out Statutory framework and the court's jurisdiction Obtaining an "agreed" order in practice Residential occupant without statutory protection or with "restricted contracts" Subsequent variation and enforcement of orders The status of the tenancy after a possession order Forfeiture and relief from forfeiture Disputes over Land General The requirements of section Boundaries During court proceedings PART 12: CONSTRUCTION LITIGATION (Michael Black QC) 31. Construction Disputes xxvi Introduction Particular issues Long-term issues Disputes concerning progress Disputes concerning existing defects Certificates and retentions Structure of construction contracts Certificates Agreements as to the content of certificates "Clean break" agreements Retentions Multiple issues Multiple causes of action causative of the same or similar damage Cause of action in respect of which damage has not yet accrued or been discovered 31-18

14 Latent effects Effect of offers to settle Multiple parties "The same damage" and Civil Liability (Contribution) Act Indemnities, subrogation rights and assignments Claims against joint contractors Claims against successive contract breakers Impugning settlements for duress Global settlements Costs Claims for contribution to settlements reached with other parties The principle in Biggin v Permanite 31^0 What must be proved to demonstrate a reasonable settlement 31^4 Relevance and admissibility of advice received Multi-party cases Payment in kind Indemnities Amendment of pleadings between date of offer and judgment or award Claimant succeeds on late amendment Defendant succeeds on late amendment Value Added Tax Adjudication Interim nature of adjudication Adjudication and compromised disputes Jurisdiction and duress Forbearance from adjudication PART 13: ARBITRATIONS (Michael Black QC) 32. Settlement of Arbitrations General Essential principles concerning compromise Enforcement of compromise Who decides whether compromise concluded? Setting aside consent award Offers and costs General The form and substance of an effective offer xxvn

15 PART 14: ADMINISTRATIVE COURT PROCEEDINGS (Nigel Giffin) 33. The Resolution by Agreement of Administrative Court Proceedings Introduction Alternative Dispute Resolution The power to compromise Nature, enforcement and effect of compromise Withdrawal of proceedings Obtaining agreed order Costs upon withdrawal or settlement of judicial review proceedings Continuation of proceedings after fresh decision Agreement at the permission stage PART 15: THE SETTLEMENT OF APPEALS AND THE ROLE OF ADR (Sir David Foskett) 34. Settlement of Appeals Court of Appeal Judge Settlement through ADR Introduction Court's role in direction and encouraging mediation and the costs consequences to parties of failing to embrace it Merits of the case Other attempts at settlement Whether mediation had reasonable prospects of success Failure to act reasonably in the course of a mediation Legal parameters of a mediation and mediation settlement APPENDIX 1: PRECEDENTS Section 1: Draft Consent Orders and Judgments General Section 2: Chancery Precedents Section 3: Precedents for Serious Personal Injury Claims by Children or Patients Al-01 Al-04 Al-10 xxviii

16 Section 4: Landlord and Tenant Cases and Boundary Disputes Section 5: Administrative Court Proceedings Al-11 Al-15 APPENDIX 2: CPR PART 36 AND PART 36 PRACTICE DIRECTION CPR Part 36 A2-01 CPR Part 36 Practice Direction A2-16 APPENDIX 3: EXTRACT FROM CPR PART 21 AND PART 21 PRACTICE DIRECTION CPR Part 21 A3-01 CPR Part 21 Practice Direction A3-02 APPENDIX 4: EXTRACTS FROM CPR PART 40 AND PART 23 PRACTICE DIRECTION CPR Part 40 Extract A4-01 CPR Part 23 Practice Direction Extract A4-02 APPENDIX 5: EXTRACT FROM B-T V B-T Extract from B-T v B-T A5-01 XXIX