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Settlement at mediation – handle with care

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In June 2019, David Quinn, a Managing Associate in our Property Litigation team, acted for the successful Claimants in the High Court case of Abberley and others v Abberley (2019) EWHC 1564 (Ch).

The case is an important reminder for parties to a mediation that in the event of a settlement being agreed the parties and their representatives ought to ensure that:

  1. There is a carefully drafted settlement agreement prepared at the mediation that clearly records all of the terms agreed by the parties; and
  2. The agreement is robust enough to refute any challenge by a later disgruntled party who may retrospectively regret the terms agreed.

The Facts

The case involved a fairly typical dissolution of a farming partnership concerning two parents, two brothers and the division of the farm, land and assets. Having not reached an agreement on the dissolution the parties agreed to mediate the dispute and it is the outcome of the mediation that is the subject of these proceedings.

The mediation lasted a full day and went on into the night when eventually terms of settlement were agreed which included transfers of land and a farm business tenancy. Plans were circulated during the day in relation to the plots of land discussed.

The mediator and the Claimants’ solicitor at the time proceeded to type the settlement terms in an electronic template using an online website used by the mediator but the document was lost before being printed. The agreed terms were therefore reduced to writing and duly signed by the parties’ solicitors. The handwritten agreement was headed “Heads of Terms”. The agreement referred to a plan but the plan was misplaced.

In the period after the mediation correspondence was exchanged between the parties’ solicitors in relation to the manner in which the terms of the agreement would be effected to include the number and nature of dispositions of land required. The correspondence in this respect continued for a period in excess of 18 months before the Defendant instructed a new solicitor.

The Defendant then presented an argument that the agreement was not a binding contract but rather a document that was signed merely as an indication of where the parties had reached in their settlement negotiations, being a document that recorded terms agreed in principle only. The Defendant further argued that the contract was not binding for uncertainty due to the further precise terms required to be agreed in relation to the terms of the dispositions of land to be effected and that it did not comply with Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 in relation to a contract for the disposition of land.

The Court

Appearing before HHJ Jarman in Cardiff it was held that:

  1. On the balance of probabilities all terms agreed at the mediation were incorporated into the agreement and that the agreement did comply with the statutory requirements of section 2 of the Law of Property (Miscellaneous Provisons) Act 1989.
  2. That the essentials of each of the heads of terms were set out in the signed agreement with sufficient certainty to be capable of amounting to a binding agreement and the fact attempts were made to agree further more precise details did not detract from the uncertainty;
  3. It was clear that the agreement contemplated further documentation (such as the dispositions of land) but this did not equate to contemplating a further formal agreement. The judge referenced the case of Von Hatzfield-Wildenburg v Alexander (1912) 1 Ch 284 in this respect where the court found that the mere fact that a more formal document is envisaged does not of itself preclude the existence of a binding agreement.

The case demonstrates the court’s willingness to give the benefit of the doubt to the agreement in cases where the terms of the agreement provide sufficient certainty to be capable of constituting a binding agreement. That said, the parties to a mediation and their legal representatives must be very careful when drafting the settlement agreement, particularly after a mediation that has lasted into the late evening and night when those attending will be tired and, with the end in sight, the tendency could be to draft the settlement agreement in haste. It must be handled with care.

The judgment can be read at: https://www.bailii.org/ew/cases/EWHC/Ch/2019/1564.html

Ince has a team of experienced specialist Property Litigation lawyers and will be very happy to have a no-obligation discussion about your case.

David Quinn, can be contacted on 029 2167 2707 and by email on davidquinn@incegd.com

David Quinn

David Quinn Partner, Real Estate

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