Settlement Agreements: Weighing up the risks
With settlement agreements making several appearances in the news lately, let’s take a look at what they are when they tend to be used.
Settlement agreements have hit the headlines a lot of late and have featured heavily in some particularly high profile court cases. To take two examples, an agreement entered into in 2009 forms a critical part of the argument from the lawyers on behalf of Prince Andrew, in the action brought against him in New York. Closer to home, actress Sienna Miller has now decided to enter into a settlement agreement to conclude her privacy action against The Sun newspaper.
What these cases share is the idea that a court cannot now hear the case, because any action is now compromised by the existence of a prior settlement agreement.
What the settlement will look like
The settlement in question will likely have involved a sum of money paid by one party, in exchange for which the other party agrees to end their action at that point, releasing the other party from any claims, or future claims, on that particular issue. Claims involving defamation may also include terms about the parties not making statements or remarks about the subject matter of the case in future. The terms of the agreement will almost always be confidential, so there is necessarily a bit of guesswork involved in piecing together what the terms of the settlement are likely to be.
Once entered into, the settlement agreement is like any other contract. If a party goes against its terms they are therefore in breach of it. So where one party releases the other from claims or future claims, then this should prevent them being able to put a claim before the court. To take such an action would be in breach of the terms of the settlement agreement and this will be brought to the court’s attention immediately.
An interesting feature of the case involving Prince Andrew is that he was not actually a party to the original settlement agreement. The agreement was instead reached between the original parties to an action, and his case is that he is a class of person caught within the terminology of this agreement, rather than the party who actually signed it and was released from it. If it is found that Prince Andrew is a person presumed to be included within the settlement agreement’s terms as well, then this could mean the Court shall be unable to hear the case, because it is precluded from doing so by the contractual agreement. This provides an interesting parallel with English law, where statute provides (unless specifically excluded) that a person or class of person provided for under the terms of a contract can enforce its terms, even though they are not actually a party to the contract itself.
Why do parties choose to settle?
So, what would make a party decide to settle, rather than exercise their right to a public hearing of their case? Litigation through the courts can be an ordeal for the parties involved. Not only can the proceedings and the trial be incredibly stressful but, even if you win, the cost can still be very high. In litigation we often say, “costs follow the event,” in other words, if you win, you should expect a recovery of your legal costs as well. However, an award by the court of all of your costs back when you win is extremely rare. The victor, after a long court battle, could still, therefore, be left with a substantial bill to pay at the end of it.
This was likely at the forefront of Sienna Miller’s mind when choosing to enter into a settlement rather than go to trial in her action – indeed this was the reason she gave for choosing to settle. Fighting on as a point of principle can be a very difficult decision, even where the resources are available. In a separate current privacy action brought by Meghan Markle against the Mail on Sunday, she decided to accept a nominal award of a single pound, rather than fighting the issue across a full trial. (She also obtained an undisclosed sum for breach of copyright in another part of proceedings, presumably by way of settlement.) With the stakes – not to mention the cost – being so high, it is little wonder than many parties choose to settle rather than bear the cost and risk of a full trial, where the outcome can be so uncertain.
Weighing up the risks
With so much risk inherent in the litigation process, it should come as no surprise that many parties decide to go for an option that involves far less risk, although most likely a good deal of compromise as well. Because of this, settlement agreements will likely always remain a feature of how we conduct litigation, in parallel with the court proceedings themselves.
If you would like to discuss your needs then please contact me directly by emailing Ieuan.jones@GAsolicitors.com or by calling 01752 513572. We can discuss your situation without obligation and ensure you are on the right path.