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The pitfalls of settling a dispute without legal advice

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Court proceedings have a reputation for being expensive and time consuming – and with some justification. Courts and solicitors therefore encourage disputing parties to settle their claims as early as possible to avoid the expense, sheer inconvenience and potential distress of court proceedings.

How to settle – and getting legal advice before you do so

There are many ways to reach a settlement. You could discuss the issues with the other party by telephone, negotiate face-to-face or you could use alternative dispute resolution (ADR) procedures such as mediation. You can handle any of these processes by yourself or you could ask a solicitor to negotiate on your behalf.

However, if you are handling a settlement negotiation on your own, it is always a good idea to obtain a legal opinion on the proposed settlement and its terms before the final deal is done. Failing to do so could mean you lose important legal rights.

Won't that cost more in legal fees?

You might well ask why incur further legal fees when the deal is nearly done?

It's true that some settlements might only need a single payment by one party to meet a debt. But even in these apparently simple cases, a failure to consider the dispute in its full context can mean that vital issues are not resolved as part of the final settlement agreement. The settlement might compromise more than you realised and might mean you lose the right to bring other claims in the future.

Instructing your solicitor to review the terms of a proposed settlement could cost more in the short term – but, in the long term, it could well save you money.

An example of legal rights being lost through a settlement agreement

In a recent banking case, Marsden -v- Barclays Bank Plc [2016] EWHC 1601 (QB), the claimant, Mr Marsden had made a claim in 2011 that Barclays had mis-sold to him two financial products known as interest-rate swaps. The two parties settled their dispute and Mr Marsden signed a written settlement agreement with Barclays to compromise his claim.

A few years later, in 2013/14, Barclays reviewed the sale of the swaps. At that point, Mr Marsden made some further claims against Barclays relating to the swaps and the bank's review. Barclays argued that Mr Marsden could no longer make such claims because he had settled all of his claims as part of the 2011 settlement agreement.

The parties took this fresh dispute to court – and the court agreed with the bank. Mr Marsden had compromised all his claims in relation to the swaps and he could no longer take court action. This result was not at all what Mr Marsden had intended back in 2011 but just look at what the judge said in his judgment:

"The Settlement Agreement is worded in the very widest of terms, expressly compromising both existing and future causes of action arising out of or in any way connected with the Swaps. On its face, that wording plainly covers all aspects of the present claim."

In all but the very simplest of settlements, parties should seek legal advice to ensure their settlement deal reflects the agreed compromise and protects their future rights. This is especially so where there the dispute involves a substantial amount of money or trade relationships are at stake.

Parties who fail to do so may find they have compromised more than they bargained or planned for. 

Issues to consider as part of the settlement process

Depending on the issues and the stage of the dispute, a solicitor will advise on how to deal with the following issues as part of the settlement process:

  • the range of claims existing and which, specifically, the parties want to compromise;
  • whether any future claims are possible and how to protect the legal right to make those claims in the future;
  • crucial terms necessary to make the settlement agreement work for both parties;
  • important details such as dealing with the dates of payment or dates by which action must be taken;
  • terms that deal with interest, costs or VAT payable;
  • dealing with any outstanding court proceedings and obtaining court orders to close the proceedings.

Get it in writing

Ask any litigator for advice about settling a dispute and they're sure to say "get it in writing ... and make sure you let me have a look at it before you finalise it".

Don't risk your future legal rights – have a word with your solicitor and check that the settlement agreement includes everything you need to protect your position.

(*It is worth noting that in this case, Mr Marsden appears to have had some legal advice in relation to his 2011 compromise - and it may be that the loss of his right to sue might form the basis of a professional negligence claim against his advisers.)


For more information about settling your claim or on other dispute resolution issues, contact:

  • Christopher Burke on 0161 684 6941 or make an enquiry.

    Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers Ltd or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.

    This blog was posted some time ago and its contents may now be out of date. For the latest legal position relating to these issues, get in touch with the author - or make an enquiry now.

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