Member Article

As we embark upon the season of goodwill, those wishing to embrace the Christmas cheer may wish to consider settlement of an ongoing commercial dispute bringing peace and goodwill to all - besides saving their business time and money in the process.

Should you settle?
Parties settle disputes for a variety of reasons. Before making a decision, you need to consider a number of issues:

• Has the court ordered a stay of proceedings during which the parties may wish to consider a settlement?
• Are there commercial considerations which make settlement an attractive option?
• Do the parties wish to continue doing business together post resolution of their dispute?
• Will a settlement impact on the financial status of the company? The value of any settlement may appear on the company accounts. A potential liability may affect the commerciality of the company going forward.
• Is the other party willing to co-operate or do you need the assistance of the court to facilitate such discussions?

Make an offer or negotiate?
Once you have decided to try to settle, it is vital to decide upon an appropriate method to facilitate the parties in reaching a settlement. You can either make a formal offer to settle or enter into settlement negotiations.

Settlement offers
Settlement offers can be worded and labelled in different ways. They include:

• Part 36 offers - these offers cannot be disclosed to the court except when dealing with the question of costs. To be valid, the offer must comply with the requirements set out in Part 36 of the Civil Procedure Rules (CPR). To achieve the advantages offered by Part 36 the offer must be 'more advantageous' or 'at least as advantageous' as the amount awarded in the judgment (depending on which party made the offer).

• Without prejudice offers - without prejudice offers must be headed up as being "without prejudice" which means the offer cannot be disclosed to the court. Although it is still possible to make such offers, they are not often used in practice because, generally, they will not attract any costs consequences.

• Without prejudice save as to costs - sometimes known as 'Calderbank offers' this form of settlement offer must be clearly headed as 'without prejudice save as to costs'. Such labelling means that the offer cannot be disclosed during the substantive proceedings. However, be warned: if you unreasonably reject such an offer the court must consider it when exercising its discretion on costs.

Negotiations 
The approach to settlement negotiations will depend on a variety of factors which means that each settlement negotiation is unique. There will be different personalities, issues in dispute, quantum and potential repercussions for the business.

Top tips for settlement negotiations include:

• It is always important to ensure that you negotiate on a 'without prejudice' basis. Failure to do so could have a significant impact on the dispute going forward. Making an open admission on some or all of the claim inevitably limits the issues in dispute between the parties and can promote settlement of the remaining issues. You should, however, be aware that once proceedings have been issued an open admission cannot be withdrawn without the permission of the court.
• Assessing the strengths and weaknesses of your case before you negotiate. Adopting this approach should mean that you will be well prepared to address issues raised by your opponent. In Brit Inns v BDW Trading [2012] EWHC 2489 (TCC), the Technology and Construction Court recently awarded costs against a successful claimant because it failed to investigate its own claim, information and relied on extremely poor expert evidence.
• Saying what you mean and meaning what you say. Do not use phrases that could be ambiguous. Make sure you clarify points with your opponent if you are unsure about their proposals.
• Ensure the person negotiating has the authority to bind the business to any settlement reached.
• If you reach an oral agreement, make sure you follow it up in writing (via email or a letter) as soon as possible setting out what has been agreed and what each party's obligations are, whilst clearly specifying key dates, for example deadlines. Alternatively, if you reach an oral agreement during a meeting, consider documenting the key points of the agreement whilst everyone is present and ask all parties to the agreement to sign before they leave.
• Depending on the complexity of the issues and the entrenchment of the parties' positions, consider using a professional mediator to facilitate negotiation.
• Even if you are not able to reach a full settlement, it may be possible to reach agreement on certain issues which means parties can concentrate on the remaining 'live' issues thereby focusing resources on these areas.

What should I do?
Before you make an offer or negotiate, consider what the business wants to achieve overall. It can be very easy for personalities to become involved, losing sight of the commercial perspective. If you are in any doubt about what to do, seek legal advice.

Happy Christmas