In Bieber & Others v Teathers Limited, the High Court considered whether the parties had reached a binding settlement. The court concluded that an agreement had been reached and Teathers was therefore obliged to pay the settlement sum of £2 million.
Background
The claimants had all invested in film and television partnerships which had failed. They blamed Teathers for the failings. Litigation was commenced. In June 2014, emails were exchanged between the parties’ solicitors. An offer to settle for £2 million was made.
On 29 June 2014, the solicitor for the claimants accepted the offer made and indicated that he would prepare a Consent Order. The defendant’s solicitors replied “Noted, with thanks”. However, upon the Consent Order being sent to the defendant’s solicitors, they responded with a detailed settlement agreement. This included a provision that the claimants provided an indemnity against any claims by third parties. The claimants refused to sign. Instead, following unsuccessful further negotiations, they sought an order from the court that a binding settlement had been reached.
Legal position
The key factor in determining whether a binding settlement had been reached was whether, on an objective analysis of the correspondence, the parties had intended to reach an agreement. If the conclusion was that the parties had intended to reach a binding agreement, then the fact that certain commercial terms had not been included would not alter that position.
If the parties did not intend to reach a binding agreement (but instead merely to set out the principles), then it would be usual to use the phrase “subject to contract”. The contract would then need to be formally recorded in writing before it would be binding. If that phrase was not used, then the circumstances could still make clear that the parties were not intending to reach a binding conclusion. However, if, to all intents and purposes, an offer had been accepted, then evidence from one or other party that they, subjectively, had not intended it to be finally binding would have little weight.
The decision
In this case, the court considered that a binding agreement had been reached. No mention of third party rights had been made by the defendant in the course of the emails in respect of settlement and, on the face of it, they set out a binding agreement. The court also placed reliance upon the defendant’s solicitor’s response to the claimant’s acceptance of the offer. Had there been outstanding issues, then the judge considered that the defendant would have raised them. Instead, the response of “noted, with thanks” indicated that agreement had been reached.
Commentary
It is common practice for parties to seek to negotiate a basis for settlement, with the intention that once an agreement in principle is reached, more detailed wording will be agreed before final agreement is reached. If that is the intention, the parties should make clear that the agreement is subject to contract. The alternative is to ensure that all relevant terms are included in any offer.
This case shows that, even in an extremely complicated case, the court will adopt a simple approach to the question of whether settlement has been reached. In this case, it appears the defendant has had to pay the sum of £2,000,000 without its concerns about third party claims being addressed. In other matters, issues such as confidentiality may be important to one or other party. Whatever stage of a matter at which settlement is being reached, it is important to ensure that all issues are included before any offer capable of binding settlement is made or accepted.
