Litig8: Tips for settlement conferences

Each month as a part of Mills Oakley’s Litig8, we bring to you snapshots of eight key cases, legislative changes or other legal events. The summaries are not comprehensive and do not constitute legal advice. You should seek professional advice before taking any action based on the content of this email.

Part 5 of Litig8 Edition 3

The recent decision of Sincerity Australia Pty Ltd v Hungerford and Ors (2016) ACTSC 125 highlights the importance of ensuring any settlement is appropriately documented to give full effect to the intention of the parties.

The claim in Sincerity Australia Pty Limited v Hungerford involved non-payment for goods sold.

The matter resolved at mediation. Terms of Agreement were subsequently prepared, providing for payment of $80,000 to the plaintiff, and judgment against the two defendant corporate entities. Proceedings were also to be discontinued against the two defendant directors.

The plaintiff tried to enforce payment of the settlement sum against the two directors. The plaintiff was unsuccessful in the first instance and subsequently appealed to the ACT Supreme Court.

The plaintiff argued that a joint obligation for all four defendants to pay the settlement sum, and that the terms providing for a consent judgment against the two corporate defendants and a discontinuance against the two individual directors were simply a mechanism for bringing the proceedings to an end. Without a joint obligation being imposed on the directors, the plaintiff argued the discontinuance against the directors lacked consideration.

In dismissing the appeal, the Supreme Court accepted that the Terms of Agreement could be construed as a joint obligation on the part of all four defendants to pay the sum of $80,000.00, but whether it did so needed to be considered against the entire agreement.  A discontinuance was incompatible with the personal liability of the directors. It also found that in entering into a global scheme for settlement, there were mutual promises, bargains and consideration by all defendants, as well as consideration by the directors in forgoing their rights to costs on the filing of the Discontinuance.

In the absence of ambiguity, the Court was prevented from considering any extrinsic material in determining intention (although it was noted, however, the plaintiff’s argument may have had more sway if the terms had required payment of the settlement sum to be completed prior to entering judgment and filing the discontinuance).

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