Briefed: Commercial Law Updates
Briefed: Commercial Law Updates
Settling Up, Not Settling Down - Offers to Settle Disputes
What will the seminar cover?
This seminar was hosted as a collaboration between the Downs & South West QLD Law Association (DSWQLA) and Level Twenty Seven Chambers 1730 on 1 December 2022. Shane Monks and Kristi Riedel (Level Twenty Seven Chambers) and Clare Dart (Inns of Court) are barristers who are well-versed in commercial, insurance and family law disputes. They look at strategic questions for your client concerning offers to settle such as:
- When should you make an offer to settle?
- How might a settlement dis/advantage your client?
- What types of settlement are available to commercial, insurance (PIPA, MAIA, WCRA) and family law disputes?
- What should be kept in mind in the context of insurance (PIPA, MAIA, WCRA) settlement conferences?
- How do you prime your client and opponent to settle?
- When should you refuse an offer to settle?
Who should watch?
This session will interest lawyers with commercial or family law practices.
PRESENTERS
Shane Monks (Barrister, Level Twenty Seven Chambers)
During a legal career of over twenty-five years, Shane has practised in national and international commercial dispute resolution as a solicitor and barrister as well as an academic. With insights gained from working at leading international, national and boutique law firms, and three years as a lecturer at Oxford University, Shane brings an intellectual, strategic and commercial approach tailored to each matter. His practice encompasses arbitration, building and construction, contractual disputes, corporations law, insolvency, professional indemnity claims, real property, restraint of trade, securities, and trade practices. Shane also acts in succession matters and tort claims, and has specialist experience in public and private international law.
Clare Dart (Barrister, Inns of Court)
Clare has been practising predominantly in family law,child protection and domestic violence law since 1997. She has practised in Australia, the United Kingdom and Swaziland. Clare has a keen interest in human rights law, having completed a Masters of Law in Human Rights in 2006. In addition to practising as a barrister, Clare is a registered Family Dispute Resolution Practitioner, a nationally accredited mediator and an arbitrator.
Kristi Riedel (Barrister, Level Twenty Seven Chambers)
Within her commercial law practice, Kristi has extensive experience in all facets of insurance law – including professional negligence, financial lines and personal injury claims. Prior to being called to the bar, Kristi practised as a solicitor and acted for local and international insurers handling professional indemnity, D & O, financial lines, personal injury, workers’ compensation and life insurance claims and also advising insurers on issues of policy interpretation and indemnity. Since being called to the Bar, Kristi has gained extensive experience acting for both plaintiffs and institutions in historical child abuse claims. Kristi is also well-versed in assisting clients in matters concerning employment law and land law, in addition to defamation matters. She acts for defendants in work, heal
Did you miss previous seminars? Check out the seminar archive on Level Twenty Seven Chambers' website for the video recordings and associated materials produced by the speakers.
Want to join future seminars live, in person or online? Register your interest.
Website: www.level27chambers.com.au
Clare Dart (CD): Good evening and welcome to tonight's presentation ‘Settling Up, Not Settling Down’. Tonight, we are going to be talking about offers to settle and we are thankful to all of the members of the Downs and Southwest Law Association who have come to join us this evening on what is unfortunately a cold and windy night in Brisbane.
This session is designed to flow on from a CPD that was presented by Level Twenty Seven last year on mediations. For those of you who missed that particular session it was recorded and is available on the Level Twenty Seven Chamber website. But don't be worried if you missed that session because tonight's content will certainly stand alone.
It is my pleasure this evening to introduce and welcome our speakers. On my left we have Kristi Riedel. Kristi’s practice is largely based within the insurance space, including professional indemnity and public liability claims. She acts for plaintiffs and defendants in a variety of matters involving PIPA and MAIA.
To my right we have Shane Monks with us this evening. Shane's legal career has spanned over 25 years. He has practiced in national and international commercial dispute resolution as a solicitor and a barrister, as well as an academic. His practice encompasses arbitration, building & construction, contractual disputes, corporations law, insolvency, professional indemnity claims, real property, restraint of trade, securities and trade practices. He also acts in succession matters and tort claims and has specialist experience in public and private international law. More recently, he has accumulated considerable experience in class actions matters and has been listed in this area by the Australian Financial Review’s Best Lawyers® 2020-2023.
They are both very hard for me to follow this evening. For those of you who don't know me, my name is Clare Dart. I am a barrister, a family dispute resolution practitioner and nationally accredited mediator and a family law arbitrator. I practice predominantly in family law, child protection and domestic violence. In fact, my connection to the Downs & Southwest Law Association is that my first role in family law was with Murdoch's back in 1997, up there. I even started as the secretary of the Association in the late 90s.
We have a lot of material to talk to you about. Hopefully, all your questions will be answered by the time we finish. But if they are not, please feel free to send the questions through the chat function this evening and Tamara will feed them through to us. Without further a due.
WHAT ARE THE TYPES OF OFFERS TO SETTLE?
Kristi Riedel (KR): Thank you very much Clare.
I thought I would get the ball rolling. We are going to have a sort of a round table kind of discussion. The first port of call we are going to chat about is the types of offers that you might have to settle and the circumstances in which you might make an offer to settle. So, Shane…
Shane Monks (SM): Kristi, thank you.
The rules of court are often the first port of call when we are looking at settlement offers. Although, as well, and when I have explained a couple of issues in relation to making offers under the rules, it is very important not to forget our old friend the Calderbank offer which, of course, is very appropriate that we have Clare here because many people often forget that it is actually a case arising out of the Family Division in the High Court of England in 1976. They should very often be made in conjunction with an offer under the rules. It is always important to remember that the context of settlement offers under the rules can involve both an offer by a plaintiff but it can also involve an offer by the defendant. So, the outcomes, and this is where things get a little bit interesting, is when you have a defendant who makes an offer and either the plaintiff is unsuccessful or the plaintiff ends up being not quite as successful as they hoped.
Let me give you a couple of illustrations of some of the problems that can arise and where one has to be careful.
There is some difference as well between the Supreme Court and the Federal Court, but I am not going to dwell on the Federal Court too much. Their rules are a little bit simpler. They are found in part 25.
One of the issues that arises in the Supreme Court is rule 361 has some problems. It was amended a few years ago. A literal reading of it, for example, suggests that the victorious defendant would still have to pay the plaintiff’s costs up until the time that the offer was made, which is a rather odd outcome. The short version is that in some of the cases which have dealt with this the judges have said “The rule just doesn't apply in those circumstances.” Others have said “The rule does apply but the rule contains its own exception which is it is not always appropriate. Clearly, this is an example of when another order is appropriate.”
There are a couple of illustrations as to why it is very important that the offer should be made as a Calderbank offer as well as under the rules. For example, where you get a defendant who effectively beats their own offer - either the plaintiff loses or does not do as well as they thought - under the rules, the defendant is going to get standard costs only, or the old-fashioned party-party costs as we knew them when I started. Whereas if it is a Calderbank
offer then there is an opportunity to seek indemnity costs. So, as I say, always make sure that you make an offer under the rules and under the principles of Calderbank v Calderbank.
CD: It is interesting to talk about rules because we have just in the last twelve months had some new rules in operation in areas that I practice in. As of September last year, we got our new FCFCI rules. Some people like to call them with the Focaccia Rules to deal with that acronym. For those of you who do practice in family law, you will be very familiar with the requirement for us to ensure that we make a genuine effort to try and resolve matters before we commence proceedings. That really means that you have to invite someone to a family dispute resolution, or a mediation if it is a property matter, prior to commencement of proceedings. When you commence the proceedings, you have to file a genuine steps certificate. If it is a parenting matter, you have to have a what we call a section 60I certificate. That requires a family dispute resolution practitioner to have conducted that family dispute resolution process and in that they can indicate whether the parties have made a genuine or non-genuine effort in terms of the discussions that go on. I am talking about those things because they are relevant in the context of a mediation or a family dispute resolution, you would anticipate that people would be making offers. So, we are really getting those offers being made right at the outset, before you even get to court, in most cases. There are obviously some exceptions to those rules in terms of those requirements but we won't have time to go through all of those today.
Can I just identify, for people who may not be familiar with the jurisdiction, that in the rules, part 4.2 specifically deals with offers to settle. Interestingly, the rules cover how to make an offer, open a without prejudice offer, which obviously flows in as well to the Calderbank offers, how to withdraw an offer, how to accept an offer and counter offers. Interestingly, there is a rule dealing with each of those.
In terms of property matters specifically, there is a requirement to make compulsory offers to settle and they are dealt with in rule ballpoint 11. You have to make a genuine offer to settle within 28 days after a conciliation conference or mediation. If you are not going through a conciliation conference or mediation, then you have to make an offer to settle, this is for property matters, twenty-eight days after the first court date, and or as such a further time as ordered by the court.
We are seeing a lot of directions being made by judges, as part of the trial directions, that there will be compulsory offers to settle made in the lead up to trial so I would encourage practitioners to have a look at those rules if you are practicing in this area and just familiarise yourself with that, particularly because rule 12.15 now deals specifically with costs orders against the lawyers. That can involve a failure to comply with the rules or a failure to comply with pre-action procedures or if there has been improper or unreasonable conduct or if there
is undue delay. It is significant and there has been a recent case where a personal costs order was made against a barrister and solicitor. That was not in the context particularly of an offer to settle but it was a quite a significant cost order. There have been things occurred in the context of a trial that the cost order was in the vicinity of $100,000. If anyone is interested in looking at that case, it was the matter of Pilkvist v Coburn. It is a 2020 decision of Justice Carew. It is good to have a look at that even though it does not specifically relate to offers to settle but I think the reality is we are going to be seeing more costs will have been made in our jurisdiction, which typically has not had a lot of cost orders being made when people are not complying with these rules when making offers, moving forward.
KR: In terms of just that compulsion that you were talking about in the family court sphere, there is a similar regime in personal injury type matters. Certainly, it is necessary to convene a compulsory conference before you can even start proceedings. The various pieces of legislation are fairly similar in requirements. Once a compulsory conference has occurred, provided it does not settle of course, you have then got sixty days after the date of that conference to file proceedings to commence litigated court action.
In terms of what needs to happen before the parties can convene a conference and therefore make some offers in an attempt to settle the matter, the legislation is quite clear in terms of what needs to occur. Obviously, you need to have a situation where a claimant has filed or served a complying notice of claim and the requisite time period needs to have passed. The parties also need to have done a certain number of things. For example, they need to make sure that they have complied with all their disclosure obligations. As with any disclosure obligation it is a really serious thing and you should comply with it. Under the WCRA, all materials should be presented or disclosed to the parties within five business days of the conference occurring, under the MAIA seven days. Certainly, there are potentially very serious implications for the parties if you do not disclose something in the lead up to the compulsory conference and that you might be precluded from relying on that evidence at trial.
Another really serious obligation that the parties are required under the acts to participate in is the signing of a certificate of readiness. That is a certification that the parties are in fact ready for conference, they have got all the material, that any expert reports have been obtained, disclosure obligations have been provided with, cross statements provided. It is professional misconduct to sign all of those certificates knowing it to be false. What we often see in this space though, because of that very significant obligation that you are undergoing when signing one of those certificates, and the fact that these conferences are occurring usually quite early on in the matter, is the parties might agree to dispense with the need to sign that certificate of readiness, that is certainly something that can happen under the rules.
If you have a situation where the parties do not want to go to a compulsory conference, again the legislation provides a number of outs. The parties can agree to dispense with the compulsory conference proceeding, or a party can apply to the court either to set the matter down for a conference or to dispense with that requirement. Sometimes, if you have a claimant who is conducting their claim in a sort of delayatory fashion, it might be quite useful to seek the assistance of the court in terms of putting in place a timetable for parties to proceed to a compulsory conference, perhaps with some guillotine orders in place if that does not occur.
I would like to just make the point though, that having a compulsory conference is a really useful tool and dispensing with it is not something that I would typically recommend a party do, unless they have good reason for that course. If you are acting for a claimant in these types of matters, having that compulsory conference often will give you some insight into the respondent’s defence and the issues that they are going to focus on moving forward. It also gives your client some insight into the level of scrutiny that their claim is going to be put under and to test their appetite for litigation because often people are all bluster and say “I'm going to go to trial” but once they actually are sitting across the table, having those opening submissions made, hearing where the respondents are going to focus their inquiries, then that might help temper their expectations and give them some insight as to what life might look like moving forward.
Similarly, if you are acting for respondent in these types of matters, having the compulsory conference is a very useful opportunity to put your eyes on the claimant, to get an idea or a read of their credibility and how they might present and also test the plaintiff’s resolve in terms of progressing forward.
Obviously, it affords the parties an opportunity to try and narrow the issues in dispute. The obvious opportunity is one to try and resolve the matter.
So, there are a number of, as I say, statutory requirements under the personal injury regime for making those offers of settlement and certainly regarding compulsory conferences.
HOW TO MAXIMISE SUCCESS IN SETTLEMENT NEGOTIATIONS
CD: Those comments certainly dovetail into the next topic that we are going to talk about which is what can you do to maximise success of settlement negotiations? I imagine there is going to be a bit of crossover between what we all say but that reality testing point, you just made is certainly one of those that plays into it. Shane, from your perspective, what do you think we can do to maximise the success in settlement negotiations?
SM: Obviously, you have got to pay attention to the context first. Are you attending a mediation or a settlement conference? Or are you making offers under the rules? I might come back to some of this a little bit later when we talk about what are the right numbers. But, if I talk about behaviour, I make this comment often at mediation, when we set mediation down for whole day, I half jokingly, but seriously talk about the problem of “the exchange of opening insults”. It is where parties turn up and start the day in the mid-morning by each of them beginning with the very entrenched position of where they started out. In fact, sometimes people even walk themselves further back. They say “I've asked for $2 million in my statement of claim, but actually, I've come along here and I want $2.5 million. What happens is a large part of the day is spent where nobody really moves very far at all, there are just lots of discussions in people's own rooms.
In my experience, often it is only after lunch people come back and they start seeing the clock tick to three o'clock in the afternoon and they think “Maybe we should start to get a bit serious.” Sure, many cases that I have been involved in, the mediation does settle and there is a flurry between three o'clock and six o'clock and things settle but I really would encourage people to think about doing things a little bit differently and trying to work a little bit harder early in the day because you might find people on the other side become frustrated and either walk away.
Or if you get a situation where perhaps unexpectedly, this happened in the mediation I had only a few days ago, where I confess we turned up expecting that it was unlikely to be very fruitful because it was very difficult to see any middle ground. It was either one party was going to win and get everything or the other party was going to get everything. One party had in fact prepared exceptionally well for the mediation. They had been realistic about their prospects in the proceeding. So instead, they came along and said “Maybe we might be prepared to walk away a bit from the proceeding but in terms of our commercial dealings, would you consider us giving these three things?” which were not unreasonable. What actually happened, and of course this is what can happen in a mediation, you go to court and you have a pleading, a judge cannot turn around and say “But I'm going to give you something else” because it might be something that he or she does not even have. To make the orders, there is no cause of action but in a mediation the parties can cut whatever deal they like. So, it is a real opportunity to sometimes think out of the box and say, as these people did, “What about something else? Maybe we could be satisfied if you gave us something outside of the proceeding.” But it can take time to formulate that. If it only appears on the table at three o'clock in the afternoon then there is not time and you then lose that atmosphere of being in the room together and having the chance on that day to actually settle because one of my other experiences, I always give this warning, it is very important to do the deal on the day and to document it and make it official because parties have to give something. Usually in a mediation, everybody is a bit disappointed in some way. If you do not
do the deal, someone will turn around overnight and get buyers regret and say “I gave away too much yesterday. I'm not going to do that” or “I'm going to quibble about this.” So, come along, really do the work beforehand about what we might want to do and do not leave it too late in the day to get serious.
KR: Shane, you talked about preparation in that most recent mediation and what a huge impact that had on the success of the outcome. I think that is one of the crucial things, whether it be under the personal injury type regimes or any type of mediation preparation, I think it is key. Certainly, what I have seen, in the personal injury scheme of things, if you have a situation where you are acting for a claimant, making sure that you have really properly prepared for the compulsory conference in advance. I think it is good practice to prepare a schedule of damages and provide it well in advance of the conference to the respondents. Also, meet with your client and make sure that they are aware of the process because often clients in the personal injury space might be somewhat fragile. Certainly, sitting in a room with a bunch of lawyers can be a pretty stressful event for them and making them aware of what to expect and the process and how the day is going to run often goes a long way in getting them to feel bit more comfortable on the day. It is also very useful in terms of tempering their expectations and making sure you have given them appropriate advice about giving them a heads up of where perhaps the weaknesses of their case lie so that when you are in that opening session and the “opening insults” are being made, your client is hearing all the points that have been taken by the respondents, that they are not hearing it for the first time and that these are all things that they have been forearmed and forewarned about and have taken into account in assessing their appetite for what would constitute an appropriate settlement for them and moving forward.
Tied in with that, and certainly with the provision of a schedule of damages, is making sure documentation is disclosed well in advance of the mediation. If you are acting for a respondent, particularly if you are acting for an insurer in the background, insurers need time to be advised and to receive advice from their solicitors about setting a settlement and limits and making sure that instructions are available on the day. If you are the claimant providing the insurer with 1000s of pages the day before mediation, it is very difficult for an insurer to be properly advised and be able to assess its risk and adjust its settlement recommendations accordingly.
If you are acting for an insurer, usually one knows that you need to get them on the phone if you need instructions on the day. Make sure you have the appropriate contact details and those sorts of things for the claims representative.
Certainly, in terms of the half day mediation, as you noted Shane, that is often a very useful tool. We use it a lot in this space in terms of getting the parties to really focus on what the
issues are and keeping the pressure on and not waiting until 3pm to make some movements. From my perspective, those are the key things to make sure you are maximising the prospect of success.
SM: Kristi, you made an interesting point when you said about how sometimes clients can be upset by what they hear. It is worth thinking in cases, and particularly sensitive ones with personalities involved, we get them in commercial law just as much as in other areas, that sometimes the classic format of saying “We'll all start with his big joint session and we'll get in a room together. We'll take it in turns to sit across the table and say ‘Your case is weak. We say you did that.’” Just pause and think maybe that is not going to be helpful. If it is going to mean either your client is going to be upset and angry and then not willing to listen reasonably either to you or to the mediator or consider offers. Alternatively, if you think that person on the other side, it is just going to set them off, listen to your own client who may well have had dealings with and understand the personalities. It is not compulsory.
I had a mediation last year with one of the most well-known mediators and he very wisely said “I just don't think any of you should get in a room at all today. I'm going to plant one of you out one end of the mediation centre and the other at the other end. I'm just going to go backwards and forwards.” We got a settlement agreement. I do not think it would have happened if everybody had had a chance to get there and get cross. I blame the clients for this, I should only be blaming clients for this but you have to concede sometimes there can be problems with the lawyers too, when it has been a contentious matter and people have had to be very combative with one another over a period of time. Sometimes those personalities can be a problem too. So, just think, there are no fixed rules about how you run your mediation. Have a think about what is going to be the interaction between the parties, that is the best way. Sometimes there might be a point where the lawyers can get together and say something. Very occasionally, I have done it in commercial case, where the two protagonists were given half an hour in a room together. After they stopped comparing which model of corporate jet they had flown in on that morning, I am not kidding, then they made some headway. So, there are all these things. Be creative, be prepared to think outside the box.
KR: If I can just add to that. As the flip side for having opening submissions and joint session, often that might be a wonderful opportunity and a persuasive opportunity to speak directly to the opponent, to that client, particularly if you have some concerns about the advice that they are getting, or whether or not their expectations are reasonable. It is a wonderful opportunity to speak directly to them and get your point across. So, preparation and making sure you are in a position to capitalise on opportunities is quite useful.
CD: I feel like I am back in the Bar Prac course: preparation, preparation, preparation. Certainly something that was said to all of us there and that is true today. I was going to
second and third that, in terms of preparing clients for this process because if you do not do the work at the front end then you are not going to make progress in terms of the mediation itself. That is particularly so in the area in which I practice in because we are dealing with a lot of emotion. I know there is a lot of emotion in your areas as well but we are really dealing with, you know, people's lives, their children, their property, their houses, where they are living, etc. Often, there are a lot of emotions attached to that.
I have to say, in my practice as a mediator, I rarely bring the parties together because in my experience that is usually not helpful. If you are going to do it, you are going to have to do a lot of reframing to try and take some of that emotion out of it. Otherwise, it can become quite personal, particularly if you have a couple who have learnt how to push each other's buttons - they invariably do. It is also a particular issue that you need to be conscious of if there are family violence issues. There are times when it can be quite powerful to bring people together, and you should do it, but there are also lots of times when you may not do so.
Family violence is obviously a particular issue in terms of preparing your client in terms of making offers to settle as well because you do not want them to feel under pressure on the day to perhaps take a deal simply because of that dynamic that is present. So, it is important to do that work with them in advance so that you know those parameters and are working within them.
Also, it is really about talking about what are the priorities for those particular clients. They may not necessarily be liberal parties, coming up with creative solutions. As you were talking about any other matter, there might be other issues that need to be addressed. They could perhaps be addressed in a different way.
Also, it is about whether or not those things are achievable. Often clients have these ideas about things that can be achieved in the process that realistically you cannot. If you can put some of that stuff to bed before you get to the mediation then you are in a much better position as well. The reality testing is so important. What does the evidence tell us? What are we going to be able to establish? If your client has concerns, for example, about drugs and alcohol, are there other ways that we can try and deal with those concerns as part of the agreement? Those are all questions that you are asking the client in preparing to go to a mediation or to have settlement discussions. They are things that you really should be putting into your initial offer. You should have your client ready to be in a position to be able to make an offer when you get to a mediation or at least be a long way towards it before you get there.
Can I be a bit pragmatic? I guess also, in terms of, for example, property matters. Often, we hear from clients about disclosure issues. I think sometimes you have got to be pragmatic. You
can keep digging, digging and digging and not find anything. Are they really significant? Do we need to address them? Or have we gone as far as we can? Let's focus on what the other issues are. Similar to other issues for your client, in terms of the mediation, work out what those key things are that you are going to need to deal with.
The other thing I was just going to comment on was making sure that you have instructions to inform the other side if something significant occurred or changed. I am sure everyone is familiar with LSC v Mullins and the principles in that particular matter. We see sometimes in property, for example mediations, somebody might have had an inheritance post separation or lotto win they do not want to disclose to the other side. Obviously if you have clients and those situations you really need to have those hard conversations in advance of the mediation and work out how are you going to deal with that. Leaving aside any ethical issues, that might be a problem if those sorts of things are not disclosed. Being frank with them about the fact that there may be an application to set aside any agreement if those bits of information are not given. Certainly, we are back to preparation, preparation, preparation.
WHAT SHOULD PARTIES CONSIDER WHEN FRAMING OFFERS?
CD: Part of that is obviously our next topic, which is to talk about what sorts of things should parties think about when they are framing their offers and how do we get those numbers right.
KR: I always think about, I do not know who said it, but someone once said “If everyone in the mediation at the end of the day is unhappy, you know that you have probably got to the right figure.” I always keep that in the back of my mind. Certainly, when we are in the personal injury regime, as I flagged already, sometimes you might be working with a client who is quite psychologically fragile. In terms of the strategy of how you go about making those offers to that person, sometimes making one of those insulting kind of first offers might not be in your best interests. I had some very positive experiences and circumstances where a respondent might have decided to make what might appear to be a more generous first offer, as opposed to an insulting one. From a psychological perspective, it just makes the day easier in terms of the client feels like they do not have everyone against them, particularly coming from that psychologically fragile background. They can create a bit of a relationship, I guess, with the respondent and say that they genuinely do want to try and resolve the matter. Obviously, it is a case-by-case basis. Sometimes it is completely appropriate to make an insulting first offer. I guess it is all about reading the room and getting a sense of what strategy is going to get the best outcome in those particular circumstances.
In that personal injury space, we talked about making mandatory final offers or written final offers. There are provisions under the various statutory regimes which set out requirements for those types of offers. Certainly under the MAIA and PIPA, with regards to say cost consequences, the legislation talks about where offers might fall with reference to the upper
limit and the lower offer limit. They are set by legislation and range from $82,870 is the upper limit and $41,700 for the lower. Where your offer might fall within that sort of range will have implications on whether or not it will be a costs exclusive offer and certainly how costs will be calculated down the line.
In terms of making those offers and coming up with that right number, there might be a couple of different strategies that are guiding you in that regard. Often cost protection is front and foremost in mind. Where those final offers are pitched might well have any impact on whether or not standard or indemnity costs are ultimately awarded. Having said that though, there might be situations where the imperative is really to keep one's powder dry and to preserve the position because, in that personal injury space, if the matter does not resolve at a compulsory conference, the proceeding will obviously become litigated. Before you ever get to a trial, the parties will usually participate in the rule 553 conference under the UCPR. What you will often find is the starting point for that particular negotiation is where you left off last time. So, if you have made an MFR at one particular point, there might be an expectation that that is where you start your negotiations at a later date. So, if you are acting for a claimant, you might not want to make, if you don't think it is going to be accepted, an offer that is wonderfully low and capable of being accepted because there will be an expectation further down the line that you might be starting from that position and things might have changed in that time period.
Other general things to keep in mind when making offers, make sure that they are capable of acceptance. So, if you are talking about a deed of release in the written offer that you are producing, attach it and make sure you are mindful of the pitfalls associated with making offers that are cost inclusive. A court is always going to find it a bit tricky to work out, how much money was set aside for the damages and how much was set aside for the costs. In terms of how that is interpreted might impact upon the way that offer offers you cost protection.
It is also worth bearing in mind that there is always that opportunity to make a formal offer under the UCPR. That said, the principles that are set out in the various personal injury pieces of legislation, they do have principles that influence the way in which the court will consider the cost consequences in that circumstance.
Shane…
SM: Thanks Kristi.
If I start with offers you are going to make under the rules. Obviously, before it should be in line with a Calderbank offer, you of course need to start thinking to yourself “what am I actually
trying to achieve here?” because if you are trying to get a settlement then you are making an offer, which obviously you want to end up either paying or receiving. Of course, under the rules, you might have another basis for making an offer and that is purely cost protection. So, you are making a strategic offer, which in fact you might be sitting there, you and your client might be really holding your breath going “I hope they don't take this” because it is not actually the settlement that you would like to reach. Now, you might be thinking “why on earth would you want to make that sort of offer?” Again, it is all about the cost protection because, for example, if you are a plaintiff making an offer to a defendant, you want the offer to be almost as low as you can bear to make hoping at that point that they will not take it. Then, if you have to go to trial, you are going to beat it. In fact, even if you do not do quite as well as you thought that you were going to do at the trial you would still beat it and then you can turn around and you can wave it in front of the judge at the end of the day and say “I'd like my indemnity costs, please.” When you are making those submissions, the fact that you might have beaten you offer by $1,000 might not be enough because the court still has a discretion. There are various cases when judges have said “Yes, they did beat the offer but they didn't beat it by a huge amount. So, it wasn't unreasonable for the other party to take it.” Or, they might say “The offer that was made, the quantum didn't really involve a great deal of compromise. There wasn’t a lot of movement from the ultimate position. Sure, they want it at the end but again that defendant you're expecting them to give in almost entirely. Maybe it wasn't unreasonable for them to go to trial.” So again, you need to have that built in margin that is enough that you can say to a judge “No, they should have taken this. It was a really good offer. So, I'd like my indemnity costs.”
At a mediation, of course, you are not in that situation, you are just trying to get a deal done on the day. As Kristi said, I think it is often the case that you will do a deal because everybody walks away feeling a little bit unhappy at the end of the day because they had to. Everyone has had to move a little bit more than they hoped they were going to have to at nine o'clock in the morning but it is that atmosphere in the room and you get a deal done.
I am mindful of time so I do not want to go into strategy too much. There are things that we are all familiar with. You do need to think about concepts like anchoring, what is the consequence if I put out an offer at this point? Where are things likely to get? Is it something though that is going to make the other side want to walk away? Or is it as Kristi said before, is it one that is actually going to make somebody on the other side optimistic “we might get a deal done today” so I can keep them listening, I can keep them in the room? There is talk about doing the dance. Some of the psychologists say that you will not get a deal unless you have at least three offers go backwards and forwards. That is just a part of negotiation. Again, you might want to think about where we think things will end up. There are no hard and fast rules. There are exceptions to everything thing.
I had one once where a party walked in and said “We are going to make one offer today. That's all we're going to do. It's a very good one, you know it is” and put it on the table. It was a very good one. I was not expecting that. Of course, for my client, I said “We will try and test it and push and see if we can get a little bit more.” The other side were very firm and said “You know it's a good offer” and started to get a bit cross. “We've told you, this is it. You think about it.” We did a deal and that was great. We all went to lunch and we were happy. I had a client who tried to do the same thing a few years later and we did not do a deal but the client was also happy because he said “We weren't prepared to offer any more than that so we didn't waste a whole day, we only wasted a morning.” Again, it is all about flexibility.
Probably the final other really interesting one that you get, I have come across this a couple of times, is when you get one party who turns up and says “You know what, you're suing us for a million dollars. You probably got a pretty good case. But your problem and our problem is we just don't have a million dollars to pay you. If you get a judgment for a million dollars, you put in a liquidator, the liquidator turns us upside down and checks our pockets out, there's not going to be million dollars, there's going to be some small change, that's all. But, today, we'll offer you, you're going to be really cross, but we're gonna offer you $100,000 because that's all we got. By the way, here are the bank statements. Here are the financials.” That can lead to some interesting discussions, it can come sometimes lead to a settlement agreement that involves people committing some of the things they have said in the mediation are true or promises to provide certain documents. Of course, the agreement, if there have been misrepresentations or those things were untrue, as Clare was saying, you just open yourself up to have it set aside. It is a strategy, if you are acting for a client who is in trouble but they have no money, you might be better off to see whether you can go along, make it go away, by putting your cards on the table. It might save them the expense and the hassle of being wound up or being made bankrupt. Again, it might be an example of where both parties are better off from that full and frank mediation process.
CD: That kind of plays out a little bit into the area that I practise in because often people have these expectations that the lifestyle that they had when they were together is going to be able to be continued once they separate. The reality is though, you now are supporting two households from probably the same amount of funds. People do not realise that that is going to necessitate some change. At the end of the day, there is only so much money in a property pool and we have to work out how to deal with it, we cannot create more money. Similar sort of situation where you have a company that has only got a certain amount of money that they can afford to pay.
Can I say, in terms of my area, the few times that I have had non-family lawyers instructing me at mediations, I can see that there is a very different approach to the commercial kind of approach in terms of negotiation. I often find those solicitors are wanting to make these very
broad, right out there kind of offers right at the outset. Whereas I am trying to rein them in because in my area, particularly that first offer, can really send a message to the other side. We often get those parties that will say “They're just not here to have a proper discussion” and they are tempted to walk out right at the outset, it bodes out their offers being made right at the outset.
When I am talking to parties where I am the mediator, as part of my intake at the beginning, I often talk about what message do you want to send with that first offer. Talk about the fact that they can start out here and chip away all day if we need to. But, I often talk about the best offers being those that really get the other side to stop and think about it and where you are getting into that range of where you should be talking about the matter of resolving.
I also talk a lot to people about making sure that all the key aspects to the offer are made right at the outset. It is a bit like that three o'clock in the afternoon session but in my case it is often that family heirloom that has been hotly contested throughout the entire proceedings that suddenly raises its head at three o'clock in the afternoon. You do not really want that to happen because that is usually the thing that will send it off its rails. So, I am trying to make sure that we get all of those really important key things out by the beginning when we start the offering process so that we do not have those sorts of issues occur later on.
I try to get people away from thinking about percentages and really thinking about what the practical outcome of what is being offered is. In my area, people often get fixated on property matters, on how much of the pool they are going to get, what percentage it is. Whereas at the end of the day it is really about what is the practical effect? Are they going to get a car, is there going to be the house, are they refinancing? Is it going to be a cash payment? Is there a super split? Those types of things, looking at the real practical outcome of what is being offered.
I also try to encourage people who really are thinking about if an offer is made by the other side, let's try and keep the parameters the same if we can so that we are only changing a few things rather than throwing the whole lot out and starting with an entirely different preface when we come back. That also gives you a chance to really focus on what concessions have already been made by the other side to bring that positive mood that we are moving forward as opposed to moving backwards. We can then focus on the level of agreement we have already reached and how we might continue to move forward.
In my area, I am sure you will both tell me that there are delays in your areas as well, that we do have court delays. So, we are encouraging people more and more to think about arbitration as an option, if they are not able to resolve matters. I had an arbitration yesterday that was resolved on the day, that often happens. From a client's perspective, that might be
something else that we need to be thinking more about as well if we are not able to resolve things at those earliest stages.
WHAT TO DO IF A PARTY TRIES TO BACK OUT OF A SETTLEMENT AGREEMENT
CD: You touched on it briefly before Shane but what do we do if a party tries to back out of a settlement agreement?
SM: That is something else I can tell a couple more stories about. I should just make one last comment about mediation offers, Kristi touched on it before, it was an important point, it is worth making again. If you make an offer under the rules you really are much better off. You should make it as an amount for the claim plus costs because a judge needs to be able to see and compare their judgment at the end of what the money judgment was about the other outcome then say “What was offered was this plus costs.” If you put costs in, it is very difficult to do that. On the other hand, at mediation it is the flip side. You really want to avoid having a client say “I want to make an offer plus costs”. You want to have something that can be a deal that is done that day, you do not want to be going off and having costs assessments to try and agree costs. That also gives you as well, the advantage. Sometimes you can package it a bit because you can present it as being “Most of our offer is for your costs”. This can either be presented to the other side, or even as a way of selling it to your client. “Your claim is hopeless. You're not actually giving them very much for their claim but you know that they're not going to go away without having their costs paid and they're going to expend all sorts of money on people like Monks so you do need to do a bit to cover that. It may well be the entire reverse. You have Kristi in the other room, she'll be packaging it all up “This is a great fit for you. They really conceded that your claim has some substance and you should take that.” Again, that is the thing about the process. Both sides are perfectly free to form different feelings about it. If ultimately it means something that they can accept and live with, well, then yes, you had a successful day.
CD: I am going to add to that and say that that is often an issue for us because our principals, each party pays their own costs, unless there is really a justifying circumstance.
Do you want to tell us [Shane] about what to do if a party tries to back out of the settlement agreement?
SM: I will, I am happy to. It is a difficult one because obviously the legal starting point is an agreement to compromise a proceeding is a contract. It is like any other and it promises there is good consideration and it can be made orally and there can be discussions. Sometimes it is agreed between solicitors and sometimes it can be agreed between counsel as well, either because it is convenient or it is thought that the personalities are not going to make that happen.
It is an awkward situation. Obviously, ideally you will have some sort of written record, you may have a file note. If there has been an email that has gone backwards and forwards between the lawyers, that is obviously ideal because then there really is a trail that can be seen and I have had, it has to be said it was an interlocutory matter so it was relatively small, but there was an email chain. The client on the other side decided that he was not happy and was going to refuse the lawyer’s authority to continue but because it was a simple matter it was a case of turning up in court the next day and me saying to the judge “We take the view the mediation was compromised yesterday. So, before we argue about this I am tendering these emails”. The judge read them and formed a view which was that a deal had been reached. It is not about anything else. It is about making sure, is it a contract? Is it an offer? Was there a time for acceptance, was it left open? Was there notification of withdrawal beforehand? Was it sufficiently certain? When somebody accepted did they actually accept or do they really want to make a counteroffer? So, it is important to be careful about these things.
You might consider, if it is a proceeding that is on foot already, maybe that you do up a draft order if there is not a settlement deed. Get something drawn up, get somebody to sign it. You might find yourself in a Masters v Cameron situation where the other side said “It wasn't really a deal. It was all subject to documentation. There wasn't a final settlement deed done”. So, make sure when you are negotiating that you had a careful think about where you are at with all these things.
Bear in mind, from our point of view as lawyers, we are at risk of being sued if there is a problem that arises. You need to be careful, if you make an offer on behalf of your client and it is accepted and it turns out that you did not have authority to make that offer, your client might be bound. The other side is happy but your client is not. Again, you might have a proceeding claim brought against you. So again, if you are in any doubt make sure that you have achieved your client’s instructions. A self-serving email and a confirmation of that enables you to be able to turn around to your client and say “I put this to you. You gave me instructions. You might have buyers regret now but it's too late. You can't tell me to withdraw that offer because the other side accepted it ten minutes ago.” Like anything else, be careful, take your time, and get things in your head if possible.
KR: Good point.
I am mindful of the time, I will just make a very short point. In terms of in the context of historical child abuse claims, there is actually some legislation in place, it is somewhat new, under the Limitation of Actions Act, where there is a statutory mechanism to set aside an agreement in circumstances where it is just and reasonable to do so. It is an emerging area. The legislation sets out some of the guidelines to be taken into account and there is some jurisprudence both in Queensland and interstate that guides the circumstances in which that might occur. It is
certainly something to keep in mind and ties back into the need to be prepared. Make sure your client is properly advised and make sure that, as you suggested Shane, that you have that paper trail in terms of what you have told your client and recommended to your client in terms of any instructions to settle.
CD: Those are all really good points. In our jurisdiction we have had appeals, or the consent orders have been made, and then there have been allegations of bullying by lawyers or whatever after the event. So, it is very important to keep records in terms of those, whether it is file notes, email chains, etc. in terms of those matters.
Also, in our situation, it is probably in yours as well. The consent can be withdrawn right up until the time the order is actually made. That certainly happened before. So, a lot of mediators have a pro forma that they attach to any heads of agreement or proposed care orders that are signed on the day to make it clear that that document can be relied upon if it is necessary in terms of any future proceedings in that regard. It really does leave you open in terms of costs application, if that is then not withdrawn or they are not bound by that particular offer.
I did remember, sorry it has been a long week, what I was going to say in relation to packaging those offers. We are used to selling certain offers or certain proposals to our clients as far as that goes. Particularly in my jurisdiction, I often talk about the emotional toll for people in terms of continuing with the litigation or commencing litigation down that path, as well as the financial toll because we do not necessarily have the same extent of the costs orders arguments that you might have. It is really about them factoring in then what they are going to pay in terms of their own legal costs as well as that emotional toll when they are thinking about those offers to settle at the early stage. I often like to say to people that I would rather see them use that money to fund the children's education or to make that available to their kids rather than paying their lawyers to continue their being part of litigation for an extended period of time.
We have covered a lot of material this evening. If you missed any parts of it, the session has been recorded and will be available on the Level Twenty Seven website so that you can access that down the track. It is always funny when you are talking to cyberspace, I cannot say “can you join with me in thanking our speakers this evening” but thank you to those of you who are out there for joining us this evening. We trust and hope that you found the discussion this evening useful and I wish you all the best. Good evening. Thank you
Liability limited by a scheme approved under professional standards legislation