The recent decision of the Court of Appeal in the case of David Frost -v- Wakesmith and Tofields Solicitors [2013] EWCA Civ 1960 provides a good illustration of the difficulties that parties face, particularly in complex commercial and property disputes, in trying to reach an enforceable Settlement Agreement at the conclusion of the mediation.
Background
As the name of the case suggests, the decision involved a claim by Mr. David Frost against his former solicitors. He alleged that they had failed to draft a Settlement Agreement at the mediation that was binding on both parties.
Mr. Frost was in dispute with his brother, with whom he had been in business for about 20 years. Their business interests included property development and management, and when the relationship broke down they became involved in a bitter dispute as to how the business should be divided.
It was eventually agreed that they would try to resolve their dispute through mediation. At the mediation itself, they reached an agreement in principle on a number of matters and it was left to Mr. David Frost’s solicitor, from the Defendant firm, to draft an Agreement based upon what had been discussed between the parties in principle.
During the drafting process, the parties themselves were not available for consultation and when they returned they were asked to sign a document which set out what they had agreed in principle. However, for a number of reasons, including the fact that their business interests included a number of properties, some of which were mortgaged , it later became clear that the document was not binding, since it failed to satisfy the requirements of the Law of Property (Miscellaneous Provisions) Act 1989. In the end, the parties had to resort to attending a second mediation in order to resolve the difficulties that had arisen out of the first.
The Court of Appeal upheld the finding of the Judge that the solicitor had not been under an obligation to conclude a binding agreement at the first mediation because the parties had not at that stage reached a final agreement, and, in view of the nature of the issues involved, it would not have been possible to reach a binding agreement on the day of that mediation.
Arguably, the solicitors were at fault in giving their client the false understanding that he had entered into a binding agreement. However, they could not be criticised for having set out the principles which had been agreed in the way that they did.
Conclusions
Most mediators will tell you that one of the reasons why mediations are often successful is that when the parties attend the mediation they get involved in the settlement process and can see the merits of settling their agreement “on the day”. The limited time that is often available to achieve settlement imposes its own pressure. In many cases, the settlement agreement is a relative formality because, by the time a conclusion has been reached, the parties are clearly in agreement as to the basis upon which the dispute will be resolved.
The facts of this case illustrate that when the dispute is more complex, it is likely that the Settlement Agreement itself will also be more complicated. Is it realistic to think that a Settlement Agreement can be drafted quickly at this stage?
Often the solicitors who attend the mediation to represent their client are experts at understanding the Court process, but would normally defer to their property or corporate colleagues in order to implement complex transfer arrangements. Where possible, each of the parties (and their advisers) should try to anticipate potential settlement options, whilst being clear in their minds about the steps that might need to be taken and who would be best placed to put those options into effect. The solicitors for both parties need to be realistic about what steps might need to be taken in order to draft a suitable Settlement Agreement.
In the case in question, even if the two brothers had been completely in agreement about the way in which their affairs should be untangled, it is likely that the documentation that would have been required and which would need to have been negotiated between the parties in order to implement the agreed scenario, would have been complex. It is not always realistic to think that documents of this nature can be drafted last thing at night after a long mediation has taken place.
In the event that a binding agreement has not been reached, then a non-binding summary of the “heads of terms” may be prepared, with an agreed timetable for implementing the agreement. In this event, it would normally be appropriate to include within the heads of terms a provision that allows either party to refer back to the original mediator in the event that the final terms cannot be agreed or that the timetable is slipping.