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Litigation

When good settlement agreements go bad-what then?

What happens when you settle a dispute or legal proceedings by way of a settlement agreement but the other party does not adhere to the terms?

Can you sue them pursuant to the agreement? 

Or can you go back to court to try to have the terms enforced? 

Do you have to institute new legal proceedings?

Solicitors Mutual Defence Fund Limited v Costigan & Others

SMDF sued Costigan & Others for breach of contract, negligence and breach of duty. The case eventually settled in the High Court in 2011 with payments to be made by the defendants to the plaintiffs. 

The original terms of settlement made provision for the parties to return to court as the proceedings were “struck out with liberty to re-enter”.

The defendants defaulted on the payments due and the plaintiff applied to court for judgment in the sum of the outstanding amount of €4.9 million.

The defendant argued that the court’s role in the case was finished and it was “functus officio”.

The High Court decided that the Defendants could not relitigate the original claim and the reason for the “liberty to re-enter” clause in the original terms of settlement was to allow the plaintiff obtain an order by way of application for any unrecovered balance. 

The “liberty to re-enter” clause in the original agreement showed the parties intended that the court should have some future role, if necessary.

But not to enter upon the questions that had already been determined, the High Court determined.

Carthy and others v Boylan and others

A settlement between the parties in this litigation was entered into in July 2018 with agreement that the case be struck out. 

When the settlement terms were handed into court the Judge allowed the parties to make further applications, should they be necessary, to enforce the agreement. 

Carthy and others brought such an application in 2019 but the defendants argued that the court was “functus officio” and had no further role to play and if the plaintiff wished to enforce the agreement he must commence new legal proceedings.

The Judge did not agree and decided that the trend in Irish courts was for justice to be administered without delay and with a view to minimise expense.

Takeaway

Any settlement agreement should make provision for the re-entry of proceedings in the event of a breach of the agreement to have it enforced. 

But not for the purpose of rerunning the case or seeking to have a second bite of the cherry at issues previously decided.

The same principle would apply to a WRC or Labour Court case which is settled and it is advisable to insert a “liberty to re-enter” term, just in case.

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