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The irreconcilable truth is that reconciliation is a good thing

legal matters

Contentious lawyers, by definition, spend their time trying to reconcile the irreconcilable, writes Kim Franklin. So we have the 'person of principle' pursuing those who know full well they will have to pay up, but simply don't want to. Both types are usually welcomed by lawyers with open arms because they represent a blank cheque.

We also have the small, opportunistic, contingently funded individual claiming against the vast, secure insurance company, which hopes that its usual strategies of delay and denial will see off the claimant and their claim. Between these extremes we have the many shades of commercial disputants, their claims and defences, which make up the rich tapestry of modern-day litigation.

In an ideal world, of course, these parties ought at some stage to be able to reassess the merits of their respective positions in the light of what they have learned from the other side and, as we lawyers say, come to terms. The usual hurdles to settlement are, in my experience, elements of madness or bad advice - or, surprisingly often, both.

But even well-advised, sensible litigants can find it difficult to assess numerous heads of a complex claim, which will have varying prospects of success. If the parties can't compromise, they face the prospect of the matter being resolved by a third party, who considers each party's evidence once it has been tested by cross-examination in a trial or arbitration. Trials are time-consuming, preparation-intensive affairs that usually last longer than expected, and tend therefore to be more expensive than planned. All this goes to show that the settlement of disputes is a good thing.

The courts - or, perhaps more accurately, the government departments that organise and fund the court system - are the first to recognise that reconciliation of the irreconcilable is to be welcomed, which is whey they have introduced such initiatives as pre-action protocols and mediation to facilitate the same. They do so under the general public policy that settlement should be encouraged.

Negotiating a satisfactory settlement can, however, be a tricky business, particularly as the sign of a good settlement is that it is one that neither party is happy with. In fact, it is often said that it is harder to settle a case than fight it. It is not unusual, therefore, for even detailed and complex claims to be settled on a global basis with a single bottom-line figure for everything.

Such a settlement was recently considered by the commercial court in Lumbermens Mutual Casualty v Bovis Lend Lease (Judgment 5.10.04).

Bovis was employed by the developer Braehead to construct a retail and leisure centre.

Disputes arose, with Bovis claiming £37 million and Braehead counterclaiming £103 million for mismanagement, defective work and liquidated damages. The litigation settled on the basis that Bovis was actually entitled to £32 million and Braehead's counterclaim was worth £19 million. The settlement agreement recorded that £15 million was payable to Bovis, but not how that sum was calculated.

Bovis then claimed from its insurers the £19 million 'loss' it had suffered as a result of its liabilities to Braehead.

The insurers successfully applied for a court declaration that, as the settlement agreement was global, it was not possible to ascertain what loss, if any, Bovis had suffered and that its claim under the policy should fail. The court held that, under the terms of the policy, Bovis had to prove that the sums paid under the agreement were both reasonable and covered by the policy. As the agreement did not separately identify these sums, it was not valid for the purposes of the insurance claim. Bovis could not subsequently put in extrinsic evidence to demonstrate, retrospectively, what those costs were and the court could not open up the settlement to evaluate it.

Ultimately the global agreement did not impose on Bovis a loss in respect of which it could claim under the policy. Such a conclusion, although bad news for Bovis, was held not to be contrary to public policy.

This case admirably illustrates the irreconcilable truth that, although it is good to settle, settlement can indeed be a tricky business.

Kim Franklin is a barrister and chartered arbitrator at Crown Office Chambers. Visit www. crownoffice chambers. com

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