Starting with Settlement

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Starting with Settlement

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Whenever I am at the start of a dispute, I explore whether it can be amicably settled. As much as possible. Especially when the potential for that is palpable. Sometimes, it is not possible at that moment, but maybe later. Sometimes, never, and the courts have to resolve it.

The courts also encourage parties to settle. For that reason, they decided that settlement negotiations between parties are privileged communications. That means they are not admissible to establish a claim or defence in court. The courts were explicit in their reasoning that the purpose of that decision was to encourage parties to speak candidly without the fear of being bound by their exchange, be it in writing or verbally.

There is a legal myth that if we put the words ‘without prejudice’ on our correspondence or declare it at a meeting, we automatically attract the protection of privileged communications. That is wrong.

Firstly, without prejudice is only used during settlement negotiations. Whatever is said during negotiations is said without prejudice to our right to contest the claim if negotiations fail. That is what the phrase ‘without prejudice’ means.

It is not a mantra to be uttered to activate a legal force field over our communications. Get outta here. I often see without prejudice printed on correspondence that has nothing to do with negotiations for a settlement. I can infer the writer’s level of legal awareness from that.

Secondly, as long as parties negotiate, their communications are automatically privileged. Even if one fails or forgets to include without prejudice in their communications, those communications still attract privilege. The failure to introduce the phrase is not fatal. The law protects any communications relating to negotiations for settlement by not allowing them to be admitted as evidence.

Thirdly, for completeness, the court will only consider settlement negotiations if they contributed to or led to the parties arriving at a concluded settlement. The court can only consider the negotiations before that settlement when there is a dispute.

Matters can be settled. However, parties must be genuinely willing to compromise to end their dispute. If the settlement talks are used strategically to delay the claim, it is unlikely to happen. The moment you have enough corroboration for your suspicions, terminate the talks and get on with the claim.

If the other side opens or responds with an unreasonable offer, I infer they are not genuine in settling the dispute. It is likely to be used strategically, either for delay or ego. A person interested in settling would not take into account the other party’s interest is unlikely to be accepted. A reasonable person would not make an offer that would be outright unappealing to the other side.

I often advise clients to make reasonable offers—either make them or not at all. Don’t try to lowball, bully, insult, push, or get one over in a settlement. If you want to settle, do it genuinely. If not, let’s not waste time trying our luck. Luck is an angel that comes unbidden. It is not clothes in a changing room to be tried on.

An insulting or lowball offer or counteroffer is likely to anger the other side, add another emotional and psychological layer of complexity to the dispute, and create more unnecessary impediments to settling.

So, what is a reasonable offer? One that is mindful of the respective parties’ interests and motivations, the dispute between them and a compromise that addresses the dispute or the factors responsible for the dispute. An offer that does not take into account the other parties’ interests will necessarily fail. To compromise is to accept that we are not going to have it all our way, that we have to work with others towards our desired outcome, and that we have to prioritise, give up some things and accept others.

Therefore, before entering settlement negotiations, it is imperative to know what is important and what is less so, what must be insisted upon, and what can be let go. Write them out. Consider them. Revise them. The point is to work it out. Be certain of it. Make it instinctive. If we don’t know these things before the discussions, we have no business entering them.

Settling a dispute amicably has many benefits for the disputing parties.

Firstly, their dispute ends. Neither party can ‘appeal’ to a higher court about their agreement. The anxiety, stress, and time they would have experienced are removed. Their quality of life, which is priceless, immediately improves.

Secondly, it is an end over which they have some control, compared to a court where the outcome is out of their hands. They could end up with a decision neither of them is happy with, even though one won. That is not unheard of. There is a phenomenon known as pyrrhic victories, where the victory was not worth it. So, although parties may not get everything they want, that suffices as long as they get the parts they want and can live with.

Thirdly, their expense for dispute resolution would be far less than if they went to trial. That is logical and real. If the claim is settled after a letter of demand is issued but before a Writ and Statement of Claim is filed, the legal expenses will likely be lower simply because there is less legal work.

Sometimes, the argument is made that just because parties settle does not mean lawyers do not get a fee; they do. But this does not address the reality, which is that lawyers earn far less if they facilitate a settlement than if they represent in a dispute. To say there is no difference in the fee one would charge for attending a few meetings and drawing up a settlement agreement compared to a legal suit that went all the way to trial with two injunctions, three summary applications and several case management is unreasonable.

I feel that argument is misconceived. The financial argument does not fly. Lawyers should encourage and facilitate the settlement of disputes where possible because it is in our client’s and the court’s interest to do so. Not because many can be made from it.

A dispute settled does not require the lawyers’ efforts or the courts’ intervention. The duty and responsibilities of a lawyer are about advancing and protecting the interest of others, not personal agendas. We should explore the peaceful resolution of a dispute even if our client’s do not instruct us. It is in our client’s interest to do for economical, administrative, emotional and psychological reasons; reasons they may not immediately appreciate. Ultimately, they can decide whether to agree to settle or not, but that does not deprive us of the opportunity to broker a settlement if one can be achieved.

An advocate and solicitor shall while acting with all due courtesy to the tribunal before which he is appearing, fearlessly uphold the interest of his client, the interest of justice and dignity of the profession without regard to any unpleasant consequences either to himself or to any other person. [Emphasis ours]

Rule 16, Legal Profession (Practice and Etiquette) Rules 1978

Observe from the rule above that a lawyer is called upon to uphold his client’s interest while simultaneously upholding the interest of justice (the courts and situation) and the dignity of the profession. It’s like juggling three balls. At least.

We have to achieve these three goals without regard to unpleasant consequences to ourselves or any other person. I sometimes jokingly think the phrase ‘any other person’ includes our client, too. They have to bear with the unpleasant consequence with us.

Whatever the case, to perform all three is a challenging art, and certainly, not a science, although it can help a little.

Regrettably, it is not common to come across lawyers who genuninely look to settle a matter. It is too common to come across that look to encourage, if not incite, others to adopt an aggressive, hostile and adversarial view of a dispute. It is common to find lawyers that look to fire up a situation instead of calming it down enough for parties to act rationally, reasonably and sensibly.

My view is lawyering done right includes the art of negotiating a settlement. Mediation should be part and parcel of our natural abilities. I feel mediation has become as a separate legal practice area because we as lawyers have forgotten to take this dimension of dispute resolutikon seriously. We have come to think that ‘dispute resolution’ as simply another word for an adversarial encounter instead of a reconciliatry one. It is also, I believe, partially driven by the fact that there is more fees to be made in disputes than settlement or mediation.

I value those lawyers that are genuinely interested to settle a matter, that talk their client’s down from the heights of indignation or aggression, that advise and cajole their client’s to be reasonable and compromise. It is not an easy thing to do when particularly when our client thinks that we should be taking their side.

I think our society is the better for it when lawyers can settle matters. When we settle matters amicably and optimally, it gives off a conciliatry vibe in the community. That is something we in Malaysia could have more of.

There was once I had a case about brawl that broke out between two men at a gym over something silly. Both lodged a police report after. I acted for one. My client blamed the other guy for starting the fight. However, even though he did not start it, he relished it. That did not help our case. A lawyer I was famliar with represented the other guy. The way he started our conversation, I knew we were going to settle it.

‘So I hear your guy and my guy had a tango in the gym.’

‘That’s why lah. They should have been in dance class.’

‘These fellas ah, what are they thinking? Grown men, some more. I heardlah they not happy with each other about some silly issue. But it’s just an opinion lah for god’s sake. No need lah, tolak-tolak (pushing around).’

‘Tell me about it. My guy is still burning. Wants to sue and lodge a report. Mad lah. I agree it’s a silly issue. Can we settle this?’

‘Can. Can. If they want to insist on it, the IO (investigating officer) said both of them will get it for affray (the offence of breaching the public peace by fighting in public). Eh, no need lah to sue.’

‘I don’t want either!’

‘This is a stupid case lah. Let’s settle.’

‘Agreed. What do you suggest?’

‘I am thinking they should shake hands at the balai after they withdraw their police reports. No further claims from the incident. No costs.

‘Can, I’ll shoot you a proposal.’

Boleh. I confirm then we fix a date for them to withdraw at the balai.’

We settled the dispute within a week.

Both clients grudingly agreed to the settlement. We charged them for negotiating a settlement and withdrawing their respective police reports. We lost out on earning fees for suing and defending a legal claim. We lost out on earning fees for the criminal charge against them both. But immediately after that both our clients could get on with their lives instead of remaining stuck in a dispute together.

The day we advise our clients to take up or defend a legal claim to serve our self-interests is the day we lose moral authority to serve as an advocate and solicitor and are no better than unauthorised persons impersonating an advocate and solicitor, i.e., a fraud.

Before we take up arms, we should always consider first whether we can amicably resolve it. Failing to do so results in a disservice to our clients, the courts and ourselves as a profession.

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