The High Court has recently held that settlement negotiations which were ‘subject to contract’ and ‘without prejudice’ could be binding.

What happened was that a case was due to go to trial, and the two barristers exchanged e-mails (all marked ‘subject to contract’ and ‘without prejudice’). After a week, draft orders were exchanged (although it was said that there is ‘no settlement until all the documents are executed’). A final conversation then took place, at the end of which all the legal advisers expressed satisfaction at having reached a settlement. Both counsels stepped down, believing that a settlement had been reached. However, a few days later, one party complained that the other had not lodged the consent agreement with the court in time and that therefore it was withdrawing from the without prejudice agreement. That then raised the issue as to whether or not the settlement was binding.

In the judge’s view, the parties had implicitly agreed to lift the protection of ‘subject to contract’ and ‘without prejudice’ (as was shown by the behaviour of the parties – both barristers had stood down, the listing office was informed, and the barristers accepted other jobs). The end result, therefore, was that settlement had been reached and the parties were bound by it. So, remember that ‘subject to contract’ and/or ‘without prejudice’ are not failsafe protection. Jirehouse v Beller [2009] EWHC 2538 (Ch), noted in [2010] 176 IHL 13.