The purpose of a settlement agreement is to bring a resolution to a dispute without the further litigation. However, in Fatseas v Fatseas bht Basha [2022],the NSW Supreme Court were called upon to consider a further dispute arising from the interpretation of a particular clause in a settlement agreement ‘finalised’ after a dispute over probate.
The parties involved had executed a Heads of Agreement following lengthy mediation. Both parties accepted this to be binding. However, further disagreement then arose concerning the timing of a payment. The clause in question stated that the defendant should pay the settlement sum by an identified date but, if payment was not made by that date, the defendant should make payment, with interest, following subsequent trigger events such as death or sale of property.
The Court determined that the proper construction of the clause provided the defendant with the options to pay as stated in the agreement.
Lessons learned
A settlement agreement is a binding agreement. Nevertheless, interpretation issues with regard to particular terms can still arise. Careful drafting is required to avoid further disputes. All parties involved need to ensure the final agreement reflects the agreement reached during the mediation process so as to avoid further costs and delay.
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