The recent Federal Court case of Worldwide Timber Traders Pty Ltd v Brouwer (No 2) [2009] FCA 447 examined the ability of parties to enforce a settlement agreement negotiated during mediation.

Background

The trial of the dispute between Worldwide Timber Traders Pty Ltd (Worldwide) and Jan Willem Brouwer (Brouwer) was set down for hearing on 9 April 2008. On the morning of the first day of trial, the parties agreed to an adjournment for the purposes of mediation.

On 19 August 2008, Worldwide applied for judgment against Brouwer on the basis of an agreement reached by the parties during the mediation.

At the hearing of the judgment application, Brouwer’s solicitor made an admission to the Court that Brouwer had agreed to pay Worldwide $17,500 to settle the proceedings. The parties both agreed that a term of the agreement reached at the mediation was that a deed of settlement be executed between the parties.

Worldwide also submitted that it was a term of the agreement that Brouwer would consent to judgment being entered in favour of Worldwide. Brouwer denied any such term had been agreed.

The matter was adjourned by the Federal Court on 19 August 2008 for the parties to finalise the terms of a settlement agreement so that final orders could be made. However, Worldwide changed its solicitors and on 10 February 2009 again requested that the Federal Court enter judgment against Brouwer for the $17,500 pursuant to Order 18 rule 4 of the Federal Court Rules, which states that the Court may pronounce judgment or make any order on an admission by a party where the applicant is entitled to that judgment or order on the admission. Worldwide’s request was again based on the admission of Brouwer’s solicitor.

Brouwer advanced a number of arguments opposing the application that judgment should be entered. However, for the purposes of this article, the following arguments are relevant:

  • Brouwer’s admission in relation to the agreement could not be taken to mean that there was a concluded and enforceable agreement, and
  • the agreement was subject to execution of a formal deed, which had not occurred.

Judgment

The application was ultimately dismissed because the agreement reached at mediation had not been concluded, in that it had not been reduced to writing and the parties had not reached consensus on all of the terms. Since the agreement had not been concluded, it could not be enforced.

Conclusion

This case reinforces the need to keep all parties at the mediation until settlement terms have been reduced to writing and signed by all parties. On a practical note, it is prudent to prepare a draft deed of settlement prior to mediation in anticipation of any agreement reached and to arrange for electronic access to the document during mediation so that it can be finalised for signing by all parties.

Although it may be possible for a party to rely on an agreement reached during mediation without an executed deed of settlement, a party will be in a much better position to enforce the agreement if the agreement has been reduced to writing and signed by all parties, which will avoid any uncertainty in relation to the terms of the agreement and ideally prevent the other party or parties from arguing that the agreement has not been concluded.