In settlements involving an appointed litigation guardian or “tutor”, court approval is required and should be borne in mind when resolving such claims. The court’s power and role in these circumstances is closely linked with concepts of unconscionability.  Pursuant to that doctrine, equitable relief is given when it is perceived that there has been “an abuse of power possessed by one party over the other by virtue of the other’s position of special disadvantage1

Unconscionability

The jurisdiction of unconscionability is long established as extending to circumstances where a disability was sufficiently evident to the stronger party to make it unfair or unconscientious that they procure, or accept, the weaker party’s consent to the transaction.  This is similar to the court’s role in approving settlement where the plaintiff is unable to act for themselves.

Responsibility of the court

The overarching responsibility of the court is to ensure the plaintiff’s best interests have been protected in relation to the settlement.  In cases where the plaintiff is severely brain damaged or a child, this is not always as straightforward as it may seem, even after significant discussion between the legal practitioners.

Although a dispute may have resolved on terms agreeable to all parties, the approval of the court is not simply an administrative function.  Legal representatives are increasingly required to explain the case in significant detail and advise the court as to why the plaintiff has agreed to the settlement and, in essence, why the settlement represents a satisfactory result.

In cases where parties have foregone the service of expert evidence or where the plaintiff has not sought counsel’s opinion, difficulties can arise in convincing the court to approve the settlement.

Some recent outcomes would indicate a trend, certainly in the District Court of New South Wales, to cast an onus upon the defendant to convince the court that the settlement was fair, just and reasonable.

The courts are faced with the difficult task of balancing party concerns when considering whether a settlement should be approved.  They are of course concerned with the public interest, and the speedy and just resolution of disputes by compromise whenever practical.  Courts are, however, also concerned with  the need for equity to provide relief in a situation where a party has unconscientiously taken advantage of another with a special disadvantage.

It is open for the courts to accept the claim on the face of the pleadings and unless otherwise convinced, not approve settlement.  This can have significant cost consequences for defendants in particular.

Comment

While procedural differences may exist between jurisdictions, the underlying principle of providing protection for the plaintiff to ensure any resolution is equitable in all of the circumstances is the same.

In New South Wales at least, parties should ensure that expert evidence is available to support the settlement, even   in circumstances where they may have agreed to approach a matter commercially and otherwise consider settlement without incurring the expense of serving reports.  It may also be necessary for the plaintiff’s solicitor to confirm that counsel’s advice has been sought and that all parties prepare written submissions.