Out-of-Court Settlement is binding even without the approval or sanction of the Court.

Abey v. Alex [1999] 14 NWLR (Pt. 637) 148 at 159, paras. E-G, per Uwaifo, JSC:

“It has been held – and I think it is in consonance with the right of parties to settle civil actions out of court and the established practice is that this should be encouraged by the courts whenever there is such a move – that at any stage of pending civil proceedings, save in specified cases or circumstances in which public interest or policy element is involved, the parties are entitled to settle or compromise all or any of the questions or disputes between them on any terms and conditions on which they agree even without the approval or sanction of the court, or prior reference to the court. Such an agreement or out-of-court settlement between the parties supersedes the original cause of action altogether and the court has no further jurisdiction in respect of the original cause of action which has been so superseded. If the terms of such new agreement or out-of-court settlement are breached or not complied with, the injured or aggrieved party must seek his remedy based on the agreement or out-of-court settlement.”

Blogger’s Note:

Uwaifo, JSC (as he then was) aptly stated the above principle and in simple language too.  He relied on the opinion expressed by Lord Denning M.R. in McCallum v. Country Residences Ltd. (1965) 1 W.L.R. 657 at 660 and the statement of the law in Halsbury’s Laws of England, 4th edn, vol. 37, paras. 383 and 391.  The case further strengthens the right of parties to amicable settlement which we had earlier discussed here. In the case, there was a land/boundary dispute which was subject of litigation and Judgment delivered even on appeals. Thereafter the Appellants instituted another suit which was later resolved by a settlement agreement. Subsequently, the Respondents instituted yet another suit whereupon the Settlement Agreement was admitted in evidence. However, in spite of the Agreement, the trial Judge found for the Respondents relying on the previous Judgment (and disregarding the contents of the Settlement Agreement). Appellants’ appeal to the Court of Appeal was dismissed. On further appeal to the Supreme Court, the apex Court unanimously allowed the appeal, upholding the terms of the Settlement Agreement. The Court held that the effects of such an Agreement are that: it puts an end to the proceedings which are thereby spent and exhausted; it precludes the parties from taking any further steps in the action, except when they have provided for liberty to apply to enforce the agreed terms; and it supersedes the original cause of action.

The above case is also an authority for the principle that the power or right to settle or compromise at any stage of pending proceedings extends even to that of compromising judgments in certain situations. See page 160, para. C of the report.

In practice, when parties settle, they tend to file the Terms of Settlement and thereafter urge the Court to make an order entering same as Consent Judgment. The court need not be involved in the settlement process. Lawyers often do this notwithstanding the fact that based on the above case, the duly executed Terms of Settlement is already binding and operational even without court sanction. However, there are some reasons while it is important to ensure that the Terms of Settlement is adopted as Consent Judgment. For instance, where adopted as Consent Judgment, the Judgment may be easily enforced in case of breach without the need to necessarily file a fresh suit based on the new agreement (which constitutes new cause of action). More so, it makes it quite difficult for one of the parties to deny the Terms of Settlement or to have the Consent Judgment set aside. This is because, usually, the courts would require the presence of all counsel in the matter to confirm on record that there has been indeed a settlement and counsel would be made to orally adopt the Terms of Settlement. That said, it must be reiterated that even where not entered as consent judgment, an out-of-court settlement precludes the parties (and even the court) from taking any further steps in the suit that affects the integrity of the settlement agreement.

 

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