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chris-hadrill-profileChris Hadrill, a specialist employment solicitor at Redmans, answers the question:

“Can I set aside the term of the settlement agreement that I entered into if I think that I have been defrauded? I was made redundant and now believe that there wasn’t in fact a redundancy situation”

Under the law of contract, there are certain defined circumstances whereby a settlement agreement may be invalid and can be set aside. These include (but are not limited to):

  • Where a party to the settlement agreement lack capacity (for example, the party has a mental disability which rendered them incapable of understanding or consenting to the agreement);
  • Where a mistake has been made about a fundamental matter or which makes it impossible to perform the settlement agreement; and
  • Where there has been a misrepresentation of a material fact in certain circumstances

In this case, the relevant question is whether a settlement agreement can be set aside due to a fraudulent misrepresentation by one party to another, inducing them to enter into the settlement agreement (i.e. that there was a genuine redundancy situation when, it is contended as a matter of fact, this was not the case).

In Hayward v Zurich Insurance Company plc [2015] EWCA Civ 327 the Court of Appeal held that, while the settlement of an ill-founded claim is nonetheless binding, this is not generally the case if the claim was fraudulent: if, subsequent to the completion of the settlement agreement, it is found that a statement about the claim was in fact fraudulent when the other party had believed it was genuine, this may be sufficient to rescind a settlement agreement. However, fraud does not necessarily ‘unravel all’, even when proved – if the party alleging fraud (“A”) was aware (prior to the settlement agreement being completed) that the representation made by the other party (“B”) may not be true but signs the agreement anyway, this will not be sufficient to unravel the settlement (as A had settled the case “with its eyes wide open”).

Applying the above principles to the current question, the crucial issue in the circumstances is whether the person alleging fraud (“A”) was aware – prior to entering into the settlement agreement – that there may not be a genuine redundancy situation at his employer (“B”). If A had alleged to B that there was not a genuine redundancy situation prior to entering into the settlement agreement, but subsequently entered into the agreement anyway, then it is probable that A would find it difficult to challenge the validity of the settlement agreement on the grounds of fraud: A had entered into the settlement agreement with “his eyes wide open”. However, if A had not alleged dishonesty by B from the outset then he may be able to challenge the settlement agreement on the grounds of fraudulent misrepresentation (depending, of course, on A being able to show on the balance of probabilities that the statement by B to this effect was fraudulent).

The practical outcome of this question is that parties need to take care about alleging fault or dishonesty prior to settling a dispute. Further, they also need to understand the implications of settling: advice from specialist legal advisers on this point will therefore normally be extremely helpful in determining the pro’s and con’s of settling a case.

About Chris Hadrill

Chris is a specialist employment lawyer at Redmans. He specialises in contentious and non-contentious employment matters, including breach of contract claims, compromise agreements and Employment Tribunal cases. He writes on employment law matters on a variety of websites, including Direct 2 Lawyers, Lawontheweb.co.uk, LegalVoice, the Justice Gap and his own blog. Contact Chris by emailing him at chadrill@redmans.co.uk

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Testimonials

4.75 Average

195 Reviews

Alkhas K

Excellent service.

Posted 5 days ago

Mathias G

Contacted them regarding my end of employment agreement. Chris Hadrill dealt with it and was done and handed back to employer same day more than happy with there service.

Posted 3 weeks ago

Mark W

Most professional from start to finish offering very a personal service. Most impressive and quick when dealing with the matters in hand.

Posted 1 month ago

Anonymous

Posted 1 month ago

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I am very glad I came across Redmans Solicitors. Fantastic service!

Posted 1 month ago

Anonymous

Fantastic communication, always happy to answer queries, highly recommended.

Posted 1 month ago

Wavenie B

They were very straight to the point, friendly and understanding people. I felt they had my best interest. They were easy to get hold of, replies were almost instant. 5/5 for customer service

Posted 1 month ago

Christina P

Caroline was fantastic to work with - extremely knowledgeable, supportive, thorough and honest. I definitely recommend Redmans!

Posted 1 month ago

Anonymous

Very well done and fast support. Professional and reliable. Highly recommended!

Posted 1 month ago

Helene L

They were very knowledgable in the respected area in terms of change in law/regulations that is crucial for the clients who are seeking for legal arvice.

Posted 1 month ago

Sara R

Very helpful and wonderful advice

Posted 1 month ago

Marie D

very good service all digitalised

Posted 1 month ago

Philip H

Chris Hadrill handled my case with great accuracy and efficiency. Basically made it feel like a process without hassle. Doesn't try to expand the case just for greater fees. I value his professional advice highly.

Posted 1 month ago

Michael W

Professional, responsive and supportive - excellent service!

Posted 1 month ago

Anonymous

I was really happy with the service provided. I had to chase a couple of time but despite that, my matter was dealt with in a timely manor. I would use again in the future

Posted 1 month ago

Lee M

Superb service and always available

Posted 2 months ago

Jonathan S

I was very grateful for the support I received from Redmans during a very difficult period. Rana Tandon really got under the skin of my issue and understood what was important to me, steering me carefully and sensibly to an outcome I was very happy with. I would recommend Redmans to anyone else without any reservations whatsoever.

Posted 2 months ago

Mohamed A

Super helpful and efficient, trustworthy service

Posted 2 months ago

Anonymous

efficient, responsive and effective

Posted 2 months ago

Andrew B

Very good service

Posted 2 months ago

Anonymous

Excellent service, compassionate and a good outcome

Posted 2 months ago