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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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    Gary P

    All good advice, prompt and efficient

    Posted 1 month ago

    Anonymous

    Excellent advice and customer service.

    Posted 2 months ago

    Aneet G

    I would definitely recommend Redmans. Very impressed with service provided. They were extremely proactive in handling my case which made things easier for me. Provided sound advice and resolution. Special credit for this goes to Chris who dealt with my case with great determination and consideration.

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    Excellent, quick and informative. Chris was a real star and gave me confidence during the uncertainty if a redundancy settlement.

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    Felt in very capable hands was listened to and given excellent advice. Would not hesitate to recomend and use again if needed.

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    Fabulous service all round.

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    Anonymous

    Redmans were quick to respond to my enquiry and dealt with my case professionally and personably. I received sound advice and was put at ease by Chris Hadrill, Partner.

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    Excellent service.

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    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.

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

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

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

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

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    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.

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    Very helpful and wonderful advice

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