Settle out of court: cost, speed and control

Settling out of court is usually the faster, cheaper way to secure a guaranteed outcome while keeping control over the result. Courts across England and Wales actively encourage it. The Court of Appeal confirmed in Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416 that a court may stay proceedings or order parties to attempt non-court dispute resolution, provided doing so does not impair the essence of the right to a judicial hearing and is proportionate. That judgment shifted the ground: refusing to engage with alternative dispute resolution (ADR) now carries real costs risk.

The core reasons to consider settling rather than running a case to trial are:

• Cost. Litigation fees accumulate quickly and are rarely fully recovered even by the winning party.
• Speed. Most civil mediations settle promptly; contested trials can take significantly longer to reach.
• Control. A negotiated agreement lets you shape the remedy. A judge decides for you.
• Confidentiality. Court judgments are public. Settlement terms, particularly those recorded in a Tomlin order schedule, can remain private.
• Relationship preservation. Adversarial litigation tends to destroy working or family relationships; mediation is designed to preserve them.
• Enforceability. A properly drafted settlement agreement, consent order, or arbitration award is legally binding and enforceable.

Settling a dispute is not giving up. It is choosing a known, enforceable outcome over an uncertain one, at a fraction of the cost and time a trial demands.

Table of Contents

• Why settling out of court benefits you in practical terms
• How does a settlement actually happen?
• When should you make or respond to a settlement offer?
• When is settlement not the right choice?
• What are the risks of settling out of court?
• How to negotiate, record and formalise a settlement in the UK
• What happens if the other side breaks the settlement?
• When should you instruct a solicitor, and how can Judgelaw help?
• A note on balanced decision-making
• Sources
• FAQ

Why settling out of court benefits you in practical terms

Cost is the most immediate reason most people and businesses choose to settle. Solicitor fees, barrister fees, court fees, expert witness costs, and the management time diverted from a business or family all mount up. Even a winning party in the High Court typically recovers only a proportion of their actual costs from the other side, and recovery is never guaranteed if the losing party lacks funds.

Speed matters too. A straightforward County Court claim can take twelve months or more to reach trial; complex commercial litigation routinely runs to two or three years. A mediated settlement can be reached in a single day. That difference is not merely convenient. Prolonged litigation is exhausting, and the uncertainty hanging over a dispute affects decisions, relationships, and sometimes mental health.

Control over the outcome is something courts cannot give you. A judge applies the law to the facts and awards what the law permits. A negotiated settlement can include apologies, staged payments, ongoing commercial arrangements, references, or confidentiality terms that no court would order. For businesses in particular, a tailored remedy often has more practical value than a damages award.

Mediation preserves commercial and family relationships in a way that adversarial litigation rarely does. The Ministry of Justice confirms that mediation is a confidential process run by an impartial third party, and that most civil disputes that attempt it settle promptly.

• Costs are contained and predictable.
• Timelines are measured in weeks or months, not years.
• Remedies can be creative and tailored to the parties’ real needs.
• Confidentiality protects commercial reputation and family privacy.
• Relationships survive, which matters when parties must continue to deal with each other.

Pro Tip: When assessing whether to settle, calculate the true cost of litigation: direct legal fees, court fees, expert costs, management time, lost productivity, and reputational risk. The headline damages figure rarely tells the whole story.

How does a settlement actually happen?

Settlement is not a single process. It is a family of mechanisms, and understanding which one fits your situation is part of making a good decision.

Negotiation is the starting point in almost every dispute. Parties exchange offers, with or without solicitors, and attempt to agree terms directly. Most disputes settle through negotiation alone, often before any formal proceedings are issued.

Mediation brings in an impartial third party to facilitate discussion. The mediator does not decide anything; they help parties find common ground. It is normally quicker and cheaper than court, and the process is confidential. Family mediators operate under a separate accreditation framework, and family mediation information and assessment meetings (MIAMs) are now required before most private family law applications.

Early neutral evaluation involves a neutral expert or retired judge giving a non-binding opinion on the merits. It is particularly useful where parties have fundamentally different views of the legal position and need an external reality check before committing to mediation or trial.

Arbitration is binding. The parties agree to submit their dispute to a private arbitrator whose award has the same legal force as a court judgment and can be enforced through the courts. It is common in construction, commercial, and some employment disputes.

Ombudsman schemes apply in regulated sectors such as financial services, energy, and legal services. They are free to complainants, non-binding on the complainant (who can still go to court), but binding on the regulated firm if the complainant accepts the decision.

Settlement offers are the formal legal tools that shape costs exposure.

• A Part 36 offer is a written offer made under CPR Part 36. If the offeree fails to beat the offer at trial, significant costs consequences follow, including an additional amount on top of the damages award.
• A Calderbank offer (also called a without prejudice save as to costs offer) operates similarly outside the Part 36 regime, particularly in family proceedings and cases where Part 36 does not apply.
• Without prejudice communications are protected from disclosure in court, allowing frank negotiation without risk that an offer will be used as an admission.

Recording the settlement correctly is as important as reaching it. A consent order filed with the court makes the agreed terms an order of the court, enforceable as such. A Tomlin order goes further: as Practical Law explains, it keeps the detailed settlement terms in a private schedule while the court retains power to enforce the parties’ undertakings, combining confidentiality with judicial enforcement.

A Tomlin order is often the most practical tool available: the terms stay private, but if the other side defaults, you can return to court to enforce without starting fresh proceedings.

When should you make or respond to a settlement offer?

Settlement can happen at any stage. Pre-issue, it avoids court fees and keeps the dispute entirely private. After proceedings are issued, it remains possible at any point up to and including during trial, and in some cases even after judgment on liability but before a quantum hearing.

The timing of a Part 36 offer matters precisely because of its costs consequences. Under CPR Part 36, if a claimant makes an offer and the defendant fails to beat it at trial, the claimant is entitled to an additional amount, indemnity costs from the date the offer expired, and enhanced interest. A defendant’s Part 36 offer that the claimant fails to beat triggers a costs order from the date of expiry. These consequences are automatic unless the court considers it unjust to apply them.

Courts now go further than merely encouraging ADR. Following Churchill v Merthyr Tydfil, a court can order parties to attempt ADR. Unreasonable refusal to engage with ADR can result in costs sanctions even where the refusing party wins at trial, as LexisNexis practice guidance confirms. The question is no longer whether ADR is encouraged; it is whether your refusal to try it was reasonable.

A short checklist for deciding whether to make or accept an offer now:

• Is the offer within a realistic range of what a court might award, accounting for costs?
• What are the likely total costs of continuing to trial, for both sides?
• Is there a risk the other party cannot pay a judgment even if you win?
• Would a trial produce a remedy you actually need, or would a negotiated term serve you better?
• Has the other side refused ADR without good reason, creating a potential costs argument in your favour?

Pro Tip: Document every settlement attempt and every refusal. If the other side declines mediation without a credible reason, record that in writing. It becomes a powerful argument on costs if the matter proceeds to trial.

When is settlement not the right choice?

Settlement is not always appropriate, and recognising those situations early saves time and money.

GOV.UK guidance on solving disputes out of court identifies categories where ADR is unsuitable. The following circumstances generally call for court proceedings rather than negotiation or mediation:

• Urgent protective relief. If you need an injunction to prevent imminent harm, freeze assets, or protect a business from irreparable damage, only a court can grant that relief on the timescale required.
• Child protection. Where a child’s safety is at immediate risk, court proceedings under the Children Act 1989 are the appropriate route. ADR cannot substitute for the court’s protective jurisdiction over children.
• Domestic abuse. Where one party has been subject to domestic abuse, mediation is generally unsuitable because the power imbalance makes genuine negotiation impossible and can expose the victim to further harm.
• Public law remedies. Judicial review, regulatory challenges, and matters requiring a declaration of incompatibility under the Human Rights Act 1998 require court proceedings. These are not disputes that can be settled by private agreement.
• Criminal matters. Settlement is a civil law concept. Criminal proceedings are brought by the state and cannot be resolved by agreement between the parties, though civil claims arising from criminal conduct can sometimes be settled separately.
• Limitation urgency. If a limitation period is about to expire, issuing proceedings to protect your position may be necessary even if you intend to negotiate immediately afterwards.

Check the limitation position before committing to an ADR process that might delay issue beyond the deadline.

What are the risks of settling out of court?

Settling carries its own risks, and they deserve honest attention before you sign anything.

• Waiver of future rights. A settlement agreement typically includes a full and final settlement clause, extinguishing all claims arising from the same facts. If further loss emerges later, you will generally have no recourse.
• Inadequate remedy. The pressure to settle can produce an agreement that undervalues your claim. A trial might have produced a larger award, particularly where the other side’s liability was strong.
• Enforcement difficulty. An informal agreement, a handshake deal, or a poorly drafted letter of settlement may be hard to enforce. Without a consent order or Tomlin order, you may need to bring a fresh claim for breach of contract.
• Confidentiality traps. A confidentiality clause that prevents you from reporting misconduct to a regulator, or that conflicts with a statutory reporting obligation, can create serious legal exposure. Non-disclosure agreements in employment settlements are subject to specific restrictions under the Equality Act 2010 and related guidance.
• Tax and pension implications. Settlement payments, particularly in employment disputes, can have tax consequences that are not always obvious. Payments above the £30,000 threshold in employment termination settlements are generally taxable.

Pro Tip: Retain negotiable protections in the settlement terms: staged payments with interest on late instalments, a personal guarantee where the counterparty is a company, or a charging order over property. These are far easier to negotiate before signing than to obtain afterwards.

How to negotiate, record and formalise a settlement in the UK

Getting the process right from the start avoids the most common pitfalls.

A practical checklist

1. Assess your legal position honestly. Calibrate your offer to what a court is likely to award, accounting for the costs of getting there. Negotiation strategy should account for the shadow of the law, as Harvard’s Program on Negotiation explains: offers grounded in realistic legal outcomes tend to settle; emotionally driven figures rarely do.
2. Mark all communications correctly. Label negotiation correspondence “without prejudice” to protect it from disclosure. If you want costs consequences, use “without prejudice save as to costs” (a Calderbank letter) or make a formal Part 36 offer.
3. Make or respond to a Part 36 offer in writing. A Part 36 offer must be in writing, state it is made pursuant to Part 36, specify a period of not less than 21 days for acceptance, and comply with the other formal requirements in CPR Part 36. LexisNexis practice notes on settlement offers set out the drafting requirements in detail.
4. Draft the settlement agreement carefully. Include the parties, the claims being settled, the consideration, a full and final settlement clause, confidentiality terms, tax indemnities where relevant, and an enforcement clause.
5. Choose the right recording mechanism. For court proceedings already issued, a consent order or Tomlin order is usually preferable to a standalone agreement because it gives immediate enforcement access through the court.
6. File the consent order or Tomlin order with the court. A Tomlin order stays the proceedings on the terms in the schedule. The schedule remains private; the order itself is a court document. If the other side defaults, you apply to the court to enforce the schedule without issuing fresh proceedings.

Key drafting points to check before signing:

• Confidentiality clause scope: does it inadvertently prevent regulatory reporting?
• Tax and pension position on any lump sum payment.
• Interest on any deferred payment.
• Costs: who pays, and is there a cap?
• Governing law and jurisdiction clause if the other party is based abroad.

A settlement agreement that omits a costs clause, a confidentiality scope, or a tax indemnity is not a complete settlement. It is a document that will generate further disputes.

What happens if the other side breaks the settlement?

Breach of a settlement agreement is more common than most people expect, particularly where payment is deferred or where the terms require ongoing conduct.

• Consent order or Tomlin order. If the settlement is recorded in a court order, you can apply to enforce it without issuing fresh proceedings. For a Tomlin order, you apply to lift the stay and enforce the schedule. Enforcement options include a charging order over property, a third-party debt order against a bank account, or a writ of control (formerly a writ of fi fa) to seize goods.
• Standalone settlement agreement. If there is no court order, breach of the agreement is a breach of contract. You will need to issue fresh proceedings to enforce it, which adds cost and delay.
• Arbitration award. An arbitration award can be enforced as a judgment of the court under section 66 of the Arbitration Act 1996, making it one of the most straightforward enforcement routes available.
• Demand letter first. Before any enforcement step, send a clear written demand specifying the breach, the amount owed, and a reasonable deadline. This creates a paper trail and may prompt compliance without further cost.
• Specific performance and committal. Where the obligation is non-monetary (for example, a confidentiality undertaking or a transfer of property), specific performance or committal for contempt may be available, but these are serious remedies reserved for clear and deliberate breaches.

Enforcement is rarely cheap. Weigh the cost of enforcement against the amount or benefit at stake before proceeding.

Pro Tip: Build enforcement protections into the settlement before you sign: an escrow arrangement for the settlement sum, stepped payments with automatic acceleration on default, or a personal guarantee from a director where the counterparty is a limited company.

When should you instruct a solicitor, and how can Judgelaw help?

Some disputes can be resolved by negotiation between the parties without legal representation. Many cannot, and the cost of getting it wrong, whether through a poorly drafted agreement, a missed Part 36 deadline, or an unenforceable clause, usually exceeds the cost of taking advice at the outset.

Instruct a solicitor when:

• The dispute involves a significant sum or a complex factual matrix.
• You are considering or responding to a Part 36 offer and need to understand the costs consequences.
• The other side has legal representation and you do not.
• The settlement involves security, staged payments, or a Tomlin order.
• You need to draft or review a confidentiality clause, particularly in an employment context.
• Enforcement is already in prospect or the other side has a history of non-compliance.
• You need urgent injunctive relief alongside or instead of settlement.

Judgelaw is an SRA-regulated firm (SRA 634380) covering civil disputes and litigation, family law, commercial disputes, and conveyancing. The team drafts Part 36 and Calderbank offers, prepares Tomlin orders and consent orders, advises on costs consequences, and represents clients at mediation. For family matters, an initial consultation is available from £150.

If you are weighing a settlement offer or preparing to make one, get in touch to discuss your situation. The earlier you take advice, the more options you have.

A note on balanced decision-making

Settlement is usually the right choice when it secures a fair, enforceable outcome with appropriate protections built in. The financial and personal cost of litigation is real, and the outcome of a trial is never guaranteed. Most disputes, including those that feel intractable, settle eventually. The question is usually not whether to settle, but when and on what terms.

That said, litigation remains the correct route for urgent protective remedies, child safety matters, and cases where a public law principle is genuinely at stake. Settlement in those contexts can leave a wrong unaddressed and a vulnerable person unprotected.

The most practical approach is often to pursue settlement actively while preserving your litigation position. Make or respond to Part 36 offers, engage with mediation, document every attempt, and keep the court option open. That combination gives you the best chance of a good outcome at proportionate cost.

Pro Tip: Where trust between the parties is low, a staged settlement with reserved enforcement rights, rather than a single lump-sum agreement, can bridge the gap between wanting to settle and being confident the other side will perform.

Sources

• Gov
• Mediation versus Litigation: Advantages, Disadvantages and Suitability for Civil Disputes in England and Wales – LexisNexis UK
• Practical Law (Tomlin orders and confidential settlements) – Thomson Reuters

This article is general information, not a substitute for advice from a qualified lawyer. Consult a qualified legal professional about your own circumstances before acting on anything here.

FAQ

Is it better to settle out of court?

For most civil disputes, yes. Settlement is usually faster, cheaper, and gives both parties control over the outcome. A court judgment is uncertain and public; a negotiated settlement can be tailored, confidential, and binding.

Is an out-of-court settlement legally binding?

Yes, provided it is properly documented. A written settlement agreement is a binding contract. If it is recorded in a consent order or Tomlin order filed with the court, it is also enforceable as a court order, which makes enforcement significantly more straightforward.

Can you settle a case after court proceedings have started?

Yes. Settlement can be reached at any point, including during trial and, in some cases, after a liability judgment but before a quantum hearing. Issuing proceedings does not prevent negotiation; it often accelerates it.

What is a Part 36 offer and why does it matter?

A Part 36 offer is a formal written settlement offer made under CPR Part 36. If the offeree fails to beat the offer at trial, automatic costs consequences apply, including indemnity costs and an additional amount on the judgment sum. It is one of the most powerful tools available for managing costs risk in litigation.

What happens if the other side refuses to mediate?

Unreasonable refusal to engage with ADR can result in costs sanctions, even if the refusing party wins at trial. Following Churchill v Merthyr Tydfil [2023], courts can also order parties to attempt ADR before proceeding to a hearing.

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