Where a court proceeding is settled and the parties enter into a settlement deed, there will usually be a default clause that entitles a party to obtain judgment if there is a default by another party along with production of the settlement deed as evidence of the party’s undertaking that it will not oppose an application to enforce the settlement deed. However, there may be circumstances where a party relies on an argument as to whether the settlement deed is enforceable in the first place.

This issue was considered by the County Court in the recent decision of Eleventh Klingon Pty Ltd v Bell and Ors (Ruling) [2025] VCC 364 (9 April 2025).  The facts of the proceeding can be summarised briefly:

1. The dispute between the parties arose in respect of two loan agreements by which proceedings were brought by Eleventh Klingon Pty Ltd (Klingon) for recovery of amounts payable under the loan agreements;
2. The parties resolved the proceedings by entering into a Deed of Settlement, which required the first defendant, Tony Bell (Bell) to pay Klingon a total sum of $500,000 by several instalments and a final instalment by either (i) the date two years and one week after the listing on the ASX via IPO of a company or (ii) 17 May 2023;

3. The Deed of Settlement included the usual default clause which stated that:

   Clause 5.1(a) made provision for the plaintiff to enforce its rights under the Deed of Settlement, including by entering judgment for the Agreed Amount together with the costs of the entry of judgment, on an indemnity basis, less any amount paid by the first defendant to the date of default. Sub-clause (b) detailed that an affidavit of the plaintiff’s lawyer as to the payments and amount then owing would be sufficient evidence for the purpose of any application to the Court for the entry of judgment. Sub-clause (c) noted that the Deed of Settlement could be relied on by the plaintiff as sufficient evidence of the first defendant’s consent to the entry of judgment” 

4. Upon execution of the Deed of Settlement, the parties sought orders that the proceedings be dismissed with a right of reinstatement reserved to Klingon in order for it to enforce the Deed of Settlement as required.  The fact that the settlement was reached at a mediation was critical to the Judge’s ultimate decision where she determined that settlements reached at mediation should not be unduly scrutinised.  Bell had the opportunity to continue to defend the proceedings but elected to enter into the Deed of Settlement in order to compromise the proceedings;
5. The parties were in agreement that Bell had made payments totalling $240,000 under the Deed of Settlement; however, the breach occurred due to Bell’s failure to pay the instalment of $260,000 in accordance with the terms of clause 2.1 of the Deed of Settlement;
6. Klingon’s application for judgment was supported by an affidavit which set out details of Bell’s breach of the terms of the Deed of Settlement. However, Bell opposed the application for judgment by asserting that the loan agreements were void or unenforceable on the basis that they were signed by Bell in reliance upon misleading misrepresentations made by representatives of Klingon as well as undue pressure exerted by Bell’s solicitors upon him urging him to enter into the Deed of Settlement (and he owed his solicitors a significant amount of fees). The principal argument of Bell was that the Deed of Settlement was “signed under a fundamental mistake and is unenforceable” [at 25];
7. Upon consideration of the evidence, Judicial Registrar Muller entered judgment based on its breach of the Deed of Settlement;
8. Bell sought a review of the Judicial Registrar’s decision to enter judgment against him;
9. The Judge undertook an analysis of the process for enforcement of a settlement deed summarily and referred to the overarching purpose in section 8(1) of the Civil Procedure Act 2010 (Vic) which is to ensure the just, efficient, timely and cost-effective resolution of the real issues in dispute;
10. One of the arguments relied upon by Bell was that the loan agreements were required to comply with the National Consumer Credit Code but did not comply – the Judge found that the Code did not apply to the loan agreements and the arguments presented by Bell as to the enforceability of the Deed of Settlement or the underlying loan agreements did not have any real prospects of success;
11. After carefully balancing all of the factors in exercising her discretion on the review, she was satisfied that the interests of justice required that the enforcement of the Deed of Settlement should be determined summarily.

The Victorian Court of Appeal decision of Sully v Englisch [2022] VSCA 184 was an appeal as to whether a binding settlement was reached between the parties at a mediation conducted in VCAT, where the Court of Appeal found that a reasonable observer of mediation would have concluded that the parties intended to be immediately bound by the terms of correspondence which referred to a “settlement in principle”.  This is where file notes of solicitors may become very important in establishing the apparent agreement reached at a mediation.  Catherine acted in VCAT matter which was settled after a full day mediation and despite the parties entering into a signed settlement deed, a dispute arose as to some specific clauses in the settlement deed and whether an agreement was actually reached to resolve the proceedings – luckily the parties saw sense and were able to resolve the differences and the file notes of the solicitors who attended the mediation became quite critical in achieving a suitable outcome concerning the parties’ intentions on certain clauses of the settlement deed and the effect of the settlement which was reached at the mediation.

Catherine and her team at FCW Lawyers have considerable experience in this area concerning settlements which have been reached either before proceedings, during proceedings or even during the course of a trial, and the steps which are required to be undertaken in relation to enforcement of a Deed of Settlement upon the event of default.  There can be complexities which arise in these situations, and we can provide advice on the best course of action.