When Settlement Language Breaks: How an Ambiguous Clause Drove Years of Litigation
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Published: 18 November 2025 | Reviewed: 18 November 2025
(3-minute read)
Case Study: H Lundbeck A/S & CNS Pharma Pty Ltd v Sandoz Pty Ltd [2022] HCA 4 - Perspective 1
Ambiguous Drafting & a Costly Detour
In H Lundbeck A/S v Sandoz Pty Ltd [2022] HCA 4, the High Court examined how a single clause in a 2007 settlement agreement created years of uncertainty about whether Sandoz held a non-exclusive licence during the extended patent term for the antidepressant escitalopram.
The Full Court had previously found that the clause granted Sandoz a licence from 31 May 2009 through to 9 December 2012. But the High Court reversed that view, stating:
“The principal ground… is that the Full Court was wrong… in their competing constructions of the settlement clause.”
The Court restored the primary judge’s finding that the clause did not extend Sandoz’s licence into the extended term. In effect, unclear drafting had created a dispute substantial enough to require the nation’s highest court to resolve it.
This litigation also interacted with the patent-extension framework in s 79 of the Patents Act 1990 (Cth), which contains a statutory fiction allowing rights to “backdate” only after an extension is granted. Though this fiction was central to other issues in the case, the starting point was the settlement clause: a short provision whose meaning was tested across multiple hearings, appeals, and cross-appeals.
Why It Still Matters - unclear drafting amplifies cost, delay and risk
Modern disputes often turn on settlement agreements, side-letters, early negotiation documents, or commercial releases. When these instruments are drafted by lawyers who simultaneously prepare for trial, the incentives can blend:
drafting may lean toward protective ambiguity,
trial assumptions influence “settlement-stage” language,
time pressure can cause parties to adopt wording that papers over unresolved issues.
The High Court’s analysis in Lundbeck shows how easily parties can later disagree about what their own settlement language meant - and how expensive that disagreement becomes when roles and incentives are misaligned at the drafting stage.
For businesses, founders, and professionals managing disputes, the core systemic risk is simple:
when one lawyer controls both the settlement path and the trial path, the overlap of incentives can create documents that later cost years to interpret.
How to Avoid the Same Trap - structural cost alignment, not better drafting habits
The risk exposed in Lundbeck is best matched to Clean Law’s Cost Alignment (Two-Lawyer Model) safeguard.
Not because the drafting was incompetent, the High Court did not criticise the drafters, but because traditional models blend two fundamentally different roles:
1. Trial preparation
A lawyer preparing for court builds contingencies, defensive wording, fallback positions, and protective margins.
2. Settlement design
Settlement aims for clarity, shared understanding, and finality, the opposite of contingency-laden drafting.
When the same lawyer is financially rewarded for doing both, the incentives naturally tilt toward over-protective or imprecise drafting, especially when trial preparation is happening in parallel.
Clean Law’s structure is built to separate these functions:
Your courtroom lawyer prepares only for trial.
Clean Law focuses solely on settlement, timing, and resolution strategy.
Each lawyer stays in their lane.
You fund one path, not both.
This alignment matters because settlement language drafted without trial-prep incentives is more likely to be:
narrow where it needs to be,
explicit on duration and scope,
transparent about assumptions,
safer against later reinterpretation.
In short, the Clean Law model is built to prevent the very situation Lundbeck illustrates: a clause whose meaning becomes disputed only once financial and strategic interests collide.
As our internal audit and governance framework (including annual Law Society trust-account audit and ACNC-governed reporting) demonstrates, this separation is structural, not promised.
Reflective Closing
The Lundbeck litigation shows how even well-intentioned settlement language can generate uncertainty when drafted within a blended role. Clients often consider whether a clearer structure, one that separates settlement from trial incentives, may reduce the chance of similar disputes in their own matters.
Below are two ways to continue exploring how structural safeguards can reduce ambiguity and cost exposure.
Settlement clarity depends on structural separation, not trust alone. Learn how Clean Law’s two-lawyer model keeps drafting, timing, and incentives aligned in lawsuit.
Two-Lawyer Collaboration & Escrow Oversight Statement
If your dispute already involves unclear settlement language or competing interpretations, clients often begin with private, fixed-fee mapping of their options.
Speak with a Principal Solicitor (Book a confidential appointment)
By Nicky Wang
Principal Solicitor
Legal Liaison Ltd (trading as Clean Law)
Prepared in accordance with public-interest governance,
annual Law Society trust-account audits, and ACNC-reported standards.
Disclaimer: This page is intended to provide general information only and is not legal advice. The contents may not reflect the most current legal developments and do not take into account your individual circumstances. You should not act or refrain from acting on the basis of this information without obtaining legal advice tailored to your situation.
