Facing a Court Case? What You May Need to Consider

Your roles (and sometimes your clients) can be demanding. You may spend much of your energy ensuring that your many spinning plates keep spinning. When the prospect of litigation looms, whether it be the need to escalate action against someone (for example, someone who owes you money or has provided a poor service), or in the form of a claim against you, it will be the last thing that you need.

Litigation can be a hugely stressful, time consuming and expensive process. No matter how strong your legal case may be, if the case is going to be determined by a judge or arbitrator (i.e. an unpredictable scenario), there are risks associated with pursuing or defending a claim all the way through to trial. Even if you are successful at court, you will not necessarily be able to recover all of your legal costs from the losing party. You certainly will not recover compensation for the time you have spent on the case or any sleepless nights suffered along the way.

Below we consider some of the settlement options available to you.

What is a settlement?

The alternative to pursuing a legal case all the way to trial is to seek to reach a settlement. Settlement involves you agreeing to accept less than you initially wanted to achieve, ideally in exchange for concluding the dispute swiftly and without incurring significant costs. For example, someone may owe you £10,000 but you may agree to accept a discounted sum of £7,000 in full settlement of the debt. You would have lost out on £3,000 but have gained certainty and a prompt payment, while avoiding costs, stress and time commitment of a court case. Generally, both parties will need to be willing to move from their original position for this to be achieved.

Settlement is particularly important where you have an ongoing working or other relationship with the other party. For example, the other party may be a supplier that you wish to continue working with, a client whose business you wish to retain, a landlord from whom you will be renting premises for years to come, or simply someone that you expect to encounter on a regular basis due to the proximity of your homes or workplaces.

A further advantage of settlement is that you can resolve the dispute in ways that a court would never order. For example, you may agree to waive payment for a historic invoice in exchange for a commitment that 10 new orders will be placed.

What are the potential routes to achieving settlement?

There are a number of routes to achieving settlement. The most appropriate route will depend on factors such as the sums at stake and the relationship between the parties.

Possible routes to achieving a settlement may be:

Negotiation - there are no rules around the process to be followed when seeking to negotiate a settlement. It can be carried out face to face, via telephone and/or correspondence. You can negotiate directly with the other side or involve lawyers.

Facilitated discussion - broadly speaking this means involving an independent third party to assist your communications with the other party. Their role may be to pass messages between you, or to attend a meeting to help facilitate constructive discussion. Ideally, the facilitator should be someone whom you both respect, for example, a mutual colleague/fellow professional or someone from a representative organisation.

Mediation - this is a more formal version of facilitated discussion as it again involves a neutral third party assisting the parties to communicate with a view to reaching a settlement. Mediator costs would generally be split between the parties to the dispute. There is complete flexibility as to the process, and the mediator can guide you through your options as the mediation progresses. There will often be a combination of joint and separate meetings between the parties and the mediator, followed by the mediator working between the two parties to relay messages, offers and counter offers.

Top tips for settlement negotiations:

• explicitly state that any settlement discussions are confidential and 'without prejudice' to the legal dispute
• document any settlement reached, obtaining the signed agreement of both parties
• if settlement discussions are initially unsuccessful, this does not mean that court proceedings are inevitable - you can settle at any point prior to judgment being given by the court. For example, if settlement is not achieved during mediation, it is relatively common for disputes to settle in the following days or weeks.

What are the non-court alternatives to settlement?

If settlement discussions are unsuccessful, you may wish to consider referring the dispute to a third party. Options include:

Expert determination - in summary, the parties agree to appoint an expert third party to determine the dispute. For example, if you were in a dispute with a former partner about your partnership accounts, you may wish to jointly appoint an accountant with experience of assisting partnerships to determine the dispute. An agreed set of papers would be sent to the expert, and both parties would usually have the opportunity to make additional written representations.

Arbitration - a less formal version of court proceedings, which takes place in private. The arbitrator determines the process to be followed, which may involve witnesses giving live evidence. The arbitrator is often a practising or retired judge or senior barrister. Given the similarities with court proceedings, costs can be similarly high.

Is settlement always appropriate?

The short answer is no. Settlement may not be feasible if there is no middle ground. Further, you may wish to pursue the dispute all the way to trial in order to set a precedent for other potential claims.

If legal issues arise it may be appropriate to seek specialist advice at an early stage.

This article first appeared in 'VPMA Practice Life - March 2017' edition.

For more information, please contact Rachel Crean in our Dispute Resolution team on 0207 665 0950.