If you are involved in a commercial dispute we will almost always advise you to try to settle it, whether court proceedings have not yet been started, or during proceedings. Court proceedings are lengthy and expensive, even if you are ultimately the successful party. Sometimes a dispute will be decided mainly on its facts. If your claim or defence relies on good documentary evidence and helpful witnesses that support those facts we may be able to advise you that you have good prospects of succeeding at court, but by their very nature, matters that end up at court are rarely as clear-cut. Your opponent might have documents that contradict yours, they might dispute that your documents formed part of any contract, or your witnesses may decide they don’t want to be involved or prove to be unreliable or vague. Sometimes a dispute will mainly be decided on the legal issues, for example, the court’s interpretation of a clause in a contract or a term in a lease. Sometimes the outcome depends upon the expert evidence of one or more experts, and which expert’s evidence the court prefers. In all of those scenarios, even if it appears your prospects of being successful at court are good, taking a dispute to trial is risky. A witness might let you down on the day, or give unexpected evidence under cross-examination, the judge might prefer the evidence of your opponent’s witnesses, an issue with your documents might come to light, or a new legal point might arise.
If you lose at trial you will usually be ordered to pay the reasonable and proportionate costs of the successful party. That will be in addition to what you might be ordered to pay your opponent in damages, together with your own legal costs. That can all amount to a substantial sum. Even if you win at trial, if the value of your claim is modest relative to the legal costs involved in getting there, you could still end up out of pocket. For example, for a claim worth £20,000, if you win, the other side will be ordered to pay you £20,000 and they will also be ordered to pay your costs. By the time of trial, these could be as much as or more than the value of your claim, but your opponent will rarely be ordered to pay all of your costs. You could still end up paying around 20 to 30 per cent of your own costs. There is also the risk that the losing side does not have the funds to pay you your costs or the amount of the court judgment, or becomes insolvent in which case you will be unlikely to recover anything from them.
Your solicitors and barrister can give you advice on what the prospects and the costs of the litigation are likely to be, but it is not an exact science and is always unpredictable. In brief, litigation is a gamble and for this reason, it makes sense to explore alternative ways of resolving the dispute both before court proceedings are issued and throughout the proceedings.
If that were not good enough reason to explore settlement at an early stage, the Courts also expect you to do so. The Civil Procedure Rules which govern civil claims contain a Practice Direction on Pre-Action Conduct which parties are expected to follow before they issue proceedings. This states:
“Settlement and ADR”
- Litigation should be a last resort. As part of a relevant pre-action protocol or this Practice Direction, the parties should consider whether negotiation or some other form of ADR might enable them to settle their dispute without commencing proceedings.
- Parties should continue to consider the possibility of reaching a settlement at all times, including after proceedings have been started. Part 36 offers may be made before proceedings are issued.
- Parties may negotiate to settle a dispute or may use a form of ADR including—
(a) mediation, a third party facilitating a resolution;
(b) arbitration, a third party deciding the dispute;
(c) early neutral evaluation, a third party giving an informed opinion on the dispute; and
(d) Ombudsmen schemes.
(Information on mediation and other forms of ADR is available in the Jackson ADR Handbook (available from Oxford University Press) or at—
- If proceedings are issued, the parties may be required by the court to provide evidence that ADR has been considered. A party’s silence in response to an invitation to participate or a refusal to participate in ADR might be considered unreasonable by the court and could lead to the court ordering that party to pay additional court costs.”
Note the warning that you could be ordered by the court to pay additional costs if you refuse to engage in ADR or are silent in response to a proposal to engage. If parties do not follow these protocols they can be penalised on costs in later court proceedings, even if they win; they might not recover as much in the way of costs as they would have, or they might be ordered to pay part of the other side’s costs because they did not attempt settlement. The logic is that if protocols were followed, and ADR was attempted earlier, there would probably have been no need for the matter to come to trial, with all the additional costs involved.
In addition to the general Practice Direction, certain types of case have their own dedicated pre-action protocols, such as the dilapidations, personal injury, professional negligence and defamation protocols, among others. The various protocols contain ways in which alternative dispute resolution should be raised at an early stage and attempted, including the early engagement of experts for some protocols.
What is ADR?
ADR can take many forms. It can be as simple as making offers over the phone, or sending without prejudice offer letters back and forwards, trying to negotiate a settlement. Written offers can be made under Part 36 of the Civil Procedure Rules. The use of Part 36 adds additional pressure to accept an offer because of additional costs penalties if an offer that was refused is later “beaten” at court. Offers can also be made outside of Part 36.
Mediation is a form of ADR. The parties jointly agree on and appoint (and pay) a mediator to attend a mediation with them, usually over a half or full-day. The parties will each have their own room, which the mediator will go-between, discussing the dispute with them, encouraging compromise, and conveying offers between them. Mediation tends to be focused more towards a resolution rather than spending time going over the issues in the case, although mediation styles vary between different mediators. There will usually also be a central room where the parties can come together with the mediator. The parties usually have their legal advisors with them, but not always. If mediation results in an agreement it will typically involve a degree of compromise by each side. If court proceedings are already underway, what is agreed at the mediation will be put into a consent order or Tomlin order, and filed with the court.
Arbitration also involves an independent third party, but the difference is that the arbitrator actually makes a binding decision in the dispute. Arbitration tends to be used in specialised areas such as lease disputes, and certain commercial disputes and the arbitrator may have particular professional qualifications such as Chartered Surveyor. The lease or contract between the parties might contain a clause requiring them to resolve any disputes by means of arbitration, and it might specify the set of arbitration rules that apply.
Less formal round the table meetings between the parties and/or their solicitors can be arranged.
A dispute is capable of settlement right up until the day of the trial. If court proceedings have already been issued against you by the time you seek our advice we can still explore the options for settling it before the proceedings move any further along, and whether it is possible to stay the court proceedings for that purpose.