Disputes over sums of money can be expensive to resolve, so selecting the right approach is really important to achieving a good outcome. Where disputes are complex and involve large sums, then it may well be worth investing to thoroughly investigate and pursue the claim. However, does the same apply to all disputes?
Ultimately, not all cases are equal, and the Courts have adopted an approach that the way in which a case is dealt with should be “proportionate” to: (i) the amount of money involved; (ii) the importance of the case; (iii) to the complexity of the issues; and (iv) to the financial position of each party (CPR 1.1(2)(c)). It follows that the amount in dispute should be a factor in how the claim should be dealt with, and hence the costs of dealing with the claim.
Whilst there will inevitably be exceptions, most cases will fall into one of three categories:
The Court has a distinct process for claims for less than £10,000 (albeit with some exceptions), known as the “small claims track”; this is a simplified version of the usual court process, aimed at enabling parties to deal with disputes themselves with minimal need for lawyers involvement, and as such, the parties are not normally able to recover their legal costs from each other, even if otherwise successful in their claim/defence. Dealing with a court dispute without lawyers might seem a daunting prospect, and parties remain entitled to seek legal assistance if they wish, though since they would usually be funding that legal assistance from their own pocket irrespective of the outcome, then anything beyond a brief generalised chat with a lawyer would often not be cost effective. Indeed, the Courts are currently exploring expanding the “small claims” process to include compulsory mediation, providing an opportunity to explore your claim with an impartial third party mediator. So in many cases, the most cost-effective approach may be to be brave, and limit how much you ask your lawyer to assist.
It is worth emphasising that this is simply a general principle with inevitable exceptions, and lawyer’s involvement in some smaller cases will be cost effective – particularly with debt enforcement for example. There may also be strategic considerations, though those are beyond the scope of this article.
For larger claims, achieving a good outcome may be more important than the expense of getting there. The extent of costs will still be an important consideration (both because no-one wants to be left with a large bill if they are unsuccessful, and because even successful parties rarely recover 100% of their costs from their opponent, leaving at least some costs to be met from their own pocket), but there is less likely to be a difficulty with it being proportionate for your lawyer to conduct the case for you.
There is no single magic figure for when disputes fall into this category.
Medium sized disputes
The third category is therefore mid-sized claims, involving sums between £10,000 and around say £100k-£1m (depending on the complexity).
Much depends on the complexity of these disputes, since greater complexity tends to lead to greater costs. By way of example, a dispute which involves considering a significant volume of documentary and witness evidence, and assistance from say an engineering or financial expert, will involve significantly greater time (and hence costs) for your legal team than a straightforward dispute over enforcement of a contractual provision. There is likely to be a corresponding benefit from that additional work by your legal team too, in refining and presenting the claim. That extra cost may nonetheless mean that it needs a larger claim size for the necessary costs to be proportionate, and hence for the claim to be cost effective.
There is no single solution to how to deal with disputes that fall into this category, particularly if they are both complex but modestly sized, though there are some particular considerations that it may be useful to keep in mind
- It will usually be worth discussing the dispute with your lawyer at an early stage, to consider what the best strategy might be. In particular, pinning down and understanding the core issues in the dispute at an early stage can help both make your case more persuasive, and reduce the extent of the dispute, and hence reduce overall costs.
- Both parties to a dispute may face similar challenges with a cost effective resolution, and so are motivated to try and find a commercial compromise that both sides can live with; our experience is that the vast majority of disputes are ultimately settled. Attempting to understand your opponent’s case, and being pragmatic about what the outcome might be, can assist robust yet realistic negotiations. There are a range of ways in which negotiations can be facilitated if necessary (sometimes referred to as Alternative Dispute Resolution, or ADR).
- The Courts are exploring fixing the costs that can be recovered from opponents for certain phases of court proceedings, in routine disputes up to £100,000, which may in turn influence the work that the Court expects the parties to do in those cases (we understand that change is currently targeted for April 2023).
- A Court trial is not the only way to resolve disputes. Depending on the circumstances, alternatives might include:
- Arbitration or Adjudication (either agreed at the outset of a commercial arrangement, or during the course of a dispute);
- Ombudsman schemes (for some types of claim – typically involving public bodies or regulated businesses – an Ombudsman can give a binding decision, though there are usually eligibility criteria and limits to any compensation that can be awarded);
- Mitigation: depending on the circumstances, there may be options for resolving the underlying problem giving rise to the claim, and hence reducing or resolving your dispute that way; this will vary significantly from case to case, so is something best discussed with your lawyer at an early stage.
- It may be tempting to seek a funding arrangement, to help reduce the costs as the case progresses. However, such arrangements usually involve a transfer of risk, in return for a transfer of some of the benefit of the claim if it succeeds, and so usually have the effect of increasing costs overall, which can create a tension with resolving claims in a proportionate way.
This is, inevitably, a simplistic consideration of the options available, but the core point is that each case needs to be considered in its own circumstances; adopting the right approach to your case is likely to lead to the best result overall.
- Not all disputes should be treated in exactly the same way;
- Discuss options with your lawyer at an early stage;
- Consider alternatives to court proceedings where appropriate;
- Costs are an important consideration for both sides to a dispute; and
- Most disputes are ultimately resolved by agreement.