Abraham Lincoln
Introduction
When litigation becomes unavoidable, SMEs sometimes face a daunting challenge. It’s therefore crucial to develop a clear understanding of the steps involved, the potential costs, and the risks at play.
Below is a short guide to help navigate the litigation process in the English courts, focusing on commercial disputes.
You may find it helpful to pre-read Twiggy’s cribsheet on Top tips when dealing with disputes and Jonathan’s article on Alternatives to litigation.
Understanding the litigation process
The litigation process in England and Wales typically follows these stages:
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Pre-action stage
Before formally starting a claim, potential parties to a dispute are expected to follow certain guidelines (known as pre-action protocols) which encourage parties to act reasonably in exchanging information and key documents relevant to their dispute and to consider negotiation or some other form of alternative dispute resolution (ADR).
A party fails to comply with the pre-action protocols at its peril. The courts can take non-compliance with pre-action protocols into account when making orders as to costs.
The pre-action protocols emphasise that litigation should be a last resort.
A recent Court of Appeal case decided that the court can order parties to engage in an ADR process in certain circumstances.
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Issuing proceedings
If the dispute cannot be resolved at the pre-action stage, formal court proceedings are initiated by filing a claim form and supporting documents.
Each party to the proceedings must prepare certain documents (Statements of Case) that contain the details of their case.
The court generally sets an initial timetable for the case. The time table is known as the ‘Directions’. -
Case management
The court will manage the case through Directions, setting timelines for evidence disclosure, witness statements, and expert reports.
Judges are obliged to actively manage cases and deal with each case proportionately and appropriately in the light of other cases which require the courts’ resources.
‘Allocation’ is one aspect of this and claims are assigned to one of four case management tracks depending on value and complexity. These are the small claims track, fast track, intermediate track and multi-track.
Often, the court will convene a Case Management Conference and provide directions for the future conduct of the case until trial. -
Trial
The case culminates in a trial where both parties present their arguments, evidence, and witness evidence before a judge. It’s worth noting here that it is increasingly common for the trial to focus on the question of liability in the first instance. Once this question has been settled, there is often a second trial as to quantum of damages.
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Judgment
The judge will deliver a judgement. Depending on the value and complexity of the case, this may include orders for damages, costs, or specific performance. As above, however sometimes the court will decide this issues at a subsequent trial.
This litigation process can be lengthy, often taking months or even years to conclude, depending on the case’s complexity and the court’s schedule. Alternative dispute resolution (ADR) should be considered at each stage of the dispute.
ADR methods, such as mediation or arbitration, can be more cost-effective and quicker than going to court. Additionally, courts often expect parties to have considered ADR before litigation, and failure to do so can result in cost penalties.
As a general guide, if the issues in a dispute are properly defined and there has been a proper exchange of information and documents relating to both the dispute and the value of the claim, then the best time to mediate may be before proceedings are issued. This will maximise cost and time savings.
Practical tips for preparing for litigation
In addition to some Top tips on dealing with disputes, consider the litigation tips below:
- Gather evidence early. Collect all relevant documents, emails, contracts and records as soon as possible
- Legal representation. Ensure you have a legal team with experience in commercial disputes. Their expertise can make a significant difference in the outcome.
- Cost management. Work with your legal team to create a budget for the litigation process, including legal fees, court costs, and potential costs recovery if you win. Explore different funding options that will allow you to see the litigation through to a conclusion. Litigation funding is a good example of an option to consider
- Risk assessment. Evaluate the potential risks, including financial exposure and reputational damage. Understanding these risks will help you make informed decisions throughout the litigation process
George Herbert
Cost-benefit analysis
Before issuing proceedings, conduct a cost-benefit analysis. This involves weighing the potential financial recovery or strategic benefit against the costs of litigation. Consider the following:
- Legal costs. These include solicitors’ fees, barristers’ fees, and court fees. Remember that even if you win, you may not recover all your costs
- Business disruption. Litigation can be time-consuming and distract from core business activities. Consider the impact on your operations
- Reputational risks. Public litigation can attract unwanted attention. Weigh the potential reputational risks against the benefits of pursuing the case
Managing documentation and communication
Proper management of documentation and communication is critical during litigation:
- Organise documentation. Ensure that all evidence is well-organized and easily accessible. This not only helps in court but also in maintaining clarity throughout the process
- Clear communication. Maintain clear and open communication with your legal team and other stakeholders. Keeping everyone informed helps manage expectations and reduces the risk of misunderstandings
Settlement considerations
During litigation, there may be opportunities to settle the dispute and indeed the courts expect parties to have genuinely engaged in this process.
Evaluate settlement offers carefully, considering both the immediate benefits and long-term implications for your business, as well as the potential cost consequences of not accepting an offer. Sometimes, settling early can save on costs and preserve business relationships.
The long-term impact of litigation
Finally, consider the long-term impact of litigation on your business.
Beyond the immediate outcome, think about how the case could affect your company’s reputation, client relationships, and financial stability.
A well-handled litigation process can mitigate these risks but it’s crucial to be prepared for the potential consequences.
Written by Ian Lakin
Principal at My Inhouse Lawyer
One of our values (Growth) is, in many ways, all about cultivating a growth mindset. We are passionate about learning, improving and evolving. We learn from each other, use the best know-how tools in the market and constantly look for ways to simplify. Lawskool is our way of sharing with you. It isn’t intended to be legal advice, rather to enlighten you to make smart business decisions day to day with the benefit of some of our insight. We hope you enjoy the experience. There are some really good ideas and tips coming from some of the best inhouse lawyers. Easy to read and practical. If there’s something you’d like us to write about or some feedback you wish to share, feel free to drop us a note. Equally, if it’s legal advice you’re after, then just give us a call on 0207 939 3959.
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