‘See You in Court’ Should be the Last Phrase That Springs to Mind During Disputes
17th July 2018
So, the worst has happened, and that business relationship, which you have spent precious time cultivating, and then working with, has turned sour. A dispute has arisen. You are convinced that you are right, but the other side is showing no signs of backing down. Perhaps it’s worse – perhaps you are still building your business, and the other side is “Goliath”, with deep pockets.
What do you do? The reflex action is to say: “See you in court” – four very expensive words. What you need at an early stage is sage advice about resolving your dispute, rather than be led straight into court. Litigation in Scottish courts is much quicker than it used to be, but it’s still extremely expensive and time consuming, which suits Goliath. Goliath can use the court process to flex their financial muscles and force smaller litigants into a Goliath-favourable settlement. It is easy for the costs of a case to reach, and exceed, the sums sued for.
The first question to ask is not “How quickly can you serve a writ?”, but “What are the most economic options to resolve this dispute?” It is difficult to predict how much litigation may cost, but with some thought it can be done with reasonable accuracy. When deciding how to deal with a dispute, it is human nature to be led by the heart rather than the head. In the end, it should always be a business decision, weighing risk against reward. Sometimes the best business decision – although it may “stick in the craw” – is to walk away, or do whatever deal is possible. Relying on the outcome of litigation to deal with an immediate cash flow issue is never a good decision.
If you want to fight, where best to do it? There are alternatives to court. Mediation is a form of voluntary dispute resolution, where a mediator tries to facilitate an agreement between parties. The mediator is not a judge, and will not make a decision, but they will “road test” parties positions, their willingness to litigate, and will discuss the alternatives to settlement, best and worst cases. Parties sit in separate rooms, and may come together to discuss certain issues. It has a great many advantages over litigation. It is private, and fast and cheap (much cheaper than court) – most only last a day. It has a high success rate – around 80% of mediations result in an agreement. The agreement is not imposed, and doesn’t depend on the legal remedies available. So parties can come to any kind of agreement they wish, even to continue trading with each other, and roll the resolution of the dispute into the future relationship. So mediation is the best chance to preserve the relationship. Courts don’t offer what mediation does. The difficulty with mediation is that the other side must agree to it. More cynical opponents, and their advisers, will keep away from mediation if they think they can gain an advantage in court. In other countries, mediation is a required step before litigation.
Scotland is not there yet. Having something in your terms and conditions about mediation may help.
Arbitration is another form of dispute resolution which, if done properly, can be cheaper and faster than court. We have an excellent arbitration procedure in Scotland. The arbitrator acts as a judge and is obliged to find the most economical route to resolve the dispute. It is more difficult for costs to run out of control. Parties can bind themselves to arbitrate a dispute before it arises, so again it is worth looking at your terms and conditions to require the other side to arbitrate.
With the right preparation and the right advice about the route you need to take, you can make the best business decision about how to resolve a dispute, and avoid being trampled by Goliath.
The information contained in this newsletter is for general guidance only and represents our understanding of relevant law and practice as at July 2018. Wright, Johnston & Mackenzie LLP cannot be held responsible for any action taken or not taken in reliance upon the contents. Specific advice should be taken on any individual matter. Transmissions to or from our email system and calls to or from our offices may be monitored and/or recorded for regulatory purposes. Authorised and regulated by the Financial Conduct Authority. Registered office: 302 St Vincent Street, Glasgow, G2 5RZ. A limited liability partnership registered in Scotland, number SO 300336.