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Resolving Disputes in 2010

25 January 2010

For the first time since Lord Woolf's 1999 reform of the civil justice system, the more conciliatory approach to resolving disputes advocated by the Civil Procedure Rules (CPR) is being thoroughly tested.

The recession has led to an increase in disputes and a hardening in attitudes. When cash is king, is it time for the return of the litigator?

Over the last 10 years we have all adapted to the more co-operative style of 'dispute resolution' as prescribed by the CPR and its pre-action protocols. Parties are required to exchange a raft of information and consider alternative dispute resolution before proceedings are even commenced. There are costs sanctions and other penalties against parties refusing to comply without good reason. Litigation is to be viewed as a last resort.

The past year has seen a marked change in attitude towards litigation, brought on no doubt by the recession. Parties have become less concerned about preserving long term relationships, focussing instead on getting cash in, quick results, minimising costs.

Dispute resolvers are hard litigators once again, and there has been undoubted growth in litigation over the last year, with courts getting busier.

There are certain themes emerging in terms of the relief sought and the subject matter of disputes. As predicted, we are experiencing more fraud-related claims, supply chain disputes, warranty claims and professional negligence claims. A downturn in the economy often highlights investments which have not worked out, where corners have been cut and companies/individuals resort to desperate measures to improve income or increase profits.

We are seeing more applications for emergency court orders, particularly to prevent dissipation of assets, and search and seize orders to catch out unlawful competitor activity. In the current climate these applications are vital if assets are to be protected and organisations are to stay ahead of the game.

Applications for summary judgment/strike-out are also becoming increasingly common as a fast track to judgment, limiting legal costs and wasted management time.

Tough times mean an inevitable hardening of attitude, which is sometimes essential for survival, but parties cannot afford to ignore the CPR, something reinforced by recent messages from the courts.

The changes to Part 36 of the CPR over the last few years are also significant. Rather than the costs and interest penalties of Part 36 applying when a party beats a Part 36 offer at trial, they apply instead when a party achieves a 'more advantageous' result.

Courts now look beyond strict monetary comparison to factors such as the stress and cost of court proceedings and the length of time between the time of the Part 36 offer and trial.

Courts are critical of parties for disproportionately expensive and lengthy litigation: incurring costs of £100,000 over nearly three years about the alleged propensity of a vehicle to steer left led to one judge commenting that the parties had 'all gone completely cuckoo. It's just madness; commercially it's completely crazy.' There was no costs recovery for either party.

Choice of legal advisors is crucial. Mindful of the Overriding Objective requiring proportionality and ensuring parties are on an equal footing, a recent bill of costs submitted by a leading London firm totalling more than £200,000 was instantly halved by the Birmingham Mercantile Court to reflect Birmingham rates. Once other discounts were applied, the successful defendant recovered only £38,517.81 - a sum found by the court to be proportionate and fair.

So a balance needs to be struck. Sometimes aggressive court action is the only option to recover money quickly or to protect a business. For most cases, however, there is more than one way to crack a nut.

Lawyers need to be able to adapt their style to get the right result, and be flexible and creative. Yes, Shoosmiths litigators are aggressive, but we can turn on the charm when required. After all, results are what count, something recognised by our securing the inaugural Litigation Team of the Year prize at the Credit Today Awards 2009.

And as budgets are slashed, in-house legal teams are looking for competitive and clever pricing as well as costs recoveries, which we must react to. Indeed, our own innovative 'risk and reward' billing model for Hewlett-Packard won the billing and fees category at the prestigious FT Innovative Lawyers Awards 2009. Other clients are now looking to adopt similar models.

What does this mean?

One thing is for certain, whether in court or round the negotiating table, 2010 is going to be a busy year for litigators. The challenging economic times will perhaps mean that parties need to be more aggressive in their approach, however, it is essential not to lose sight of the provisions of the CPR.

What should you do?

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Get in touch

Alex Bishop

Partner
T: 03700 86 4188
I: +44 (0)121 625 4188
E: alex.bishop@shoosmiths.co.uk