Top Tips for Handling Commercial Disputes

Published: 27 October 2013

Nobody wants to think about disputes unless they have one. Unfortunately all too often, businesses find themselves stumbling into disputes they didn’t see coming, only to find that they have no idea how to deal with them, what to plan for, or how it will affect their business. 

Rod Dykins, Consultant Solicitor-Advocate in the  Dispute Resolution Team shares some tips on what to think about when faced with the unwelcome prospect of a commercial dispute:

Be clear and realistic about your objective

There are three things you can almost always be sure of when it comes to disputes:

1.     they are unpredictable,

2.     everyone involved will suffer some cost, and

3.     they are resolved through compromise.

Therefore, even if you think you have a watertight case, it is better to think in terms of a range of possible outcomes rather than one desired outcome. Think carefully about what your business can and cannot afford in terms of cost and disruption, and what the full impact is likely to be of engaging in a dispute. If the demands of your business do not fall within the range of realistic outcomes then you should probably rethink your approach to the dispute entirely.

Take time to think about any aspects that you might be able to turn to your advantage. For example, some opponents will be sensitive to costs, delays or media exposure, whilst others might be dependent on an ongoing relationship with you. Others may be weak on the evidence because they don’t maintain good records, or because their witnesses are unreliable. Everyone has their strengths and weaknesses. Be sure to identify them and act on them early.

Be realistic about the cost

The decision to involve your business in a dispute should always be commercially driven. In other words, only get involved if the likely result is that you will be in a better position financially than if you don’t. Having said that, it is often difficult to predict the full impact that a dispute will have on your business. Apart from legal costs and the risk of having to pay your opponent if you lose, there are other, less visible costs to consider such as lost revenue caused by employee downtime, increased future costs (e.g. lost contracts or higher insurance premiums) and indirect losses caused by, for example, damage to your reputation. Some of these are difficult to identify and even more difficult to value so it is worth getting professional guidance on these matters at the outset.

Appoint someone to manage it

Having a case manager (where possible) can save time and money. Don’t assume senior staff are best for the job: they may be able to give instructions and make decisions but they usually don’t have time to get to grips with the details, stay abreast of developments and they are not always available when required. When deciding who to appoint, consider whether the candidate:

  • has the necessary skills (e.g. good communicator, able to deal with voluminous documents)
  • understands the issues (important in technical disputes)
  • has some legal knowledge (not essential but helpful)
  • has sufficient authority and respect within the business
  • has a suitable relationships with others involved (the less they know each other the better)
  • will be available day-to-day and for the duration of the dispute.

Strengthen your position: your initial reaction matters

The steps you take immediately after a dispute arises can influence or even determine the outcome. For example:

  • Where two parties simultaneously accuse each other of breaching a contract, how you respond and whether or not you continue to perform the contract can have profound legal consequences.
  • Where there is doubt about how or where a dispute will be fought, being the first to act (e.g. by commencing proceedings in a preferred jurisdiction) can give you a significant advantage.
  • How documents are managed and created once a dispute has arisen can determine whether or not they will be admissible as evidence.

Getting these matters right can also improve your negotiating position.

Work out how you’re going to pay for it

Disputes can be expensive and not everyone will be able to fund them from their own resources.  First, check whether you are entitled to be funded by someone else under pre-existing arrangements (e.g. insurance policies or other contractual indemnities). If not, there are a few other options to consider.

  • After The Event (ATE) insurance can help you manage the risk of having to pay your opponent’s costs if you lose the case.
  • Third Party Funding can be useful if you are unable to pay your own legal costs, but you will have to share the proceeds if you win.
  • Conditional Fee Agreements allow law firms to charge less than their normal rates if you lose the case and more than their normal rates if you win. 

However, these options are only available in limited circumstances: usually to claimants with strong, high value claims that they bring against wealthy defendants. Whether they such funding will actually benefit you is not always obvious so professional guidance should be obtained. 

Don’t miss a good settlement

Disputes are risky, expensive and unpredictable. They are also stressful and distract you from your business. In most cases, the sooner you can exit a dispute the better it will be for you and your business - provided of course the terms are acceptable. A commercially savvy litigant will always have one eye on settlement and will favour a reasonable, timely settlement over a risky day in court.

For specific advice and information about handling commercial disputes please contact Jovita Vassallo, Head of Litigation in the Dispute Resolution Team.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.