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Commercial Question

Trial or Error?

updated on 17 May 2005


How does litigation work in practice?


For many students, the idea of becoming a litigation solicitor is an exciting prospect. Picture the scene - sitting alongside a barrister who is cross-examining a defence witness, who is in turn crumbling on the stand. However, the reality may be somewhat different.

The Overriding Objective

Following the reforms put in place by Lord Woolf in 1999, the number of matters that reach trial is decreasing. Lord Woolf reformed the procedures for bringing court proceedings and the Civil Procedure Rules (CPR) were introduced. There is a new 'overriding objective', which requires that the courts deal with matters proportionately and expeditiously, and with a view to saving money.

The parties to a potential dispute are required to help the court to further this overriding objective. This has increased the emphasis on settling matters before they reach proceedings, let alone a full trial. Before proceedings are started, parties must inform each other about their positions and their arguments, to exchange as much information as possible and to seek to settle the dispute by an alternative method. The increased emphasis on settling matters without the need for a trial is clear, with the CPR providing not only a positive obligation to consider alternative dispute resolution but also penalties. For instance, formal offers to settle the dispute can be made. If one party does not accept an offer and subsequently fails to be awarded a larger sum at trial, it will have to pay the other’s costs from the last date it could have accepted the offer. Such costs can be substantial, with even fairly simple cases able to run into tens of thousands of pounds.

The courts have also been given increased case management powers once proceedings begin, allowing them to be proactive in moving the case forward (eg, a court can set instructions on what steps must be taken). Once proceedings begin, matters can progress very quickly – with mounting costs, parties may be persuaded to settle sooner.

The Commercial Context

Despite the obvious dangers of not attempting some form of alternative dispute resolution, there are also important commercial factors for most major clients. Any form of legal proceedings will cause concern for a client with a reputation to protect, and may persuade the client to settle early.

Furthermore, the cost of pursuing legal proceedings through to trial will be significant. If a case can be settled early to avoid such expense, even if the case is strong, the client will often take the commercial decision to settle for less than it may be liable or entitled to. If a company is involved in a takeover it will often want to settle litigation to remove it from the company books.

On the other hand, a client may want to make a point. For example, a company that owns a large portfolio of properties may choose to pursue all rent arrears regardless of size to deter its other tenants from defaulting.

Also, commercial disputes are not always bad news. Business is about taking risks and sometimes problems can arise. If companies accept that complex problems are a fact of business life, then they will accept that the resolution of disputes is also a fact of business life.

As a result, some law firms - including Eversheds - have developed procedures to help clients make this perception adjustment, and give them guidance when facing a dispute. Early Case Assessment identifies the issues and gets to the bottom of a problem early on. The types of question that lawyers need to ask include:

  • what is the industry background?;
  • what is the client really trying to achieve (eg, maintain customers or prevent someone from doing something)?; and
  • what is the commercial imperative?

Having gained this information, a lawyer can then carry out the factual analysis from which the best practical outcome will be determined.

Katherine English is a second seat trainee in Eversheds' London office.