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20-January-2007
8 ways to avoid litigation
It may be impossible to avoid litigation. You might be an unwilling Claimant or an even more unwilling Defendant! But you can reduce the chances:
Keep copies of all communications. Confirm important discussions by letter or email. Keep a hard copy, otherwise your opponent could deny it or say you misunderstood each other. A server may break down, an email might be misfiled or deleted or the recipient may say it never arrived. That could all lead to wasted time, disagreements, loss of business and possibly litigation. In a dispute, your opponent can inspect all relevant documents so beware what is recorded.
Your terms and conditions should be carefully reviewed, with customers and suppliers and with any other party that may be involved.
When a dispute occurs, keep a record of all the time spent by management, employees and agents. Loss of staff time can be claimed in damages.
Set up a chain of reporting to coordinate all potential legal problems. It makes sense for one person in the business to become experienced in dealing with potential litigation matters. Sometimes those intimately involved are not necessarily best suited to either attempting to negotiate, or managing the litigation. A fresh pair of hands may be ideal to inject objectivity.
Be aware of the principles behind the Civil Procedure Rules. These include duties of reasonable conduct between the parties, and early exchange of information and documents. If these principles are ignored, there could be a costs penalty.
Specify that any negotiations are “without prejudice”. Negotiations are encouraged. If you refused to negotiate you could be deprived of costs, even if you won.
Frequently a business will only contact their lawyers once a dispute has reached the litigation stage. But often an early discussion with your lawyer will help to concentrate minds and focus on the issues. A thorough investigation and a careful but robust response can take the heat out of a dispute and prevent the threat of litigation getting out of hand.
Carefully gauge what you would be prepared to settle for. Then a formal “Part 36 offer” can be made. This is kept confidential between the parties. If you do better at trial than you have spelt out in your Part 36 offer, then the other side can be heavily penalised. Even if they won, if it is the same or less than you already offered they can be ordered to pay the costs since the date of your offer on the “indemnity basis”. Punitive interest would be in addition. Similarly, if a Claimant beats their own Part 36 offer the opponent can be ordered to pay indemnity costs and punitive interest on those costs, plus punitive interest on the damages. All parties should consider making a formal offer before any legal proceedings are issued.
This article is part of a serial intended as a general guide and specialist advice should be obtained about your individual position.
ENDS
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