Settle or sue

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					Settle or sue?

Dermot Burke – Partner, Commercial Litigation

There are some obvious disincentives for people considering whether to
go to court over a dispute – the inherent uncertainty of litigation, the sheer
cost involved, the delay, the threat of publicity, and the often-
underestimated emotional toll on the parties themselves. As a result of
this, most claims settle long before trial. The problem, however, is that
even after this natural wastage, there are simply more cases than the court
system can cope with. How are people encouraged to settle?

English law encourages ‘cards on the table’ litigation. A party’s claim or
defence must beset out in full in formal ‘statements of case’ and fresh
allegations cannot be put forward at trial. It is therefore not possible to
ambush the other side. For over a hundred years parties to litigation have
had to disclose all relevant documentary evidence to each other, even
material that damages their own case, and even if it is considered
confidential e.g. internal board minutes. More recently, parties have had
to prepare and exchange witness statements in advance of the trial, as
well. Accordingly, each side knows the strengths and weaknesses of the
other before the trial begins and in theory should know if it is going to win
or lose. There is no doubt that the number of active claims is further
reduced by these processes but even so, there are enough cases left over,
where each side still thinks it is onto a '‘winner'’, for the system to
struggle. When Lord Woolf considered his reforms to civil justice in 1999,
therefore, he was keen to promote the idea of alternative dispute
resolution in order to address this problem.

ADR, as it is called, can take several forms but the one I want to
concentrate on here is mediation. Mediation involves a third party who
actively tries to promote settlement by discussing the claim with the
parties individually, testing their case and seeking out common ground.
By way of example, in October last year I attended a mediation to try to
resolve a dispute between our clients, Mr and Mrs X, and a company, A
Ltd. Mr and Mrs X had sold their company to A Ltd. for a deferred
payment but A Ltd. had then run out of money and tried to renege on the
deal. To help it do so it made allegations of fraudulent misrepresentation
against Mr and Mrs X and in fact instituted proceedings in which it
claimed substantial damages. Mr and Mrs X denied these allegations and
counterclaimed for the sale price, about £1.3 million. By agreement the
matter was referred to mediation at a fairly early stage, although A Ltd
had by then already incurred legal costs in excess of £100,000.

The mediation was conducted by a professional mediator appointed from
a panel supplied by CEDR, the Centre for Effective Dispute Resolution.
The mediation took place at a neutral venue in London, and after 2
gruelling days of negotiations the matter was settled, with the dismissal of
A Ltd.’s claim and Mr and Mrs X accepting a substantial amount in

The experience has increased my faith in the usefulness of mediation,
although I do find that many others in the profession view it with
suspicion, and unless both sides are prepared to give it a go it cannot
happen – mediation is a consensual process. In this case the settlement
saved our clients several thousands of pounds in legal fees and, just as
importantly, many months of distracting litigation. Mediation is not the
answer to all disputes but for many it is and I am sure that the courts will
now penalise parties who do not try it before committing themselves to

For further information please contact Dermot Burke or Gabor Kovacs in our
Commercial Litigation department

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