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What does a result look like?

What are you looking for from the other party? If it is money (and it usually is), would you settle for a lesser amount? What about payment by instalment? The reality is that if you take court action you may still not get all you feel is due to you, but you would still be incurring all the cost. Could an acceptable solution be found without court action?

Does the other side have any money?

However strong your legal position, there is no point suing for damages or breach of contract if the other side does not have any money. Before incurring significant legal costs on a dispute or action for recovery of money, try to get some idea of whether the other company or person has any assets and is likely to be able to pay.

Publicity

Journalists generally know what is going through the courts and high-profile or interesting cases may well be reported. Your case might not seem of any great interest at the outset but you don’t know what might happen during the weeks and months that the case lasts, which might generate some point of public interest.

Consider your reputation

If it is you that is being threatened with court proceedings remember that judgement against you can serious affect your credit rating and your standing generally, which could be critical in obtaining bank loans and overdrafts later. If you are the one taking action against a supplier or customer remember that this might affect the views of other businesses that you deal with. Will they see you as taking court action simply because it is the only way to get what is due to you, or as a highly litigious business owner who takes legal action at the drop at the hat – which means they might be less keen to deal with you in the future.

Consider the cost to your business

Apart from legal costs, issuing court proceedings is likely to mean a lot of other work for you including collating and providing information and witness statements. Remember also that court cases can mean quite a lot of stress for the individuals involved, particularly for witnesses even if they don’t actually have to give verbal evidence. On top of this, court action can be a distraction that impedes the development of your business generally.

No guarantees!

Taking court action is no guarantee of success. You might not win. If you do win, you might not get all the money that is due to you. You also might not recover your cost. If you lose, you might have to pay the other side’s costs. Worse, the other side might counter-claim meaning you actually have to pay out to the person against whom you took action in the first place.

Get ready to bare all

Court proceedings involve a duty of disclosure. That means you will have to provide all the information you have to the other side about the case, including: emails; telephone notes; notes to colleagues; as well as other correspondence and documents. Certain information is privileged, but frankly, not very much. This means that the other side may get to know a considerable amount of information that you would normally regard as confidential, or highly sensitive. Are you prepared to do this?

Small Claims Court

The limit for the Small Claims Court has now been increased to £10,000. This means that you will recover hardly any legal costs (basically, a nominal amount plus court fees) unless the claim is for more than £10,000. This, in turn, means you might well need legal advice to try and recover the money due to you and that would effectively be part of the cost of pursuing the claim which you would not be able to recover.

Try to negotiate

For all the above reasons, taking legal action should be seen as a last resort. Accepting less than the amount due to you can feel that you are being weak or seen as “an easy touch”, but sometimes coming to a deal with the other side can be a good business decision that allows both parties to move on. Indeed, if there was a previously reasonable relationship then it might be even be possible to repair and strengthen that relationship.

You can’t get the toothpaste back in the tube!

Once court proceedings are issued then the parties must comply with the orders of the court. It is very difficult to withdraw without consequences; some, but not all of them, financial. Once court action is proceeding legal costs tend to mount quite quickly which makes it even more difficult to reach a negotiated settlement because the legal costs issue also has to be addressed.

From the above it might appear strange that, as lawyers, we appear to be advocating that you avoid court proceedings, and in fact that is exactly what we would say. In our view issuing court proceedings should be a last resort, although there are always exceptions to this. Most disputes that we deal with are resolved without the need for court action. Instead, we concentrate on examining not just your legal situation but also most of the above points and try to get a solution that is best for you moving forward. We believe all solicitors should do this. Ultimately, if court proceedings have to be issued (or defended) then, by considering all the various aspects, you would be prepared and better able to handle the situation with minimum impact upon your business.

For more information please contact Richard Tomlinson at Lawson-West Commercial on 0116 212 1061.