How to settle a dispute before taking the caseto court
Writing for Business Advice, solicitor David Walker tells readers how to settle a dispute and reachthe best possible outcome for your small business beforea case goes to court.
In my last article I explained how to win in court without a lawyer. However, as confident as you might be about your chances of success, going to trial is always risky and the outcome is never guaranteed. So, you should always try to settle adispute before you get there.
I deal with a huge number of late payment disputes, and when I suggest to a client that they should try to settle their dispute and consider accepting a lower amount, they’re often not keen. they’re owed money, theyve done all the hard work, so why should they accept anything less than the full amount?
I fully understand this, but you have to face facts. At this point they have exhausted their credit control procedures and their client still isnt paying up. it’s taking time and effort to fight this dispute so they have to consider whether this is the best use of those resources.
Now, Im not for one moment suggesting you should just roll over and accept anything. And Im not saying you shouldnt put up a fight, because you definitely should. Im simply making the point that this is business, and there is a commercial reality to the situation.
Also, remember that your client will be thinking along similar lines. In most cases, they will be delaying payment for as long as possible to ease their cash flow, and will only pay up to settle a dispute when they really have to.
How long are they going to hold out if they know they will ultimately lose the battle and be forced to pay up?
They will have to balance the risk of paying something now, or holding out and potentially being forced to pay more if you go all the way to trial.
So, to settle a dispute and get the best outcome for your business, i.e. to recover as much money as you can as quickly as you can, you need to increase the pressure on your client.
You do this by using the legal system to your advantage. As much as our aim is to avoid court, the legal system is actually designed to encourage settlement and make a trial the last resort.
Even before you start legal action, the court rules encourage the parties to a dispute to share information as early as possible and try to settle a dispute.
It is very much a cards on the table? approach, so neither party should be hiding anything from the other or keeping information or evidence back. This will help you get to the real reason why your client hasn’t paid.
If there is a genuine reason why your client hasn’t paid, the procedure you follow will enable you to get to the bottom of it. You can then resolve the problem or reach a sensible compromise.
If there’s no good reason for not paying, starting legal proceedings will show you are committed to recovering your unpaid invoices. This will increase the pressure on your client because there will be a clear timetable to get to court. They will then be at a serious risk of losing and being forced to pay everything they owe you plus interest and court fees.
This puts you in a much stronger position to demand a higher settlement.
Starting legal action doesnt mean that settlement discussions have to stop. On the contrary, your client may start taking them more seriously.
To assist in reaching a settlement, the courts have a small claims mediation service. This is free to use for any claims valued at less than 10, 000 and in my experience is excellent.
I have had some very good results using this service in the past, where previously my opponent has refused to even speak to me.
Mediation is a form of alternative dispute resolution. it’s confidential and without prejudice. This means the discussions are off the record, so anything you say, or concessions you make, can’t be used as part of the legal proceedings if you don’t reach a settlement.
David Walker is the founder of Grid Law, a firm which first targeted the motorsport industry, advising on sponsorship deals, new contracts and building of personal brands. He has now expanded his remit to include entrepreneurs, aiding with contract law, dispute resolution and protecting and defending intellectual property rights.
Our legal expert David Walker is providing his expert advice on all things contract law, dispute resolution and intellectual property. Step five looks at how a breach of contract can occur and what a small business owner can do to protect their company. more»
Legal expert David Walker continues his advice series on all things contract law, dispute resolution and intellectual property. Step four involves a look at some of the most common contractual problems for a small business owner and the best way to address them. more»