Litigation can be lengthy, costly, and stressful. While it may seem like the natural route to resolve disputes, it’s not always the most effective solution. In many cases, exploring alternative approaches can save time, money, and stress for all parties involved.
Early Considerations
It’s common for clients to want to start legal proceedings early, often citing a matter of principle. However, it’s important to pause and consider the potential risks and costs. Legal proceedings are not always the quickest or most effective way to resolve a dispute, and sometimes a less formal approach can achieve a more satisfactory outcome.
Civil Procedure Rules and Alternative Dispute Resolution
The litigation process is governed by the Civil Procedure Rules (CPR). These rules encourage parties to consider whether negotiation or some form of Alternative Dispute Resolution (ADR) could resolve the dispute before proceeding to court. Litigation should always be treated as a last resort.
Common forms of ADR include:
- Mediation – Both parties discuss the dispute with an independent mediator who helps facilitate a mutually agreeable solution.
- Arbitration – An independent arbitrator or panel makes a binding decision. This option can be costly and is not suitable for all disputes.
- Roundtable Meetings – Open discussion can often prevent proceedings and lead to a sensible resolution.
Failing to consider ADR could be viewed by the court as unreasonable behaviour, which may result in cost sanctions. For this reason, engaging in ADR is strongly recommended.
Cost Recovery
If ADR is unsuccessful and litigation proceeds, it’s important to understand the rules around cost recovery. While the general principle is that the losing party pays the successful party’s costs, this is subject to various factors, including the conduct of the parties and any settlement offers made.
It’s also important to note that during litigation, each party is responsible for their own costs, including legal fees, disbursements, and court expenses, until a ruling is made.
Litigation Costs
At the conclusion of a case, the court typically orders the unsuccessful party to pay a portion of the winning party’s costs. However, it’s rare for 100% of costs to be recovered. Usually, the court awards 60–70% of the total costs, with “indemnity basis” cases allowing 80–90% recovery when the losing party has acted unreasonably, obstructed settlement offers or refused to engage in ADR.
Courts also consider factors such as:
- The outcome of the case and whether all aspects of the claim were upheld
- Whether either party exaggerated their claims or defence
- Reasonableness of legal team fees
- Complexity and duration of the case
Acting reasonably and attempting to resolve disputes amicably can help minimise liability for costs.
Consequences of Litigation
The unsuccessful party is likely to face significant financial impact. Even if not required to cover all costs, paying a percentage of both their own and the opposing party’s legal expenses can result in a substantial sum.
Weighing the Advantages
While winning a court case can be satisfying, the financial and emotional costs can be high. With potential liability for 10–40% of legal costs, it’s important to carefully consider whether litigation is the most appropriate route, and whether pursuing the principle of the dispute is worth the time, stress, and expense.
For more information or for expert advice on business or personal legal issues, contact us by email at info@carterbond.co.uk or call us on 020 3475 6751.
This content is not intended to be used as a substitute for specific legal advice or opinions. No recipients of content from this site should act or refrain from acting on the basis of content of the site without seeking appropriate legal advice.
