Managing litigation from the outset: A guide for parties when a dispute arises

Handling a dispute, whether for damages for breach of contract, recovery of a debt, or a negligence claim, is not just a job for the lawyers.

31 Jan 2019

At the very outset of a dispute, the decisions made by key stakeholders will play a crucial role in ensuring that the business achieves its desired result. Balancing the demands of litigation against day-to-day work can be very challenging, but there are some key strategies and considerations which can be adopted to make things run more smoothly.

1. Consulting the Pre-Action Protocols and required Pre-Action Conduct

Under the Civil Procedure Rules (CPR), parties are expected to comply with specific pre-action protocols, where they apply, when handling a dispute, thus it is important that these are considered. The pre-action protocols apply to different types of claim (but not all) and are annexed to the CPR. They are designed to encourage parties to resolve disputes without recourse to the courts. There are various steps which are normally expected to be taken by parties before commencing proceedings for particular disputes. For example, only reasonable and proportionate steps should be taken in order to identify, narrow and resolve the legal, factual or expert issues.

At the outset of any litigation, parties are expected to:

  • make decisions about how to proceed,
  • gather and exchange sufficient information in order to understand each other's position,
  • try to settle the issues without proceedings,
  • consider a form of Alternative Dispute Resolution (ADR) to assist with settlement,
  • support the efficient management of those proceedings and reduce the costs of resolving the dispute.

If a dispute proceeds to litigation, the court will consider whether all parties have complied with the terms of the relevant protocol or the practice direction. It will take into account any non-compliance when giving directions for the management of proceedings and when making orders for costs.

2. Getting the team together and deciding upon strategy…

It is essential to identify which personnel will need to be involved in the case in order to provide instructions, evidence, and strengthen the business' position. You should consider:

  • Who will be responsible for giving instructions to the lawyers?
  • Who will be involved in strategic decisions about the litigation and any settlement?
  • Who will need to search for/provide relevant documents for disclosure purposes?
  • Who will need to give witness evidence?

By taking a proactive approach and identifying all relevant parties at the outset, a lot of wasted time, and costs, can be avoided. It also ensures that the key decision-makers are fully on board with the strategy for the case.

Aside from legal issues, key decision-makers will need to consider the commercial impact of litigation. Is there likely to be press interest? Will allegations be made which could affect the share price or have regulatory repercussions?

3. Gathering the evidence…

Disclosure of relevant documents and preparation of witness statements are two of the most crucial and expensive aspects of litigation.

It is important not to underestimate the importance of disclosure, or the time it may take to identify and retrieve any relevant documents. Failing to disclose relevant documentation can be fatal to the business' litigation position. Often the culprit is a poorly-planned disclosure exercise. This risk can be reduced by you helping to identify who is likely to have relevant documents, ensuring that they understand what they need to do to locate relevant material, and making sure the documents are well-organised and provided to the lawyers promptly.

Electronic disclosure tools vary widely and can assist greatly in, often onerous, disclosure exercises - it is critical to get specialists on board as early as possible.

The same goes for witness statements, as a case will often turn on the strength of the factual witness evidence. It is vital that the witnesses understand their role and are available to give instructions and review draft statements when needed. As well as being reassured about the practicalities of giving evidence.

4. Considering alternative options…

Litigation should always be a last resort and all other options should be explored first. The parties should consider whether negotiation or some other form of ADR might enable them to settle their dispute instead, without having to commence proceedings. Such consideration doesn't just apply at the outset of litigation, parties should continue to consider the possibility of reaching a settlement at all times, including after proceedings have been started.

There are a number of ADR mechanisms available which may be considered by parties to a dispute. These include:

  • Mediation
  • Arbitration
  • Expert determination
  • Early neutral evaluation
  • Ombudsmen schemes

The pre-action protocols mentioned above encourage the use of ADR.

In most cases, ADR will provide a more time and cost-effective means of reaching an agreement in relation to a particular dispute. ADR can also result in more flexible, imaginative and practical solutions that are not based on a "win/lose" paradigm. From a commercial perspective, resolving a dispute at an early stage can also assist the parties in maintaining a business relationship. Despite its advantages, parties should assess the use of ADR carefully in light of the particular circumstances of their case.

5. Taking the strategic view…

When in the thick of a hard-fought dispute, it's easy to lose sight of what the business is trying to achieve, particularly if it takes a personal turn (as many disputes sadly often do). A range of outcomes can arise in any dispute, it is therefore important for the business to take a moment to pause and reflect on these. The business must keep in mind the settlement and commercial goals. Business imperatives should underpin the litigation strategy rather than the case taking on a life of its own.

Very few people conduct business hoping to deal with bitterly-fought litigation – but with thoughtful planning and a clear strategy, managing a case effectively needn't be an all-consuming task.

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