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What should you consider before issuing court proceedings?

A practical guide of matters to consider when deciding whether to issue proceedings against a potential opponent.

Do you have a good claim?

It is often easy to forget that before you issue a claim, you must identify a valid cause of action. However, from the earliest opportunity, you should ensure you have a cause of action which will give you a strong, cohesive case. For example:

  • Has there been a breach of contract?
  • Has a misrepresentation been made?
  • Have you carefully reviewed the terms of business you have with your potential opponent?
  • Have you been the victim of defamatory comments?

A solicitor can advise you about the strength of your case at this point.

When considering your claim, you should also bear in mind the possibility that a counterclaim may be issued against you. You should always reflect on the context of your claim and the dealings between the parties. If a counterclaim is issued, there is a risk that you will have to incur additional legal costs dealing with the counterclaim which will run alongside your claim.

Are you within the Limitation Period?

A limitation period is the period of time within which a party must bring a claim. The law on limitation periods is set out in the Limitation Act 1980. Different provisions are made in respect of different causes of action. For example, the limitation period for a simple contractual claim or a tortious claim is six years, whereas if an agreement has been executed as a deed, the limitation period increases to 12 years. Comparatively, a claim for defamation must be brought within one year of the alleged defamatory act.

Have you considered settling the dispute?

In order to save time and money, it is always important to consider resolving your dispute without issuing proceedings. Indeed, the Court system requires parties to engage in pre-action correspondence before formal proceedings are issued. If you have failed to do so, you may face cost consequences even if your claim is successful. Pre-action negotiations can involve correspondence drafted by solicitors, round table meetings or alternative dispute resolution (see below for further details).

Is the other party worth suing?

Before engaging in pre-action correspondence or issuing a claim it is crucial to ascertain whether your potential opponent is worth pursuing. Is the company trading successfully or do they appear to be insolvent? Does the individual you are claiming against have business interests or assets which a judgment can be enforced against? It is one thing to obtain a judgment against a company or individual but if they have no means of paying the judgment debt, then you will need to consider other methods of enforcement such as Third Party Debt Orders, Charging Orders or insolvency/bankruptcy proceedings.

In addition, it is worth considering whether your potential opponent is a foreign company. Different jurisdictions will complicate the situation, and with complication inevitably comes increased costs which need to be considered.

Can you afford the cost of the litigation?

If you have engaged in pre-action correspondence which has not resolved your dispute and the only option available to you is to issue proceedings, you will need to be fully appraised of the cost implications of starting a claim from the outset.

If your claim is for a value of £10,000 or below it is likely that it will be allocated to the ‘Small Claims track’. The Small Claims track is a simplified procedural system for dealing with lower value claims. The rules and procedures are designed to be less formal and more accessible to claimants who do not have legal representation. Although certain rules have been disapplied, the Court still has the same powers to grant remedies to parties as it does for claims on the ‘Multi-track’ or ‘Fast-track’. One key difference is that only limited costs are recoverable in Small Claims.

If your claim is for over £10,000 then it may be allocated to the Multi-track or Fast-track. The costs associated with simply issuing a claim on these tracks, can cost anywhere in the region of £5,000 to £15,000. In addition, there will be a Court issue fee of between £450 and £10,000 depending on the value of your claim. Your solicitor will give you a detailed breakdown of the costs of each phase of litigation at the outset of proceedings and these are likely to be significant.

Even if you are successful in your claim, cost recovery on the Multi-track and Fast-track are still limited. In the event you are successful, you can expect to recover 60-70% of your costs. However, if you are not successful, there is a significant adverse costs risks with regards to the costs of your opponents, which you will be liable for, in addition to your own.

Litigation is not just a financial consideration, there will be significant management time, resources, energy and stress involved in any court case. Pleadings will need to be drafted which will require significant input from those involved, witness statements and exhibits will also need to be prepared, along with disclosure of documents which both support and adversely effect your case. The time that litigation will involve should not be underestimated.

Alternative Dispute Resolution (“ADR”)

As mentioned above, parties are always encouraged to settle any dispute between them. Settlement negotiations can take place at any time, even after proceedings have been issued. These can take the form of mediation, arbitration or negotiations, among others.

Benefits of ADR include:

  • greater flexibility, choice and control for participants;
  • reduction in the amount of time that a dispute can last;
  • reduction in costs incurred (in some, but not all cases, arbitration can be as expensive as traditional litigation);
  • ADR is confidential which is an attractive feature for many participants; and
  • it narrows issues between parties even if the process is not completely successful, and can focus parties’ attention on a smaller amount of key issues of dispute between them.

If you would like more information in relation to this article or any of the matters raised above, please contact Dominic Holden at dominic.holden@burlingtonslegal.com. This article is provided for general information only and is not intended to be nor should it be relied upon as legal advice in relation to any particular matter.

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