Resolving disputes in the current economic climate

In a climate where purse strings are being tightened, businesses are more inclined to challenge their liabilities in the hope of securing a better deal.

This can lead to cash flow problems and disputes. Here are some tips on how matters can be brought to a swift conclusion.

Insolvency proceedings

If payment is the issue and a solicitor’s letter has not produced results, it may be sensible to serve a statutory demand. This is a formal-looking document which gives the debtor a short time either to pay or to formally dispute the debt.

If he fails to pay, you may then issue a petition to start insolvency proceedings. This option is only suitable for debts of £750 or more where there are no disputes or counterclaims that could reduce the debt to below that limit. As banking, loan and tenancy arrangements often include termination provisions in the event of insolvency proceedings/orders, a statutory demand will often prompt a debtor business to pay up fast.

If formal insolvency proceedings are brought and the case is uncontested, generally it should be decided by the court in around three months. If a bankruptcy or winding-up order is made, your debt would then be paid from the insolvent estate – the sum you receive being determined by how much is in the pot and other creditors, some of whom may be higher than you in the pecking order.

Court proceedings

If it is necessary to issue a claim in the courts (as an alternative to insolvency proceedings), ultimately the matter may have to go to trial. This can take over a year in larger and more complex cases but there are ways of speeding up the process.

• Default judgment: If the debtor fails to file a defence to your claim within a specified time (usually 14–28 days), in some circumstances you can ask the court for judgment.
• Summary judgment: Broadly, if you feel that the other party has a particularly weak case, an application may be made for summary judgment at a much earlier stage in the proceedings. It can be a robust and useful strategy that, at the very least, puts the other side under pressure. It can also promote settlement negotiations if they want to avoid the application coming before the court, and the resulting costs implications.
• Settlement offers: While any party can make an offer as they see fit, it is often preferable to do so in keeping with Part 36 of the Civil Procedure Rules (the court rules). The rules are complex, but a carefully presented offer can put tremendous pressure on the other side who, even if successful at trial, may be liable for costs and interest if the amount they ‘win’ is lower than an offer made earlier.

Alternative dispute resolution

Disputing parties should always consider ADR both before and during court proceedings. Surveys show an extremely high success rate for cases referred to mediation that result in some form of settlement. It is also a real consideration when the parties want to preserve business relations.

We can advise on the method and approach that best suits your means and objectives and assist in applying the appropriate strategy and pressure required to achieve the swiftest result.

As always, if you need commercial and pragmatic legal advice, we’re here to help so please get in touch.

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