London Solicitor Advises on the Cost of Not Having a Lawyer!

There are, in essence, three principal ways of resolving a dispute other than by means of legal proceedings. If they work they are better for you and your business than pursuing matters through litigation. They are (1) communication between the parties; (2) communication between the lawyers; and (3) alternative dispute resolution or ADR as it is called for short. However, in relation to all three ways, you must adopt the maxim of:

“Hoping for the best and preparing for the worst”.

While you hope that your negotiations, your solicitor’s letters or ADR will be successful the prudent person also prepares for the possibility that you might have to resort to litigation. While you may not be aware of it, what you do and do not do before legal proceedings are commenced can affect your position in those proceedings should they become necessary. The obvious way in which your pre-action conduct can affect you is in the area of costs and interest rates. While (broadly speaking) the Court has no jurisdiction over parties unless/until they become involved in litigation, it nevertheless seeks to influence their conduct primarily through the threat of financial penalties.

Costs are, of course, an extremely serious issue both for the client and the lawyer. That is something that is recognised by the Court and reflected in the Rules. Thus, while the issue of costs is always within the discretion of the Court, it is usual in this jurisdiction for the unsuccessful party to be ordered by the Court to pay the reasonable costs of the successful party on what is known as the “standard basis”. That generally translates into about 70-75% of actual costs leaving a shortfall for which the successful party will be liable to pay. Hence if those parties conduct themselves properly the successful party (let us say the Claimant) will recover 70-75% of actual costs from the Defendant. However, if either of the parties does not behave properly in the Court’s eyes, that party is likely to be penalised.

(a) For example, the Court might consider that the successful Claimant has behaved in an inappropriate manner and is therefore not to be allowed any of its costs or as much of its costs as would otherwise have been the case.

(b) Alternatively, the Court may consider that the unsuccessful Defendant has behaved unreasonably and will order it to pay costs on what is known as the “indemnity basis” which entitles the Claimant to a recovery rate of more than the usual 70-75% of actual costs (sometimes – in rare cases - as much as 100% of actual costs).

(c) Similarly, the Court is able in certain circumstances to penalise the unsuccessful defendant who has behaved in an unreasonable way by ordering it to pay interest on the claim at a higher rate (up to 10% above base!) than would otherwise have been the case.

If the parties can resolve the dispute between themselves and without the involvement of the lawyers then of course they should do so. However, if you have a dispute which you feel able to resolve yourself (and not all will fall into that category) you must be careful in case the dispute is not resolved in spite of your best efforts. What you say, write, or do during this stage of the dispute may prejudice your position should matters escalate to legal proceedings. Thus, for example, do you know when you should write on a “without prejudice” basis or a “without prejudice save as to costs” basis or on an “open” basis? Many people get these things wrong. Do you know what you should and should not be saying in each of those different categories of correspondence? Do you know what the Court considers to be reasonable and unreasonable conduct before litigation is commenced? Do you know whether your dispute is covered by any of the pre-action protocols? Do you know what documents you are obliged to provide at this stage and which documents you do not have to disclose now or ever?

Court is the last resort. Before letting slip the dogs of war explore first what can be achieved through the arts of peace – negotiation, correspondence, expert advice, mediation and all the techniques of alternative dispute resolution.

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