The Commercial Dynamics of Litigation: Liability, Quantum, Costs, Enforcement & Recovery

Litigation is a formal remedy for disputes that can’t be resolved via other routes, like negotiation or alternative dispute resolution.

Litigation in England and Wales is governed by the Civil Procedure Rules (CPR) which set out a framework to manage a claim pre-trial and during its time in court. However, go behind the scenes, and litigation is about so much more than the law.

This article considers the other key elements of litigation: commercial imperatives, recovery, and costs.

If you are dealing with a commercial dispute and are looking for experienced specialist litigation solicitors, don’t hesitate to reach out to our team today. We act nationally and would love to help.

Understanding Litigation as a Commercial Process

Litigation can be used to protect your commercial interests and this is something that must not be lost sight of, each move that you make has the potential to increase commercial pressure on your opponent and visa-versa, each move they make is usually intended to put pressure on you. All too often we encounter situations where a thorough cost-benefit analysis wasn’t conducted at the outset and the commercial pros and cons remain unclear to a client until much later, when significant costs have been incurred. Its then too late.  

To avoid uncertainty and mission creep, including on your best case and worst case outcomes, its critically important that you work out the best moves to make as soon as you consider that litigation may be a possibility, because a court will look at absolutely everything you do when working out what the legal position is. It is vital you get the right advice from day one to protect and/or press your position.

In terms of an overview, there are the following key parts of litigation:

• Liability
• Quantum and remedy
• Costs
• Recovery

Liability

The starting point if you are considering issuing a claim or are being forced to defend a case is to work out what the legal basis of the liability is i.e. who is at fault, and why you are entitled to what you are asking for. By way of example, in a breach of contract claim you might be seeking money owed for goods delivered or services rendered. When it comes to something more complex like Unfair Prejudice it might be that a director or shareholder has done something that has unfairly caused you loss.

Quantum and remedy

Liability (or fault)  is only one part of the law, you can have a breach of contract that is worth not very much or nothing and it is this loss, i.e. the money you are asking the other side to pay you, that is known as ‘Quantum’. Importantly in England and Wales damages are generally speaking compensatory, meaning the aim of damages is to compensate you for losses suffered and to put you in a position you should have been in anyway. If there is no loss you might not have a valid claim, even if liability (or wrongdoing) is proven. 

We have dealt with high value cases of millions of pounds in dispute where liability is clear and is admitted, but where the main focus is around proving or disproving the quantum caused by that conduct, which was disputed.

Alternatively, it might be that what you need is something beyond money, such as an injunction to stop another company using Intellectual Property or cutting you out of a business relationship such as an ‘introducer agreement’.

It is vital that you consider not just whether you have a case, but what you are likely to get the court to give you as a result.Frequently, courts have a wide discretion on what they award both in terms of money and remedy.

Costs and Costs Budgets

Legal costs can be a significant factor even in high-value litigation. 

The starting point is that if there is a claim, the court is going to decide who wins and who loses.Usually, ‘costs follow the event’.So if you had a claim for a breach of contract and the court agreed, it would award the quantum to you, and order that the other side pay your costs.

However, the position on costs is incredibly nuanced, there are often multiple issues in a case and a court can decide you win some and lose some and divide the costs on that basis. The court also has a wide discretion and if the court considers the conduct of a party has been unreasonable or in breach of court rules it may award costs against them even if they win.

Even if you win convincingly, it is rare that you will get all of your costs, so this is something that you need to consider from the start. Whether you are a Claimant or a Defendant, you will suffer a loss on costs.

Finally, there are various ways that your lawyer will be able to try and protect you on costs including making Part 36 Offers and/or Calderbank offers to the other side, these are offers that the court does not get to see in the litigation, except when it comes to costs. This is a complex area, but at its heart it is about showing you have ‘beaten’ your offer at trial. For example, if you had a claim for breach of contract, you would have offered less than you achieved at trial and this may protect you on costs.

It is also possible for costs to increase to a point at which a case does not work commercially and a frequent issue we see when taking on cases which other lawyers have started, is that this was not thought about properly at the start. 

It is vital that as soon as you are contemplating or facing litigation you think about the issue of costs and how this feeds into you weighing up the commercial risks vs rewards of proceeding or not. A further important consideration is whether you can find a lawyer like ourselves who might be prepared to consider sharing the risks vs rewards with you through potential alternative funding arrangements.

Whatever the funding position, an important mechanism the courts have devised for managing costs is Costs Budgets.

Costs Budgets

A costs budget is a detailed estimate of the costs both sides expect to incur from pre-trial preparation right through to the trial. Costs budgets are mandatory in high-value and/or legally complex cases. 

These must be approved and are set by the court. Once they are set, they give a good indication of what you can expect to recover if you are successful in bringing or defending a claim and form an important part of case strategy.

Recovery

Commercial litigation is usually about money, so having the strongest case in the world will not cut it if you cannot get paid because the opponent does not have or has hidden or put their assets beyond the reach of the English Court. 

Therefore, looking at how you recover i.e. get paid, should be the first port of call before starting litigation. If there are concerns, there are various approaches that can be taken to help you assess and risk manage this before you commit to spending significant costs litigating. 

If you are successful in your litigation and obtain a judgment, there are several further legal steps and mechanisms to ensure enforcement, so you actually recover your money.

The best route depends on the facts of the case, but all routes require a separate application for a court order and this will in itself incur further costs.

Options include a charging order which places a charge on a debtor’s property so that the judgment creditor is paid when the property is sold. We can also sometimes find ways to charge the debtor’s business.

An attachment of earnings is when a court instructs a debtor’s employer to take regular payments from wages or salary to pay the judgment creditor.

A third-party debt order freezes a debtor’s bank account, prohibiting access until the judgment is paid.

It’s vital to consider the circumstances of the person or company you’re claiming against and the nature of any assets they hold to determine the best enforcement method.

Aligning Legal Strategy with Commercial Objectives

The key focus needs to be using litigation to serve your commercial objective. Importantly, this means working out how you are going to get paid and how much it costs at an early stage. Next, you should weigh this up with the merits of the case, making an informed commercial decision on how you want to proceed.

It may be that litigation isn’t the most suitable or financially viable option for resolution. There are other methods of alternative dispute resolution including mediation and arbitration that offer a different route.

Sometimes, early legal intervention and good old-fashioned negotiation can provide the best (and often quickest) outcome. 

We consider a key component of the value we add for clients is being able to do this at an early stage and the first step is just to give us a call and we can talk about how we can help you do this.

A less obvious, but critically important aspect, is the role that being seen to have instructed solicitors can play in forcing settlement and resolution of commercial disputes. It is one thing for someone to ignore your correspondence, but it is quite another to ignore solicitors. Often there will be a flawed assumption/misconception that you not going to pursue things further, won’t pay to escalate the matter and that they will ultimately be successful in delaying matters indefinitely, fobbing you off in the process. 

Frequently Asked Questions

Is It Worth Pursuing a Claim if the Other Party Cannot Pay?

It makes no financial sense to pursue a party who could never satisfy a court judgment. Consequently, accurately establishing a defendant’s resources is an important element in the decision-making process of whether to litigate. 

Some people want to proceed based on the principle of the matter. However, where the law’s concerned, principles can be expensive.

How Do Legal Costs Affect the Overall Value of a Claim?

Legal costs may significantly impact a claim’s value; generally, the loser pays the winner’s costs, but this cannot always be guaranteed as the court has the ultimate discretion.

It’s essential to plan anticipated costs and know how to budget for them, including the possibility of receiving an adverse costs order. Mapping out costs also helps understand their relationship to the value of the claim. 

Helix Law Can Support Your Litigation Strategy

Appointing lawyers who can help you understand litigation from a commercial perspective is vital. Positioning you for success is key. A commercial litigation strategy is essential to maximise the chance of success, put pressure on your opponent from the start, and to control costs.

Helix Law offers a team of litigation specialists, experts in a wide variety of contentious disputes in different sectors. In good claims where it stacks up for you and for us we’re happy to back our own advice and to only be paid if we’re right. In more difficult situations our work is to try to help you exit as cleanly as possible. Whatever your position we love what we do and we have a team with proven experience doing it. This is all we do as litigation specialists, working nationally. Where instructed we will position you to negotiate and/or mediate successfully, protecting and improving your position using all the tools available to us.

Delay can increase costs and prevent claims being brought, so if you are in a situation where you consider litigation may be needed, get in touch today to talk through your dispute with our specialist litigation team. We would love to help you.