Business Law & Compliance

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How to manage litigation costs as an SME

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Beyond that, there will be a fixed fee of £10,000 for claims. Under these proposals, a claim for £100,000 for example will jump from £910 to £5,000.

Discounts of ten per cent will be available to claimants that use the Court Service’s Secure Data Transfer facility or Money Claims Online option. Still, there is no doubt that the changes will hit the cash flow of small businesses the hardest.

It has been argued these increased changes will stop smaller businesses from accessing justice and collecting what is due to them in the courts. But, as a small business, there are a number of ways to manage litigation costs under this new regime.

The first question would-be claimants must always ask themselves is: “Should we sue?” The answer is rarely straightforward. Litigation can be a time-consuming and costly process. Although the winner will usually get an order that enables them to recover some of their costs, this rarely covers the whole legal spend.

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An early resolution (possibly with confidentiality provisions to shelter the deal from the public eye) can often make sense and help keep costs down – especially as commercial settlement will likely be encouraged by the judge presiding over the case during its early stages.

Tied up in the question of whether to sue is whether the defendant is actually worth pursuing. You can’t get blood from a stone as the old saying goes and investigating a defendant’s financial history through credit references before considering court makes a lot of sense.

If you do decide to sue, explore whether you have any legal expenses insurance that might cover legal costs before instructing lawyers as cover is not usually retrospective. Moreover, manage the case as you would any other project so that you know what human and financial resources will need to be devoted to the case and when. Work with your solicitors to set a budget and workable timeline that takes into account other demands on your staff time.

Evaluation and re-evaluation are key throughout the life of the case. Evaluate at the outset whether you are being realistic in what you’re asking for and which issues are key to the case – judges can penalise claimants for bringing weaker issues. Similarly, any expert witnesses and evidence must be thoroughly tested for holes and inconsistencies. Re-evaluate at major milestones: a good plan will take into account a number of different scenarios, but pausing and assessing the direction of travel is vital.

Simon Walsh is an associate specialising in commercial litigation at SA Law.

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