Important Factors to consider before Legal Action
Any business faced with a dispute whether it is involving their customers, suppliers or a dispute arising from a merger, acquisition or share purchase transaction, places it in an unfavourable position. The difficulties may be considerably amplified if there is a cross-border element to the issue. If initial discussions between the parties fail to satisfactorily decide the matter, then the aggrieved business may start to consider litigation to resolve the situation. Such action should not be undertaken lightly - there are a number of considerations that must be properly thought out.
Khizar Arif, a partner in the litigation and dispute resolution team, points out “litigation should be the last resort and good legal advice should include more than simply the legal points of a potential case.” Khizar further remarked “all aspects of the matter, the benefits and potential risks should be pointed out and fully explained to enable a decision to be made in the full understanding of the implications. The alternative options to litigation should be outlined, from taking no action and writing off the loss to other solutions such as alternative dispute resolution (ADR). Litigation is not a course of action that should be undertaken without full knowledge of the potential legal, financial and reputational consequences.”
One of the most important benefits of taking legal action in the face of a dispute involving payment is that a strong message is sent to all companies with whom you have dealings, indicating that the business will not tolerate failure to settle outstanding invoices and it will not simply take the view that writing off a debt is the easiest option. Acting quickly also lets your customers know that the business is on-the-ball and alert to the situation and there is no advantage in slow payment in an attempt to gain extra time before settlement.
Another benefit is that a robust attitude to the settlement of invoices is that it helps to highlight the good customers from the not so good. Once a customer has been identified as a slow or reluctant payer, only in certain circumstances, where it may seem that the customer may be able to be retained with a payment plan or by some other means can the business relationship be retained.
However, it could be decided that a customer who requires a greater degree of management is not commercially viable and rather than having your credit controller devoting too many hours repeatedly chasing the same company for payment, you can choose not to continue the relationship.
Depending on the nature of the dispute the decision to pursue legal action should be taken with the knowledge that there is a degree of unrecoverable management time being taken up when assisting your lawyers to build a case by gathering information and documents as evidence, and do not overlook the fact your staff may eventually attend a trial as witnesses during the course of litigation or ADR. Prior to any decision, it is prudent to review all the relevant documentation to ensure that you a) have actually signed copies of the appropriate contracts b) review the clauses relevant to the dispute and c) check that the people involved in the original transaction can be contacted if required.
Once the documentation is to hand, this is the point where legal expertise is called for. A meeting with legal advisers will be useful for scrutinising all aspects of the matter and provide an idea of the strengths and weaknesses of the case, as well as intangible consequences such as the impact on the business’s reputation.
Another extremely pertinent consideration, which every business will be keenly aware of, is the cost of litigation. Giambrone & Partners’ litigation lawyers always strongly recommend avoiding court procedures in favour of ADR, either mediation or arbitration. Both procedures are likely to be quicker and less costly. If resolution can be achieved, there is a greater chance of retaining the business relationship.
Giambrone & Partners’ litigation and dispute resolution lawyers enjoy a first-class reputation for effectively managing ADR procedures and delivering successful solutions. ADR procedures are conducted privately and therefore the risk of exposure to reputational damage that can arise in open court where journalists can be in attendance, is not present.
If, despite all best efforts, there is no reasonable solution, it will be necessary to step over the threshold and litigate in court. The London courts under the jurisdiction of England & Wales continue to be one of the most favourable choices for litigation. Once firm ground has been established, our lawyers will conduct a robust and assertive argument and have contingency plans to rebuff any hostile attacks from the counterparty.