Managing cash flow efficiently is particularly pressing in the current climate. A tightly worded contract can protect this, but where it has not been possible to provide for every eventuality and a dispute does arise there are three basic options to resolve the matter.
- Alternative Dispute Resolution (ADR);
- Issuing a claim in the courts; and
- Bankruptcy or Winding Up Proceedings
Alternative Dispute Resolution
The courts encourage parties to enter into ADR to resolve matters without incurring the full costs of trial. These take a number of forms and the most effective varies on the contract and nature of the dispute; generally the most cost effective are the instruction of a joint single expert to determine a dispute (e.g. a chartered surveyor for a boundary dispute) or the appointment of a mediator to reach a compromise.
Court Claims
This is best illustrated by an example, but applies to a broad range of disputes, for example a contracting party failed to pay an invoice within the relevant period. Problems are often invented to delay payment or in efforts to justify a reduction in the amount due. To avoid such delaying tactics impacting cash flow the quickest way to focus the mind is often by issuing a formal claim.
Where the claim value is less than £5,000 it is usually better to prepare the paperwork yourself as legal costs are rarely recoverable, but where the claim value exceeds this figure legal advice is beneficial as deadlines are strictly adhered to and failures to comply with court rules can leave you at a significant disadvantage. Legal costs are usually recoverable by a successful claimant, in part if not entirely, and therefore, provided your case has sufficient merit, instructing solicitors to litigate can be without any client cost in the long term.
Only 2% of cases ever result in full trial. A number of strategic mechanisms are available to speed the process and an offer to settle is usually received fairly early after the claim is issued. One example of strictly following time limits is the ability to succeed in your claim where a defendant has failed to acknowledge it within 14 days or file a defence within 28. Therefore formal litigation can solve your cash flow problems very quickly indeed.
To talk to our experts, contact mark.wrinch@birkettlong.co.uk
