How to help your clients with their business disputes

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In the latest UK200Group blog post, Nick Parker, Partner and Head of Dispute Resolution at Berry Smith discusses how to help your clients with their business disputes and the benefits of mediation

Nick Parker - Berry Smith
As lawyers and accountants advising up to 150,000 businesses, UK200 members are well placed to advise their clients who are involved in disputes.

Disputes are not generally considered to be ‘good news’ by the parties, and resolving them quickly and effectively is, usually, a priority.

There are of course a wide range of issues that businesses face regarding their day to day operations, such as disputes with customers and suppliers. Often however, the most debilitating disputes for businesses are shareholder or partnership disputes involving the business owners themselves. In the most serious cases these disputes can imperil the business itself.

As trusted advisers we often become aware of disputes at a relatively early stage and our guidance is sought.

Traditionally, the forum for resolving disputes has been through litigation in the courts. However, in the last 15 years or so, forms of Alternative Dispute Resolution (ADR) have grown in the UK, and mediation is now regarded as a mainstream dispute resolution option.

This is recognised by the courts themselves, with an increasing emphasis on encouraging parties to mediate their dispute (which at first glance may seem akin to a butcher encouraging his customers to turn vegetarian).

Mediation is however still a voluntary process, with the parties needing to agree to appoint an independent party to act as mediator and, usually, attending a one day meeting with their advisers and the mediator in an attempt to reach resolution and reach a legally binding agreement.

One of the frequent misconceptions of mediation is that the mediator imposes a decision – that is not the case. The mediator facilitates the discussions in such a way that it focuses the parties on reaching their own solution. It focuses on the future.

A recent wide ranging survey carried out by CEDR, one of the leading mediation providers, concludes that around 12,000 civil and commercial law disputes were referred to mediation last year, an increase of 20% on when the last survey was conducted two years ago.

The survey found that of the cases that proceed to mediation an impressive 89% settle either on the day or shortly afterwards. In my experience, these are not just ‘easy wins’ with many disputes that have previously proven intractable being resolved.

In a survey of dispute lawyers by CEDR, of the disputes that reach them (and many disputes are of course resolved before lawyers are appointed), 24% are settled before court proceedings by direct negotiation between lawyers, 7% are settled after court proceedings are issued by direct negotiation, 45% settle at mediation and only 4% of cases go to trial. Mediation is therefore undoubtedly a mainstream dispute resolution process.

So, what are the particular features of mediation that make it a ‘good thing’?

  • Speed: a mediation can be arranged within a matter of weeks and can be arranged either before or after court proceedings have been issued.

  • Confidentiality: the discussions carried out at mediation are confidential. This means that proposals and discussions can be held in an environment which cannot be referred to if the dispute does not settle. Mediation therefore provides a safe harbour in holding full and frank discussions. In particular, each party has private discussions with the mediator that remain confidential from the other party. This is particularly useful to the mediator in seeing the true, whole picture of the dispute enabling informed guidance of what it will take to get to a settlement

  • Informality: while both parties need to have an understanding of their position and that of the opponent in relation to the dispute, it is not essential for the parties to have progressed through the detailed procedural requirement needed in litigation (that can incur significant cost).

  • Less cost and avoids risk: one of the main attractions of mediation over litigation is that it is a significantly cheaper process and, if successful, avoids the risk of losing and the wasted costs and adverse costs that may have to be paid to an opponent.

Possibly the major benefit for many businesses is the flexibility of outcome. While court proceedings often provide a binary solution – one party wins and the other loses, and usually the judgment involves the award (or not) of money - mediation provides an opportunity for the parties to reach a much wider agreement. That can cover a whole host of solutions - creativity in problem solving is encouraged.
If there is to be a payment of money from one party to another, a much longer period of time and structure can be agreed than would be obtainable in court; a solution could bring other assets or value in to the agreement that may not be directly relevant to the dispute (for example investment property held outside the company or partnership or an agreement to place future orders); or the division of a business or its assets or customer list on agreed terms to give each party a way forward.

One particularly memorable solution was the agricultural sales agent that settled his dispute with his former employer by accepting several tonnes of fertiliser in settlement – a solution of minimal cost to the company, but giving the sales agent the opportunity to earn profit for himself from selling the fertiliser to farmers, as the old adage has it, “where’s there’s muck, there’s money”.

Significantly, a mediated outcome can help preserve business or personal relationships – whereas litigation is often terminal to future dealings between parties.

In summary, mediation has much to commend it and usually ‘makes sense’ to clients when faced with a dispute. As advisers, we should keep this option in mind in our toolbox when advising those involved in a dispute.

In disputes between business owners, mediation at a relatively early stage can prove particularly beneficial – and a successful outcome may increase the chances of retaining both parties as clients of our firms in the future.

Nick Parker is a Partner and Head of Dispute Resolution at Berry Smith LLP, and is a highly experienced independent civil and commercial mediator, acting across the UK.

Nick is always happy to act as mediator, or to give guidance on the process on a no-obligation basis. Contact Nick on or 029 2034 5511.

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