When you are involved in a dispute it can be tempting to rush off to the lawyers and demand your day in court and it can almost be the default process for companies wanting to collect debts due.
The fact is though that a dispute can rapidly escalate and in extreme cases even lead to the liquidation of one or more parties to the action. It’s often said that the only winners in a court case are the lawyers.
But before you think about spending any money with your local firm of business solicitors it might be advisable to think about whether your issue could be solved in a more amicable way.
Mediation (known as Alternative Dispute Resolution or ADR) is a structured method of getting the parties to an action together to see if some form of common ground can be achieved and it doesn’t take long to find some significant upsides.
The first, and probably most significant benefit is that of cost saving.
Going to the law can be incredibly expensive, not simply in terms of the company’s own legal fees but also court costs, and in the sheer amount of distraction that it creates for the business. Often in a civil case the losing side also has to pay some measure of the costs of the other side and with lawyers being expert in the art of billing that could possibly threaten the future of the business.
The law moves at an almost glacial rate and any litigant hoping for a swift resolution is likely to be sadly disappointed. In fact cases need to be measured in terms of months and years with any possible appeal simply adding to the process.
The court service, like all other public services is facing tighter budgets and is having to cope with an ever longer caseload with less and less resource.
Time is important for companies. Getting to an end point swiftly and decisively means that the business is free to move on but having a case hanging over the organisation can cause other difficulties.
Companies in a sale process will usually be expected to report any legal actions that the business is involved in and this can give rise to either some of the sale price being held back pending an outcome or in extreme cases can put buyers off altogether.
Similarly pending court cases can cause difficulties for companies that work in regulated industries as often their conduct is taken into account by the regulator and along the same lines, being in court has a reputational effect whether you are the plaintiff or simply the defendant.
Mediation is a way of cutting through this clutter and getting to a point of decision within a reasonable time frame. It takes away the extended period where the company faces uncertainty, damage to reputation and distraction for its executives.
Directors assuming that a court case is a simple matter of turning up at court are likely to be disappointed. Given the pressure on the court services that we have already discussed, judges are now likely to ask if the parties have been through a mediation process and if not, they are likely to order that mediation is attended before any actual court time can be used up.
Mediation isn’t a cottage industry either; the process is generally run by trained and experienced people who are able to take an impassionate view and then walk the parties towards a point where they are able to agree or at least agree to disagree! Most trade associations will require their members to attend mediation in the case of dispute with consumers and trade customers and this form of ADR has been rolled out to all areas where the alternative could be a lengthy and expensive court appearance.
So is it worth looking at mediation when you are trying to enforce a debt?
The answer as usual is ‘it depends’.
If the debt is small then you’ll probably be better off going through the small claims process as this is simple, fast and doesn’t require lawyers to get involved.
However if you find that you have a particularly difficult situation, involving a lot of money and you can’t find a way to reach agreement with your opposite number them mediation may be the way forward.
Admittedly the likelihood is that you won’t get everything you want but that has to be netted off against the legal and court fees that will not need to be paid under an ADR.
The process also doesn’t look at the legal ‘right’ of the matter in hand but is more focused around finding a way to achieve a resolution that is acceptable to both parties so that they can move on.
Mediation is an exceptionally useful tool in the armoury of businesses that have intransigent debtors. It is often required by trade bodies and will be expected to have been carried out prior to any court appearance.
That having been said there are some great benefits for the businesses involved. It tends to be much less expensive, much quicker and certainly doesn’t involve the level of disruption that a full blown court date would entail.
Without a doubt any company looking at taking a debtor to court would be wise to start with the mediation option.