When is the right time to settle your commercial dispute?

Mr Moss was suing Culture Club for being excluded from the band and suffering a loss of profit as a result. He also made allegations of conspiracy to defraud against Boy George, specifically in relation to tour monies and other funds. The band defended these claims. A trial was due to be heard to determine the value of the Culture Club name, the profits made since the alleged expulsion, and the amount Mr Moss might be entitled to receive.

With less than a week before the trial was due to begin, a settlement was announced. Culture Club would pay Mr Moss £1.75m in return for Mr Moss agreeing to relinquish any further right to the Culture Club name.

Why do so many cases settle just before trial?

We are dispute resolution lawyers; our job is to try and settle a dispute at the right point for our client allowing them access to the best possible settlement.  The “right point” to settle varies from case-to-case, taking into account the client’s objectives and strategy. Settlement should be considered and reviewed regularly during the course of a claim as part of the Civil Procedure Rules.

Many clients assume that settlement at the last minute is down to brinkmanship by the parties.  In fact, it is quite common for new evidence to emerge, even quite late in the legal process, which can critically affect the merits of a client’s case.  The key is to agree on a legal strategy, and then keep testing it against the evidence as it emerges.

There are some common triggers in the life of a dispute that may cause parties to reconsider settlement:

• From the outset – in our experience, not enough clients do this. It makes sense to be brutally honest at the outset about the cost, stress and inconvenience that being involved in a dispute will inevitably entail, and the potential wasted management time. Think about this calmly, stripping away the emotion.  Do you really need to litigate?  Litigation should always be a last resort. Agree on a legal strategy early and keep pressure-testing it against new evidence and arguments as they emerge.  We always provide an open costs and merits assessment right at the start.
• Pre-action and after service of the pleadings – sometimes a response from your opponent forces you to reconsider, for example on reading your opponent’s pre-action correspondence (see Adele’s recent example below) or their pleaded case. Pressure-test your strategy in light of that response. Do not close your eyes to your opponent’s arguments.
• When preparing for the Costs and Case Management Conference – where full costs to trial (including contingencies such as potential interim applications) are budgeted for by all parties and set by the court, this can be a sobering moment for many. We always provide costs assessments at the start, and regularly update them, so all clients are clear on where they stand.
• After the disclosure and expert evidence phases – are there any difficult documents? How credible is your expert? How does this alter the strategy?
• Alternative dispute resolution (ADR) – parties must always look to resolve their dispute by ADR throughout the life-span of the case. Mediation or other ADR should be viewed as, in effect, compulsory. Even if mediation fails, you always learn something of value.
• Imminent trial – like the Culture Club case, many cases will settle at the 11^th Even the most confident and articulate clients tend to underestimate how difficult being cross-examined will be. In a claim we dealt with a few years ago, the other side’s main witness withdrew his entire evidence whilst on the witness stand following cross examination – an interesting day in court!

Partner Adele Whaley recently advised a client in respect of a £1m contract dispute acting against the Royal Mail. She advised the client on its legal position in response to the allegations made and, as a result of a robust letter of response, early settlement was achieved at a subsequent settlement meeting.   This was a dispute which had the potential to roll on for months, but the early settlement saved the client thousands of pounds, gave it certainty and freed up the client’s time to manage and grow its business.

Our approach to ADR is rooted in detailed early tactical preparation, a detailed understanding of each form of ADR and a clear understanding of our clients aims, objectives and attitude towards risks. Deployed properly, ADR can be a valuable means not just to settle on preferential terms but also, even if you are unable to settle, to probe your opponent’s case to gain a tactical advantage to either secure settlement in the future or to help prepare your case for trial.