Examples of Litigation versus Mediation
A simple Contractual Dispute
Charles was an event planner who was contracted to organise a very large event in London on behalf of Laura; the agreed figure for Charles’ planning services was £40,000. There were numerous problems with the event and Laura blamed the planner and refused to pay him any of the agreed fee. Charles wanted to sue Laura for breach of contract in the sum of £40,000
Option 1 – litigation (going to Court)
To take the matter to court Charles had to pay the following:
Issue Fee: £2,000
Hearing Fee: £1,090
Solicitor Fees (15 hours prep at £180.00 p/h) : £2,700
Counsel (Barrister) Fees for advice and attending 1 day trial: £2,500
Total Costs: £8,290
Laura’s legal fees in defending the claim amount to £5,000
Option 2 – mediation
In Mediating the dispute Charles avoided over £5,500 worth of costs and agreed a settlement figure of £33,500, accepting that there were some problems with the service offered. As part of the offer Laura undertook to write a positive review for Charles on a leading event planning website. Both parties saved substantial time, money, stress and crucially business reputations were maintained.
MEDIATION V LITIGATION
- Significantly Cheaper
- More certain outcome
- Swifter resolution
- Reputations maintained
- Both parties walked away happy
Charles’ lawyer explained that if he took the matter to court, due to failings by his company he may only recover 75% of the money owed to him and that he would have to prepare to write-off £1,500 of his fees as irrecoverable. Therefore at best he should be prepared to receive £28,500 of the £40,000 claim. He recommended mediation but Charles refused stating, “Why should I mediate when she is to blame?”
At court the judge found in Charles’ favour but penalised him in costs for refusing to mediate without a justifiable excuse, ordering that he could only recover 30% of his costs and 75% of his claim (due to failures on his part identified by his lawyer). This gave Charles a final figure of: £24,197 after he had to pay 70% of his own costs.
Personal Injury Case - litigation
It is common in personal injury claims for the defendant to admit liability for the injury but to challenge the amount (Quantum) of damages that the claimant is seeking.
In this matter the claimant was seeking £12,000 for damage to his hand, the defendant refused to enter into mediation and took the matter to court.
The court awarded the Claimant £8,500 in damages and ordered the defendant to pay costs of almost £10,000.
Instead of agreeing a figure close to £12,000 the defendant ended up paying over £18,000 (more in costs than he did in damages)
LESSONS FROM LITIGATION
- If you can settle you will save money
- There is always the risk of losing at court and receiving nothing
- If there is no unreasonable behaviour on behalf of the parties the loser will have to pay a signficant part of the winners costs
- The judgement is in the public domain, if reputation is important this may not be desireable.
- Mediation remains confidential