Suing: What you Need to Know as a Business
Sometimes court proceedings are unavoidable, and it pays to be prepared. Read these key considerations before you think about suing…
It would be nice to think that as a small business that you and your customers will keep agreements, pay on time and resolve any issues smoothly and amicably. However, sometimes conflict is inevitable, and whilst you should avoid going to court at all costs in these situations it is useful to know the procedure involved.
In this article, you will find the key questions you should be asking as a business when relationships turn sour, accompanied by answers that should tell you what you need to know when suing someone as a business.
Is it worth going to court?
Going to court is stressful, expensive, time-consuming and distracting – even if you have a watertight case.
You should never sue impulsively. Instead, try to step back, look at the situation rationally and weigh up the pros and cons of going to court. To do this, you should ask yourself a number of key questions:
How strong is my case?
Remember that there are two sides to every story, and whilst you might feel rightly aggrieved at something done to you the legal position might be quite different. In the vast majority of cases, it is worth consulting a lawyer before commencing any claim.
Does it make financial sense to sue?
In straightforward commercial claims (for example, non-payment for goods or breach of contract) you can normally make a rough estimate of how much you will be awarded. If you do win, you usually get your legal costs back – but remember that this is not always the case.
For commercial debt claims, you can claim an enhanced rate of interest on money owed to you – currently 8% over the Bank of England base rate. You should include this when working out the value of your claim. If in doubt, talk to your lawyer.
If I won, would the defendant be able to pay?
This is perhaps the most important question you should ask yourself, but it is one too often overlooked when people are considering legal action. Consider using credit information or credit reference services to assess someone’s financial situation – these can also tell you if there are other court judgements against them that have not been paid.
Will I be able to prove my claim?
In court, if you are the one suing, you must prove your claim – the defendant does not have to disprove it. Ask yourself whether you have enough evidence to support your version of events.
What should I do before suing someone?
Firstly, you should explore other options rather than going to court. There are a number of Alternative Dispute Resolution (ADR) procedures you should consider, which can resolve the dispute between you and the other party without the expense and mess of court proceedings. In addition, coming to an agreement outside the courtroom may preserve the working relationship between you and a customer or supplier, allowing you to do business again in future.
There are two main kinds of ADR:
This is a structured conciliation process, usually lasting about a day, where you and the other party identify the issues in dispute and try and establish common ground. The process is overseen by a neutral third party – known as the mediator – who will control and facilitate the process. This has the advantage of being less confrontational than court proceedings, and you have considerably more flexibility over the timing and format of the mediation. In the majority of scenarios, it is also cheaper.
Common in some commercial sectors, arbitration can be thought of as a private alternative to going to court. A professional arbitrator will hear both sides of the story and come to a decision on the facts, which you can agree to be legally binding. Bear in mind that this route is rarely used for claims under £20,000, due to the high cost involved – but you can conduct a ‘paper arbitration’, which is a cheaper process in which the arbitrator’s decision is based on written evidence that both parties have submitted.
Get in touch with the Chartered Institute of Arbitrators for more information.
Where should I start if I want to sue someone?
If you have explored the other alternatives and concluded that going to court is your only option, it is time to initiate proceedings.
Before doing anything, you should consult a lawyer, as they will help you to plan out your strategy – there are many ways to conduct a litigation process, and your approach will depend on your individual circumstances. Broadly, however, you should follow these initial steps.
Send your opponent a letter of claim. This should set out why you are considering court action against them, and insist that you require compensation or a reasonable offer by a reasonable deadline, or you will sue. At this stage, you are not commencing a claim – just reminding your opponent that the threat of legal action is real. You should be aware that sending such a letter is not consequence-free; your opponent might have grievances against you too, and sending the letter might provoke them to issue a counterclaim against you.
As this letter will form a key part of any eventual case, you should consult a lawyer to figure out exactly what you should include.
Instruct a solicitor. If there is no satisfactory response to your letter, now is the time to appoint a lawyer. Remember to choose wisely, and be aware that lawyers are very expensive, even in relatively minor cases.
Be prepared to compromise. The majority of cases are settled before the parties set foot in court, and accepting a reasonable offer will mean you avoid the uncertainty of court proceedings. When considering an offer, assess whether it matches or exceeds what you could expect to win, and take into account the risk of losing. If the amount you win in court is less than a previous offer you have rejected, you have to pay some of the opponent’s costs.
What happens when I go to court?
Civil court cases are quicker and cheaper than they used to be, and there are now simplified procedures in place for dealing with lower-value claims. There are three different kinds of court procedure, known as ‘tracks’ – which you end up in depends on the value of your claim:
Small claims track (for cases up to £10,000)
Hearings rarely last more than a few hours, and you don’t actually need to attend the hearing yourself – providing you give the court your written evidence and a ‘statement of non-attendance’ at least seven days beforehand.
Fast Track (for cases between £10,000 and £25,000)
Like the small claims track, this uses a simplified procedure and hearings normally last around a day.
Multi-track (for claims more than £25,000)
The court is given its full range of powers to deal with the complexities of the case, hearings can last several days, and it is much more expensive.
Remember to follow all the legal formalities down to the letter – any missed deadlines, and the defendant might be able to obtain what’s known as a ‘judgement in default’, which means you automatically lose the case.
For small claims and fast track hearings, the hearing will be held at your local county court (unless the defendant is a sole trader or individual, in which case it will be transferred to their local court). Multi-track hearings can be heard at either the county court or High Court, depending on how complicated the case is and the value of the claim.
How should I collect evidence for my claim?
Collecting evidence to support your case can be a painstaking process, and you should consult your lawyer to find out exactly what to include. In general, you should follow these guidelines:
- Be comprehensive – if you think something is at all relevant, include it
- Collect evidence quickly – this is doubly important if you plan to use witness statements
- Get it in writing – Written evidence can be used earlier and it carries more weight than uncorroborated statements. Your solicitor will normally take written witness statements.
How do I find a good lawyer?
You should choose a lawyer with extensive expertise in the area of your claim, who has a good track record. Word-of-mouth recommendation is normally a good way of finding solicitors, but professional body the Law Society also has a search tool in which you can search lawyers by legal issue and geographical area.
What should I do when I have appointed a lawyer?
You will normally book an initial consultation with your solicitor, which will cover the issues in the case and assess the strength of your claim.
Make sure you prepare thoroughly in advance of the meeting. Your solicitor’s time is your money, so you want to get the most out of your consultation. Beforehand, send a letter outlining your claim, the facts, and the evidence – enclosing copies of any relevant notes, emails or correspondence.
Ask the right questions. Request an upfront opinion about the strength of your case. A good lawyer will be able to give you an honest assessment of your legal position, and whether it is worth continuing with the case
Find out an estimate of costs. Most solicitors charge an hourly rate, although for certain claims you might be able to agree on a fixed fee. Hourly rates are normally £500 or so for senior London lawyers – for juniors, this drops down to around £200-£360.
If you need a barrister to argue your case in court, be aware that they are very expensive; specialist barristers costs thousands of pounds per day.
After the initial consultation, you should keep in touch with your solicitor, getting regular updates on progress and costs.
What risks should I be aware of when suing as a business?
The most obvious risk is losing a claim in court. This can happen even if you think you have a watertight claim – there can be legal defences to even outwardly straightforward cases, witnesses may change their stories or found to be unconvincing in the courtroom, or your lawyers may have over-estimated the strength of your case.
In addition, even if you win the claim, you might have difficulty actually getting your money from the defendant. If you are awarded less than £600, county court bailiffs are appointed to enforce the judgement – but the chances of you recovering anything are relatively low. For higher amounts, High Court enforcement officers deal with enforcement, but these are potentially more expensive.
More generally, litigation is a time-consuming and stressful process, and your business activities might suffer if you end up focusing too much on the claim.
Are there any situations where I don’t need a lawyer to sue?
If you know the general procedures, it is not normally necessary to appoint a solicitor for small claims track case – the process is intended to be used directly by members of the public, and you can save significantly on costs by going without a lawyer.
For more complex or higher-value cases, a solicitor is almost always worth the expense. Even if the facts seem straightforward at first, unforeseen issues might arise (such as a counterclaim), which you will need legal advice to deal with.