Litigation is a recognised cost of doing business.  All sizes of business will inevitably find themselves involved in disputes.  Court is usually a last resort, as it is time consuming, slow and costly.  It can also be risky.  Effective management of the risk and cost of litigation will assist in minimising the impact of any litigation on the business.  Here are some key points to be aware of.

Risk

Early stage mitigation

The most effective risk management is carried out at an early stage.  It is very important to know who you are contracting with.  Credit check your customers, review their annual accounts, consider getting personal guarantees.  

Be prepared

Be prepared for a dispute going to court.  Evidence is the most important factor in determining the success of a claim, and that evidence can be in the form of documents or witnesses.  Tell your staff that anything in writing may be used as evidence at a later date, and ensure accuracy by having documents checked and corrected contemporaneously.  Keep records of inspections and accidents, which may later prove to be favourable evidence.

Implement policies (accounting for statutory/PII requirements and time bars) to shred documents regularly rather than ad hoc – this will avoid adverse inference being drawn should you have destroyed documents relevant to a court action. 

Engage potential witnesses at an early stage – it is never too early to get statements from your staff as doing so when a court case is well under way may be too late to add in key facts or arguments.  Check the credentials of independent expert witnesses - articles they have written or previous cases in which they have been involved may be detrimental to your case.

Cost

Security measures

There are useful tools to put pressure on opponents.  Litigants considered to be in financial difficulty may have to lodge a sum with the court ("Caution") as security for expenses to allow them to proceed with the action. Where an award of expenses is made against the litigant, this sum may be 'claimed' by the other party towards payment.

A debtor may have a proportion of their assets arrested (i.e. frozen) in order to obtain security for a judgment against him for the debt.  This provides a level of protection to the creditor. 

An inhibition may be registered against a defender, which would prevent the disposal of land and buildings in Scotland for a period of 5 years. 

All of these measures can be carried out before the final judgment.

Funding

You may have heard of ATE insurance which can be taken out to protect against the risk of having to pay your opponent's legal costs if an action is unsuccessful.  Third Party Funding, where a specialist company helps with litigation costs in return for a percentage of damages recovered, is also an option. These costs are unlikely to be recoverable through a court award of expenses, but are increasingly considered by companies, as it de-risks costs and takes litigation costs off balance sheet until conclusion.

Given the recent huge hike in court fees in England, starting at £1,000 for a claim for over £20,000, rising to £10,000 for claims of £250,000 or more, you may want to look at whether Scotland is an option as a cheaper alternative (initial court fees vary between £100-200).