Peripheral disputes, such as jurisdictional challenges and security for costs applications, often arise in the course of disputes. We consider the extent to which these peripheral disputes can assist the parties in discussing settlement options.
What are peripheral disputes?
No project manager sets out to have a dispute with its contractual counterparty about issues such as whether they should be allowed to continue a court proceeding or go before an arbitrator to resolve the dispute; whether a document they wrote in the middle of the job is subject to legal professional privilege; or whether the adjudicator who just determined a dispute in their favour committed jurisdictional error in doing so because he forgot to attach a spreadsheet to an email in the middle of the night.
Why do peripheral disputes arise?
These sorts of disputes occur in most jurisdictions in the common law world. The reason is deceptively simple: running a complex construction case where there are multiple claims for variations, delays and disruptions is hard work. It takes a large multidisciplinary team working together over many months to put a case together. Then another equally talented multidisciplinary team works together for many months to pull it apart. Finally, a judge or arbitral tribunal is then asked to decide who was right - a process which itself can take many months, if not years. In some jurisdictions this can be further lengthened and complicated by having many parties involved in the litigation.
What opportunities arise from peripheral disputes?
These seemingly peripheral disputes about matters such as privilege, security for costs, or disputes about the proper forum for resolving a dispute can offer a way of getting to a resolution sooner than going through the pain and distraction of a full trial. This is because, while they are legitimate steps for litigants to take (indeed they are usually aimed at ensuring the dispute process is fair to all concerned) they have the collateral effect of creating pressure and additional negotiation points.
The pressure comes from the need to address and engage in the peripheral dispute - once it starts it must be dealt with. For example, in a security for costs application, a respondent who doesn’t wish to put up the requested security must come up with an argument why the application is not warranted. To do that it will undoubtedly need to review the relevant legal position and file evidence about its solvency. However, it may also need to engage a costs expert to challenge the claimant’s estimate of its costs or brief an advocate to appear in any hearing of the issue. All of these steps have the inevitable effect of distracting the litigant from the main dispute.
Furthermore, additional negotiation points arise because each peripheral dispute is its own mini-trial and so (at least in common law jurisdictions) adheres to the usual pattern of pleadings, evidence, submissions, a hearing and then a decision. The usual negotiation points for any dispute apply equally to these peripheral disputes: at the close of pleadings and the close of evidence/submissions.
Without the peripheral dispute it may be many months between commencing the proceedings and the first of these “natural” negotiation points. However, the existence of a peripheral dispute can create an opportunity for the parties to negotiate much earlier and, importantly, there is no rule which says that the negotiation point created by the existence of the peripheral dispute must be confined to that issue. So there is an opportunity for the parties to settle everything, perhaps earlier than would otherwise be the case and with the additional knowledge about how each party approaches the formal dispute resolution process. That can only be good.