How do you evaluate the decision to litigate against your supplier? This article investigates the pros and cons of litigation, the 13 steps to trial day and the ways in which the costs, time commitments and potential reputational damage of ending up in court can be prevented, even after the litigation process has begun.
Understanding the basics of litigation in complex projects
Litigation is the process of taking legal action to enforce a right, resolve a dispute, or gain compensation for a wrong. The process can be quite lengthy and involves a number of stages: from something called a ‘pre-action protocol’ where the parties try to resolve the dispute before court proceedings begin, to the issuing of proceedings, the exchange of documents, evidence and eventually, potentially, a trial. While the act of entering the litigation process risks the case gaining its own momentum, there is still time to determine whether this is the best course of action for your organisation.
A forum for dispute resolution: The TCC
The Technology and Construction Court, commonly known as the TCC, is a specialised division of the High Court in England and Wales. Its primary role, much as its name would suggest, is to handle complex cases relating to technology and construction disputes. However, the TCC is not limited to this and is also equipped to deal with cases that require a deeper understanding of technical, engineering or IT matters, which is why it is often the place where complex cases of all manner of origins end up. It has a reputation for its robust and detailed judgments, which often involve intricate technical evidence and require judges to understand and apply specialist industry knowledge.
By choosing the TCC, parties can usually have the confidence that their case will be handled by judges who are experienced in dealing with the particular complexities and challenges that often arise in such disputes – disputes such as complex technical issues, technicalities in ambiguous contract terms, project delays, cost overruns, defects or breaches of contract. This can lead to a more efficient resolution and can provide greater certainty for businesses about the likely outcomes of litigation.
The TCC’s establishment and its role are rooted in the recognition that certain types of cases require a specific kind of expertise to ensure that they are fully understood and handled effectively. Think of the TCC as a specialist medical consultant who has a unique knowledge and understanding of certain conditions and the best treatments to prescribe.
However, like any court process, litigation in the TCC can be time-consuming, costly, and sometimes less predictable. It is essential for businesses to seek professional legal and/or technical expert advice before going through informal and formal dispute escalation, and certainly prior to deciding to litigate in the TCC. Any advisor worth their salt will explain that courts will take a very dim view of parties to the dispute being able to recover their costs if they have not already attempted genuine efforts with other dispute resolution options, such as negotiation, mediation or arbitration.
The pros and cons of litigation
We spend a lot of time in our articles talking about how to get to ‘what good looks like’ in the successful delivery of complex projects so that the project relationship benefits suppliers, contractors, and their clients. If the project delivery does start to wobble, and despite everyone’s best intentions and behaviours, it is not getting back on the right track, it is still usually in everyone’s best interests to avoid ending up in litigation. There are times, however, when serious misunderstandings can lead to the intransigence of one or both parties over a very protracted period. In these cases, there can be a number of benefits that the litigation process can bring to the table if there appears to be no other pragmatic way to successfully resolve your differences.
Useful aspects of the litigation process can be:
- Resolution of disputes:
Litigation can resolve disputes where other methods (like negotiation or mediation) have failed. Once a judge makes a decision, it’s usually binding on both parties.
- Enforcing rights:
If a party is in breach of a contract or has caused damage, litigation can enforce the victim’s rights and support them in receiving compensation.
- Clarification of law:
Litigation can help clarify points of law. This is particularly useful in complex areas where the law may be ambiguous, uncertain or developing.
The threat of litigation can deter parties from breaching contracts, knowing that they may be taken to court.
What are the potential downsides to litigation?
Despite the above, litigation should still be considered a solution of last resort if you wish to retain any form of civil or productive relationship between clients, suppliers and contractors.
Litigation can be expensive. Legal fees can add up quickly, especially in complex cases that require experts to analyse complex evidence. If a party loses, they may also have to pay the other side’s costs.
Litigation can take a long time, often many months or even years. This can delay finding a resolution to the dispute and the time you’ll need to invest in the process can be substantial.
- Stress and uncertainty:
Court proceedings can be stressful. The outcome cannot be certain and this can be challenging for businesses.
Unlike mediation or negotiation, court proceedings are public. This means the dispute and any damaging information related to it could potentially become public knowledge and adversely impact reputations.
- Damage to relationships:
Litigation is often adversarial and usually fatally damages business relationships. It may make future cooperation between the parties challenging.
While litigation in the TCC can be a powerful tool to resolve complex technology and construction disputes, it’s not without its challenges. It is, therefore, important to carefully consider the potential benefits and downsides before deciding to litigate and seek appropriate advice.
Litigation steps in complex project cases
While the timescales may vary based on the complexities of the case, the court’s workload and other factors, what follows are the 13 typical steps involved in a litigation case, specifically in the UK’s High Court’s Technology and Construction Court.
Step 1 – Pre-action protocol (typically 3 months):
Before commencing any claim, parties are encouraged to comply with a pre-action protocol. This usually involves the exchange of letters setting out the claims and, where possible, using other methods such as mediation to promote a settlement, ideally avoiding the need for court proceedings.
Step 2 – Issuing proceedings (day 1):
If the dispute cannot be resolved in pre-action, the claimant (often the client of the services received from the supplier) will prepare a claim form and particulars of the claim setting out the basis of their claim. These are filed with the court and served on the defendant (often the supplier).
Step 3 – Acknowledgement of service (usually 14 days from service of proceedings):
The defendant has 14 days from the date of service of the claim form to file an acknowledgement of service, indicating their intention to defend the claim.
Step 4 – Defence (usually 28 days from service of proceedings):
The defendant then usually has 14 days from the acknowledgement of service to file their defence, setting out the basis on which they deny the claim.
Step 5 – Reply (usually 14 days from service of defence):
The claimant may reply to the defence, addressing any new issues raised. This isn’t always required and depends on the specifics of the case.
Step 6 – Application for a trial of preliminary issues (timing can vary):
After the defence is filed and if it becomes apparent that there are discrete issues that could be tried separately, an application can be made to the court for a trial of preliminary issues (see more details below). This will involve drafting an application notice and supporting witness statements, setting out the issues to be tried and why a separate trial of these issues is justified.
- Hearing of the application (typically within 1–3 months after the application):
A judge will hear the application and decide whether to order a trial of preliminary issues.
- Preparation for a trial of preliminary issues (timing can vary):
If the application is successful, the parties will then prepare for the trial of preliminary issues. This can involve preparing further witness statements and/or expert reports, depending on the nature of the issues to be tried.
- Trial of preliminary issues (timing can vary):
The preliminary issues are then tried and a judgment is given. Depending on the outcome, the parties may then decide to settle the case or it may proceed to a full trial.
Step 7 – Case management conference (CMC):
Typically within 3 months after defence or after judgment on preliminary issues: The court will arrange a case management conference (CMC) at which directions will be given for the future conduct of the case, taking into account the judgment on the preliminary issues. This is when the timetable for the exchange of evidence and the trial date is usually set.
Step 8 – Disclosure (typically 6–8 weeks after CMC):
Both parties disclose relevant documents to each other. This stage can take longer if there are many documents or if there are disputes over what needs to be disclosed.
Step 9 – Exchange of witness statements (typically 6–8 weeks after disclosure):
Each party will exchange witness statements. These are the written evidence of the witnesses which they would give orally at trial.
Step 10 – Exchange of expert reports (typically 6–26 weeks, subject to complexities, after witness statements):
If expert evidence is required, each party will instruct their own expert to prepare a report. These reports are then exchanged.
Step 11 – Pre-trial review (typically 3–4 weeks before trial):
A pre-trial review is typically held to ensure that the case is ready for trial.
Step 12 – Trial (typically 9–12 months after issuing proceedings – see step 2 above):
The final hearing or trial takes place where the judge will hear the evidence and make a decision.
Step 13 – Judgment and costs (typically within 3 months of the trial):
The judge will deliver their judgment. Following the judgment, there will be a determination of costs, i.e. who will pay the legal costs of the proceedings.
Please remember, these steps and timescales can vary significantly depending on the specifics of the case and may be affected by factors such as court availability and the strategies of the parties involved. It’s also worth noting that at any stage the parties can still settle the dispute outside of court.
What is a trial of preliminary issues?
A trial of preliminary issues is a court hearing that takes place before the main trial. The purpose of this hearing is to resolve specific legal or factual issues that are critical to the overall dispute. These are often issues that, if resolved early, have the potential to simplify the main trial, reduce costs, or even lead to an early settlement.
Why can it be helpful?
- Simplifying the main trial:
By resolving key issues early, the main trial can be focused on the remaining issues – this can make the main trial shorter and less complex.
- Cost reduction:
If certain issues are resolved early it could reduce the amount of evidence that needs to be prepared for the main trial, which can result in significant cost savings.
- Facilitating settlement:
A ruling on a preliminary issue could shift the perceived strengths and weaknesses of each party’s case, making it easier for parties to reach a settlement and avoid a full trial.
What are the downsides?
- Additional costs and delay:
Preparing for and conducting a trial of preliminary issues involves additional costs and can delay the main trial. If the issues are not resolved as expected, this could result in higher costs overall and longer delays.
- Risk of unfavourable ruling:
There’s always the risk that the court’s decision on the preliminary issue will not be in your favour, which could weaken your overall position.
How does it fit into the overall litigation process?
A trial of preliminary issues usually takes place after the claim and defence have been filed (see step 5 above), but before the main trial. An application must be made to the court to have a trial of preliminary issues and the court will decide whether it is appropriate in the circumstances. If the application is successful, the parties will prepare for and conduct the trial of preliminary issues, and the court’s decision on these issues will shape how the rest of the litigation proceeds.
In conclusion, a trial of preliminary issues can be a valuable tool in complex TCC litigation, but it requires careful consideration of the potential benefits and drawbacks. A solicitor experienced in TCC litigation can provide advice tailored to your specific circumstances.
Preventing disputes in the first instance
How can a client–supplier partnership help in the successful implementation of a complex project?
The delivery of a complex project can sometimes feel akin to steering a ship through a foggy sea. The ultimate destination is known, but the path to get there may be fraught with uncertainties. This is particularly true when it comes to defining the outcomes of a complex project. Client organisations, despite their best efforts, can sometimes struggle to clearly articulate these desired outcomes to the supplier.
The task is not easy, after all – it involves translating high-level business objectives into specific, achievable results that can be tied directly to the implementation of a complex project.
In these situations, the relationship between the client and the supplier becomes critical. An ‘expert’ supplier is not just a service provider. In the best of relationships, an expert supplier acts as a solution partner and a critical friend. In this, the supplier’s role goes beyond merely delivering a product or service. They share their wealth of experience from past projects, providing valuable insights that can help the client navigate through the fog.
As a solution partner, an expert supplier helps the client articulate more clearly what realistic business outcomes they can expect to achieve through the successful implementation of the supplier’s solution. This is not just about defining what the solution can do, but also about understanding the broader context of the client’s business objectives.
As a critical friend, the supplier is open and honest about what their solution can and cannot achieve. They identify where their solution will meet the client’s business objectives and where it may fall short. They suggest workarounds where appropriate and help the client understand the impact of these on their operations. It is a relationship built on trust and open communication where issues and challenges are shared and tackled together, rather than swept under the carpet.
The value of this partnership approach cannot be overstated. By providing this clarity, the supplier helps to set realistic expectations and prevent misunderstandings that could lead to disputes. It’s like the supplier switching on a lighthouse in the fog and providing the client with a map and compass, providing clear direction for them to avoid potential pitfalls.
In turn, this often eliminates the need for a formal litigation process. This is not to say that disputes will never arise, but, when they do, they are more likely to be resolved amicably through open dialogue, rather than in the courtroom.
The supplier–client relationship is, therefore, not just a commercial transaction. It is a partnership that requires both parties to work together to achieve a common goal, enabling the client to rely on the supplier’s greater experience in delivering complex solutions to assist the client in meeting its business outcomes. It is about the supplier asking the right critical friend questions of the client to achieve the clarity needed to appropriately design, configure and implement a solution. In turn, helping each other navigate the complexities of the project to ensure that the final outcomes align with the client’s business objectives. This approach fosters trust, reduces risk and, ultimately, leads to the successful delivery of complex projects.