Mediation vs soaring litigation costs to resolve a dispute
How does court stack up versus ADR?
In the UK we are avid users of litigation. Going to court and suing someone has often been the method of choice when trying to resolve a dispute. This continues to be the case when it comes to the purchasing of services and goods.
In October 2015, The Consumer Rights Act came into force, making Alternative Dispute Resolution (ADR) available to all businesses to help when a dispute with a consumer cannot be settled directly. Before the Consumer Rights Act became law, this service had only been available in certain sectors. A business which is involved in a dispute will now need to make the consumer aware of a relevant certified ADR provider. The business should also let the consumer know whether or not they are prepared to use the ADR provider to deal with the dispute. However, a business does not have to use ADR unless it operates in a sector where existing legislation makes it mandatory (for example, financial services).
Despite this change in law, it is no surprise that due to the emotion involved in disputes, litigation continues to prosper, without both parties realising the potential cost differences. Much of the cost will depend on the actions and decisions of the other party to the dispute, the mediator chosen, the judge you are assigned and also which solicitor you use.
Another very important point is how one defines “cost”. We should rightly assign a ‘cost’ to our time even if it is not a financial outlay. It is similar to what economists might call the “opportunity cost”: “the loss of potential gain from other alternatives when one alternative is chosen”. Typically, a good metric is the approximate amount you earn for an hour of work, although another metric might be more suitable for your personal circumstances. Below we set out the cost of mediation vs litigation, using DisputeAssist as an example of mediation provider costs:
Cost of Mediation
The cost of mediation with Dispute Assist is fixed, either on a per case basis, or via a subscription. The costs can be broken up into 3 categories:
1. Dispute Management Fee – this is the fee charged by Dispute Assist to handle the case, mediate between both parties and coordinate any independent expert advice if required. This will normally be£350 exc VAT per case.
2. Basic Inspection Fee – this is the fee charged by an independent inspection company to come out to site and capture any evidence required as part of the case. This will normally be around £175exc VAT.
3. Expert Witness Report – this is an enhanced inspection that is written in line with court procedural rules and normally used in cases where the dispute value is high, and potentially likely to go to court. This will normally be around £750 exc VAT.
Based on the above, a business or consumer using Alternative Dispute Resolution, is likely to pay somewhere between £350 – £1,275 exc VAT per dispute. At Dispute Assist, consumers who use members of our schemes receive mediation for free.
Cost of Litigation
Court Fees
Court Issue Fees depend on the potential value of any claim being brought to court. For any claims up to £10,000, you can expect to pay in between £25 and £410 if paying online. This is up to £455 if paying via a paper form.
For claims between £10,000 and £100,000, the court fee is 5%of the claim value if the application is in paper form, or 4.5% if done online. For claims between £100,000 and £200,000 it is 5% and above £200,000, it is a fixed fee of £10,000.
If the claim is defended, then a Claims Hearing Fee will need to be paid, which is £170 for claims up to £3,000 and £335 for anything above that up to £10,000. Above this and it moves to a percentage fee again.
Solicitor’s/Barrister’s Fees
If you choose to use a barrister in court, a junior barrister will cost somewhere between £250 – £750 If you choose to use a solicitor instead, the cost of this ranges from a % of the final claim payment won to fees charged based on time. Sending a formal notice to the other party that you are suing them will cost between £15 – £80.
Your time
As a way of working out your own time cost and helping calculate how much time you may need with your solicitor, below is what an average timeline could look like, based on an average hourly wage of £14.80:
To calculate based on our annual salary, use our handy cost calculator here
There are other costs that could potentially arise if further expert inspections are required, or other witnesses are required. Based on the above, a business or consumer using litigation is likely to pay somewhere between £2,500 – £10,000 excluding your solicitor’s fees as well, likely to be a % of the claim value. Depending on the case outcome, you may be ordered to pay the legal costs of the other party if you have unreasonably refused mediation as part of the process. The court is likely to regard the following reasons as unacceptable when refusing mediation:
· Believing there is no middle ground to be had.
· Believing that only your side had a case, with the other having no merit.
· Refusing to mediate due to hatred or malice between the two parties.
· Stating the other side had not presented documentation in a certain way, or that you had not seen all the relevant documentation.
· It is a matter of interpretation that can only be solved by a court.
· Believing that both parties’ opinion is too opposite for there to be any chance of agreement.
On the other side of this, the general rule is that the winner recovers its legal costs from the loser. But the recovery is never 100%and generally falls between 60% – 80% of the total legal costs.
Therefore, as a result of the above, there is enough evidence to suggest that taking part in mediation ahead of litigation very much has its merits from a time, cost and emotional distress saving perspective.
How Dispute Assist can help
Dispute Assist offers mediation, specifically to the home improvement and renewable energy sectors, where we have vast experience of dispute resolution. We offer independent, experienced advice and mediation to businesses and consumers, in a bid to get to a fair resolution for both parties. We are an approved Alternative Dispute Resolution Provider, under the Chartered Trading Standards Institute (CTSI). We also provide free of charge to both parties, in the event of us not reaching a successful resolution, access to the Ombudsman, whose fees we will pay on behalf of the parties.