Introduction
We have all witnessed, in some form, the tumultuous way in which 2020 has changed the world. The legal world, which is a sector historically reluctant to change, has seen unprecedented changes to the way in which it operates, and we hope it continues to embrace these changes.
How will affect you?
Specifically, there has been a shift in the area of litigation which has seen substantial changes to its operations. As a firm, we have noticed that parties are favouring out of court communication far more, as issuing through the courts is becoming more expensive and time consuming than ever before. We are also noticing a real shift towards methods such as mediation and arbitration ordinarily seen as a voluntary aid as and when needed.
Although the courts have tried , during the pandemic , to come up with innovative ways in which to embrace technology, we have still seen huge backlogs of up to 10 months in some courts. However, this has given rise to video hearings , which have proven far more cost effective for the parties and we hope this may continue.
The most significant change has been seen in alternative dispute resolution (ADR) methods like arbitration and mediation, where the vast majority of hearings and meetings have moved online. The ease and the cost saving benefits of virtual hearings is likely to mean that the majority of face-to-face hearings become a thing of the past in ADR. This means paperless hearings ; no travel expenses ; and witnesses are not having to hang around a court room all day. We hope this can enable a decrease in costs for litigation parties and speed up the process.
The coronavirus bill published by the Department of Health and Social Care expands the availability of video and audio link in court proceedings. New Practice Directions (PD 51ZA) have also been introduced allowing parties to agree to extensions of time, without applying to the court, of 56 days in certain circumstances
TRENDS
Increase in commercial litigation cases
Based on current trends, we are likely to see an increase in the amount of commercial litigation going into 2021. This is because, during the height of the pandemic, many businesses stayed their litigation, especially debt recovery matters and property eviction, as the government have introduced temporary protective legislation for debtors and tenants. Now that business is picking back up, and this legislation is ending, we are going to see a huge influx of litigation as people clamber to get their money back.
The pandemic has had a huge effect on businesses, with their cashflow and standard operations turned upside down. Due to this, even organisations with a huge portfolio of contracts found that a large amount weren’t being honoured due to insolvency , cashflow issues and delaying tactics. New agreements will need to be made, old ones re-negotiated and litigation pursued when all else fails. The contracts themselves are likely to be drafted in a disease-wary way going forward, to reduce the defaults should we see the same scenarios we have witnessed in 2020 occur again. Disputes between insurances and its customers may also open a whole raft of litigation.
On the other end, we are also likely to see litigation stemming from organisations not able to meet their obligations under a contract. With the focus on this litigation being unfair contractual terms with the view to getting out of the deal or renegotiate particularly onerous agreements.
Insolvency work be it restructuring or recovery will also be likely to increase as more and more businesses struggle after the loan repayments become due, mortgage and rent free periods cease , furlough ends and they need to make a determination trade or close.
Costs and Fees
Demand for lawyers is going to increase. Because of this the amount that clients pay, for both counsel (barristers) and solicitors, is going to increase. Whilst we don’t expect individual lawyers’ fees to change dramatically, the amount of litigation that will be ‘floating around’ means that organisations will need to ensure their budget for legal fees increases. It is expected that spending on legal fees will increase by at least 5%. However, hopefully this is balanced with the recovery rates and success these professionals will bring back to the business.
This increase in litigation is going to mean that companies are going to look to work with different firms. We urge all readers to ensure that they are getting the best possible service and more importantly, good results from their lawyers. If your current firm is under performing, then it might be worth switching over to one who is more inclined to look after you and your interests. Look at capped and fixed fee lawyers ; are they specialists in the areas needed ; can they offer preventive advice as well as the current cure and more so do they relate o you and your business?
Expect settlements to increase as it is thought that around 60% of litigious disputes will settle. The possibility of accepting less than 100% of what you are owed might be a viable option to ensure that you receive at least some lost revenue and to ensure that costs and time are kept to a minimum. Work with your insurers and advisors as long drawn out court battles may secure the lost monies , but you are never guaranteed a full refund of your costs so a balancing act early on is key.
Increase in Employment Litigation
Unsurprisingly, going into 2021, with the almost guaranteed increase in redundancies, we will see an enormous surge in employment litigation. We have already noticed this trend occurring and expect it to get worse when the governments furlough scheme ends. Identifying what was a genuine redundancy over an unfair dismissal is one action, but the unilateral variation in terms is something we have started to see becoming a concern for many employees.
The issues for employment litigation are varied, as companies are down-sizing we expect insolvency and layoffs to become commonplace. It is extremely important that both employers and employees are open, honest and fair with each other. If you are unsure of anything, including the impact of any potential decisions, it is highly recommended you seek legal advice. ACAS is likely to become overloaded with questions and conciliations so insurers and lawyers will be in greater demand.
Conclusion
Although 2021 is likely to be a busy year, we are going to see real change in litigation, with out of court disputes and settlement becoming usual. Technology will be used to ensure a smooth process is possible and the benefits will hopefully be felt by all who embrace it.
It is important that both individuals and organisations are commercially aware of their options, to ensure they save stress, time and costs. Please reach out to one of our experienced team here at ACLF, where we can help you understand all of your options and get the best result possible.