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Settling disputes by mediation

04 August 2004
Settling disputes by mediation

The problem Your business is suffering because of the action of another business. You think legal action would help, but it's too costly. For instance, you could be the owner of a popular new restaurant in a busy shopping centre. Within six months you establish a clientele and start making a profit. With very little notice, your landlord starts building work to improve the pedestrian areas in the centre. Customers are forced to walk around a cordoned-off area to reach your restaurant and are diverted past one of your competitors. Now that the works are completed it looks attractive, but the dirt, noise and diversion have taken their toll - sales have been falling since the work started, and nine months later the business hasn't returned to profitability.

The Law
You can consider bringing an action against your landlord for the loss of profits suffered by your business as a consequence of the building work.

To do this, you'll need to establish that the landlord breached his contract, and to quantify the losses suffered as a result.

You'll need a lawyer experienced in such matters, as well as someone, probably a forensic accountant, to quantify the loss to the business. Armed with the tools, your lawyer is likely to advise you that there are a number of ways in which you can proceed.

Expert Advice
A claim like this can be extremely time-consuming as well as costly. The time lost by managers in tackling disputes shouldn't be underestimated, and the business's performance will inevitably be affected.

The good news is that the damaging effects and high costs of a long-running dispute can often be avoided by turning towards Alternative Dispute Resolution (ADR), which includes mediation.

Mediation offers a flexible and effective alternative means of resolution that has significant advantages over litigation, including:

  • Settlements can be reached in a matter of days, or even hours, which minimises costs to businesses and is less stressful for those who run them.
  • The resulting settlement doesn't need to be restricted to cash payments; other solutions can be agreed.
  • The parties involved have far more control in the process. They jointly select a neutral third party to facilitate the negotiation process and reach a settlement.
  • At the mediation, the parties discuss what matters to them, rather than sticking purely to the legal issues.
  • The process has the added benefit of being private and confidential so that no one has to know the outcome.
  • The most positive outcome of mediation is that it can help to preserve, or even enhance, existing business relationships. And once a settlement has been reached a binding agreement can be signed.
  • In the case of your restaurant, you might feel that the landlord could help promote your business. If such arrangements could be made as part of a settlement, it might be more valuable to you than straight cash compensation, and might keep the relationship on an even keel.

Check List
Before taking action it's important to think clearly about your desired outcome. Take appropriate advice and arm yourself with the tools you need to negotiate effectively.

  • Don't let the dispute become a personal or aggressive battle. One of the most damaging consequences arising from any dispute is the amount of time it can absorb and the accompanying impact on the business and the personal lives of those involved.

  • The mediator's role is to act as a catalyst - an independent third party, who can introduce a new dynamic into the discussion and facilitate a settlement. He or she needs to be someone you can relate to and who will understand the issues between the parties.

  • It's vital to learn from the whole experience to avoid the same thing happening again, so prepare for the worst and put a rigorous response plan in place to safeguard against future disputes. In particular, ensure that all your contracts are watertight and free from ambiguity.

Beware! There's always a possibility that your claim may be worth less than you think, so a reality check from objective advisers is always important at an early stage.

Contacts
Kathryn Britten
BDO Stoy Hayward
Tel: 01372 734 300
E-mail:kathryn.britten@bdo.co.uk
www.bdo.co.uk

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