Chris Clay’s blog – An Escalate Story

I wanted to share a real Escalate story with you. It follows a typical dispute theme, but with a few twists to allow me to raise some hypothetical questions. The questions are all rhetorical and highlight some of the challenges that Escalate was designed to overcome. If you’re involved in commercial disputes – whether as an SME or an adviser – I encourage you to spend a few minutes reading this true account of a recent Escalate case. 

We took on a case recently to represent an individual who had a contractual dispute with a former business partner. There was clear bad behaviour from the other side and the merits in the case were strong. We calculated that our client was owed around £350,000 in total.

Our client had tried to resolve the case himself (supported by some ad-hoc legal advice) but didn’t get anywhere, as concerns about spiralling costs prevented meaningful progress. The longer the case dragged on, the stronger the defendant became (or should I say ‘felt’), because no traction was ever gained in the pursuit of a resolution. I suspect the defendant and his lawyers felt that they could keep playing the game until our client gave up. They were helped by the fact that our client was ageing and in ill-health, so there was perhaps a view from the defendant that maybe the client wouldn’t make it to the end of a drawn out process (not a nice thing to say – but we believe it to be true).

So, Escalate stepped in to help. We followed our usual processes and tried to give very clear messages about how we operate. We stressed that Escalate is a packaged solution including funding and adverse cost protection, so the client now has all the means needed to take the case all the way to resolution: no stopping, no messing about, let’s get this sorted as quickly possible for all.

The defendant (or should we say, the defendant’s lawyers) thought that we were bluffing and seemed uninterested in pushing for early engagement and settlement. I guess the defendant was happy to keep spending the money on legal letters as the costs were insignificant at that point because it was sat on the bounty of £350,000 (important for my twist later on).

Anyway, the game played out in the usual way – Escalate issued proceedings and the defendant and his lawyers did all they could to delay and frustrate the system. They tried to put us off by asking for ‘security for costs’ – but that backfired when we responded with confirmation that we had put £100,000 into a client account and requested they should do the same otherwise we would push for our own ‘security for costs’. Shortly afterwards, we finally got a mediation agreed (I suspect this was not a coincidence) – albeit only after a lot of wasted time and costs.

Mediation started, and we were looking to get around £300,000 on the day. We felt the case was strong enough to hang on for the full £350,000, but the client needed closure and we also wanted to recognise that both sides need to be pragmatic and commercial. We went in to play fair and do a deal. And now the twist begins…

Their first offer to our client was a low five-figure sum. It was offered alongside a message of “the contracts are weak, you know it, we know it. Your funders and adverse costs protectors are not going to continue to support your case as it moves closer to court, so take the money before they bail out on you and you get nothing”. We all scratched our heads – having already provided volumes of communications on how Escalate worked (we also gave a further explanation of Escalate in the opening introduction of mediation), we couldn’t understand either the offer provided or the message that supported it. We rejected the offer and also repeated (again!) that Escalate was the ‘funding and adverse cost protector’, was sat in the room with the client and had no intention of bailing on this case. Costs were not an issue and we were only focused on merits. Unless the defendant could change the merit position (which all parties knew they couldn’t do), we were prepared to go all the way to court should mediation fail.

The second offer was for a six-figure sum. However, this time it was offered with a different message. The defendant had offered to pay ‘all costs in full’ with just a small five figure element attached for damages. This time we all laughed rather than scratched our heads. Having failed in their attempt to scare our client into accepting a low ball offer for fear of funder/adverse cost protector stepping away, this time they went in the other direction and tried to buy off the funder/adverse cost protector by paying us in full in the hope we would then force the client to make a settlement at the level offered. Unfortunately, they chose to forget (and/or ignore) all the information we had given on Escalate. A client of Escalate is guaranteed to be the main beneficiary of any award. The offer received couldn’t have been further from the Escalate proposition and ethos. Needless to say, it got rejected amongst our frustrated chuckles.

Eventually, the penny (or some 30,000,000 pennies) dropped and we settled on the day at the level we set out to achieve. Our client was really grateful, but we remained somewhat disappointed on the basis this shouldn’t have needed to go on for so long. It could have been resolved a full six months earlier in the same way for the benefit of both sides.

We weren’t the only ones to think that. The feedback after settlement from the defendant’s lawyers was this: ‘if we had known about Escalate before today’s mediation, then we would have looked to have settled this earlier’.

So, here are my hypothetical questions:

How could the defendant’s lawyers not have known about Escalate before mediation? We’ve reviewed our communications with them, and we clearly stated what we do and how we operate on numerous occasions throughout the process. We also know they did research into Escalate – including looking at our financials and our website. There was nothing that we told them in the mediation that they didn’t already have at their disposal from day 1.

So, did they not believe in Escalate and what it claimed to do until mediation? And, if that was the case, who decided that we were bluffing – the lawyer or the defendant?

The defendant must have spent at least £150,000 more than it needed to in damages and costs by ignoring the Escalate message.  

If we assume that the lawyers did indeed have all information on Escalate and chose to ignore it or not believe it, then were the lawyers negligent?

If the lawyers were negligent, then should the defendant now use Escalate to recover the £150,000 plus they didn’t need to spend?

If the lawyers claim that ‘if they had known about Escalate fully before mediation they would have settled’, were they negligent in not fully understanding it or trying to understand it for their clients earlier in the process? If so, should the defendant at least expect a reduction in its costs on the basis they were inflated without due care and attention?

Assuming the lawyers did understand Escalate and how it operates from the beginning, would they really have settled the case earlier, thus saving money for the client (but at the expense of a significant reduction in their potential case fees)? Surely the defendant and defendant lawyer’s interests are not aligned in these circumstances? This is the complete opposite of the Escalate proposition, which ensures advisers’ and clients’ interests are fully aligned from the very start.

Could it be argued that in any Escalate case where merit assessment remains strong for the claimant, the defendant’s lawyer should always advise its client to get into mediation (ideally pre-action) as quickly as possible to reduce its financial outlay? Could you argue that not doing this (unless specifically rejected by the defendant) would hold the lawyer out as being negligent?

Or is this story a simple case of Escalate not communicating very well its message, thereby alleviating all defendant lawyer responsibility for the unnecessary £150,000 plus that its client paid out?   

Maybe. We’re continually refining our message – but still think it’s very simple to understand:

Escalate supports cases with strong merits by providing a packaged solution that includes lawyers, corporate recovery professionals and sectors specialists who all work as a ‘resolution team of talent’ to try and drive quick pragmatic commercial settlement to disputes. All cases taken on by Escalate are fully funded from day 1, including provision for adverse costs protection, thus removing all financial risk for the claimant. We are 100% focused on merits in a case and, if we believe they’re strong, we’ll run quickly and not stop until a settlement is made. We don’t think like traditional providers of litigation support and run a portfolio principle rather than a transactional approach. This means that we don’t worry about individual case risk or case fees and profit – if we see merit in a case and an ability to recover, then we accept it (and if we don’t get any new information that weakens the merits, we’ll never stop until it is resolved).

We haven’t lost a case yet, but we know one day we might – and that won’t change our approach or our beliefs. On the fateful ‘loss day’, we may have to accept we made a wrong call on an individual case – but it won’t cost our client a penny as we’ll accept and pay all the adverse costs along with swallowing all our time costs and disbursements paid to that point. And it won’t even put a ripple in our pond because, on that same day, we’ll be running another 100+ cases to successful settlement. Traditional tactics of deflect and delay don’t really work in the Escalate model.

Escalate is simple in what it wants to achieve. We know that there are two sides to every story and that cases are not always black and white. Escalate wants to help claimants resolve their disputes quickly and in a commercial pragmatic way that should not only benefit them but also the defendants (by not exposing them to unnecessary costs).  

So help us help your clients whenever you see the Escalate name. If we should be acting for a claimant in a dispute with your client, please focus on merits. Help us understand why the merit position is not as we see it and then quickly move to mediation for settlement. Tactics to delay and frustrate do nothing more than incur more costs for your clients in the long run as this waste of time and money does nothing to alter the merit position. If you refuse to engage with us in mediation, then we guarantee we will issue proceedings after three months, as the Escalate way is to drive the case quickly to settlement. This doesn’t mean we want to or have to go to court; we will always go into mediation after proceedings have been issued (but this does seem a silly approach – and certainly not in your clients’ interests as the costs incurred by the action will have increased unnecessarily for the same outcome we could have sorted pre-issue).   

All successful businesses will have trading bumps in the road and commercial disputes are a by-product of this. It doesn’t matter whether you represent the claimant or defendant – the goal must always be to resolve these disputes and flatten these trading bumps as quickly and fairly as possible with the minimum costs attached. We’re trying to change the thinking and approach to dispute resolution via the Escalate proposition and we hope this is something you can embrace for the good of your clients. Let’s create a better story than the one I told above…

The end.

Chris

Chris Clay
Managing Director
Chris.clay@escalatedisputes.co.uk