As a property litigator, over the past couple of years I have noticed a marked change in the nature of cases landing on my desk; more contested dilapidation claims, challenges on the validity of break options and claims against former tenants and guarantors.
Tougher economic conditions have led to an increase in the number of proceedings issued in the High Court in 2006 and 2007, reversing six years of steady decline triggered by the Woolf reforms which encouraged parties to settle their disputes outside the courts system. However, the reforms were introduced when the economy was robust. The reforms are now facing their first real economic stress test. Financial squeeze always tends to cause an upturn in disputes and litigation. During the first quarter of 2008 mortgage re-possession claims issued were 16% higher, and landlord re-possession claims were 4% higher than in the first quarter of 2007. The Companies Court, a sub-section of the Chancery Division of the High Court, which deals predominantly with company liquidations, including winding up petitions by creditors and bankruptcy saw the strongest rise in cases filed last year. The figures indicate that concerns over the future direction of the economy are encouraging businesses and creditors to fight more aggressively to recover debts and enforce contracts.
New ways of funding commercial litigation have also emerged on the scene and become more widespread over the last year. Parties may be affected by these developments whether or not they wish to consider funding their litigation through one of these methods. In particular, a party may find that they are facing claims by parties which have chosen to take advantage of these new methods of funding.
It is impossible to predict the extent to which levels of litigation will increase as a result of current market conditions and the availability of new methods of funding. It seems likely, however, that the combination of these factors will result in a continuing increase. However, litigation is an expensive and risky business and should be a last resort. Businesses should look to the effective use of alterative dispute resolution and managing their disputes. In a recent judgment the Court of Appeal gave the strongest endorsement of the use of mediation, reminding the parties that it can do more for them than negotiation and that the best time to mediate is before the litigation begins. The Court stressed that it was not a sign of weakness to suggest mediation but the hallmark of common sense.
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