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Commercial Litigation Guide

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Commercial Litigation Guide

Sometimes in business, disputes arise that cannot be resolved in any other way, meaning that court proceedings are needed in order to find a solution. Known as commercial litigation, the process of taking a dispute through the court system as well as negotiating a settlement to that claim can be complex and having the right expert legal advice is necessary at every stage.

In this guide, we look at what commercial litigation is, what kinds of business disputes it can be used for and how the process works.

What is commercial litigation?

Commercial litigation is a broad term used to describe various types of legal action taken (including court claims) that has company, corporate or business involvement. It might be a business that has a dispute with another company or a dispute relating to those who run or own the business and this sometimes needs commercial litigation to find a solution.

Businesses that find themselves involved in a dispute will usually try to resolve the situation as quickly as possible to try and minimise the negative impact on the company. However, sometimes there is no alternative to legal action in order to find a settlement and move forward.

Why commercial litigation might be necessary

When a business dispute arises that can't be resolved simply through discussion, it might become necessary to take further specialist legal advice and action so that a solution can be found as well as protecting certain legal rights and asserts in the process. The first port of call in this kind of situation is usually to try alternative dispute resolution to find a settlement.

There are different types of alternative dispute resolution, but they all aim to get the two involved parties to agree on an outcome to the dispute, so that everyone can move on. Examples of alternative dispute resolution for businesses include mediation or arbitration. They can also include joint settlement meetings or written offers and counter offers.

While alternative dispute resolution processes have a good success rate for settling business disputes, they are not always successful or it's possible that one party refuses to engage with these methods. In this kind of situation, there may be no other options remaining apart from commercial litigation, where one party essentially takes the other to court over the disagreement.

What is the difference between civil and commercial litigation?

Civil litigation refers to a legal case between parties, who may be individuals, where there are no criminal charges involved. Civil litigation aim to protect and assert personal rights such as in consumer law. Commercial litigation refers to a legal case between at least two business entities, such a companies, partnerships or trusts, where again there are no criminal charges as part of the claim.

Commercial litigation is essentially a type of civil litigation, but involves businesses in dispute rather than individual people in dispute. There are specialist Courts and Judges who manage commercial litigation. Commercial litigation solicitors will represent you at Court and advise and guide you through the court case from start to finish.

How does commercial litigation work?

Commercial litigation can be a complex process, which has several different stages. At any point before the claim reaches the court decision stage, the parties involved can choose to settle outside of court, rather than proceed with the litigation.

The stages of the commercial litigation process include:

Commercial litigation - the pre-action protocols

The parties will usually be expected to attempt alternative dispute resolution before taking any further legal action. If the attempts to resolve the dispute are not successful, the next stage of pre-action conduct can take place, known as pre-action protocols.

Pre-action protocols are a series of steps and directions that the court expects parties to business disputes to go through before issuing court proceedings. There are different protocols in place for some specific industries or types of dispute, so it's very important that the correct process for the individual situation is followed. Getting the right legal advice is very important to ensure that things are done correctly.

Depending on the specific protocol, in general terms it is usual for this stage to include a letter of claim being sent from one party to the other, outlining the details and the outcome that they want. The other party is then given an opportunity to respond to this and sometimes this communication will be enough for both parties to agree a settlement.

If they cannot agree, issuing a claim at court is the next stage.

Issuing a claim in commercial litigation

The claiming party (known as the claimant) will send a claim form and a particulars of claim document to the Court, which outlines the claim (the facts, the law and the remedy sought), those who are involved and their estimation of the claim value. A court fee needs to be paid and the court will then issue the claim. The claimant then has four months to serve the claim form on the defendant, which must be done in the required manner laid out in law.

Responding to a claim in commercial litigation

The defendant has 14 days in which to respond to the claim form they were served. They can respond by:

Filing am Acknowledgement of Service which can given the defendant an extra 14 days to formally submit their defence,
Filing full admission to the claim, or
Filing a defence to the court and serving a copy of this defence to the claimant, or
Filing a partial admission to the claim and a partial defence for the other part of the claim.

The defendant also has the opportunity to issue their own counterclaim with their defence if they have incurred losses because of the dispute.

In preparation for a commercial litigation court hearing

If no resolution can be found after the claim has been issued and responded to, the next stage is for each party to provide more information about the case to the court, which will enable the court to determine things such as what kind of evidence is needed, and whether witnesses or experts will be needed to provide some of that evidence.

The claim will be treated differently by the court system depending on value. Claims with a value of less than £10,000 are dealt with by the Small Claims Track. Claims with a value of between £10,000 and £25,000 are dealt with by the Fast Track. Claims with a higher value than this are handled by the Multi Track.

There are plans to bring in a new Intermediate Track which will eventually apply to claims valued at between £25,000 and £100,000, leaving only those claims valued over £100,000 being allocated to the Multi Track. These changes are likely to be brought in from October 2023 together with a new fixed recoverable costs regime for all claims valued at between £10,000 and £100,000.

Higher value and more complex claims might have to be dealt with by the High Court.

For Muti Track cases, the court asks the parties to detail the predicted costs of the litigation, up to and including the trial itself. The parties will disclose a list of the evidence they have in relation to the claim, and can inspect documents by request. Witness statements are also exchanged, along with any expert reports that have been agreed. A barrister will be instructed by each party as part of their legal team, to represent them in the courtroom.

The final stage before the trial date, time and location are fixed is for both parties to complete pre-trial checklists, where the court checks that all stages and directions have been completed as required.

The trial is held and unless the two parties agree to settle out of court during the process leading up to this, a decision is made on the dispute that is legally binding after the judge considers all of the evidence. The decision may be made at the time or may be delivered later, either at a hearing or in writing.

It's usual for the unsuccessful party in the dispute to be ordered to pay a proportion of the costs of the successful party, but recouping all costs is very rare.

Commercial litigation can be a lengthy and costly process, so taking a business dispute to court should always be a last resort.

Get in touch with our team to find out more about how we can assist with commercial litigation.