Dispute Resolution As An Investment For SMEs - 1st March 2021

• Published date: 02 April 2021
• Subject Matter: Litigation, Mediation & Arbitration, Real Estate and Construction, Arbitration & Dispute Resolution, Trials & Appeals & Compensation, Landlord & Tenant - Leases
• Law Firm: Macdonald Henderson
• Author: Mr Michael Hankinson

Why do venture capitalists fund litigations on behalf of organisations and individuals in which they otherwise have no interest?

Because litigations can be investments (see some further background in relation to litigation funding in the UK below).

The same proposition applies to you, as the owner of an SME, and any disputes or problems that your business might be facing.

If you invest funds, and your time, into tackling a dispute or a problem - then you can produce a return; the funds recovered, or commercial opportunity protected or created, as a result, can exceed the value of the investment.

Here are two very different (redacted) stories, from the real world, of SME clients of Macdonald Henderson that invested time and money into setting-about a dispute and enjoyed the benefit of a return:-

Real World Example A

Our clients purchased the entire share capital of a business for several million pounds.

The share purchase agreement included a number of warranties, or guarantees, about the state of play of various parts of the business.

Some of those warranties were breached. Our clients did not entirely get what they had been promised.

Claims were intimated. Efforts to resolve without litigation were made. A pre-litigation offer was made by the sellers.

However, our clients refused that offer and instructed Macdonald Henderson to raise court action for the financial cost to the business of putting the breaches of warranty right.

Ultimately, after around 12 months of court procedure but before a final Hearing, a settlement was negotiated.

The settlement represented around a 300% return on the financial investment.

Real World Example B

On the opposite side of a battle, and with much lesser sums at stake (just short of '30,000.00) - our client was tenant under a lease, which included provisions for payment by our client of service charges.

At the start of year 6 of the lease, the landlord invoiced our clients for service/maintenance costs incurred by the landlord over the course of the prior 5 years.

We advised our client why it was too late for the landlord to raise these charges.

Again, efforts were made to resolve without litigation. Our clients made an offer (given that even in...