By Sally Butt
The English courts offer the best justice in the world, supported by the best legal professionals. The entry fees have traditionally been modest, even if the cost once entry is gained can be eye-watering. As Mr Justice Darling famously quipped, "The law, like the Ritz Hotel, is open to all".
Go deeper with GlobalData
But has that now changed? From 9 March, there have been hefty increases to courts’ fees, particularly issue fees. The issue fee for a claim between £10,000 and £200,000 is now 5% and £10,000 for any claim of a value exceeding £200,000 (which compares with £1,315 pre-9 March). There are other increases in application fees too. Although the fees for issuing a return of goods claim have not increased at the moment, one can only speculate that such an increase will follow. Sadly regular court users will know that the standard and speed of service at many courts has not increased commensurate with the fee increase.
These substantial increases will be keenly felt by those institutions who have to bring volumes of claims – not least lessors. They will result in a significant increase in a lessor’s annual legal costs spend. It will also not be lost on lessors that increased court fees being debited to accounts in arrears may not be the best way to assist customers in genuine financial difficulties.
An undisputed debt claim has always been recoverable via use of the service of a statutory demand or presentation of a winding up petition in the right type of case, and lessors should continue to use these devises where appropriate and proportionate to do so.
Where valuable assets are at risk, the urgent recovery of the asset is a priority. We still believe the most effective route to this is an urgent application to the court for interim delivery up of the asset which can lead to its return within as little as 24 hours.
The earlier use of mediation at a pre-action stage should also always be considered when claims are disputed. The issue fee for a £200,000 claim can easily cover the costs of a straightforward mediation. Early without prejudice meetings, without the expense of a mediator, are also highly effective. Lessors may wish to invite defaulting customers into "open days" at their advisor’s offices to secure over-the-table arrangements for repayment quickly and cost-effectively.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataAn innovative approach
But what about a more groundbreaking approach to effective dispute resolution at a reasonable cost? Lessors are often at the forefront of innovation in taking their products to market. Why can’t this mindset be applied to more cost-effective dispute management for the industry and a fairer outcome for defaulting customers?
Our view is that this theme of increasingly expensive litigation should mark a sea change in how disputes are approached and managed by lessors. Lessors should think about adopting a fresh approach to recovery litigation and consider developing an entirely different approach to achieve cost-effective outcomes in recovery litigation.
Arbitration
If a dispute requires a binding decision, an alternative to litigation is arbitration. This is a method of alternative dispute resolution (ADR)outside the courts where the parties agree to be bound by the arbitrator’s decision, which is enforceable thereafter in the courts. While popular for international commercial dispute resolution, the costs involved have often dissuaded financial institutions from following the ADR process. We suggest that this view should be revisited, particularly for high-value claims (where arbitration fees may now be cheaper than court fees) and for the recovery of high-value assets in difficult jurisdictions. We suggest the industry seriously considers the inclusion of an agreement to arbitrate clause in some finance agreements to allow for use of this process where appropriate.
In our view, lessors should at the very least consider the inclusion of a multi-tiered dispute resolution clause in finance agreements compelling parties to use ADR before proceedings are issued.
A new disputes procedure for the industry
We recognise that arbitration may still not be proportionate in some cases and that the need to undergo ADR procedures such as a mediation may be constraining for lessors keen to progress matters quickly. We believe that an opportunity exists for the industry to lead the way in pioneering a new leasing-focussed arbitration process which could be a cheaper alternative to the law courts.
Of course the savings achieved in not having to pay an upfront court issue fee must not be eroded by the costs of the alternative system. It would therefore be important for any alternative system (whether it is based on arbitration or mediation) to have a streamlined process for steps such as disclosure and exchange of witness evidence and to provide a quick route to a decision on simple cases within a matter of days rather than months or years. This would be a potentially significant enhancement for the industry, but also provide a fairer outcome for customers too.
We suggest that now is the time for the industry and its legal providers to work together to shape some sort of system or set of rules that would work for it, and which would achieve true cost savings during the course of it – not just a saving of upfront fees. It should be possible to devise a system which could deal with volume or routine case as well as the more complex ones. The outcome could be a simplified, cheaper and efficient system for all concerned and mark out the industry as once again being at the forefront of innovation to benefit both itself and its customers. It would require a coordinated industry approach to achieve this.
Sally Butt is a partner and Head of Financial Services at the law firm, Addleshaw Goddard LLP.
