NEWS & VIEWS

Saving Money

It is frequently said that early intervention and using mediation saves both costs and stress. I will attempt to illustrate exactly why this is nearly always the case. This exercise assumes the reduction of stress by avoiding cross-examination, publicity and a court hearing is self-evident.  What about costs?

Take a relatively modest example of a contractual dispute over, say, £350,000. The time estimate for a court hearing is three days. A partner in a county town firm charges £300 an hour and has an assistant who charges £150 an hour. The litigation takes nine months to get to court and a barrister is retained who charges £3500 as a brief fee and refreshers of say £300 for the other two days. The evidence requires disclosure of a bundle of 150 pages and preparation of three witness statements.

Here are some typical estimates of the time for which the lawyers will charge assuming no settlement occurs.

Partner

Taking instructions, dealing with preparation over 9 months, taking witness statements and supervising disclosure, corresponding with other side and instructing counsel. Limiting attending court to one hour a day: say 100 hours (which amounts to under 10 hours a month).

Assistant

Providing support throughout the 9 months and full attendance at court: say, 65 hours.

Adding these times together you will pay £30,000 for the partner, and £9,750 for the assistant and £4,100 for the barrister. A total of £43,850.  Vat has been ignored as has any risk factor of having to pay the other side’s costs if the claim fails. I have also assumed that no conferences with Counsel have taken place (which is unlikely).

If you mediate, then obviously the amount paid for preparation depends on when the mediation takes place but the earlier it does the more is saved. Therefore, one should often resist those who say that “it is too early to mediate, let’s wait until we have completed disclosure of all documents”. That is an excellent way to spend money when it may be quite unnecessary to do so.  A settlement will only be reached if it satisfies the parties. If it fails, disclosure can take place then.

It is entirely possible that the total cost can be restricted to less than half incurred if a trial takes place. The services of a decent mediator can be obtained for less than £4000 a day and most mediations at this level are resolved in a day and the general success figure for commercial mediations is over 80%.  Add the fact that the outcome is entirely private then I suggest the example shows that what is said frequently is entirely correct. I add that I believe these time estimates to be modest and there are many examples of cases when legal costs entirely outstrip the amounts in dispute. The other sad fact is that whilst this example assumes the amount in dispute to be £350,000 if it were to be half as much the time spent would not be much less.