‘Can we win’: first question for commercial litigators
The recent British High Court litigation involving Prince Harry, Sir Elton John and several other claimants against Associated Newspapers has attracted significant attention, not least because of the profile of those involved, writes Stehen Keogh (small picture) of MHP Sellors and UL.
For many lawyers, however, the most interesting aspect of the case lay elsewhere.
The reported legal costs were striking.
Initial liability
Reports indicate that the claimants face an initial liability for approximately £9.5 million in legal costs, while the defendant publisher reportedly incurred legal costs in the region of £34.5 million, with questions regarding the final costs position continuing even after the substantive litigation had concluded.
Regardless of one's views on the underlying dispute, the case provides an excellent masterclass of the reality that commercial lawyers encounter throughout their careers: litigation can become a very different proposition from the dispute that started it.
The most important question is not always:
“Can we win?”
Very often, the more important question is:
“What happens if we don’t?”
Looking beyond the merits
When clients first seek advice on a commercial dispute, their focus is understandably on the merits of the case.
They want to know whether they have been wronged.
They want to know whether they are legally correct.
They want to understand their prospects of success and the remedies that may be available to them.
These are all entirely reasonable questions and ones that solicitors must carefully address.
However, litigation is not solely a legal exercise. It is also a commercial decision.
In many disputes, clients arrive with a strong sense of grievance.
Emotion often plays a significant role.
The client may feel that a contractual promise has been broken, that another party has acted unfairly, or that they are entitled to be vindicated in principle.
A client can be entirely right in principle and still make the wrong commercial decision by pursuing litigation without fully understanding the risks, costs and possible outcomes.
What Is the commercial objective?
One of the most valuable questions a solicitor can ask at the outset of a dispute is deceptively simple:
What is the client's commercial objective?
The answer is often more nuanced than initially appears.
A client may say they want damages, when what they really want is certainty.
A shareholder may appear determined to litigate when the true objective is obtaining leverage in a broader commercial negotiation.
A business owner may speak about principle, but what they actually need is a swift resolution that allows their management team to return its focus to operating the business.
Identifying that objective changes the nature of the advice.
Objective
Once the objective is understood, the solicitor can properly evaluate whether litigation represents the best route to achieving it.
In some cases, it undoubtedly will.
In others, another form of dispute resolution may offer a significantly better outcome.
That analysis requires lawyers to draw not only upon legal expertise but also upon broader commercial understanding and judgement.
Importance of downside analysis
Clients naturally focus on what they might recover if they succeed.
Far less attention is often paid to what could happen if matters do not go according to plan.
Yet these are precisely the questions that often matter most.
How long will it take and how much management time will be diverted?
What impact will the proceedings have on business relationships?
What will happen if the court reaches an unexpected conclusion?
Can the business absorb an adverse costs order? Is sufficient liquidity available to meet that exposure?"
The answers to these questions can fundamentally alter the commercial attractiveness of pursuing proceedings.
As commercial litigators know only too well, litigation outcomes are inherently uncertain.
Strong cases lose. Witnesses underperform.
Documents emerge unexpectedly.
Legal arguments that appear compelling at the outset sometimes fail to persuade a court.
Success is never guaranteed.
Often overlooked risk of costs
The recent Associated Newspapers decision is shining a light on the possibility of costs being awarded on an indemnity basis.
While exceptional, such orders can materially increase a losing party's exposure and serve as a powerful reminder that costs risk should form part of any strategic assessment from the outset.
When clients evaluate litigation risk, the discussion should therefore extend to the full range of potential costs consequences.
The question is not simply whether a client can afford to fund proceedings.
It is whether they can afford an adverse outcome. This distinction is critical.
Solicitor's advisory role
Clients are rarely seeking legal analysis alone. What they often require is experienced judgement.
The solicitor's role extends beyond drafting documents and presenting legal arguments.
We are frequently asked to help clients make important commercial decisions in circumstances of uncertainty.
That means being willing to have difficult conversations.
Sometimes the correct advice is to litigate aggressively and pursue the matter to hearing.
Sometimes the correct advice is to settle.
Sometimes it is to engage in mediation.
Commercial realities
Sometimes, after a full assessment of the commercial realities, the right advice is not to litigate at all.
Those conversations are not always easy, particularly where a client has a strong emotional attachment to the dispute.
They are among the most important conversations we have.
Ultimately, litigation is not simply about establishing who is right.
It is about helping clients make informed decisions in the face of uncertainty.
And that is why, before asking whether a case can be won, it is often worth asking a more important question:
What does losing look like?