There are many events that can impact negatively upon the career of a professional person. Most are generated internally, such as lack of promotion opportunities, not being happy or comfortable with the workings or culture of an organisation or personality differences with colleagues.
Perhaps the biggest single event that can be generated by an external source is the receipt of a letter from a client indicating an intention to bring a claim for negligent advice or omission. The heart will sink, the internal processes will begin and the life of the individual involved will change dramatically. Where there was contentment there is misery, where there was positive there is negative. A devastating development to which, thankfully, the majority of professionals are never exposed.
Those lawyers who advise regularly in professional negligence situations know that the manner in which they advise and investigate any given situation is vital – one of the tasks is to provide comfort to distressed individuals in such circumstances. This involves not only rigorous inquiry into the matters in question, but also addressing those issues which cause most anguish. One such issue is publicity. Every individual will in such circumstances want to minimise the likelihood of other clients, contacts and colleagues becoming aware of the claim situation. This is why dispute resolution processes, which provide an alternative path to the public forum that is litigation, can be attractive.
Mediation and arbitration
Mediation and arbitration spring to mind. Mediation is, of course, a process that the lawyer is duty-bound to consider with clients – the advantages and pitfalls of mediation are written about elsewhere. Arbitration is another genuine alternative to the litigation process, which has the advantage of taking place behind closed doors, and yet it is perhaps not always considered fully as a sensible alternative to the courts.
Suppose a client indicates that it does not intend to pay the full amount of a bill. There are genuine grievances expressed about the way in which a matter has been handled – for example the staffing or the decision-making processes in the case. The firm is disinclined to reduce the bill, while the client refuses to pay and raises specific contentions about the financial detriment that has been caused by the handling of the matter. Another law firm is instructed to advise and a letter outlining potential claims is written. If the traditional court-driven process is triggered, there is no avoiding the commencement of a three-month pre-action protocol process, which may be followed by court proceedings in the public eye. As an alternative, consider arbitration.
In a situation where there is no arbitration clause in the contract in question (and indeed there may be no written contract at all), it will be necessary to agree with the other side that the matter proceeds to final determination by way of arbitration. For the reasons set out below, the other side may well be amenable to such a suggestion. Some will think of the well-known arbitration institutions, but this is not always necessary. Ad hoc or bespoke arbitration involving agreement by the parties to a specifically tailored process to suit the claim and circumstances in question can be advantageous.
What needs to be considered?
Among other things, what most needs to be taken into consideration are: the arbitration contract (preferably short), the intended process, the extent of disclosure, the timetable and, of course, the choice of arbitrator. The nature of a discussion about process is affected by the atmosphere surrounding the dispute. In some cases, consensus is not possible. However, although parties may sometimes consider that consensus does not suit their objectives, in many situations it does or should, particularly when the size of lawyers’ bills can be reduced by cooperation. Of course, the ad hoc arbitration process is not suitable in all cases. Often parties will be advised to pursue an arbitration structure in a more formal, traditional manner.
Why consider a dispute resolution structure?
The time and cost savings can be significant with dispute resolution, although the extent of any savings will often depend on the approach of the arbitrator and their case management skills, as well as the tactics of the parties.
In cases involving ongoing commercial relationships, it is unlikely that either of the parties will consider it in their best interests to disrupt a relatively swift and effective path towards a decision.
Hopefully the parties can agree to limited document exchange and written submissions. The time and cost savings will then flow. In addition, as a general rule, the longer the period before a decision the higher the cost. This is why the ability that a robust arbitrator has to bring a case to a relatively swift conclusion and an award (which need not be reasoned to save time) can be so helpful to the parties.
In all arbitration cases the benefit of confidentiality is also a major factor. One important point to keep in mind is that parties are often well advised to be specific about the scope of the confidentiality obligation – ie spell it out.
In Associated Electric and Gas Insurance Services Ltd v European Reinsurance Company of Zurich (2003) (Aegis), the main issue for the Privy Council concerned the interpretation and scope of an express confidentiality clause and whether, in the light of that clause, an award in a previous arbitration between the parties could be used in a second arbitration in relation to an issue estoppel point. However, the Privy Council also expressed concern about those arbitrations in which confidentiality rested on an implied duty to which exceptions were then formulated on a case-by-case basis in previous authorities. The moral of the story is: define confidentiality in the arbitration agreement. This will go a long way towards dealing with one of the major concerns of the person who first received that letter outlining a professional negligence claim.
Roger Parker is managing partner of Richards Butler