So, if as a professional or a contractor, a client presents a claim against you, how can you avoid either paying over the odds to bring the matter to an end, or ending up in formal dispute resolution of some sort? Here are a few general tips to keep you on the right track.
Hold fire on the lawyers
By all means refer to your lawyers for advice, but think twice before wheeling them out. It's tempting to unleash the most vicious legal Rottweiler you can afford on an ungrateful client, but the dispute then immediately becomes formalised and open discussion is curtailed. Both sides can become entrenched far too early.
Keep insurers in the shadows, too
You should, of course, always notify and be guided by your insurers in the event of a claim against you, but it's often a good idea to keep their involvement out of the limelight in those very early days, provided they agree. Claimants have an unfortunate habit of seeing insurers as an open cheque book and a sign that the defendant feels vulnerable.
Civility pays off
Good old-fashioned courtesy goes a long way. Avoid becoming aggressive, dismissive or curt in your response– this will force the other side into the same position. From then on, the whole thing snowballs. It is better to keep the lines of communication open and courteous for as long as you can. That way, more often than not, the claimant will drop the complaint – once it is over its initial annoyance at discovering the defect.
Play the political game
Try to research the politics of the dispute. For example, does the other side have a reason for settling by a particular date? Maybe it wants to get its end-of-year accounts straight, or it's being prepared for sale. Do you know the ranking of the people you are meeting with? Are they the decision-makers you have to win over? Bored receptionists are often a very useful source of information.
It might be cheaper to rectify a defect for free rather than appointing experts and lawyers to slug it out
Allow an honourable exit
Pride is often the biggest stumbling block to a claimant dropping a claim. I knew a defendant who humiliated the claimant's in-house lawyer in front of his boss for "wasting his company's funds on a patently spurious claim". The lawyer then felt obliged to justify himself and exaggerated the claim's chance of success. As a result, it was only after the waste of considerably more cost and time that the claim was dropped.
Don't get too hung up on the law
It can be sensible to consider a practical compromise rather than the strictly legal one. For example, it might be cheaper to rectify a defect free of charge, rather than appointing experts and lawyers to slug it out.
If you believe that the fault does not lie with you, it is crucial to explain early and in full why you hold that view. It may well not be obvious, particularly to a non-professional client. Simply saying you have no responsibility for the defect
is highly unlikely to conclude the matter. The pre-action protocol for construction and engineering disputes, which came in after the Woolf reforms, requires the defendant to set out its reasons for rejecting any claim within 28 days.
Melinda Parisotti is a barrister and a director of Wren Managers Limited, which manages a professional indemnity mutual for architects.