For many small businesses it is a bane of their life that at some point they are going to end up in a court defending or claiming against someone for money. The case can be clear cut, it can be flimsy, you may have a counter claim or a large claim, the other person may have no leg to stand on or a reasonable case. The principle of dealing with court cases is always the same: know when and how to get out of the case with minimal risk to you or your company’s finances and reputation. Also know when to step in and pursue matters as far as possible.

I have been involved in court cases over the years as a small business on numerous occasions. We usually have to sue at least five of our clients every year (we work with solicitors so this is to be expected I guess!), and out of these probably one ends up with a full court hearing in all likelihood.

We always progress matters to court and attend the final hearing if we think we have a watertight case. Similarly even if we have a watertight case we always try to negotiate a settlement without needing to attend court, even dropping our claim amount considerably in order to achieve this.

If we don’t have a particularly strong case we may still attempt to bluff the defendant into paying us more than we think we can get away with, but we will always seek to negotiate a settlement as far as possible, but even considering withdrawing at some stage if we believe there is any risk at all to the financial stability of our business.

So how do you know at what point to settle a case or walk away? The answer is simple – look at your case, and give it a percentage chance of success looking solely at the contractual terms. If your cases are anything like ours then there will be rather a lot of extra information in addition to the contractual situation, and it is so easy to get sidetracked by this and forget the actual case you are pursuing.

Let me give you an example. I, as a recruitment consultant, introduce a candidate to a firm, they take the candidate on, they subsequently decide that the candidate is no good and in some way we’re at fault for this and refuse to pay us.

They may come back to us and threaten to issue a counter claim for a large sum of money, but the crux of the case is going to be the contractual position at the time we introduced the candidate and whether or not a) a contract exists and if it does, then b) are the other party in breach of it? If these answers are both yes then there’s a very good chance that everything else that crops up in the case is utterly irrelevant and needs to be discounted from any decisions you make on settling the case.

If however there is no clear contract and it is going to be open to the court’s interpretation as to what the terms were, and there is also a possibility that the other party may have a claim against you, then it is important to take a view on the case and not get too sucked in to extensive court proceedings if there is a chance you’re going to lose.

Keeping strictly to your contract and forgetting everything else the defendant throws at you can be very, very hard as a small business because you’re always worried that if you take anything on and progress to court there is the chance that you will end up losing and the other side will be awarded costs against you.

This is the beauty of the small claims procedure in the UK. By following the small claims procedure, which is to sue someone for less than £10,000, you only ever pay the court costs of the matter even if you lose. The defendant or other party cannot claim legal costs under any circumstances unless the court decides you are in some way taking a vexatious case out against them.

This means that you can be fairly assured that your case is not going to cost you considerable amounts of money, and apart from some time attending court you will not be subject to severe financial issues if you decide to go ahead and press your claim. This is very important to think about all the way through your case because it does mean that you are safe in the knowledge that even if you are wrong and your case is not watertight and the Judge goes against you, you are not going to lose out to a significant amount, and the only money you’re likely to lose are your own costs and the claim you are bringing.

It is important to try to settle as quickly as possible at any time because if you do not, you are leaving yourself open to a decision being made by a Judge. As those who work with them will testify, most District Judges working in the County Courts in the UK are a law unto themselves, and they don’t always go with what is obvious to the parties. I have been involved in cases where a District Judge has taken a completely fresh look at a case and seen something that neither party had noticed and decided that it is of fundamental importance, and this has subsequently changed the outcome of the case without either party realising that this was going to happen.

However I can safely say that most of the ones I’ve come across have been very good and got to the heart of the matter quickly, and the decisions they have made have been logical, sensible and, importantly (!), in our favour.

So the key to knowing when to settle is to make sure you always take a pragmatic view, think very carefully about your case, and if at any time you decide you have less chance of success than say 90%, run away as quickly as possible.