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Cordial Relations: How Litigation Can Take The Fizz Out Of Even The Fruitiest of Businesses

The lengthening spell of warm weather has left us almost constantly trying to quench our thirst.

For those of us in the North West, there's one taste with which many of us are readily familiar: Vimto.

However, the company which makes the fruity soft drink has revealed that it's recently experienced the kind of high pressure not promised by the Met Office.

Nichols has announced that its pre-tax profits have taken a sizeable hit as a result of having to pay £8 million in damages and up to £1.5 in costs awarded to its distributor in Pakistan by the High Court earlier this month.

The size of the award outstripped the £2 million which the company had set aside in its 2013 accounts to meet what it thought it might have to shell out if the Court's judgement went against it.

Whilst the figures themselves might be enough to get many people hot under the collar, regardless of the current summer temperatures, the case illustrates several important consequences of and issues involved in commercial litigation.

It demonstrates the impact which litigation can have even on a well-established business. Vimto was first sold from a Salford warehouse in 1908 and, as the case suggests, is drunk across the globe.

Coverage so far has focused on the effect which the damages pay-out has had on Nichols' bottom line.

I think that the broader implications are even more interesting. Litigation can be measured not only in the size of any settlement and the legal fees involved in getting to that point but in the time which a company's management have to spend dealing with it.

You could say that any potential such distraction is a broader and relatively unseen cost of litigation, something which is not always immediately appreciated. Although we can't say for sure to what degree that might have been true for Nichols, it is a common feature of cases which I and my colleagues in JMW's Commercial Litigation department handle.

As you'd imagine, such an effect is even more pronounced for firms which are smaller and don't have the personnel to absorb even some of the impact of senior managers having to concentrate on legal affairs.

Whenever we take on a case, we are looking for means of resolving whatever problems there are straight away and not prolonging the impact - and increasing the costs - associated with action.

It's a common approach because, after all, there are very few clients who want to pursue a lawsuit as a matter of principle. The majority, in our experience, simply want the problem to go away.

We believe that engaging with the other side - whether they be the claimant or responding to our client's complaint - is critical to reducing tension and bringing a dispute to as swift, realistic and constructive a closure as possible.

Conversation not conflict is key to achieving the right result for everybody and that is something that we can all drink to.

Cheers!

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