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What is alternative dispute resolution?

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Introduction to alternative dispute resolution

Alternative Dispute Resolution (‘ADR’) is a way to try to resolve a civil dispute. Successful ADR resolves the dispute without the need for a court hearing. (Having said that, civil disputes which have reached court could still be resolved outside of court e.g. by negotiation).

People as well as companies often want to avoid disputes ending up in court, because:

  • Court proceedings can be expensive
  • Hearings are normally public, so can lead to bad publicity.
  • Resolving disputes in court can also be expensive.

The main types of alternative dispute resolution are:

  • Negotiation

  • Mediation

  • Conciliation

  • Arbitration

Each is discussed briefly below.

What is negotiation?

  • Negotiation has the meaning that most people would understand it as. It is simply trying to resolve a dispute by negotiation.
  • There are no real formalities for negotiation. As you would expect, you can negotiate on the phone, by email, by letter, in a meeting, etc.
  • This is usually a cheap way of settling a dispute, as it does not necessarily require legal advice, etc.
  • Success depends on the willingness of the parties to come to an agreement.
  • It is private (as opposed to court proceedings which are public).
  • Even if a matter has reached the stage of court proceedings, the parties are free to try to negotiate a settlement outside of court.

What is mediation?

  • Here an independent, impartial person known as a ‘mediator’ meets with the parties to try to help them to come to a settlement.
  • The mediator cannot say their opinion or advise the parties on the strengths and weaknesses in their arguments.
  • Some mediators charge a lot of money for their services, but for some types of disputes there are mediators which are free in some circumstances. This however is uncommon.
  • Discussions with the mediator are private, so there is less risk of publicity, etc.
  • The mediator cannot force the parties to come to a settlement.

What is conciliation?

  • With conciliation the person trying to help the parties to come to a settlement is called a ‘conciliator’.
  • The conciliator is more involved than a mediator in trying to resolve the dispute, in that he or she can give an impartial opinion on the legal position of the parties’ arguments.
  • It is up to the parties whether they agree a settlement or not, as the conciliator cannot make the parties come to a binding settlement agreement.
  • The conciliator usually charges for their services.

What is arbitration?

  • Commercial contracts often provide that in the event of a dispute the matter is to be referred to an arbitrator rather than to a court to decide the outcome. The reason for this is to avoid publicity, expensive court costs, etc.
  • The contract usually sets out how many arbitrators are appointed to settle the dispute. Normally this is one.
  • Even if the contract is silent on the use of arbitrator (or even if there is no contract), parties with a dispute in civil law can often choose to avoid court and opt for an arbitrator.
  • The arbitrator effectively acts like a judge in that he or she will hear the evidence and make a binding decision to resolve the dispute.
  • The parties decide how the arbitrator hears evidence, etc. The could agree, for example, written statements only being allowed or by the parties, witnesses, etc. giving evidence in person to the arbitrator.
  • The arbitrator makes a binding decision to decide the outcome of the dispute. Limited rights of appeal exist (in some circumstances).
  • Arbitrators usually charge a lot for their services.
  • Hearings with an arbitrator are usually private (rather than court hearings which are public).

To summarise, alternative dispute resolution has the aim of resolving civil disputes without the need for expensive and long court proceedings.

Only in the case of arbitration is there a guaranteed binding decision. In all the other types of alternative dispute resolution discussed above it is up to the parties to decide whether they wish to come to an agreement. Only the parties can decide whether they wish to resolve the dispute. Consequently court proceedings could still be necessary to resolve a dispute.

Further Information

The above is a brief introduction into alternative dispute resolution. For more details on how I could help you with your Civil Litigation Law studies, feel free to contact me by clicking here on my Contact Me page.

Alternatively you may wish to see the following pages:

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Types of company structures in the UK

In this post I introduce the different company structures in the UK. Read on to discover more.

In the UK the following company types exist:

  • Sole traders

  • Partnerships

  • LLPs (Limited Liability Partnerships)

  • Private Limited Companies

  • Public Limited Companies

Each business type has different legal consequences. I will briefly deal with each in turn.

Sole traders

Anyone who starts working for themselves on a self-employed basis normally automatically becomes a sole trader.  No legal formalities are necessary to set up as a sole trader.

Sole traders are responsible for reporting their own income.

There is no public disclosure of financial records.

Sole traders are in complete control as to how the business is run. Essentially they control their own destiny.

One disadvantage of being a sole trader is they have unlimited personal liability. Essentially all their assets can be liable to pay for a claim made against them. Essentially no distinction is made between their business assets and their personal assets. All their assets are therefore liable to pay for debts regardless of their status.

Some sole traders may be able to take out public liability insurance. This may help them meet the cost of some claims (e.g. a professional negligence claim). This would not however cover general trading debts, etc. Sole traders will always be personally liable for these debts.

If a sole trader cannot pay their debts, they could become bankrupt. For this reason, raising finance from banks is often a difficulty for sole traders.

Partnerships

A partnership exists where two or more people start working together with a view to making a profit.

No legal formalities are necessary to set up a partnership.

Partners are taxed as individuals.

There is no public disclosure of partnership financial records.

Partnership agreement

As indicated, no legal formalities are necessary to create a partnership. However, a partnership agreement is always a good idea. A formal agreement can help to avoid or reduce disputes at a later date.

Ideally the partners should have a finalised partnership agreement before the partnership begins. The agreement sets out (amongst other things):

  • Who has what responsibilities, powers, etc.;
  • How decisions are made in the the partnership; and
  • What shares in profits/losses each partner has

A partnership agreement can also set out important internal procedures for the running of the partnership. It can also set out procedure for partners leaving the partnership or new members joining. This is important, because, for example if a partner ‘retires’ from a partnership the partnership automatically ends. A partnership agreement could provide that the partnership continues notwithstanding a partner leaving.

In the absence of express agreement saying otherwise, each partner has an equal share in profits (and losses). If one partner has contributed more assets or capital into the partnership, for example, this may be unfair. The partnership agreement can vary the default position of equal shares in profits (and losses).

Decision making in partnerships

By default, decisions in the partnership are made by agreement of the majority of partners.  This could possibly be problematic in practice. One partner might, for example, not wish to involved in the management of the partnership. The partnership agreement could say what type of decisions need the agreement of a majority and which decisions need all partners to agree upon. It could also provide for what happens if a partner is, for example, hospitalised.

In addition, if ‘the decision by majority’ rule is not varied (typically) in a partnership agreement and there is an even number of partners this create problems. In this situation there is likely to be a deadlock at some point when the partners cannot agree upon an issue. The partnership agreement could set out what happens in this situation. This could be, for example, one partner’s decision having the final say. Agreeing this in advance however may be problematic and could cause friction and frustration at a later date.

Partners should get legal advice to ensure the agreement accurately records their wishes. The advisor would also advise them on the legal consequences of the agreement. They would also seek to cover common problematic situations in the partnership agreement.

Personal liability of Partners

Partners have unlimited personal liability for any debts of the partnership. This means there is no distinction between their business assets and personal assets. Consequently all their assets are liable to settle any partnership debts.

LLPs (Limited Liability Partnerships)

Limited liability partnerships are similar to partnerships. The main points concerning LLPs are:

  • LLPs must be registered formally at Companies House

  • People who run a LLP are ‘members’ rather than ‘partners’

  • Members of a LLP have limited liability as to the liabilities of the LLP. This means that their personal assets are not liable to settle general debts of the LLP.

  • However, a member of the LLP could have unlimited liablility for their own personal conduct. This is usually when a claim is made against them for professional negligence. In this situation their own personal assets may be liable to pay for any claim.

  • Members may be able to take out professional negligence insurance. This may help them to meet the cost of a future professional negligence claim.

  • LLPs must send financial records to Companies House, which the public can see.

Private Limited Companies

A limited company does not exist in law until registered at Companies House. Registration is possible by post or online.

Some of the main parts of setting up a private limited company include (amongst others):

  • appointing a director (or directors or director(s) and secretary);
  • allotting shares;
  • submitting the company articles; and
  • confirmation of who is responsible for keeping Companies House records up to date, etc.

Company Articles

The articles are an important part of the company constitution. Amongst other things, the articles set out:

  • internal procedures that must be followed by directors; and
  • voting procedures, etc.

There are standard articles that can be used. However, each company should amend these to meet the needs of that company. Consequently, legal advice is essential to ensure the articles are suitable for the proposed company.

The public can read the annual accounts of private limited companies.

Decision making in limited companies

Directors’ powers are usually set out in the company articles, but are subject to legislation. Directors usually can make normal everyday decisions on the running of the business. However more important decisions relating to the company usually need the shareholder’s approval.

Liability of Shareholders & Directors

Normally shareholders in a private limited company have limited liability. What this means is they could lose their investment, for example, if the company becomes insolvent. They would however normally not be liable to pay anything further towards the companys’ debts.

The concept of limited liability, strictly speaking, only applies to shareholders and not directors. What this means for someone who is both a director and a shareholder is:

  • In the absense of wrongdoing the person will usually have limited liability as a shareholder, so may lose their shareholding investment.

  • However, as a director they may have to contribute towards the companys’ losses.

Directors normally do not have automatic personal liability. However, they may be personally liable for personal misconduct. I do not discuss this further here, but would happily discuss it during law tuition.

Public Limited Companies

Public limited companies are similar to private limited companies. However they have two main differences from private limited companies. The two main differences are:

  • Public limited companies must have a minimum of £50,000 allotted share capital; and
  • A company secretary is a requirement for public limited companies.

One advantage public limited companies have over private limited companies is they can offer shares to the general public. Therefore, their ability to raise finance is greater, because they can advertise to the general public.

Shareholders in a public limited companies again usually have limited liability (i.e. they may lose their investment to settle debts).

Directors again could have liability to the company for misconduct, but I do not discuss this further here.

This aim of this post to give people an introduction into the different types of UK company. It is just for information purposes.

The above article is subject to copyright, so please do not use or adapt it for any purposes.

Further Information

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What is negligence? (Tort Law)

Negligence is all about fault

The law of negligence is complicated, but let’s discuss what it really means in plain English.

Fault is what underlies the law of negligence. If someone is not at fault then they are not negligent.

Negligence covers many different situations, such as (amongst others):

  • road traffic accidents
  • negligent advice (e.g. a doctor giving the wrong advice to a patient)
  • accidental physical injury (e.g. a cyclist accidently injuring a pedestrian)
  • nervous shock (e.g. someone seeing their relative being injured in a traumatic and distressing negligent event)

Regardless of the type of negligence claim, fault is the centre to a negligence claim. Any claim in all the above situations would focus on whether someone is at fault or not. For example:

  • In the case of a road traffic accident the focus is on who caused the accident and whether the person took reasonable care.
  • In the case of negligent advice the focus would be focused on the standard of advice.

All of the above situations have their own unique rules. The factors which would be considered in a road traffic accident are very different from those in a negligent advice claim.

In light of the above please keep in mind the law of negligence is complex. Anything but a generalisation in a short post is impossible. This post is a generalisation of the many different possible rules. The aim of this post is to give you a feel for negligence, rather than the detailed rules.

What are the key elements of negligence?

Negligence is usually focused on proving:

  1. The defendant owed a duty of care to the claimant (= person bringing the claim);
  2. The defendant must have breached that duty of care; and
  3. The claimant suffered damage as a result.

A duty of care

In claims of negligence a duty of care will usually be recognised where:

  • 1. There was foreseeability of damage;
  • 2. A sufficient proximate relationship existed between the parties; and
  • 3. It must be fair, just and reasonable to impose a duty.

The three stage-test is very vague. The idea behind this is it gives courts discretion over the situations in which a duty should be allowed or denied.

Duty of care explained in plain English

Considerations will vary enormously on the circumstances involved. The type of damage suffered (e.g. pure financial loss, physical injury, etc.) will also be a factor. However, when considering whether a duty is owed (in the context of negligence), the court usually will likely look at:

  • the likelihood of harm;
  • the closeness of relationship between the parties; and
  • whether imposing a duty is fair, just and reasonable in the circumstances

The likelihood of harm is called ‘foreseeability’. This is usually focused on looking at the circumstances and facts of each scenario to determine how likely harm was.

The closeness of relationship is called ‘proximity’. Consider:

  • The relationship between drivers with other road users. In terms of law, drivers have a close ‘proximity’ with each other as well as pedestrians.
  • A mother has a close ‘proximity’ with her child.
  • A doctor would also likely have a close ‘proximity’ with their patient.
  • The ambulance service would not usually have a close ‘proximity’ with general members of the public. (However, this may change once they agree to attend a call and assume a responsibility for the individual in question).

On the question of whether it is ‘fair, just and reasonable’ to impose a duty, public policy factors come in. This area of law can be complicated, but some arguments that could be raised are:

  • Imposing a duty could lead to too many cases coming to court.
  • The loss should have been covered by insurance (e.g. some financial losses incurred as a result of electricity negligently being cut by roadworks should have been insured against).
  • It would lead to defensive practice (e.g. doctors would have to refer everyone to specialists just in case of a negligence claim).
  • Public resources were limited (e.g. the ability for ambulances to arrive quickly on scene is subject to prioritising limited resources).

Raising a public policy reason could mean that a duty is denied in the circumstances. However this is not necessarily the case. Public policy considerations are complex. Each case is looked at in light of the considersations before a decision is made.

In reality it is often difficult to separate completely ‘foreseeability’, ‘proximity’ and the ‘fair, just and reasonable’ considerations. All the circumstances need to be considered in light of the tests to decide whether a duty is appropriate.

Breach of duty

Even if a duty is owed, it would next be necessary to prove a breach of duty. The normal test that applies to most sitiuations looks at whether the person fell below the standard of care expected of that person in the circumstances.

The standard is usually that of a reasonable person. If the person however has relevant special skills or knowledge, the person will be judged against the higher standard of someone with those skills or knowledge.

In assessing whether there has been a breach, it is usually necessary to consider:

  • The likely level of harm;
  • The likelihood of harm; and
  • Where relevant the expense of taking steps to avoid (or reduce the likelihood) the harm

Essentially:

  • The higher the likely harm, the higher the standard of care;
  • The more likely the harm was going to happen, the higher the standard of care; and
  • If the risks could have been avoided or reduced by taking precautions, the cost of those precautions and the practicality of doing so (in light of the level of likely harm and the likelihood of harm) would be taken into account

One unusual point to note is for learner drivers’ inexperience is not taken into account in assessing the standard. All drivers, regardless of their experience, are judged as having the standard of a reasonably competent driver.

Failing to act at all when there was a duty to act could be a breach of duty in certain circumstances. An example of this could be where a lifeguard on duty at a swimming pool fails to try to save a drowning swimmer.

Damage

Most negligence situations need damage to be proven. This could be physical injury, financial loss, etc. There should be a clear link between the breach of duty and the damage. This is known as proving ‘causation’.  Essentially the court needs to be satisfied that as a matter of fact the defendant caused the damage/injury suffered by the claimant. Logically it would be unfair to hold the defendant liable for damage/injury if the court does not think the defendant caused.

In straightforward cases causation is proven by the ‘but for’ test. This focuses on whether the injury/damage would have occurred but for the defendant’s negligent act (or omission).

Sometimes, however, the ‘but for’ test is inappropriate. This could be, for example, where there are multiple possible causes of the damage/injury and it is not clear which one caused the damage/injury. To cope with this, the courts may use other alternative tests to establish causation, but these tests are not discussed further here.

Regardless of the above, tests of remoteness (not discussed here), may also limit any financial losses/injuries/damage that can be claimed where the type of loss was unforeseeable. The complicated rules on remoteness I do not discuss here further

I hope the above has given you an introduction to ‘negligence’. Remember that the above is only intended to give you an insight to ‘negligence’. Detailed rules on certain types of loss (e.g. pure economic loss (financial loss without physical damage), psychiatric harm, etc.) have not been discussed.

This post is subject to copyright, so please do not copy any part of the post or use it elsewhere.

For more detailed information and information on how I could help you with tort, please see my law  tuition page page.

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