Mediation achieves better business result

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Mediation achieves better business result

Our client was a family company supplying chemicals to industry. The managing director, also a shareholder but not a family member, suddenly resigned. Next, the family discovered he was creating a business that would directly compete with our client’s company. Even worse, he would take the company’s customers, employees, sales agents and suppliers with him. This not only breached the restrictive covenants in his employment contract, but could potentially destroy the company’s business.

How we resolved the commercial dispute

We then:

Immediate steps to protect positions

Within a few days of being instructed, we had applied to the court for an emergency injunction to stop the managing director. The application was successful. However, our client faced lengthy and expensive litigation to take the case through to final judgment.

The strategy to obtain the results our client actually wanted

Using the courts, our client could seek damages for lost profits and enforce the 6 month non-competition restriction in the managing director’s employment contract. However, even assuming our client won the claim, it would only delay the managing director for 6 months.

How to address a dispute

Our client was less concerned about the damages. The family really wanted wanted to keep the managing director out of the market for as long as possible. We proposed mediation, since a settlement via mediation is more flexible and can go wider than a court decision. We agreed to instruct an expert in the chemicals sector to assess the likely loss to our client.

A good result from mediation

We used the threat of significant damages and costs to leverage an agreement by which:

  • Our client dropped their damages claims,
  • The managing director agreed not to compete for 2 years.

This great result for our client could not possibly have been reached through the courts. Note that usually:

  • Mediations are successful,
  • The costs are tiny if compared to an expensive court case.

We always consider mediation or other alternative dispute resolution (ADR) strategies in disputes of all kinds.

Alex Kleanthous heads the dispute resolution team at Gannons. As a result of reforms to the litigation system in England, parties are required to consider mediation. John Deane is the mediator at Gannons, and has acted for clients involved in sector specific disputes.