Mediation achieves better business result
Gannons successfully mediated a dispute, which achieved a better outcome for our client than taking the case to court.
Our client was a family company which supplied industrial chemicals. The managing director of the company was not a family member but was nevertheless a shareholder in the company. He resigned suddenly and went on to create a business that would directly compete with our client’s company. He planned to take our client company’s customers, employees, sales agents and suppliers with him to his new venture. This breached the restrictive covenants in his employment contract and threatened to destroy our client’s business.
Immediate action to protect our client
After being briefed by our client, our first step was to seek an emergency injunction to restrict the activities of the managing director. Time was of the essence. Within a few days of our client first briefing us, we had obtained an emergency injunction from the courts to stop the managing director. The successful injunction application was only the first step in this case though. Our client then faced a long and expensive litigation process to take the case through the courts to a final judgement.
Limitations of the courts
Our client could easily have pursued this case through the courts and won. They would have been able to seek damages for lost profits and enforce the 6-month non-competition restriction in the outgoing managing director’s employment contract. However this would only take the managing director out of competition for 6 months. Furthermore, it would have been a much longer and more costly process than the eventual mediation.
Obtaining the best result for our client
Our client was less concerned about seeking the damages. The family really 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.
We used the threat of significant damages and costs to leverage an agreement between the two parties. This led to a commercial settlement that protected the business and restricted the managing director’s future activities.
Positive outcome of mediation
Our client dropped agreed to drop any damages claims, if the managing director agreed not to compete for 2 years.
It was only through mediation, rather than pursuing the case through the courts that we were able to achieve this great result for our client.
Benefits of mediation
Mediation very often leads to the successful resolution of cases. The costs are tiny when compared to an expensive court case. Additionally, as seen here, mediation can frequently obtain better results than the courts are capable of achieving. 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. Reforms to the litigation system in England now require parties to consider mediation before litigation. John Deane is the mediator at Gannons and has acted for clients involved in sector specific disputes.
Fantastic job by Gannons to achieve exactly what we wanted without having to pursue the matter in the courts.