Legal update on dispute resolution

Sean Hick, Genus Law

14th October, 2015

In recent months a number of changes in dispute resolution have come into force (by both legislative updates and case decisions). Genus Law discusses the recent changes and what steps your business should be taking to ensure it is compliant.

Legislative Changes

From 1 October 2015 the Consumer Rights Act 2015, and several other pieces of legislation, give consumers and businesses advice on how to deal with issues such as faulty goods, faulty digital content, unfair terms in a contract and how services should match up to what has been agreed. They also cover what should happen when reality does not meet expectations, or when services are not provided with reasonable care and skill.

Importantly, in the age of ever increasing digital and online content, for the first time, businesses will be required to deal with complaints about digital products, such as music downloads, games and e-books.

Changes were also brought in to law requiring companies to advise consumers of Alternative Dispute Resolution (ADR) which is available to them. These are designed to improve access to low cost services available for the resolution of consumer disputes.

Generally, these changes apply to anyone providing business to consumer goods and/or services and are worth considering in all cases as best practice.

What information do businesses need to provide to consumers?

Businesses in certain sectors (for example; financial services, energy and telecoms) where the use of a certified ADR provider is required by legislation or due to the rules of a trade association, must provide the name and website of the ADR provider on:

• their website (if they have one); and

• in their general Terms and Conditions.

Other businesses (where the use of ADR is not mandatory) must, if the internal complaint handling procedure has been exhausted, advise consumers via letter or email:

• that the complaint cannot be settled with the consumer;

• details of an appropriate certified ADR provider; and

• whether the business intends to use that provider.

This information must be provided irrespective of whether or not the business intends to use ADR and even if the contract was entered into before 1 October 2015 but the dispute cannot be resolved after that date.

Whilst these changes add some additional burden onto business and their impact is yet to be measured, they are designed with avoiding litigation in mind and are likely to result in less time defending claims.

Caselaw changes

When matters do become a court issue, the one thing that companies always ask is, will I get my legal costs back when I win? In some courts (where disputes are for more than £10,000) this has never been an issue. However, in the small claims court (which now handles all claims with a value of up to £10,000) the principle has long been understood that costs should generally be met by each of the parties individually and that costs orders against the losing party should be the exception and not the rule.

In an appeal of a recent small claims court debt dispute (relating to a tenant in rent arrears), the Court of Appeal decided that the landlord’s full legal costs in bringing the claim could be recovered from the losing tenant.

This seems obtuse to the general approach of the small claims court. However, the Court made this decision on the basis that legislation could not override contract law and that where a contractual term exists expressly permitting the recovery of costs then those legal costs could be recovered.

It seems now that well drafted terms and conditions and commercial contracts can extremely valuable when a business gives credit of up to £10,000. If terms and conditions contain a specific right to recover the costs of legal proceedings then this may be relied upon in the small claims court.

What do these changes mean for business?

Following the recent changes, there are several steps which businesses should take to ensure that they are both compliant and also put in the best position when it comes to disputes:

• Ensure that a well drafted complaints procedure is in place referencing ADR if appropriate

• Ensure that website content is updated so consumers can easily find links to the business’ complaints procedure and the new requirements of ADR

• If they are happy to use ADR, consider what approved ADR providers are available

• Ensure that their terms and conditions and commercial contracts are reviewed and amended to make reference to any ADR procedure in place (and the associated provider) and to recovery of costs in legal proceedings.

Genus Law’s Dispute Resolution Team can answer any questions you might have on the new ADR requirements. In addition, our Commercial Team are experts at reviewing, updating and bespoke drafting terms and conditions, commercial contracts and complaints procedures to ensure that your business is put in the best possible position in their dealings with consumers.

To contact one of the team please email dispute.resolution@genuslaw.co.uk, commercial@genuslaw.co.uk or call 0113 320 4540.