West Midlands firms braced for surge in disputes and employment litigation

An increase in legal costs is expected by businesses across the West Midlands as a perfect storm of conditions results in a rise in claims, according to Thursfields Solicitors.

The leading Midlands law firm said that Covid-19 was an extra catalyst in accelerating dispute numbers that were already rising because of Brexit transition complications and the economic downturn.

Stephen Rome, who heads the Commercial Litigation and Contentious Insolvency teams at Thursfields, was commenting following a recent Gallagher Business Litigation Index study which flagged the rising trend of cases.

Stephen said: “Gallagher’s study supports what we have seen on the ground with an increase in claims across a number of sectors and the pandemic causing a further surge.”

He explained that employment cases were expected to rise, especially with the UK government’s furlough scheme due to end on 30 September 2021.

It is thought that more employees will be bringing wrongful dismissal and discrimination claims, with complaints due to injury, illness or stress also expected.

Stephen said: “Where firms decided to furlough staff, those remaining worked under considerable pressure to help keep businesses trading.

“Without proper processes in place, including ensuring adequate PPE and wellbeing support, employers are now likely to see more tribunal claims.”

Up to 60 per cent of businesses are also expected to sue another business due to breaches of contract or money not being paid. This could include claims about faulty products or services, injury or damage to property, professional negligence, data breaches or fraud.

Stephen said: “Our team has already been assisting clients with an increasing number of these types of disputes.

“Many companies were given protection from being wound-up, but organisations have pursued claims in court so once that protection is lifted they can use the insolvency regime to either force repayment or appoint a liquidator to investigate if directors have mismanaged the company since March 2020.

“However, a number of businesses have adopted a sensible and pragmatic ‘we are in this together’ attitude, avoiding legal costs by reaching settlements that allows both parties to agree variations to their strict legal position to maintain relationships.

“I expect businesses that have helped each other out will form stronger partnerships in the future.”

Stephen said companies where both the directors and shareholders are the same, including family owned businesses, were also at risk as the stresses and strains of the last year take their toll, with individuals clashing, wanting to break up the business or seek exits.

He said: “We have been advising owners caught in this situation to use alternative dispute resolution like mediation.

“Ideally, parties will reach an amicable agreement where one party can continue to run the business with the orderly exit of the outgoing shareholder. But where this cannot be achieved, court action may be necessary.”

The increase in litigation services has seen Thursfields’ own Commercial Litigation & Contentious Insolvency team increase turnover by 20 per cent, again reflecting the Gallagher study results.

Stephen added: “We continue to invest in this area with Georgia Morris joining us last year as a newly qualified solicitor, Daniel Tetsell being promoted to associate and, more recently, Simon Hocking joining us as a senior associate.

“This places us in a strong position to continue to support the SME market across the Midlands, providing strategic advice to owners on the risks facing them and how they can continue to thrive in this difficult environment.”

Businesses needing litigation advice can contact Stephen Rome via 0345 20 73 72 8 or by emailing SRome@thursfields.co.uk.