Murder has one thing in common with dodgy commercial dealing: it’s much more likely to be perpetrated by someone you know. Nick Britton looks into the complex issues surrounding legal disputes with a client

Mike Watson, MD of industrial cleaning company Tube Tech International, has fought three legal battles over the past 25 years. ‘Considering that our industry as a whole is fraught with problems, that isn’t too bad,’ he says, adding that a proliferation of “man and a pump” operations has led to a general lack of professionalism.

The most recent case began when the £3 million turnover business was asked
by a blue-chip petrochemical company to undertake an urgent cleaning assignment at
one of its African refineries. Tube Tech mobilised a ‘vast arsenal’ of equipment and
50 staff, having negotiated a fortnightly payment schedule to enable it to meet the
job’s hefty cash flow requirements.

One month before completion of the project, the payments ceased. Watson says
he was ‘palmed off’ with excuses for a while, then the client’s attitude hardened.
‘They just said, “We’re not paying any more”,’ he recalls. ‘It was a case of moving
the goalposts: they argued our agreement should be “x”, when the contract clearly said it was “y”. We’d delivered them a monstrous saving, and we were being squished into the ground, bullied by a multibillion dollar company.’

Outrageous as such behaviour seems, it’s sadly all too common, according to Michael Clavell-Bate, a partner at law firm Eversheds.

‘There’s no doubt about it whatsoever: we are seeing many more examples of
pressure being brought to bear between customers and suppliers as people look
to save money,’ he reveals.

‘There are cases of major organisations calling suppliers and saying, “We know we’re purchasing 1,000 units a week for £200 an item, but we’re now putting you on notice that as of 5 September we’re only paying you £150 an item.” That approach is not unusual in an economic climate like this one, but it has no legal basis.’

In Tube Tech’s case, the amount of money under dispute was less than £1 million. ‘At one point, we were talking about widgets that cost pennies when we all knew every hour of legal time was costing £1,000,’ says Watson.

With the help of its in-house legal team, Tube Tech’s ex-client stretched the dispute
out for five years, through attempts at mediation to a court judgement and finally
an appeal. In the end, though, the decision went in Tube Tech’s favour – a victory that Watson credits not just to his having right on his side but the quality of his documentation. ‘We’re prolific note-takers,’ he says.

Tube Tech recouped most of its legal costs, and Watson wouldn’t rule out working with the organisation again. ‘We don’t have a problem with them,’ he comments.

For those companies on the losing side of a legal dispute, such generosity of spirit
may be hard to find. According to Clavell-Bate, the fear of a breakdown in the relationship with an important client is a key reason for companies’ reluctance to enter a dispute in the first place – but it is possible to avoid such a split.

‘We had a case where our client was owed more than £1 million by another company, on whom it absolutely depended for its business,’ he relates. ‘We fought them, and fought them aggressively, but in a way that we laid out the ground rules in advance.

‘We agreed to use an expert determination procedure, whereby a senior QC was engaged as an expert. We exchanged documents, then spent half a day with him and put forward oral arguments.’

Clavell-Bate says the case went in his client’s favour, but the relationship between the two companies was preserved. Furthermore, the cost and time savings compared with a full-blown court case were enormous (see boxout).

Watson says that of the three clients he’s entered legal disputes with, one is still working with Tube Tech, though ‘it took a while to get back with them’. He admits that it can be hard to suppress personal feelings when a company has jeopardised your livelihood, but it’s worth it in the long run.

‘Bite the bullet, and be persistent but polite after the dust has settled,’ he counsels. ‘Go back and put forward a well-thought-out suggestion as to how you could work together having learned from the court case. Give them an olive branch if possible.’

You should not hesitate to stand up for yourself when a disputed sum of money is significant, Watson adds. ‘Always ignore those who say, “Look, if you drop the case I’m sure there will be a load more work for you”,’ he advises. ‘It just doesn’t happen.

‘If you are going to sue, then play the numbers game elsewhere and get on with
the job of selling more to others. Never think you “need” a client.’