When Winning Becomes Too Expensive: The Commercial Case for Mediation

A reasonable settlement can be more valuable than pursuing the maximum result at trial. Litigation decisions need to reflect changing evidence, future costs and the financial consequences of both defeat and success.

The Law Society Gazette reports that Thomson Heath Jenkins, a firm involved in the unsuccessful privacy litigation brought by Prince Harry and other claimants against Associated Newspapers, has ceased trading and called in insolvency practitioners.

That reporting raises wider questions about substantial litigation and financial exposure. It does not establish that the litigation was the sole cause of the firm’s difficulties. This article makes no assumptions about its borrowing, creditors, funding agreements or confidential advice.

The broader commercial question is not simply “Can we win?” It is “Does continuing on these terms still make commercial sense?” A reasonable settlement may be worth more than pursuing the maximum possible result at trial.

Prospects are not fixed

An assessment at the beginning of a dispute is necessarily based on incomplete information. Disclosure may reveal documents that change the picture. Witness statements may expose inconsistencies. Expert evidence or significant procedural decisions may alter the likely outcome.

A case that initially appeared attractive may become materially less promising. Equally, new evidence may strengthen it. Neither development removes the need to compare the likely result with the cost of achieving it.

That is a general observation, not a judgment about whether the Harry litigation was strong, hopeless or unlucky. Reassessment should be based on what is known at the time, not hindsight.

Different people bear different financial risks

The client’s own legal fees and potential liability for the opponent’s costs are distinct. A client may also incur expenses for experts and other work needed to prepare the case.

Where lawyers’ remuneration is conditional on success, they bear a different exposure: some fees may not become payable if the agreed conditions are not met. The precise allocation depends on the agreement.

Insurance or litigation funding may provide protection or resources, but only within their terms and limits. Cover, exclusions and conditions need careful examination. “No win, no fee” does not mean nobody bears financial risk, nor does it automatically protect a client against every adverse costs liability.

Concentration is not the same as diversification

For a legal practice, committing substantial staff time and working capital to contingent fees can concentrate exposure. Work must be undertaken and operating costs met before the outcome—and any conditional payment—is known.

Several claimants do not necessarily diversify that risk. If their claims depend on common evidence or legal issues, the same development may affect them all.

“Gearing” strictly concerns debt relative to equity. It should not be used as shorthand for every financial pressure, and no borrowing is assumed here. These are general business considerations, not findings about this firm’s finances.

The sunk-cost problem

Money and effort already spent can make settlement psychologically harder. Accepting less than originally sought may feel like abandoning an investment or conceding that the struggle was wasted.

But expenditure already incurred cannot be undone by spending more. The next decision should concern future costs, realistic recovery and remaining risk. Otherwise, an understandable wish to justify the past can obscure the best available choice now.

“The fact that a dispute has become expensive is a reason to reassess it carefully, not a reason in itself to carry on.”

This is a general decision-making problem. It is not attributed to the lawyers or claimants in the Harry litigation.

What mediation can contribute

Commercial mediation creates a structured opportunity to test strengths and weaknesses and consider realistic outcomes after costs. That includes the possibility that winning will leave a party with unrecovered expenditure, delayed payment or further enforcement difficulties.

Negotiation can also explore apologies, confidentiality, payment arrangements or other agreed terms that a judgment may not provide. Discussing these possibilities before further expenditure accumulates may preserve practical options.

The mediator facilitates negotiation and reality testing; the parties decide whether to settle, with advice from their lawyers. Mediation does not guarantee agreement. Our articles on mediation, litigation conduct and indemnity costs and unsuccessful early neutral evaluation and costs explore related costs questions.

Vindication deserves a conscious assessment

Reputation, accountability and vindication may matter as much as money. Those objectives are not irrational and should not be dismissed by reducing every dispute to a balance sheet.

The task is to weigh them consciously against uncertainty, expense, time and personal burden. What would a favourable judgment actually achieve? What would defeat mean? Could an agreed outcome meet important objectives differently?

A reasonable settlement is not necessarily the cheapest settlement or an equal division of the disputed amount. Its value depends on the parties’ priorities and realistic alternatives.

Review at meaningful stages

Settlement should be reviewed after important developments, rather than left until the eve of trial. A fresh assessment from independent counsel can help test assumptions alongside the settlement process.

This does not require abandoning a strong claim. Nor does mediation suspend court deadlines: parties must continue to meet their obligations unless a valid agreement or court order changes them.

We do not know whether an acceptable settlement was available in the Harry litigation, whether either side would have agreed to mediate, or whether mediation would have succeeded. Nothing here suggests financial exposure influenced professional advice, or alleges negligence, misconduct or conflicts of interest.

Judge settlement against the realistic alternatives

A settlement should be judged against the alternatives available at the time, including the possibility of defeat and the cost of success—not against an ideal result with no expense or uncertainty.

“A settlement does not have to deliver everything a party hoped for to deliver more than continued litigation is realistically likely to achieve.”

Contact ProMediate to discuss civil and commercial mediation, or enquire about arranging a mediation.

This article provides general commentary about mediation and litigation risk in England and Wales, not legal advice on an individual dispute. The topical opening is attributed to the linked Law Society Gazette report; the wider analysis does not purport to establish the causes of any firm’s financial difficulties.