In her latest Alternative Dispute Resolution series article Tracey Summerell examines the role that stress can play in disputes.

The decision in J Wanstall & Sons v. Fridays Ltd [2022] EWHC 2759 (TCC) highlights the immense personal stress parties suffer when trade disputes arise.

After a salmonella outbreak started on an egg farm, issues arose between the farmer and its buyer. Initially, they took a practical approach and met to discuss the possible routes of contamination and infection, and their consequent costs. However, the relationship later deteriorated and the farmer issued proceedings. The decision in a subsequent summary judgment application is notable, not for the result but for its acknowledgement of the human side of disputes.

Firstly, while the parties talked and corresponded about the issues, it was not clear even in the midst of discussions what the dispute was or even whether there was a dispute. Further, while the farmer agreed to accept a payment from the buyer, it was clear from the correspondence that each party had a different understanding of the nature of the agreed payment.

Secondly, correspondence quoted in the decision evidenced the farmer’s (understandable) stress during the salmonella crisis: “I am obviously very anxious … This has all come as rather a shock … we were in such a dark hole financially … a very unsettling time…”. The language leaves little doubt about the financial and emotional distress that took the farmer “almost to breaking point”.

Intense stress makes it hard to keep a clear head when evaluating settlement terms and their ramifications for the business. An offer of much-needed finance might keep the business going temporarily – but how will its terms take effect in the longer term?

Post-pandemic and facing supply chain pressures, rising inflation and costs, many businesses are cash-poor and many business owners are anxious about the future. Disputes tend to proliferate in bad times and, while most acknowledge the good sense in the government’s pandemic call to collaborate, long-term stress is not conducive to effective collaboration.

So, how can cash-poor businesses manage disagreements and avoid disputes?

• Recognise the impact of rising stress levels on all involved. Protect yourself and your employees by arranging appropriate support from friends and relatives. Recognise the link between financial difficulties and mental health, and access the free advice available on sites like https://nationaldebtline.org/. If rising debts are the issue, seek support as soon as possible and work with creditors to manage the debt. If you are suffering mental health issues, tell the creditors.
• Deal with supply chain or site issues that arise as soon as possible. Failure to do so can exacerbate problems, increase anxiety and damage trade relationships. Try to set aside time to prepare carefully for discussions about the issues. Research the facts. List all the issues. Calculate your current and potential losses. Estimate the other parties’ losses. Collate relevant documents. Assess your commercial needs. Discuss the options with a work colleague, friend or relative.
• Focus limited budgets for legal fees on specific instructions to a solicitor such as: advice on the issues or proposed settlement terms; advice on alternative dispute resolution (ADR) procedures; or drafting a settlement agreement. ADR procedures such as expert determination or mediation can help diffuse rising tension between disputing parties that, in turn, reduces stress.
• Remember that seemingly simple discussions can result in a binding oral agreement. If you do not understand an offer, ask for clarification. Confirm your discussions in writing to the other party.

Above all, reach out for support – whether from family, friends, lawyers, your doctor, debt helplines or charities like Mind.

This article was first published by Construction Law on 5 December 2022 here.