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Thu 3 Apr 2014, 14:42 GMT

Survey highlights high cost of litigation for brokers


Survey of London solicitors highlights the high cost of litigation for brokers seeking judgement in the English courts.

A survey of London solicitors by International Transport Intermediaries Club Ltd. (ITIC) - a mutual insurance company that provides professional indemnity insurance to companies involved in the transport industry - has highlighted the high cost of litigation for shipbrokers and others seeking judgement in the English courts.

ITIC gave a panel of London solicitors – all of whom had previously been instructed on cases involving ITIC members – a hypothetical claim scenario involving a broker which had been cut out of commission. The solicitors were asked to estimate the costs that the broker would have to pay to take the matter to court. The average estimate of the costs was GBP 177,163.

The claim scenario given to the solicitors was based on actual cases financed by ITIC under its debt collection cover. It involved a sale and purchase broker which claimed that it had introduced principals and performed the original groundwork for the deal. The broker claimed that it had then been cut out at the last minute and replaced by another broker which had simply "tied up the loose ends". The sellers denied that they had any commitment to the broker.

ITIC said: "A dispute of this nature is likely to involve no more than a couple of witnesses and an expert giving evidence on each side. If, at GBP 177,163, the cost of winning was expensive, then losing would be even more so. Under the English legal system, a losing party is responsible for its opponent's costs. The solicitors estimated that the likely additional liability if the broker lost would have amounted to GBP 139,687. This would have brought the total costs liability faced by the broker to GBP 316,850."

ITIC says that, although few cases proceed all the way to trial, and many will settle at an early stage, often without the need for formal legal proceedings, it is important that brokers have a sufficient level of cover to fund the matter going to litigation.

ITIC says its debt collection cover pays not only for the broker’s own costs but also for the potential liability to opponents.

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