Remember the collapse of Atlantic Computers in 1990? It also brought down British & Commonwealth Holdings (B&C) – the company that had taken it over.
The collapse triggered a series of litigations. After an extensive investigation into Atlantic by the DTI, Atlantic and B&C started proceedings against a spectacular cast including BZW (B&C’s advisers in the takeover), NM Rothschild (Atlantic’s advisers in the takeover), OC&C (strategy consultants in the takeover), Spicer & Oppenheim (Atlantic’s former auditors) and various Atlantic directors.
B&C also sued Atlantic. B&C claimed a total of £850m including interest. The trial had been scheduled to begin in May 2000 and was predicted to last for 15 months. The litigation settled in January 1999 following the biggest-ever known European mediation. The mediation was conducted with the support and approval of the Centre for Dispute Resolution (CEDR) by two co-mediators – Lord Griffiths, a retired Law Lord, and US mediator Jonathan Marks.
Is mediation or alternative dispute resolution (ADR) particularly suited to insolvency-related cases? We think it is.
Unique commercial considerations
Regular litigants may have more than purely commercial concerns at heart. They may be keen to have their day in court, protect their reputation and capitalise on or avoid potential publicity.
Liquidators or administrators have principally commercial objectives in mind. Their primary duty is to creditors. Mediation may also provide a commercial solution for creditors. For example, the mediated settlement could require the creditor to vote in favour of a Company Voluntary Agreement or a scheme of arrangement.
Liquidators and administrators’ duty of care and skill means they are particularly keen to ensure quick and speedy resolution of disputes. A successful mediation will invariably be cheaper and quicker than a court action, resulting in more money for creditors and more time for the liquidators and administrators to concentrate on other matters. They are under a duty to consider the use of ADR – and will have to justify themselves to creditors where they have not done so.
An administrator can make the company enter into a mediation agreement and be bound by it, and must ensure that the terms are reasonable. A liquidator is empowered to settle disputes but only with creditors’ committee or court sanction. Any settlement will therefore be conditional on this, lending the liquidator greater bargaining strength.
