More companies turn to court in order to collect their debts

This trend, according to Nick Bates, the regional managing partner at Irwin Mitchell’s Leeds office, is a reflection of how desperate some companies have become. Mr Bates quoted the latest figures from the Chancery Division, which showed that 982 claims were issued in 2011, with both breach of contract and debt being cited as the main reasons behind this action. This marked an increase of 44 per cent on the comparable number of claims for 2010, Mr Bates said.

He added: “It may be viewed that litigation in the past couple of years has been a discretionary spend, but many companies may have reached the point where all other opportunities to avoid such action have been exhausted. As people get desperate maintaining commercial relationships becomes less important.”

Peter McCormick, senior partner of Harrogate-based McCormicks Solicitors also reported an increase in litigation activity. He added: “Those who are owed money want to collect it as quickly as possible. Some of those who may owe money wish to defer payment and often create disputes to delay the payment process and to explore the chances of getting a discount from the creditor, in return for a prompt end to the dispute.

“There is a second reason, however, why the Chancery Division of the High Court is experiencing increased activity. The High Court has been marketing itself as a venue of choice for foreign litigants. The new Rolls Building of the Court, on New Fetter Lane in London, is a purpose-made court hypermarket with 31 courtrooms and 55 consultation rooms and is the largest specialised dispute resolution centre in the world.”

Mark Amsden, a commercial litigation partner at Addleshaw Goddard, said he had seen an increasing number of claims being issued at court. According to Mr Amsden, this was due to more businesses wanting to secure payment of what they believe is owed to them. It also reflected the fact that businesses on the receiving end of a claim are also more prepared to fight, for longer, than they might have been in more favourable economic times, Mr Amsden added.

He continued: “However, we should not forget that the claims reaching court remain the tip of the iceberg of all commercial disputes. Settlement, even of unclear cases, remains the favoured option in the vast majority of commercial disputes.”

Damian Crosse, a partner at Pinsent Masons, said it was “slightly surprising” that there had not been a more noticeable increase in court activity. He added: “The main reason is cash flow. It costs thousands of pounds to run a piece of litigation before you get to trial, which can involve a period of 12 to 18 months. There is also the inherent risk of litigation. Critical and strategic disputes are still being litigated. Frauds of various types are also being discovered in greater number and businesses are always keen to pursue these types of complaints aggressively and costs become less of an issue.”

Figures from the Queens Bench Division revealed that debt cases have gone down, but contract cases have risen, Mr Crosse added.