X Limited ordered 20 thousand summer dresses from Y Limited in accordance with samples previously produced by Y Limited. The dresses were delivered slightly late. X Limited did not pay the full sum due. Y Limited sued for the balance owing or for the return of the goods seeking to rely on its (probably defective) retention of title clause. X Limited defended the claim saying that late delivery had caused it problems, a loss of market and therefore loss of sales due to the seasonal nature of the goods, it claimed that the dresses were not of the same quality as in the sample and that there were other defects with the goods. It counterclaimed for its loss of profit.
There were disputes over whose terms and conditions applied, over the meaning of the terms and conditions, and over the validity of the retention of title clause. There were also omissions in both parties’ paperwork, and question marks as to whether terms were enforceable, reasonable and so on in both the claim and counterclaim. Both parties had evidential problems in relation to the contracts.
Y Limited had considerable concerns about the solvency of X Limited.
At mediation many of the issues between the parties were not resolved but a solution was found that suited both parties. X Limited agreed to return the goods to Y Limited which believed it had another market for the dresses. In return it was agreed that Y Limited would drop its claim for payment from X Limited. Since Y Limited was concerned that even if it obtained judgment against X Limited it would not have been able to enforce that judgment it was happy with that outcome. Unbeknown to Y Limited, X Limited was in serious financial difficulties. Its paperwork was in a mess, many of its witnesses had left the company and the slight delay was probably not fatal to its ability to sell the dresses. It had no cogent evidence on defects or quality. If ordered to pay it would have gone into liquidation.
If the matter had gone to trial Y Limited would in all probability have lost on the retention of title point but won on all others and so obtained judgment against X Limited for the balance due, which X Limited would not have been able to pay. By mediating both parties achieved a result that was not likely to be ordered at trial but gave both the best result for each of them.
Neither party wasted money on further legal costs pursuing judgments that were unlikely to be enforced. Risk was reduced for both parties. Costs were limited. The result was achieved much faster than allowing the matter to go to trial. Management time could be devoted to more pressing matters rather than be wasted in fruitless litigation.