Analysis of merits of claim or defence - Consideration of po...

Learning Outcomes

This article outlines how to analyse the merits of a civil claim or defence and to evaluate likely outcomes in line with the SQE1 syllabus. It explains how to identify viable causes of action and defences, check limitation, jurisdiction, and parties, and relate statutory provisions and case law to an exam-style scenario. It details how to construct a factual chronology, test the legal and evidential basis of each issue, and assess the strength of witness, documentary, hearsay, and expert evidence. It examines how pre-action protocols, ADR obligations, and the CPR’s overriding objective influence case strategy, track allocation, and proportionality. It discusses the impact of key procedural tools—disclosure, interim applications, default and summary judgment, Part 36 offers, security for costs, and costs management—on prospects and risk. It reviews how to analyse potential remedies, including damages, interest, non-monetary relief, and enforcement options, and how costs, funding, and QOCS affect litigation choices. It supports your ability to articulate realistic, proportionate advice and to answer SQE1 multiple choice questions that test integrated reasoning on merits, procedure, and outcomes.

SQE1 Syllabus

For SQE1, you are required to understand how to analyse the merits of a claim or defence and consider potential outcomes, with a focus on the following syllabus points:

• Assessing the legal basis of a claim or defence by applying relevant statutory provisions and case law.
• Evaluating the strength and admissibility of evidence, including witness testimony, documents, hearsay, and expert reports (including single joint experts).
• Understanding the burden and standard of proof in civil claims, and awareness of how criminal convictions may affect civil proof.
• Comparing dispute resolution options (litigation, mediation, arbitration, negotiation, early neutral evaluation) and their suitability based on case merits and client objectives.
• Applying pre-action protocols and the Practice Direction on Pre-Action Conduct and Protocols, and recognising court encouragement of ADR and costs sanctions for unreasonable refusal.
• Analysing potential outcomes, including damages and interest, timeframes, enforcement prospects, and costs implications (funding, recoverability, QOCS, Part 36, costs management/budgeting).
• Advising on procedural outcomes and risks (default judgment, summary judgment, strike out, security for costs).
• Using disclosure rules and e-disclosure proportionately; understanding witness statement requirements and hearsay notices.
• Formulating strategy aligned with track allocation, case management directions, and client objectives (including settlement structures such as Tomlin orders).

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. What is the standard of proof in a civil claim?
   1. Beyond reasonable doubt
   2. On the balance of probabilities
   3. Clear and convincing evidence
   4. Substantial evidence
2. Which of the following dispute resolution methods typically results in a binding decision imposed by a third party, other than a court?
   1. Mediation
   2. Negotiation
   3. Arbitration
   4. Early Neutral Evaluation

3. True or false? When analysing the merits, a solicitor should only consider evidence that supports their client's case.

4. What principle generally governs the recovery of legal costs in litigation?

Introduction

Before commencing or defending a civil claim, a solicitor must undertake a thorough analysis of the merits of the case and consider the potential outcomes. This process is fundamental to providing sound legal advice and formulating an effective case strategy. It involves a critical evaluation of the legal principles, the available evidence, the potential remedies, the associated costs, and the client's objectives. It must also take account of pre-action duties, the Civil Procedure Rules’ overriding objective, and judicial encouragement of ADR. The court expects proportionate steps to narrow issues early and will case manage robustly to that end. This analysis informs decisions on whether to proceed with litigation, explore alternative dispute resolution (ADR), or advise the client against pursuing the matter further. A robust assessment allows you to manage client expectations and guide the dispute resolution process effectively.

Key Term: Burden of Proof
The obligation on a party in a legal dispute to prove an allegation they have made. In civil cases, this usually rests with the claimant.

Key Term: Standard of Proof
The level of certainty required to prove a fact in legal proceedings. In civil cases, this is 'the balance of probabilities' – i.e., more likely than not.

Assessing the Merits

Evaluating the merits involves a multi-faceted analysis, examining the legal foundations, the factual background, and the strength of the supporting evidence. It is also essential to consider limitation (to avoid a case being statute-barred) and the suitability of forum and track, as these decisions affect procedure, costs, and timetable.

Legal Basis Analysis

The first step is to determine the relevant area(s) of law governing the dispute (e.g., contract, tort). You must identify the specific cause(s) of action or the legal grounds for the defence. This requires:

• Identifying relevant statutory provisions (e.g., Sale of Goods Act 1979, Occupiers' Liability Act 1957).
• Researching and applying relevant case law (precedent). Understanding how courts have interpreted similar legal issues is essential.
• Establishing whether all the necessary legal elements for the claim or defence can potentially be met based on the known facts. For example, in a negligence claim, can duty, breach, causation, and loss be established?
• Checking the limitation period at the outset (e.g., six years for contract, three years for personal injury, subject to date-of-knowledge rules). If limitation is tight, consider protective issue of the claim form and compliance with service deadlines.
• Ensuring correct parties are named (e.g., corporate entities rather than individuals) and that the cause of action is pleaded accurately.
• Considering whether a criminal conviction relevant to the facts may assist proof in civil proceedings; a conviction can reverse the burden in limited respects on that issue in the civil case.

Choice of process also sits within legal analysis. Some disputes are better suited to specialist venues (e.g., Technology and Construction Court) or to arbitration under contractual clauses, where the court may stay proceedings.

Factual Analysis

A clear understanding of the factual matrix is essential. This involves:

• Establishing a detailed chronology of events leading to the dispute, mapping key dates including contract formation, performance, alleged breaches, and communications.
• Identifying the key facts that are agreed upon by the parties.
• Pinpointing the specific facts that are in dispute. These disputed facts will often form the core issues the court or tribunal needs to decide.
• Evaluating whether additional factual evidence is realistically obtainable (e.g., from third parties or through disclosure) and what gaps may remain.

A proportionate plan for disclosure and investigation should be devised early, bearing in mind the overriding objective and potential costs/timetable ramifications.

Evidential Analysis

The strength of a claim or defence often hinges on the quality and availability of evidence. Key considerations include:

• Burden and Standard of Proof: In civil litigation, the general rule is that the party making an allegation (usually the claimant) bears the burden of proving it to the standard of ‘on the balance of probabilities’.
• Witness Evidence: Assess the credibility and reliability of potential witnesses. Consider what facts they can attest to from personal knowledge, whether their accounts are consistent, and how they might perform under cross-examination. Ensure witness statements meet formal requirements (e.g., PD 32 form and statement of truth) and are drafted in the witness’s own words, clearly distinguishing knowledge from information or belief.
• Documentary Evidence: Identify relevant documents (e.g., contracts, emails, invoices, letters). Assess their authenticity and probative value. Consider the implications of disclosure rules (standard disclosure requires documents relied upon, those that adversely affect a party’s case or support another’s, and those required by practice direction) and whether key documents might be privileged. Plan for electronic documents: agree keyword searches, formats, and any staged approach to e-disclosure where appropriate.
• Hearsay Evidence: Recognise that hearsay is admissible in civil proceedings, but notice may be required and the court will assess weight by considering reliability factors (e.g., contemporaneity, motive, multiple hearsay).
• Expert Evidence: Determine if expert evidence is necessary (e.g., medical reports in personal injury claims, surveyor reports in construction disputes). Consider the expert's qualifications, independence, the clarity of their opinion, and whether a single joint expert might be appropriate to save costs and time. Experts owe an overriding duty to the court; their reports should comply with CPR 35 and PD 35, summarising the range of opinion and reasons for conclusions.

Key Term: Witness Statement
A written statement of a witness’s evidence, verified by a statement of truth, served in accordance with court directions and standing as evidence-in-chief unless the court orders otherwise.

Key Term: Standard Disclosure
The usual disclosure order requiring parties to disclose documents they rely upon, that adversely affect their case or support another’s case, and those required by practice direction, following a reasonable search.

Key Term: Single Joint Expert
An expert instructed to report to the court on behalf of both parties, typically used where proportionate to do so, particularly in fast-track cases.

Proportionality and case management

The civil courts encourage proportionate litigation. Case management will require directions that balance the amount in dispute, complexity, and parties’ finances. Identify early whether the matter is likely to be allocated to the small claims, fast track, or multi-track and how that affects evidence, timetable, costs budgeting, and trial length.

Considering Potential Outcomes

Once the merits have been assessed, you must consider the potential outcomes of the dispute and the various ways it might be resolved. Potential outcomes are not limited to trial judgments; they include settlement (with cost consequences), interim orders, and procedural terminations. Outcome analysis should integrate cost, risk, and enforcement considerations.

Dispute Resolution Options

Litigation is not the only, and often not the best, way to resolve a dispute. Consider the suitability of different methods:

• Litigation: Pursuing the claim through the court system. This provides a binding decision from a judge but can be lengthy, costly, public, and adversarial. Its suitability depends on factors like the need for a legal precedent, the complexity of the issues, and the opponent's willingness to comply with voluntary methods. The court will actively manage the case and may encourage ADR; it can stay proceedings to allow ADR and impose costs sanctions where ADR was unreasonably refused.

Key Term: Litigation
The process of resolving disputes through the formal court system, culminating in a trial and a binding judgment.

Key Term: Alternative Dispute Resolution (ADR)
A range of methods for resolving disputes without resorting to court proceedings, such as mediation, arbitration, negotiation, or early neutral evaluation.

• Negotiation: Direct discussion between the parties or their solicitors to reach a mutually agreeable settlement. It is informal, flexible, private, and cost-effective but relies on cooperation. Negotiation can be enhanced by without prejudice exchanges and may culminate in a Tomlin order if proceedings are on foot.

• Mediation: A neutral third party (the mediator) facilitates negotiation between the parties to help them reach their own settlement. It is confidential, flexible, and can preserve relationships but is non-binding unless a settlement agreement is signed.

Key Term: Mediation
A form of ADR where an impartial third party (mediator) helps disputing parties reach a negotiated settlement agreement.

• Arbitration: A private process where the parties agree to submit their dispute to an impartial third party (the arbitrator) or panel for a binding decision (the award). It is confidential and can be tailored to the dispute. Appeal rights are limited; serious irregularity challenges are possible, and points of law appeals are tightly constrained.

Key Term: Arbitration
A form of ADR where parties agree to have their dispute decided by an independent third party (arbitrator), whose decision is legally binding.

Arbitration can be advantageous where specialist knowledge is desirable and where confidentiality or cross-border enforceability is important; the New York Convention facilitates recognition and enforcement of awards internationally. Domestically, the Arbitration Act 1996 provides the procedural framework, including tribunal powers and limited appeal grounds.

Courts also recognise other assisted processes (e.g., early neutral evaluation) that can help parties realistically appraise outcomes without binding them.

Worked Example 1.1

Your client, BuildCo Ltd, is owed £75,000 by Develop PLC for construction work completed. Develop PLC refuses to pay, alleging defects in the work. Your initial analysis suggests BuildCo has a strong contractual claim with good supporting documents (contract, invoices, completion certificate) but Develop PLC has raised potentially arguable points about minor defects, supported by their own surveyor's report. Develop PLC suggests mediation. Advise BuildCo.

Answer:
BuildCo has a strong prima facie case, but Develop PLC has raised potentially arguable issues, suggesting litigation carries some risk and potential cost. Mediation offers a confidential, quicker, and potentially cheaper way to resolve the dispute. It allows examination of the defect issues and negotiation of a settlement figure, potentially preserving the commercial relationship which might be valuable. Given the encouragement of ADR by the courts and potential costs sanctions for unreasonable refusal, advising BuildCo to agree to mediation is appropriate, while reserving the right to litigate if mediation fails.

Costs Implications

Costs are a critical factor in any dispute. You must advise the client on:

• Potential Legal Costs: Your firm's fees (hourly rates, fixed fees), potential barristers' fees, court fees, expert witness fees, and disbursements. Explain summary assessment (fast track) versus detailed assessment (multi-track) and how track allocation influences costs recovery and process.
• Costs Management: In multi-track cases, parties normally must prepare and exchange costs budgets (Precedent H). Approval by costs management order indicates likely recoverability, but failure to file on time can restrict recovery to court fees only.
• Funding Options: Private payment, Conditional Fee Agreements (CFAs), Damages-Based Agreements (DBAs), Before-the-Event (BTE) insurance, After-the-Event (ATE) insurance, third-party funding, and (rarely in commercial disputes) Legal Aid. Explain that many insurance premiums and success fees are not recoverable inter partes; these are client liabilities even if they win.
• Cost Recovery: The general rule in litigation ('loser pays winner's costs') under CPR Part 44. Explain that the winner rarely recovers 100% of their costs due to assessment rules (standard vs indemnity basis) and proportionality. Define the Indemnity Principle.
• Adverse Costs Risk: The risk of having to pay the opponent's costs if the case is lost.
• Impact of Offers: Explain the significant costs implications of Part 36 offers.
• QOCS: In personal injury claims, explain the Qualified One-Way Costs Shifting regime.

Key Term: Costs
The expenses incurred in relation to legal proceedings, including solicitors' and barristers' fees, court fees, expert fees, and other disbursements.

Key Term: Indemnity Principle
The principle in costs assessment stating that a winning party cannot recover more in costs from the losing party than they are liable to pay their own legal representative.

Key Term: Part 36 offer
A formal offer to settle that carries specific costs consequences if not accepted within a defined period and the offer is later beaten or not beaten at trial.

Key Term: QOCS
A regime in personal injury claims limiting defendants’ ability to enforce costs orders against claimants, subject to exceptions (e.g., fundamental dishonesty).

Part 36 consequences can be substantial. If a claimant equals or beats their own Part 36 offer, they may obtain an “additional amount” (typically 10% up to £500,000, 5% thereafter up to a cap), enhanced interest (up to 10% above base) on damages and indemnity costs with interest from the day after the offer’s relevant period expires. If a defendant’s offer is not beaten, the claimant can be liable for the defendant’s costs from the end of the relevant period.

Costs are assessed on the standard or indemnity basis. On the standard basis, doubts are resolved in favour of the paying party and proportionality is considered; on the indemnity basis, only reasonableness is considered and doubts are resolved in favour of the receiving party.

Key Term: Costs Budget
A court-managed estimate of future litigation costs (Precedent H), used to control and assess proportionality and potential recoverability.

Worked Example 1.2

The claimant makes a Part 36 offer of £90,000 on 1 September (relevant period expires on 22 September). The defendant rejects the offer. At trial in March the claimant wins £95,000. What are the likely Part 36 consequences?

Answer:
The claimant has obtained a judgment at least as advantageous as their Part 36 offer. Unless unjust, the court should award: (1) an additional amount calculated on damages (10% of £95,000 = £9,500); (2) enhanced interest on damages (up to 10% above base rate) from 23 September to judgment; (3) costs on the indemnity basis from 23 September to judgment; and (4) interest on those indemnity costs (potentially up to 10% above base). Standard costs apply up to 22 September.

Worked Example 1.3

The defendant makes a Part 36 offer of £20,000 on 15 May (relevant period expires on 5 June). The claimant wins £18,000 at trial on 1 December. How are costs likely to be dealt with?

Answer:
The claimant failed to obtain a judgment more advantageous than the defendant’s offer. Unless unjust, the court should order: (1) the defendant to pay the claimant’s costs up to 5 June on the standard basis; and (2) the claimant to pay the defendant’s costs from 6 June to 1 December on the standard basis, plus interest on those costs. This is the classic ‘split costs’ outcome.

Exam Warning

Clients often underestimate the costs involved in litigation and the risk of adverse costs orders. Ensure you provide clear, realistic advice on costs from the outset and throughout the matter, including the potential impact of Part 36 offers. Failure to do so can lead to client complaints and professional negligence claims.

Non-Monetary Factors

Consider outcomes beyond financial compensation:

• Reputation: Will litigation damage the client's personal or business reputation? ADR methods like mediation offer confidentiality.
• Relationships: Is preserving a relationship with the opponent important (e.g., ongoing commercial relationship, family dispute)? Adversarial litigation can destroy relationships.
• Time and Management Resources: Litigation can be very time-consuming and divert significant management attention away from a client's business.
• Precedent: Does the client need a binding legal ruling to clarify a point of law or deter future breaches? Only litigation can achieve this.
• Enforceability: Assess whether the opponent can pay a judgment; this affects settlement value and strategy. Consider likely enforcement routes and their practicality (e.g., assets, employment status, bank balances).
• Confidentiality and Privacy: Arbitration and mediation are private; court judgments are public.
• Client Objectives: Ultimately, the strategy must align with the client's overall commercial or personal objectives. What does the client really want to achieve? Sometimes speed or certainty outweighs maximising damages.

Key Term: Tomlin order
A consent order that stays proceedings on agreed terms set out in a confidential schedule, allowing enforcement through the court if terms are breached.

Key Term: Default Judgment
A judgment entered without trial where the defendant fails to acknowledge service or file a defence within time; set aside is possible on mandatory or discretionary grounds.

Key Term: Summary Judgment
A judgment obtained where the opponent has no real prospect of succeeding on or defending the claim and there is no other compelling reason for a trial.

Outcomes in Litigation

Potential litigation outcomes include:

• Procedural termination through default judgment or strike out (with possible set-aside applications).
• Early disposal via summary judgment on part or whole of the case.
• Interim remedies (e.g., interim payments where liability is admitted or highly likely).
• Final judgment addressing liability, quantum, interest, and costs.
• Settlement at any stage, often documented by consent order or Tomlin order, with associated costs outcomes.

Interest is often awarded at judgment: pre-judgment interest may be at court’s discretion under statute (in County Court or High Court depending on venue), and post-judgment interest accrues at fixed rates depending on court and amount.

Key Term: Writ/Warrant of Control
An order empowering enforcement officers to seize and sell a judgment debtor’s goods to satisfy a judgment debt (writ in High Court; warrant in County Court).

Key Term: Charging Order
An order securing a judgment debt against the debtor’s property or securities, often followed by an order for sale to realise the debt.

Judgment outcomes must be considered alongside enforcement: taking control of goods, third party debt orders, charging orders, and attachment of earnings are common routes. Enforcement prospects should inform negotiation and litigation risk analysis.

Worked Example 1.4

Your client (defendant company) faces a £250,000 claim. The company has limited assets and is based overseas but operates in England. The claimant threatens to apply for security for costs. What is your advice on potential outcomes?

Answer:
A security for costs application is possible where just and where a condition (e.g., company unable to pay, assets moved to hinder enforcement, or claimant resident outside jurisdiction) applies. If granted, the defendant must pay specified security (often by payment into court) or risk being debarred from defending. Advise on demonstrating solvency, proposing a suitable alternative form of security, or contesting the application on proportionality and merits. Factor the risk of an order into settlement analysis.

Strategic Decision Making

Synthesising the Analysis

The analysis of merits and potential outcomes must be brought together to form a coherent view of the case. This involves weighing the strengths and weaknesses:

• How strong is the legal case (including the chances of interim or procedural success)?
• How robust is the evidence? Are there significant gaps or weaknesses?
• What are the realistic prospects of success at trial? (Often expressed as a percentage chance.)
• What is the likely range of damages if successful, and what interest might be awarded?
• What are the estimated costs of pursuing each dispute resolution option?
• What are the costs risks associated with losing (including Part 36 consequences and adverse costs)?
• How likely is enforcement and at what cost?
• Which approach best meets the client's commercial and personal objectives?
• How does track allocation, timetable, and court case management affect strategy and resource planning?

When litigation is chosen, check track allocation and consider how directions will affect costs and timetable. In multi-track, factor costs budgeting and potential sanctions into case planning.

Advising the Client

Your advice should be clear, objective, and comprehensive. Present the analysis, outlining:

• The strengths and weaknesses of their position.
• The available options (negotiation, mediation, arbitration, litigation).
• The potential outcomes for each option, including best-case, worst-case, and most likely scenarios regarding liability, quantum, interest, enforcement, and costs.
• The risks and benefits associated with each option, including ADR cost/benefit, confidentiality gains, relationship considerations, and timing.
• A recommended strategy, explaining the rationale and incorporating pre-action duties, ADR opportunities, settlement tactics (including Part 36), and procedural milestones (e.g., disclosure, expert evidence, interim applications).

Key Term: Disclosure
The process of informing other parties of relevant documents within a party’s control, followed by inspection, subject to privilege and proportionality.

Recommendations should be revisited as evidence emerges (e.g., after disclosure and witness/expert exchanges) and offers change. Advice must remain proportionate and aligned to the client’s objectives and risk tolerance.

Revision Tip

When tackling SQE1 questions on case analysis, structure your thinking: 1. Identify the cause of action/defence. 2. Assess the legal elements. 3. Evaluate the evidence (strengths/weaknesses). 4. Consider dispute resolution options. 5. Analyse potential outcomes (damages, interest, enforcement, costs, risks, Part 36/QOCS). 6. Advise based on the client's objectives and proportionate strategy.

Key Point Checklist

This article has covered the following key knowledge points:

• Analysing merits involves assessing the legal basis, factual background, and evidential strength of a claim or defence, with early attention to limitation, parties, and track allocation.
• The burden of proof in civil claims generally lies with the claimant, and the standard of proof is the balance of probabilities.
• Courts actively encourage ADR; a refusal to mediate or otherwise engage can result in costs sanctions, and the court may stay proceedings to permit ADR.
• Various dispute resolution methods exist, including litigation, negotiation, mediation, and arbitration (with limited appeal rights and strong international enforceability of awards).
• Evidential analysis includes witness statements (PD 32), hearsay (with notice and weight factors), documentary evidence, and expert evidence (CPR 35), with single joint experts where proportionate.
• Disclosure on the standard basis requires proportionate search and listing of documents relied upon, adverse to a party’s case, or supporting another’s case; e-disclosure should be agreed and controlled.
• A thorough consideration of potential outcomes includes analysing damages, interest, enforcement practicalities, costs implications (funding, recoverability, adverse costs risk), and non-monetary factors like reputation and relationships.
• Understanding the Indemnity Principle, costs bases (standard vs indemnity), costs management and budgeting (Precedent H), and the impact of Part 36 offers is essential for costs advice.
• Recognise potential procedural outcomes: default judgment, summary judgment, interim payments, and security for costs—each can alter the trajectory and cost of a case.
• QOCS limits costs exposure for claimants in personal injury claims, subject to exceptions like fundamental dishonesty and failure to beat a defendant’s Part 36 offer.
• Settlement structures such as Tomlin orders allow confidentiality and practical enforcement of agreed terms.

Key Terms and Concepts

• Burden of Proof
• Standard of Proof
• Litigation
• Alternative Dispute Resolution (ADR)
• Mediation
• Arbitration
• Costs
• Indemnity Principle
• Part 36 offer
• QOCS
• Witness Statement
• Standard Disclosure
• Single Joint Expert
• Costs Budget
• Tomlin order
• Default Judgment
• Summary Judgment
• Disclosure
• Writ/Warrant of Control
• Charging Order