A Q&A with Chris Clay, Managing Director of Escalate
What is Escalate?
Escalate is a two-stage dispute resolution process. Firstly, it focuses focusing on a negotiated settlement, using licenced corporate recovery specialists with a track record of rapidly recovering assets to negotiate on behalf of the claimant, and encouraging the defendant to settle quickly in the client’s favour without the need for litigation. The process allows a maximum of three months for this negotiation. If the defendant is unwilling to settle in this timeframe, solicitors acting on a fully conditional basis will begin preparing for litigation. As part of the service, all fees and associated costs are funded and paid on the client’s behalf all the way up to a High Court resolution.
This contrasts with the traditional commercial dispute resolution process that typically takes 18 months; is often billed by the hour; can require the payment of disbursements, such as court fees or the costs of an expert, up front; and leaves the claimant at risk from large legal bills from its advisers and exposure to the defendant’s costs in the event of an unsuccessful outcome.
Why did you create Escalate?
The commercial dispute market for SMEs has been broken for a long time, with high upfront costs, considerable financial risks and a slow process being the primary barriers preventing ‘access to justice’ for claimants. A business that has suffered a £200,000 loss due to a dispute might need to pay £200,000 to recover that amount - and then may only get 50-60% back after costs. As a result, many SMEs reluctantly write off what they’re owed.
Nobody has tried to fix this problem. We have. We set out to remove these barriers and give SMEs access to justice through a cashflow-centric solution. As a result, our Escalate process removes all financial risk, gives transparency on process and pricing, and ensures that the claimant remains the main beneficiary on settlement.
We've challenged the way disputes are resolved, making it accountancy profession-led, providing a cost-effective solution and unlocking the market for all.
How does Escalate differ from the traditional dispute resolution process?
Escalate is unique in the market. It was created by looking at each barrier in the dispute resolution process and tackling it. We brought together the dispute ‘supply chain’ (accountants, lawyers, funders and insurers) into a single R&D process and encouraged everyone to look at the issues collectively rather than as individual suppliers.
Escalate has made dispute resolution an ‘accountancy-led’ service, helping the profession to develop a new advisory service to combat the technology-led revenue profile change away from audit and compliance.
Service innovation is mainly technology-driven. Escalate is not. It's based on a collaborative approach that challenged the wider professional services industry to rebuild its models to fix a broken market and improve client delivery. It did.
Escalate embodies professional service innovation driven by accountants.
Why do disputes take so long to resolve?
In our experience, the current system creates and allows bad business behaviour. There tends not be a strong incentive for the defendant to settle promptly in a traditional dispute resolution process; by delaying the outcome for as long as possible, they increase the chances of the claimant giving up or running out of funds. The Escalate process targets a result in less than three months by engaging a team of experienced corporate recovery experts to negotiate on the client’s behalf.
Why do so few disputes get resolved?
The combination of high costs (considerable up-front costs and legal bills based on the amount of time your lawyers spend on the case), long delays (a typical case takes 18 months to reach a conclusion) and considerable uncertainty (about the outcome of the case and the total cost of pursuing it) deters many businesses from pursuing a case. Escalate directly addresses all of these issues, removing these barriers.
How does Escalate differ from ‘no win no fee’?
In a traditional ‘no win no fee’ situation, the claimant still has to pay up front for some costs (such as court fees and Counsel fees), which can total tens of thousands of pounds and are not recoverable if its case is unsuccessful. The claimant is also likely to have to pay the defendant’s legal fees if it loses its case, unless it takes out insurance. And the traditional dispute resolution process typically takes 18 months to resolve; Escalate targets a good outcome in as little as three months.
Escalate is unique and there is no similar service that prioritises the claimant’s cash flow by focussing on an early settlement, removing all upfront costs and minimising risk. Escalate has fixed and clear upfront pricing to give the claimant full visibility and, importantly, there is a cap on the cost to ensure that the claimant is always the main beneficiary.
What happens if a client loses its case?
If a claim cannot be resolved and the claimant loses its claim, typically the claimant will be liable for its own costs plus at least part of the defendant’s costs. Escalate removes the financial risk for the SME business – if a case is litigated but is ultimately unsuccessful, an Escalate claimant will have no liability for its own costs (under the fully conditional fee arrangement in place) and will have the benefit of insurance cover for any liability for adverse costs and own disbursements.
What is your plan for rolling-out Escalate?
We soft-launched Escalate at the start of 2017, as part of a phased approach to enable us to test our systems with a handful of initial cases, before rolling-out the offer more broadly later in the spring.
To meet our objective of access to justice for all, our focus has been on building a panel of firms and educating the market so that all SMEs can look for support. This has resulted in the creation of a network of trusted partners that continues to expand every week in size and reach.
We've targeted four areas for roll-out and are underpinning them with some strong brands: accountancy; membership bodies; lenders; and wealth management.
Which professional services firms are part of the Escalate network?
Escalate has partnered with leading professional services business including accountants PKF and Price Bailey; law firms Bermans and Moore Blatch; Capitalise.com, an online funding platform; leading peer-to-peer lender ArchOver; and insurance claims mediation specialist Flaxmans.
Has Escalate been successful?
We have seen considerable interest in Escalate.
To date, we have looked at over 70 cases and have over £12 million in damages being recovered for SMEs.
We're also delivering the rapid, cost effective results that we'd set-out to achieve. In one case, we outlined the heads of terms of a six-figure resolution just six weeks after we'd been appointed on a dispute that had been dragging on for more than a year.
Through Escalate's partner firms, we now have channels to help over 100,000 SMEs to get access to justice and pursue money that was previously written-off. This is growing weekly.
Along with attracting new accountant partner firms, we're being approached by new lawyers, funders and insurers wishing to provide support to the Escalate process and roll-out to their clients.
What has the market said about Escalate?
Mike Williams – Director, Mirah Accountants: “I have been delighted with the results that Escalate has delivered for one of my clients, an East Midlands sports club that had been in a long standing and expensive construction dispute.
“With the dispute still unresolved after more than 12 months of negotiations, and with the client’s fighting fund almost exhausted, I advised the club to transfer the case from its incumbent lawyers to the Escalate process. Within just six weeks, the team – led by PKF Littlejohn – had outlined heads of terms of an acceptable settlement offer. I would not hesitate to refer other clients and contacts with commercial disputes to Escalate.”
Roger Flaxman – Flaxmans and BIBA: “The term ‘disrupter’ is over-used in professional services, but I have no doubt that the Escalate process has the potential to transform how commercial disputes are resolved.
“I’ve been helping SMEs resolve insurance disputes for many years, and this is the first time that I’ve seen a process that can overcome the cost and risk impediments common to the traditional litigation approach; both at the same time. This is why Flaxmans has adopted Escalate and reshaped its operating around the process. Escalate now forms the core of our activities and I’m confident that it will be the catalyst to ensuring the business’s continued growth. We’ve only just started using Escalate and our clients are already benefitting considerably from the new process. The future potential is enormous.”
Ian Anderson – COO, ArchOver: “Within the SME market, all sorts of debt tends to be written off due to the time and money it takes to chase debtors down. With Escalate on board, we will now be able to help SMEs to recover that debt, managing their cash flow and increasing their ability to access essential funding as a result.”
Paul Surtees – Founder, Capitalise: “Escalate and Capitalise share a common goal: helping SMEs to access capital. We’ve developed complimentary solutions – a process for releasing cash that is locked up in unresolved disputes and an online comparison of finance options from mainstream and independent lenders – and it makes sense for us to work together to help businesses secure the resources they need to survive and grow. Escalate is going to be a game-changer for SMEs.”
Can I use Escalate?
All ILP members can use Escalate - please get in touch with Chris Clay, the ILP’s dedicated Escalate contact, on firstname.lastname@example.org
Further information about Escalate is available at www.escalatedisputes.co.uk