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Highlights: You can’t choose your family: complicated dynamics and disputes in family business and how to resolve them

Posted on 15 November 2022

Mishcon de Reya event

On 8 November, Mishcon de Reya welcomed a panel of experts to discuss the effective management of family centred disputes.

The panel was moderated by Rebecca Attree, a highly experienced Mediator at IPOS Mediation. Rebecca put her considerable skills to good use, skilfully guiding an interesting (and often entertaining) discussion on a variety of topics: from the early rumbles of discontent through to what happens once formal litigation proceedings have been issued. The panel comprised Mishcon de Reya's Shona Coffer, a Partner in Private Commercial Litigation, Victoria Palmer-Moore, Managing Partner at Powerscourt and Sarah Middleton, a Partner in PwC's Valuations practice.

The panel's broad range of expertise enabled the discussion to address everything from what public communication strategy families should take to considerations around the valuation of family businesses.

The event was inspired by last summer's hit film, House of Gucci. Unfortunately, the family dynamics portrayed in House of Gucci are not dissimilar to those occasionally encountered by the expert panel on a day-to-day basis. The panellists agreed that family disputes require a different approach to purely commercial disputes: more often than not, family disputes are played out in pre-action correspondence. Advisors recognise that, once you push the button on litigation, positions become increasingly entrenched making it harder to build bridges. From Rebecca's perspective as a mediator, this can present a challenge for mediation as it is harder for a potential defendant to assess the merits of a claim before it is particularised in pleadings. However the benefits of a pre-action mediation usually outweigh this issue..

The panel discussed the various phases of a dispute and when it might be appropriate to obtain valuations. It was clear that it is important to consider the timing of a valuation (for example if there are allegations of the other party intentionally dissipating the asset during the course of the dispute). Similarly, important discussions are to be had around the actual value of a family business, both in terms of its  reliance on a key person (and how much goodwill resides with that individual); and also in terms of its market value to a third party versus its “real value” to a family shareholder.

Victoria helpfully explained the importance of getting a proper communication strategy in place and – if possible – ensuring that everyone is on the same page. The potential influence of social media means that any strategy should, if possible, take into account all members of the family as well as members of its staff. Family members should be advised to resist the temptation to retaliate to comments made online and should, if possible, identify a single spokesperson to ensure a consistent message.

Speaking about dispute resolution, Shona was clear that litigators are always looking ahead to identify potential opportunities to settle proceedings before they reach court. This is particularly true in family disputes where confidentiality, around both the details and the outcome of a dispute, is often a primary consideration. Rebecca said that according to statistics, only 7% of mediations fail and they are obviously, therefore, an incredibly effective tool for dispute resolution, allowing families a safe place to air a grievance whilst searching for a resolution that is both personally – and commercially – equitable. Often the agreement reached in an out of court settlement with terms that would not have been within the court's power to order.

The session ended with each of the panellists imparting a key piece of advice to an individual on the brink of a family dispute:

  • Get an early grasp on the value of asset, the value at stake – and how volatile that value is likely to be over a lengthy dispute;
  • Agree a comprehensive communications plan and game plan scenarios;
  • Consider whether your client wants to see every letter exchanged between the lawyers – often the tone of this correspondence can unnecessarily exacerbate a dispute;
    Take a deep breath and count to ten – do you really want to set the ball in motion with litigation or arbitration or is there hope of a resolution at mediation?
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