Litigation Learnings Series
Practical tips on how to avoid
being caught up in litigation
By Paul Vincent
Paul Vincent has been working in the litigation field for over 30 years and during that time has been involved in hundreds of very costly disputes, many of which could have been avoided. This series of short articles draws on Paul’s litigation experience and provides practical tips on how to avoid being caught up in litigation. Each topic will be supported by an actual case study that will demonstrate the importance of being “Litigation Smart.”
Ok, you are in a dispute… What options do you have to resolve it?
Before I go into the detail, here is a quick summary of how to resolve a dispute once it has arisen.
- Review your case;
- Assess your loss;
- Preserve and gather evidence;
- Attempt to negotiate a resolution;
- Be willing to compromise;
- Assess the other party’s ability to pay;
- Attempt to negotiate a resolution;
- If unable to resolve, assess the costs to proceed, the likely success then revisit negotiation with this knowledge;
- If still unable to find a settlement, obtain cost estimate to litigate, review again the likely outcome and the other side’s ability to pay;
- Further consider a compromise and negotiate a resolution;
- Proceed to Court or abandon the claim.
You will notice that the above summary has a theme that is repeated throughout the dispute resolution process. Always remember that a negotiated settlement is one that you will have some control over. You may think that having a court impose a resolution is sometimes the only means to resolve a particular dispute. However, this in my opinion should be the last resort. There are many ways you can resolve a dispute. It is a fact that only a very small percentage of disputes find their way to the courts. You should be very keen not to be part of the minority.
Despite all your best efforts, you will find yourself in a dispute in some capacity. Many disputes resolve themselves well before they get to a stage that requires any intervention from third parties. There are a good number of disputes in that category and you would be not criticised for thinking that the parties are much better off by resolving their disputes between themselves early and unassisted. I have however seen many disputes resolved this way where the ultimate resolution is completely inequitable for one of the parties.
Consequently, it is my opinion that for every commercial dispute there is a preferred resolution path. Whether or not the parties find that path is sometimes a matter of luck rather than good management. In this paper and ones that follow, I will attempt to provide you with the options that you have in resolving commercial disputes, give you some examples of ones that went well and ones that went horribly wrong and provide you with the framework that surrounds the dispute resolution process. Hopefully this will provide you with sufficient information to either select the best path yourself or be sufficiently terrified to seek some expert advice on the best way forward.
When confronted with a commercial dispute, parties have the following options open to them to resolve it:
- Negotiate a resolution between themselves without third party involvement;
- Negotiate a resolution between themselves with third party advice;
- Negotiate a resolution by formal Mediation;
- Have a resolution imposed upon them by an appropriate Court as a result of Litigation.
Today’s discussion will focus on Negotiation.
Negotiated resolution between the parties without third party involvement
There is no doubt that many commercial disputes settle by negotiation between the parties without any assistance or advice from third parties. This is certainly a cost effective means of resolving a dispute but I caution everyone who “goes it alone” to ensure they are confident that will achieve a fair result. Be careful not to undersell your case.
While I am a huge advocate of early resolution, I have seen so many early resolutions occur to the significant detriment of one or other of the parties simply because decisions were made without proper enquiry or advice. As an example, a company settled a claim with a supplier who supplied faulty potting mix, without having made any detailed enquiry or seeking formal advice as to the damages that flowed from such a faulty product. The company was happy to accept replacement product and the sum of $20,000 as full and final settlement. As further and more detailed enquiry revealed, the extent of the loss was significantly more. The loss was in the vicinity of $400,000 with 100% liability not in dispute.
My advice therefore is quite clear. Negotiated resolution between the parties in most cases should only be made after receiving appropriate legal and forensic accounting advice.
Negotiated resolution between the parties with third party involvement
I have also seen many litigation matters proceed at great expense based on a strong legal argument, only to find out way too late that the quantum of the loss is only nominal. Conversely, I have seen many cases with large quantum claims proceed way too far only to discover that there is no legal basis for the claim. Both these situations incur costs which could be reduced significantly if the parties obtained appropriate timely legal and forensic accounting advice.
Even after receipt of the appropriate legal and forensic accounting advice provides gives you the courage to proceed with a claim or defend a claim, as a plaintiff/applicant, it is well worth investigating the capacity of the defendant/respondent to meet an award for damages and potential costs order. Likewise, it is also important as a defendant/respondent to ensure the plaintiff/applicant has capacity to meet any costs orders or counterclaims. Winning on principle doesn’t pay the bills!
An Important Message
While every effort has been made to provide valuable, useful information in this publication, this firm and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents. Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.