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.”
Understanding and Avoiding Disputes
Avoiding disputes in the first place should be your primary goal, but we all realise that there are some disputes that are simply unpreventable. How we identify and deal with these disputes becomes the important issue for our businesses.
One thing is certain. All disputes will eventually get resolved. When and at what cost has a lot to do with your understanding of the process so informed decisions can be made.
All disputes can be classified under four types. Knowing what type of dispute you have is essential to planning a resolution. The four types of disputes are:
- Disputes on matters of principle
- Disputes in law or legal interpretation
- Disputes requiring compromise
- Win/lose disputes
How to Avoid a Dispute
I mentioned above in a passing comment that avoiding disputes in the first place should be our primary goal. I plan now to deal with that very issue. Below are the Ten Commandments. You can actively maximise your chances of avoiding disputes or at least better protect yourself against a bad result (either in or out of Court) whether you are the being sued or the one taking the action, by following these:
(1) Don’t do anything you are not qualified to do
This may sound rather simplistic but you would be surprised how many actions I have been engaged in where the work or advice of a party is outside their area of expertise. Work and give advice within your own area of expertise and when in doubt, defer to others suitably qualified to give it.
(2) Limit your liability contractually
The good thing about being in business is that you generally have the luxury of negotiating the terms upon which you do business. For instance, there is no excuse for not having clear written and agreed to trading terms with your clients or customers. You should also be careful in reviewing the trading terms of those with whom you deal. You should attempt to limit your liability contractually wherever possible and you should be using disclaimers to limit your liability for things that you cannot reasonably be expected to control. Remember though, you cannot contract out of or disclaim negligence on your part.
(3) Obtain adequate insurance
You should always ensure you have adequate insurance. Any risks you cannot adequately deal with contractually should have (if possible) adequate insurance cover. Your insurance cover should extend to cover such things as product liability, environmental damage, negligence and employee harm along with cover for adequate legal expenses and costs. Review insurances annually with your broker.
(4) Limit your liability structurally
If the above measures fall short, you can always structure your affairs to ensure you and your business can weather a storm to fight another day. Lawyers and Accountants should be experts at properly structuring businesses however you would be surprised to see the structural nightmares that turn up on my desk. If you are serious about properly structuring your businesses to minimise financial loss you should always engage the services both a lawyer and an accountant with appropriate experience. Some of the biggest potential legal claims have been defeated in the first weeks because of a properly structured business.
(5)Understand the legal environment in which you operate
You really need to understand the key legal issues that affect the orderly running of your business and the industry in which it operates. For example, financial services licencing, privacy legislation, limitation of liability issues, franchise law, industrial relations, consumer protection and fair trading. Use industry experts to give you proper advice in the areas where you have some knowledge gaps and keep up to date with legislative changes.
(6) Keep proper records
If you find yourself on either the end of a law suit, you will thank me for encouraging you to keep proper records so as to produce the necessary evidence to defend or bring a claim. Without proper evidence it is nearly impossible to win any argument. In fact, having proper records that produce compelling evidence certainly gives you a commercial advantage when engaged in any dispute. You would be surprised at the number of matters that fail, simply because the evidence was not easily available. Keep regular backups of your data (offsite or cloud) to ensure that the information is protected and accessible if necessary. Understand the options available to you to recover and preserve digital evidence by the use of forensic technology experts.
(7) Maintain honesty and integrity
We should continually remind ourselves how important it is to be honest with others as well as ourselves. A high level of honesty and integrity fosters trust in our business dealings and sometimes, even if things go wrong, having a history of honest and ethical behaviour may well stop a matter escalating into full scale litigation.
(8) Be prepared
Watch your business and make sure you have the skills and support either internally or externally to manage it. Anticipate things that may place your business at risk and be proactive rather than reactive. For example, don’t be afraid to employ or seek counsel from a Human Resource expert before you terminate a long-standing employee. If you are having trouble managing your documents or filing system, engage someone to manage that for you. Don’t be afraid to spend a little money on things that may eventually save you a lot of money.
(9) Maintain a regular training program for your staff
There is no use being the only person in your organisation who understands the risks associated with your business. You should ensure that all your staff are properly trained to be aware of and understand the likely events that may give rise to liability. Create an environment of honesty and integrity that forms the platform from which your business is conducted.
(10) Perform regular reviews
Don’t become complacent. Conduct regular risk reviews and maintain a culture of accountability and transparency. The risks in your business are changing every day. New staff, new services new clients, new customers, new suppliers, all affect the risk inherent in your business. You cannot eliminate risk, but understanding it brings you well on the way to mitigating the effects of it.
The next article in the series will take you through the various options you have a dispute that needs to be resolved.
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.