As a business owner, you are faced with a number of issues every day that seriously tests your resolve.  Disputes with your customers or suppliers can often ‘snowball’, and, unless you act quickly to resolve the problem, you may find yourself in a situation in which your business is at risk of suffering a significant loss.

When something goes wrong that causes a loss it is easy for emotion to take the place of reason and for you to immediately want to do anything to take the party responsible to the proverbial cleaners!

The Courts do provide an invaluable framework for disputes to be resolved.  However, in the commercial environment, a decision to litigate should be measured, considered, and reconsidered.  Litigation can be a long and drawn out process that can involve the expenditure of significant fees with no guarantee of recovering your money.

In certain circumstances litigating is the best option, however, that decision should not be made without considering at least the following four key criteria:

1. Have you tried to negotiate?

Clients often come to me with a commercial dispute and they are ‘out for blood’.  They are angry, emotional and in many cases feel wronged by the other party.

The first question I ask them is “have you tried to negotiate the dispute?”  The response is often along the lines that one, or in most cases both, of the parties, are too stubborn to compromise their respective positions.

This is where a reasonable, ethical legal practitioner can add real value.  Sometimes it’s not the terms of an offer that a party objects to, rather it is the messenger that obstructs a reasonable settlement.  In my experience, I have often found that a little ‘prompt’ from the lawyers will encourage the other party to come to the table.  Then, if an agreement can be reached, it can be properly documented in writing with the correct terms.

It is always best to consult an experienced legal practitioner before taking any steps to resolve a dispute.  A legal practitioner can help you see the dispute from an objective perspective in terms of how far you want to take the matter.

2. Debt v Return

At the outset of a dispute, it is easy to say you are willing to spend “thousands of dollars” in recovering a debt.  When emotions are running high, principles seem to be all that matters.  But as the old adage goes ‘principles can be expensive’.

Before beginning the Court process you should:

  1. Sit down with a legal practitioner and gain a better understanding of the possible cost of the Court process;
  2. Map out how much you are willing to spend on litigation; and
  3. Whether that expenditure is comparable to the amount you are seeking to recover.

If the figures don’t add up then you should either consider settling early for a compromise amount or in certain cases whether the debt is not significant, possibly even writing it off.

3. Can you afford to spend the time?

Aside from looking at the dollars and cents you should also consider the amount of time that needs to be dedicated to litigating a matter.  Business owners and their staff will be required to spend considerable time with their lawyers communicating instructions, checking progress and discussing strategy.

This all takes away from productivity that is dedicated to the business.  Often business owners don’t allocate value to this expenditure before commencing proceedings.  The result is a massive shock when your staff are spending more time in your lawyer’s office than on your own.

4. Judgment does not always mean a cheque

When a client comes to me and wants to commence proceedings, one of the first things I consider is whether, if successful, I can turn a judgment into a cheque.

Regardless of whether you have a certificate of judgment; if you are forced to wind up a company or bankrupt an individual you run the risk of obtaining a lesser sum than the judgment debt, or not receiving anything, all the while increasing the expenditure of your legal costs.

There are certain mechanisms the Courts have made available to a litigant to protect them from this occurring, but serious consideration should be given to a party’s financial position before commencing proceedings against them.

Where does that leave you?

Ultimately this list is not exhaustive and every matter has its own specific issues that need to be considered and dealt with.  Nevertheless, the decision to litigate should be given the same amount of scrutiny as a decision to invest in any other commodity.

Legal practitioners are able to help you in planning the best route possible in recovering a debt or dealing with a dispute – one that will increase your chances of spending the least amount of money and time, and ultimately getting the best return on your investment.