How to avoid 'pressing the nuclear button' in business and winding up in court

LITIGATION IS OFTEN avoidable – and seldom absolutely necessary. Mediation is increasingly being used to resolve disputes and, in appropriate cases, it offers a speedy and cost-effective alternative to litigation.

However, very often parties only engage in mediation after proceedings have been initiated.

Accordingly, it may well be in a client’s interests to engage a lawyer to obtain advice from an objective, strategic and tactical perspective as to how to resolve disputes as early as possible thus avoiding litigation.

This will, of course, depend on the lawyer’s ability and pre-disposition to resolving disputes pre-litigation!

There are, of course, times when the injustice of a situation demands and necessitates legal action. Nevertheless, it is almost always in the client’s interests to explore reasonable alternatives to settling a dispute before embarking on litigation.

It may not be the most elegant phrasing but as, by way of context, Ambrose Bierce, the American journalist and author of The Devil’s Dictionary once put it, “Litigation: A machine which you go into as a pig and come out of as a sausage.”

The downsides of litigation

Litigation is very (very) expensive and its outcome is unpredictable. Too often the costs of litigation outweigh any potential award or settlement amount.

In any dispute, notwithstanding the liability position, there is always merit in considering the consequences of litigation on purely economic/commercial grounds:

• Litigation does little to facilitate management of risk – parties to litigation lose control, to a certain degree, of their destiny, and their ability to manage risk is severely curtailed. This is because the very nature of litigation is that certain things are outside of one’s control;
• It disrupts and disturbs parties from doing their jobs;
• From a reputational management perspective, litigation does nothing to enhance a party’s reputation and standing. How litigation plays out in the public domain is very difficult to predict, and very often the average customer only sees damaging headlines and does not undertake an analysis of the facts;
• It damages business relationships.

It should be the job of the lawyer to dissuade a client, wherever possible, to commence litigation or at the very least to point out the reasons to support the argument that litigation should be the weapon of last resort.

Stubbornness and other drivers of litigation

Litigation is driven by personalities who are very often personally affected and whose human characteristics of rationality and objectivity are severely impaired by their emotional attachment.

This results in parties becoming unreasonably stubborn and too proud to concede that a compromise is the best way forward. As a result, many do not act in the best interests of the company.

This can include the failure at the outset to adequately and critically analyse the strength or weakness of the case.

Often there is a failure to communicate. By parties simply talking to each other there is less risk of misunderstanding and misconception, which might ordinarily result in a party pressing the nuclear button.

Parties may end up holding out for more than they need or deserve. Very often a dispute resolves on the steps of the court on similar terms to what could have been achieved at a much earlier date and perhaps even before litigation commenced.

Here are some pre-emptive steps for handling litigation:

• Step into the shoes of the other party and try to be as objective as possible;
• Improve the way you communicate – pick up the phone and try to resolve the matter before proceedings are issued;
• Carry out an analysis of why it is that you have found yourself involved in the dispute. Is it perhaps down to poor operational structures or procedures, or a poor culture or environment?
• Deal with disputes or threats of litigation promptly – head them off at the pass!

Murrough McMahon is a partner at Philip Lee specialising in litigation and pre-litigation dispute resolution advice.

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