In Short
- Before resorting to court, explore options like negotiation and mediation, which are often more cost-effective and quicker.
- Court proceedings can be lengthy and expensive, with no guaranteed outcome. Even if successful, you may not recover all legal costs.
- Litigation can strain or damage business relationships. Consider if preserving the relationship is important before proceeding
Tips for Businesses
Before initiating court action, evaluate the potential time commitment, financial costs, and the importance of maintaining business relationships. Exploring alternative dispute resolution methods like negotiation or mediation can often lead to quicker, less costly, and more amicable solutions.
Table of Contents
Court proceedings of any nature can be time-consuming and expensive. Additionally, litigation always carries some risk, as there is never a guaranteed outcome. No matter how ‘rock solid’ your case might be, once you commence litigation, your future is in the hands of a third party. This said, it may be the best option to resolve a dispute in court in some instances. In this article, we will outline the factors to consider before commencing court proceedings and offer some potential litigation alternatives.
Key Considerations
There are many factors to consider before deciding to commence proceedings in court, some of which include:
- your time;
- potential legal costs;
- costs you may be able to recover;
- ongoing relationships; and
- your desired outcome.
1. Your Time
This is an important factor that is sometimes overlooked. As a party to court proceedings, you will be required to take part in several time-consuming activities, including:
- regularly liaising with your lawyer;
- providing instructions promptly, as and when required;
- attending court proceedings; and
- giving evidence.
These tasks will likely cut into personal and work time. For a small business or startup, time spent away from work can have a significant impact.
2. Legal Costs
Disputes can be expensive and legal costs can quickly escalate. If you would like to engage a lawyer, ask them to provide you with an estimate of the costs you will likely incur. Your lawyer is obliged to provide you with this information, and to disclose how the costs were calculated.
3. Costs Recoverable
As a general rule, a successful party will be awarded part of their costs by the court. The unsuccessful party will pay these costs. This is the amount recoverable and is dependent on several factors, including the total amount of your claim.
Even if you are the successful party, you will still usually be out of pocket for part of your legal fees. If you are the unsuccessful party and a costs order is made against you, you will be significantly out of pocket.
4. Ongoing Relationships
Commencing court proceedings against someone can have a negative impact on both the personal and business relationship. Before going to court, ask yourself: ‘Is this relationship important to me, personally or professionally?’. If your answer is ‘yes’, commencing court proceedings may not be the best way forward.
5. Outcome
Are you likely to get the outcome you desire by going to court? For example, there is little point in commencing proceedings against a company that is insolvent and cannot pay. Speak to a dispute resolution lawyer about what exactly you want to achieve – there may be another way.
Alternatives to Court
If you decide that court is not the best way forward for you, there are alternate methods for resolving a dispute. Often, these methods are:
- cheaper;
- less time-consuming; and
- allow for the preservation of personal and professional relationships.
Parties should take active steps to attempt to resolve their dispute before commencing court proceedings. There are many ways to negotiate the settlement of a dispute. The option you choose will depend on several factors, including the:
- nature of your dispute;
- complexity of the issues at hand; and
- existence of any power imbalance between the parties.
Two popular methods of alternative dispute resolution are negotiation and mediation:
| Negotiation | Mediation |
| Negotiation provides the opportunity for the parties to attempt to reach an agreement. Usually, both parties compromise on their position in one way or another.Parties to a dispute can conduct this type of negotiation directly between themselves or via their lawyers. | Mediation is a more formal and structured negotiation process, where a neutral third party (known as the mediator) helps the parties to reach a mutually acceptable agreement. Mediation is a negotiation, which means that the parties are not forced to resolve their dispute, and a successful outcome cannot be guaranteed. It will depend on the each party’s desire to compromise. |
Get It In Writing
If you are successful in negotiating a settlement to your dispute, it is essential that you record your agreement in writing. Ensure that you include all the details of the agreement. Having a lawyer draft the terms of the settlement may be helpful, especially if you want to avoid any future disputes about the same issues.
This guide provides key information on how to manage a business dispute as quickly and cost-effectively as possible.
Key Takeaways
Commencing court proceedings may not be your best option in resolving your dispute, particularly if you are looking for cost and time-effective solutions. Going to court to resolve your dispute should be a last resort.
Try alternative dispute resolution methods, such as negotiation and mediation, before taking such a drastic step.
If you have any questions, our experienced dispute resolution lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
Consider your time, potential legal costs, recoverable costs, ongoing relationships, and the likelihood of achieving your desired outcome. Litigation is time-consuming and costly, and it may strain personal or business relationships.
Negotiation and mediation are effective alternatives to court. Negotiation allows direct or lawyer-assisted discussions, while mediation involves a neutral third party facilitating a resolution. Both methods save time, reduce costs, and help preserve relationships.
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