This is why you want to avoid being sued in business
In business, prevention is always better than cure, especially when it comes to litigation and dispute resolution. As someone who spent over a decade working as a business disputes lawyer, I understand the far-reaching ramifications and consequences that come from being sued. Most of what I saw during those years of my career could have been avoided, and I’m going to discuss how.
In this blog post, I will take you through what happens if you end up embroiled in a legal battle and why setting yourself up for success is crucial to avoid such situations. While many factors can lead to litigation, having strong foundational legals in your business and solid strategies in place can significantly reduce your risk of ending up in court.
Being sued
To be frank, being sued is one of the most awful experiences. Going through the court process is stressful, time-consuming, and expensive. As the saying goes, "often the only ones that win when you go to court are the lawyers," this holds true given that legal fees are incurred regardless of the outcome. This, plus the time and energy required to tackle a legal stoush, is why I say you really want to do all you can to stay far away from court and litigation.
The start
When you are sued, the process begins when you are served with a claim or some form of legal proceeding. The proceedings can occur in different courts or tribunals depending on the jurisdiction. Jurisdiction can be determined by the location of the contract formation or the relevant state or territory. This means that even if your business is based in one location, you might have to fight the case in a different jurisdiction, which can escalate costs significantly.
Timely action
When served with a claim, timeframes start ticking, and you must immediately act. Missing deadlines or timeframes can have severe consequences, including receiving a judgment against you for the total claim amount plus costs. Therefore, engaging your business disputes lawyer promptly and understanding the requirements set out in the documents you receive is crucial.
Legal proceedings can be commenced for anything from one thousand dollars to one million dollars or more. So, just because you're a small business doesn’t mean you’re immune from legal proceedings, even if you only deal in small sums with your clients. You can be sued for things that extend well beyond the money you've exchanged with your client.
The legwork
When you receive a claim, the other party has already done considerable legwork to reach this point. There may have been letters of demand or cease and desist letters exchanged, or attempts at negotiation.
Responding
Once served, you need to get cracking with assessing and filing your defence or response and there are strict timeframes for this to occur. This is a critical stage where significant money is spent on obtaining legal advice, gathering evidence where necessary, and preparing documents for filing in court. Missing these deadlines can lead to severe consequences, and you cannot simply request an extension from the court. It doesn't work like that. Once you're in the court system, firm timeframes apply and the pressure is on.
You have to provide everything needed so that you can obtain proper and sensible advice. There are no shortcuts. Just because you think you have a solid defence doesn’t mean you do and your business disputes lawyer will need a lot of input from you so they can do their job properly.
The journey
After filing your defence, the court will set a timetable for various things to occur, including filing both parties' evidence, affidavits, statements, and other applications. So, whether you are the person bringing the claim or the person defending it, many different applications can be made (including interlocutory applications) throughout this whole process, which can lead to further delay and cost. This process is time-consuming and stressful, loaded with uncertainty, and it can take months years to get to a final hearing.
Negotiating
Negotiation is always available to the parties, if they want to explore it (and they really should!), and at certain times in the proceedings, the court can order the parties to attend mediation.
The Final Hearing
If you end up here, it means any attempt at mediation or negotiation has failed, and you’re here for your day in court. Trust me, it’s not as sexy as it appears on American tv shows.
This is when the parties and their legal teams turn up to court and present their cases, their evidence, and more often than not there will be witnesses involved, an examination in chief, cross-examination, submissions, and more. This can be another lengthy process, and yes, you’ve guessed it, even more expense. The outcome of a court case is never certain— you need to be prepared for any outcome here, there are no guarantees.
There is an enormous amount of uncertainty when going to court, and the only way to eliminate this is by reaching a settlement. A settlement will bring certainty.
So, to wrap up, this has been a very brief overview of the litigation process and what you can be in for when you become caught up in legal proceedings. It can be a harrowing experience for business owners and it is something that you really should position yourself to be able to avoid. It’s financially and emotionally draining, it’s stressful, and as I have said at the start, it really is one of the most awful experiences for clients (not so much for the lawyers!).
Strategy in business is your friend. By investing in a substantial risk mitigation strategy, including solid legal documents with clients, business partners, suppliers, employees and contractors, businesses can significantly reduce the likelihood of ending up in court.
Prevention is the key to a successful and sustainable business, and taking steps to avoid litigation is a crucial part of that process.
If you've got questions or if you would like to speak with me about how you can strengthen the foundations of your business, please reach out. Let's start the conversation because honestly, this type of conversation is not something that you can afford to be putting off if you haven't already addressed it. Book in with me for a free 20-minute chat.
I also discuss this topic in the episode What actually happens if you’re sued on the Rise Up in Business podcast, which you may like to listen to and review.
Another helpful resource you may like to refer to is my Legal Advice for Small Business guide.
