Imagine spending 1 million dollars in a legal battle over a sum of $50,000. It might sound outrageous, but this is precisely what happened in a matter which this firm recently inherited from another solicitor. Naturally, the original reason for the dispute was all but forgotten in the battle to recover legal costs.
This is obviously an extreme example. However, the truth is that, even in the absence of the sort of negligence or dishonesty which might make a good segment for ‘A Current Affair‘, costs in litigation can rise far beyond the initial expectations of the litigants and their solicitors.
This can happen for a multitude of reasons. There may be unexpected preliminary hearings on procedural issues; there may prove to be a huge weight of documents produced by the other side to sift through; evidence may prove more difficult to prepare than originally anticipated; the other side may be hopelessly inefficient. The bottom line is that there are a wide range of factors which are partially or completely out of a solicitor’s control which can contribute to a longer, more expensive litigation process. Rarely does litigation proceed without any surprises.
We conduct our practice specifically with a view to avoiding this potential trap. Often we encourage our clients not to press litigation in circumstances where the amount in dispute is small enough to create a real risk that legal fees will outweigh the value of the dispute. There are alternatives which we seek to explore, including mediation, which often yield reasonable results without the burden of risk associated with litigation.
In circumstances where litigation has been commenced, we often advise our clients to make their best, most reasonable offer quite early in the dispute. Not only does this maximize prospects of settling the matter before legal costs become oppressive, but it also protects our clients’ capacity to recover maximum costs at the end of the dispute if it fails to settle.
We often encourage our clients to consider litigation as they would consider an investment. Spending 1 million dollars to fight over $50,000 is obviously a poor investment. However the question becomes more difficult when the numbers are less extreme (for example, spending $30,000 in fees to chase $100,000).
If you are considering commencing litigation, you should bear in mind the risks and alternatives outlined above. Although the decision is ultimately yours, we will give you frank advice on whether litigation is commercially justifiable, having regard to the costs and risks which you will inevitably face.
Please contact a member of our Litigation and Dispute Resolution team if you would like more information.