SETTING A BUDGET FOR LITIGATION LEGAL SERVICES

When your company is on threatened with legal action, your first reaction might be to escalate and seek to sue the party that caused this. That approach is seldom the right initial response. If it is clear that a dispute cannot be avoided then and only then Litigation may be a legitimate means to settle a business dispute, but you should treat your decision to file a lawsuit in the same manner as you treat other business decisions. This includes establishing a budget for your litigation law matters and knowing the downside and upside risk.

Ordinarily your solicitor can advice you on your prospects of success. Moreover, it may surprise you to learn that lawyers cannot act on a damages claim under the Legal Profession Legislation (now Uniform Law) unless you have reasonable prospects for success. That effectively makes your lawyer a gatekeeper in the sense that if your case does not have the requisite prospects it may be that your solicitor will not act. Lawyers take these obligations very seriously as they can be personally liable in the event that a speculative claim is encouraged and proceeded with. If you do end up asking for an advice on prospect and evidence it is likely that you will receive a summary form of a table that should enable you to more carefully analyze whether it will ultimately be worthwhile suing. Regrettably, it is all an inexact science and there are many variables involved that could dramatically alter the advice given. For instance if the other side appeals then you will be up for another round of costs that may not have been accounted for in the initial stages.

In all litigation, your solicitors are charged with acting in your best interest provided there is not conflict with the administration of justice. When you establish a tight budget for your litigation, you may be placing restrictions on your lawyers’ ability to provide zealous advocacy, particularly if your budget does not provide for discovery, research and interlocutory motions. Nonetheless, from a business perspective, a budget is critical to maintain a sense of objectivity in the litigation efforts. You will not want to spend $200,000 in legal fees, for example, if the most you are likely to recover is $100,000. Those involved in litigation can easily allow their emotions to overpower their business decisions. Your litigation budget can help keep your emotions in check.

Also, no two litigation matters are identical, and your litigation budget will be different for each piece of litigation that you decide to pursue. There will be times, for example, when the facts of a case and your business judgment increase your willingness to spend money on legal fees (in some cases because you have little choice in the matter). The important thing is to establish the budget before you start the litigation, and before that litigation gets out of hand.

Please contact us for more information on getting an advice as to prospects so you can try and budget more effectively.

This content does not purport to give legal advice. Readers must obtain their own legal advice, that applies to the particular circumstances of their case, before taking any action at all.

Leave a Reply