When a company is involved in litigation, one of the most significant costs is the disruption to its ordinary business. Executives and in-house counsel devote considerable time and resources to instructing solicitors as well as dealing with reputational risks, external stakeholders and regulatory requirements.
Yet these disruption costs are rarely quantified and often overlooked, even though they are costs that cannot be recovered – win, lose or draw. How then can litigants best manage and minimise disruption costs?
Business needs quick, efficient, affordable and predictable outcomes from litigation. While there has been a push in Australia’s court systems to resolve disputes faster and with less expense, companies often forget the hidden cost of litigation to their business.
When a company is involved in litigation it necessarily means executives will spend considerable time dealing with lawyers, media and other litigation-related issues. This opportunity cost of time is largely hidden and takes management’s attention away from core business issues.
There is also the cost of potential reputation damage from litigation which can be extensive and long-lasting.
While these ‘disruption to business’ costs are sometimes seen as part of the price of transacting, the fact is they are significant and not recoverable. Thus, it makes sense for litigants to have a plan in place to manage these costs as far as possible.
Through our experience, there are five strategies that will help:
In recent years, both the States and Commonwealth have heeded calls to reduce the costs of disputes for litigation parties with a range of welcome initiatives. For example, in the Federal Court of Australia:
The imperatives of speed and cost effectiveness are now very much at the forefront of modern commercial litigation. However, the cost to companies of their business being disrupted as a result of litigation, remains largely hidden.
Companies need to take it on themselves to manage these costs. The cold reality is litigation processes have little sympathy for the pressures placed on executives as they try to simultaneously navigate through litigation and run a business.
Alternative dispute resolution processes (such as expert determination and early mediation) can also greatly reduce the demand placed on business by offering a faster and more commercially focussed resolution than traditional litigation.
The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.