Pick Your Battles

In the last NZTECHO issue Tim Riley looked at situations when you could be ‘liable’ to other people. Or, to use the more technical legal term – ‘in the shit’. This time, Tim is coming in from the other side and looking at when you are on the side of the good and the other person is in the shit (in your humble opinion of course).

So, what to do if you think someone has breached their contract with you or in some other way has incurred legal liability to you? When and in what circumstances should you, in the words of Marcellus from Pulp Fiction, get “medieval on their arses”?

Just as a preliminary matter, there is one cheap (free!) option for resolving simple legal queries, and that is to ring up 95bFM between 8.15am and 8.30am on a Wednesday morning, where yours truly will be there to answer your legal questions for free. For free!

The 95bFM option is obviously only useful for very simple problems with clear answers that are both entertaining and that showcase my prodigious legal knowledge. If your legal problem does not fall into that category, then hopefully the rest of this article will be of some help to you.

The problem with legal disputes is that they can very quickly become very expensive. So the very first thing to do is a cost-benefit analysis. What is it going to cost you to sue this person and what are you going to receive if you are successful? At a more fundamental level – why do you want to do this? There are many reasons why people come to a decision to commence legal action against someone and not all of them are good. If the desire to sue comes from a sense of hurt or anger at the way you were treated and/or a desire for revenge, then my advice is don’t do it. The law, and in particular the law as expressed through the courts, is not a very effective tool for dealing with emotions. You are far better to spend the money on a good psychotherapist.

In my opinion, the only really valid reason to pursue legal action against someone is to recover a financial loss (or at least a loss that can be adequately compensated by a payment of money). I hear many expressions of principal expressed by clients such as “I just want to make sure they don’t do it to anyone else”. Aside from that hardly ever being true, it is pretty much never a good reason to sue someone.

Getting back to the cost-benefit analysis, it is actually a very complicated exercise you need to go through. It might be relatively easy to work out what you will get if you are successful (particularly if you are recovering a set or pre-agreed amount) but then you have to factor in an allowance for the fact that you might lose (commonly called ‘litigation risk’). Even claims that appear on paper to be un-losable can change dramatically when you actually get in front of a judge. If you do lose, you will be liable for the other party’s costs, so somehow that has to be factored in also. It is also often difficult for your lawyer to assess what your costs are going to be. Lawyers cannot provide quotes given the uncertainty involved in the job, but you should ask for and get an estimate. The problem is that a lawyer cannot guarantee that the estimate will be correct, all they can do is agree to notify you if circumstances change such that the estimate has to be revised. However by then you may be well down the track and not willing to pull out, meaning you will have to accept the increased costs to complete the job. There are also additional costs you will have to bear as the person initiating the action, being filing costs for the court documents, and what is called a ‘setting down’ cost that will be several thousand dollars and is payable when the time comes for the hearing (which could well be a year after you commence the process, given the gridlock that applies to New Zealand courts).

Also, you have to consider the emotional and time cost, as well as the financial cost. Court proceedings can drag on for a long time and require a significant involvement of your time. They are often very stressful and anxiety-inducing, and can take over your life. Given the very narrow focus of a court proceeding, you might find that the real issue that you need resolved does not even feature when you finally get your day in court. Courts are blunt instruments with no ability to deal with anything other than strict legal rights (as opposed to say mediation).

But having said that (and having just talked dozens of you out of hiring me) there are certainly times when the only option is to sue their arse! Sometimes the only way to make people address the issue is to compel them to do it by issuing proceedings. The reality is that the vast majority of commercial proceedings are settled before they get to court. One of the great benefits of issuing proceedings against someone is it focuses the mind and forces the person to deal with you. However, the courts do not take kindly to people using the court system just as a threat to make people settle, so you really do have to be committed and prepared to follow it through if you have to. Once the court proceeding is initiated you can only stop with the leave of the court and only on the basis that you pay the costs that the other party has incurred in responding to your claim.

So before jumping in the deep end, make sure that not only can you swim but you also have the stamina to go the distance. You need pretty deep pockets too. It’s like joining the church of Scientology really, once you start there is no going back.