Litigation Advice from a Non-Litigator – Part II

As noted in the last Blurb, I don’t do litigation – going to Court. However, I frequently advise on litigation strategy – to get a reasonable economic result while avoiding Court. I would now like to offer my tips for minimizing your exposure as a defendant (the party defending the a claim from another party or parties) in litigation in Ontario, from my perspective as a corporate/commercial lawyer.

Grant’s Litigation Tips for Defendant:

You’ll note many of these tips are the same the tips for plaintiffs in the last Blurb:

1.    Determine if you have a dispute (and not just a simple misunderstanding or miscommunication), and jump on it right away, using the tips below. New Ontario legislation has greatly shortened the limitation period of most actions to two years. Besides, your chances of resolving a dispute are highest in the first 90 days. Always. This tip assumes that you really do want to make this problem go away, and that you can accept the economic consequence of dealing with it. This isn’t always true as a defendant.

2.     Keep talking to the other party as long as you can to resolve the dispute; keep things civil, take the high road; try to understand the other party’s perspective; don’t polarize the dispute with extreme claims and allegations.

3.     Make detailed notes, make copies of key documents and generally gather up all your materials at the outset of trouble – not on the courthouse steps. Check and re-check your facts; separate your suspicions from what you can likely prove in Court. Confirm calls with emails or letters.

4.     At the outset, try to objectively determine what the claim against you is really worth in cold, hard cash. Be sure to add a realistic amount for legal costs – yours and theirs, because if they win, you must pay most of their legal costs. Write down your figures – a high/low range – somewhere for later reference.

5.     Consider what evidence you have, and what evidence they have. You might have made a mistake that caused the plaintiff harm, but all that matters is whether or not the plaintiff has provable damages in dollar terms. That is, can the plaintiff establish with evidence how much loss or damages they have suffered? Are the witnesses available and willing? Frequently, a claim for breach of contract or negligence is valid but the monetary damages cannot be proven. Or, the cost of experts to prove damages exceeds the amount at issue. In my experience, this situation is as good as a real defence. Make sure the plaintiff is made aware of this, and it may encourage settlement or even termination of the claim.

6.     Consider the likelihood that eventually you will have to pay damages and costs to the plaintiff. What do you have to lose? Do you have any personal or other guarantees (or indemnity, or joint liability, etc.) at stake? Do you have any partners to share liability? Is the claim worth defending at all? Is the liability in a corporation with or without assets?

7.     Consult a business lawyer who has had some litigation experience for strategic advice, assuming this is a business dispute (contract breach, debt collection, employee termination, non-compete issue). The main discussion areas are:

  • Do the facts, if provable, or the law give you a “legal defence”?

  • Or, do you just need time to pay?

  • What is the “measure of damages” legally?

  • What are the options for defending this action?

  • What are the upfront costs vs. the ongoing costs, and the duration of the litigation process?

  • What is the business fallout from losing this claim? (eg, credit rating, insolvency, alienating a supplier or customer)

  • Do you have a serious counterclaim, with provable monetary damages against the plaintiff?

  • Even if you’re responsible to some extent for the damages, is another party equally or partially responsible? – in which case you could Third Party them (basically saying to the Plaintiff, “It’s not my fault, it’s this other guy’s fault”)

If you’re not prepared to spend $500 to get some initial advice from a business lawyer, then you obviously don’t feel your action is worth pursuing at all (or you’re imprudent).

8.    With the strategic advice in hand, ask yourself the question: do I have the emotional energy to litigate? It’s a nasty business, litigation. Lots of BS, lies, pettiness, delays, more BS, ridiculous procedures, rules and orders, ignorant judges who have never practiced business law (very few biz lawyers become judges), and more delays. And, there are the relentless costs that must be satisfied as you proceed, unless it is one of the very few contingent fee actions. Litigation is a terrible distraction for most business owners, except those that are obsessed with their action (dangerous) or are wannabe lawyers (I know one successful owner who loves going to Small Claims Court for collections – that’s fine by me, and it’s entertainment and hubris for him).

On the other hand, I know of respectable business people who have had valid legal defences, but litigation wasn’t an option because they would make a horrible witness for their own claim – they could pursue something up to the courthouse stairs, but if they got into the witness box, they’d be vilified, disbelieved or too emotional (think of Conrad Black taking the stand on a invalid parking ticket). Litigation is a high-stakes game played well by only a few; it is always the last resort. .

9.     Even if you are confident of your defence, seriously consider making an early good faith offer of settlement. What’s it worth to make this claim go away early? Make the offer in writing, without prejudice. If you later win in Court, and have made a settlement offer before trial, you can sometimes get relief on costs due to your attempt to avoid a trial – the Court likes people to settle commercial disputes outside of Court, and rewards those who are reasonable vs. people who are pig-headed.

10.    If you go ahead with litigation, re-visit that piece of paper with your range of likely results on it. Do this regularly. My litigation colleagues know how to litigate. Some don’t think about settlement as long as the client is all fired up over the claim and still willing to pay retainers. You should always be considering settlement options – be creative, consult your business lawyer on it once in awhile. Remember, litigation lawyers know how to litigate, so that’s what they do.

11.     The Courts don’t find the truth and dispense justice in civil/commercial actions. The party with the best lawyer, most resources and perseverance will win, eventually. Don’t put too much faith in this very flawed dispute resolution system. That is, your lawyer may tell you that you have a great defence, but you can still lose.

12.     I have no evidence that mediation or arbitration is any better than litigation in Court. Both are still very expensive, and maybe slightly faster. Such methods work best in areas where all parties to the dispute genuinely want to resolve the dispute – this is rarely the case in Court proceedings, the cost and delay of which are often the remedy or defence itself. As a defendent, be aware that new procedures require pre-trial talks to sort out cases where the defendent is simply delaying the action without merit. The action might proceed more quickly and be more costly than you thought it would be. Delay used to be the best defence, but if the action is not complex or huge, this tactic is more limited now.

13.    Even if you’re totally successful in your court action, you will not recover and be paid 100% of your costs. Not 90% or 75% either. Litigators are very coy on this factor, so be careful in your cost recovery assumptions. I usually tell plaintiffs that you might get a Court order for the payment of something more than 50% of your actual out of pocket expenses, if you can get it from the defendant. Vice versa for defendents.

14.   If your claim involves any business aspects other than the non-payment of a simple debt, make sure the litigator truly understands the case! My view is that most litigators don’t understand very much at all about business or business law. They don’t even understand the difference between a trade name and a corporate name, profit vs. revenue. Ask your business lawyer to brief the litigator if you can. I warn you: litigators think they can learn what they need at the last minute and at a superficial level, and they’re wrong. Conceptual mistakes are made. Your defence can quickly fall off the rails if the litigator misses or misinterprets a business issue.

15.    You can save a great deal of legal costs if you do your homework without the lawyer having to follow-up two and three times, or do it themselves. Assemble your evidence in an organized, chronological fashion and create a chronological narrative of factual events.

16.   If you’re sued in another province or in the U.S. (or elsewhere), for God’s sake, don’t ignore it! If the plaintiff gets a judgment, it can often enforce that judgment against you here in Ontario, and you probably can’t get the default judgment set aside. Hire a reputable local lawyer right away, and file a defence.

17.    Conversely, don’t:

  • Delay dealing with your defence

  • defend on principle or for revenge

  • Underestimate the plaintiff

  • Withhold any facts or documents from your lawyer

  • Act on free advice from unqualified parties

  • Expect your lawyer, or the Court system to right the wrong done to you: litigation is not about justice

I hope you’ve found the foregoing defence tips from a commercial lawyer to be useful.