Nine steps to help businesses avoid litigation

Litigation has increasingly become a tool of last resort. It is expensive, distracting and can seriously reduce the productivity of the people involved in running a case.

But it is naive to think that a business can avoid conflict altogether and never become embroiled in an argument.

Avoiding litigation doesn’t need to involve simply walking away from disputes or paying exorbitant settlement sums. Instead, the trick is to have strategies to stop conflicts escalating into serious disputes. Writs and judges will then become a thing of the past.

Every business has the ability to facilitate good relationships with clients and to resolve disputes efficiently – they just need to know the right tactics.

Here are nine steps that you can implement in your business to keep things on track – even when your latest employee responds to an email from Nigeria.

1. Know the legal environment in which you operate

Before considering a new relationship with another party, make sure that you understand the underlying legal obligations. Whether it is an employee, client or a takeover target, Australia has a web of interacting regulations that have a profound impact on how the relationship must operate.

2. Train staff about relevant risk issues

Employees are the frontline of the business. Not only are they the ones facing the customers, they are also a common source of problems. You must ensure that staff are trained to be aware of the likely events that may give rise to problems so they come to you before matters escalate.

By keeping staff educated about legal obligations and the risks to the business, you will minimise your chance of disputes with both the employees and the people they are dealing with.

3. Put it in writing

The very first stage of any business relationship is aligning what the parties expect of each other. It seems that the new catchcry of business in Australia is “manage expectations.” The best way to do this is to put it in writing.

A well-drafted contract, combined with procedures and policies, makes the rights and obligations of the parties explicit. This should give everyone a road map towards a smooth business partnership.

4. Good communication and relationships

Management should keep business relationships strong enough to withstand the stress of conflict. This involves a high level of mutual trust and respect.

Studies have shown that people are far less likely to get into disputes with people or entities that they like and empathise with, so get to know your clients and suppliers. And if someone stuffs up (and let’s face it, we all do from time to time) deal with it immediately.

5. Be organised and prepared

Having properly organised systems and filing makes it much easier to deal with problems when they arise. If you can quickly assemble a complete set of documents that explain your negotiation position, you can assess your exposure with all of the relevant facts.

This is the time to get an external opinion from someone who can give you objective advice on the risks that you face. This is a best possible launching pad for a frank and positive negotiation.

6. Manage conflicts before they become disputes

Business life is based around conflict. Everyone wants a little bit more of the pie: consumers want cheaper prices, and suppliers want to expand their margins. You just need to stop conflict from escalating into a formal dispute.

If conflicts arise, use early intervention. If things have the potential to escalate, obtain expert assistance to provide you with advice on how to proceed.

7. Pick your battles

Some fights just aren’t worth having. Make sure you look at the big picture when deciding when to take a stand. You need to consider the effect on those involved in the business as well as the cost of litigation. If you can’t justify the dispute financially and morally, it isn’t a fight worth having.

8. Get help early

Even if you are experienced in a particular area, it may be worth getting a second opinion. An independent bystander may be able to see things from a different perspective.

9. Negotiate smart

Modern psychology has transformed negotiating tactics. Avoid positional bargaining and instead try to work together with the other party to achieve a mutually acceptable result. The use of interest-based bargaining and early intervention will deliver you some surprising results.

Ben Patrick is a senior associate at law firm Holding Redlich.


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