Businesses that fail to manage conflict and litigation proactively may find themselves embroiled in lengthy, expensive battles with their clients, employees or third parties. They may even fall out with their lawyers.
Long drawn out litigation causes emotional hardship for managers, crippling direct legal costs and destructive indirect costs due to loss of productivity and bad publicity. If it spirals out of control, conflict and litigation may destroy a business entirely.
In order to protect their businesses, managers must be constantly aware of the pitfalls that conflict can present and try to reduce it before it spirals into litigation. If litigation becomes inevitable managers should supervise their cases proactively with the help of lawyers who share their aim of reducing conflict and maximising the economic interests and reputation of their business.
Managers can reduce the conflict that might lead to litigation by careful planning and ongoing monitoring of potential hazards. Before they start trading they must be sure that they have set up an appropriate structure for their business. While they are trading they should have a system for addressing consumer complaints in an efficient, responsive and timely manner.
If conflict does transform into litigation, managers ought to instruct their lawyers to negotiate or use alternative dispute resolution where possible, and actively involve themselves in the management of their cases as they progress through the courts.
Paying attention to the structure of your business is of huge importance. The weaknesses in the structure of the banks in Ireland due to a poor regulatory system, high leveraging and risky lending practices has had a disastrous effect on the business of banking and the Irish economy as a whole.
Structural weaknesses
Recently, the liquidators of the IBRC in a case before the commercial court against Michael Fingleton and four former directors of Irish Nationwide over losses to the company of €6 billion, claim that an "unusual" management structure had operated at the INBS, allowing risky loans to be issued without prior board approval in breach of the building society's lending policy.
The structural weaknesses in individual banks and building societies have spawned exponential conflict and litigation into the Irish economy and courts system with catastrophic results for the whole country. All managers and businesses can examine the tragedy of the implosion of the Irish banking system and learn valuable lessons from these events and examine and pay attention to their own business structure.
Addressing consumer complaints in an efficient and timely manner is vital. Two programmes on RTÉ's Liveline last month were concerned with complaints by disgruntled Eventelephant customers. Eventelephant is an online event registration site that allows you to use its software to create your own website to market your event and process payments by credit card. Problems had arisen in relation to the processing of credit card payments by event attendees due to customer confusion over the identity of the host.
Eventelephant is changing its protocols so that this type of confusion doesn’t arise in the future, but the delay in implementing these new protocols caused the company financial loss due to customer complaints, litigation and bad publicity. Managers must make sure that if their customers are unhappy that their complaints are dealt with. Small businesses rely on word of mouth recommendation and while unhappy customers may not take to the airwaves, their opinions can have a huge effect on business opportunities and development.
It is always in a manager’s interests to try to resolve disputes by peaceful consensual methods because if the conflict is allowed to escalate it will invariably rob their business of time, energy and resources.
Many commercial contracts contain provisions for mediation or arbitration and the use of a private, speedy mechanism with a highly trained professional mediator or arbitrator often helps managers to reach an agreement or settlement without losing too much time, draining valuable resources or receiving bad publicity.
High Court Commercial List
Efficient management of litigation is critical to protect businesses from financial loss and damage to reputation. The situation has improved in recent years since the Commercial List of the High Court was set up in 2004 to deal with high value commercial cases.
The court encourages mediation and negotiation, sets agressively short deadlines for procedural steps, insists that parties meet those deadlines and imposes costs penalties on parties who delay or fail to meet those deadlines.
Managers and lawyers before the commercial courts are under more pressure to act efficiently and responsively as their case progresses through the courts. The attitude of the Commercial Courts has caused a cultural shift in the lower courts as well so that all judges in commercial cases are more inclined to manage cases actively and strike out claims that are not prosecuted quickly.
The majority of cases listed before the Commercial Court settle, but those that go to full hearing are usually dealt with within nine months. This compares very well to the commercial courts in London where cases can take up to 18 months to bring to trial. The efficiency of the Irish Commercial Court enhances our reputation abroad and makes Ireland an attractive place to do business.
Rachel Fehily is a barrister, mediator, author and playwright. Her new ebook Managing Litigation for your Business, published by Oak Tree Press, is available online in Kindle, PDF or ePub format.