Defending court actions are expensive for several reasons. Depending on the forum in which the action is instituted, the costs of defending claims can easily run into hundreds of thousands of Rands. Careful consideration should, therefore, be given to the costs of litigation prior to defending claims.
Early Assessment of the Merits of the Claim
It is standard practice for a plaintiff to dispatch a letter of demand to a defendant prior to instituting action. Upon receipt of the demand, defendants should interrogate the merit of the claim. More often than not, it should be clear whether there is merit in a plaintiff's claim. In the event that this is not clear to a defendant, legal advice should be sought promptly.
Meritorious claims should be settled as soon as possible. Too often claims are defended for the wrong reasons, whether it originates from a principial to a more sinister motive.
In South Africa and many other jurisdictions around the world, defendants are responsible for the plaintiff's costs of instituting a claim should it be found that a defendant is liable for the claim. In addition, defendants also need to pay their own costs of defending claims. Therefore, defending claims for the wrong reasons can be an extremely costly exercise.
Litigation Versus Alternative Forms of Dispute Resolution
Where a dispute is unavoidable, the question becomes which course of action you should use to resolve it.
One of the main advantages of litigation is it is conducted through the courts and therefore becomes part of the public record. Litigation also provides lasting benefit in the form of precedent. Parties can point to previous rulings in similar cases and use that precedent to bolster their own argument. Lastly, one of the most obvious benefits of litigation is you know, however long it takes, that you will eventually have a result (whether you like the result is, of course, another matter).
Traditionally, litigation has been the preferred method, but with growing demands on courts' time and the costs associated with litigation, other options have grown in popularity.
The two most common types of alternative dispute resolution ("ADR") are mediation and arbitration. In both cases, a neutral third party is selected to help resolve the dispute. In general, mediation is a more informal process where the two parties work together to settle on mutually agreeable terms. The role of the mediator is not to judge the case, but to assist the parties in reaching a voluntary settlement.
Arbitration also involves a neutral third party, but in this case, the arbitrator(s), which can be anyone from an individual to a team of three people, will act as the judge and jury by making a final, legally binding decision regarding the dispute. During the arbitration process, the legal representatives of the two parties will make statements and submit evidence for review, but neither party is involved in the decision making.
ADR is usually faster and cheaper than litigation. The ADR process is also less rigid and completely confidential.
We are living in an increasingly litigious society. Court actions are being instituted more than ever before. With this in mind, careful consideration should be given to whether an action should be defended and if so, what form of dispute resolution should be used to resolve the dispute in the most time efficient and cost-effective manner possible.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.