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To Litigate or to not Litigate

Discussion in 'Legal Issues' started by RPI, 25th Jul, 2015.

  1. RPI

    RPI Property Lawyer, Town Planner Business Member

    Joined:
    19th Jun, 2015
    Posts:
    712
    Location:
    Brisbane
    We often get contacted by people wanting to sue someone over a perceived loss of $10-$15k.

    I have a specific litigation team that does all sorts of commercial litigation and planning and environment court work, so most people may rightly assume that I would be very pro litigation and suggest you should run on anything.

    We run what I call a lean litigation model, we don't charge paralegal time and we confine the work to 1 or 2 people. What that means is I have at most, Senior Associate and a solicitor working on the matter, not a partner, senior associate, associate, paralegals (and this includes complex matters that cost $20-$30k a month to run through us). In traditional firms there are so many layers looking at the file and consulting on it that they are charging for each person. My senior associate rate is $375 an hour and my solicitor $310 an hour, I believe that leaves us with sufficient to cover a paralegals time assisting them, most places will charge the paralegal at $200 an hour or so.

    Planning and Environment Court (eg DA appeals etc)
    Circa 1% in QLD make it to trial. I have not had a client for many years now who has not been pleasantly surprised at the cost. Most settles at mediation or close there after. Majority of my guys would spend <$10k for an outcome. Even at a 3 day trial you are topping out at $55k so when for a development it would be rare that you would get improve density/better conditions that outweigh the cost.

    Commercial Litigation
    For small disputes, small debt recovery etc the costs don't tend to mount much and you would see them to their logical end (filing a claim in court and often getting a default judgement doesn't cost much)

    Defended disputes are a different story. Litigation is expensive, draining, time consuming and worst of all you have to spend a lot of your spare time hanging out with lawyers and barristers. You need to think about the actual cost, the time cost and the opportunity cost. Chances are you are going to have to fund the litigation along the way and even if you win you very rarely get indemnity costs (as in what it cost you).

    If you are looking at stopping something continuing to happen (eg business partner setup shop next door and stealing your clients then it is a no brainer.

    If it is a fixed cost/loss of $60k but there is a vigorous defence outlined by the otherside after initial correspondence then you would need to think hard about it. Taken all the way to having a judge decide on it then you would be looking at $20k for the barrister and $35k for my firm and court fees etc.

    Outcome 1.
    8 months later you win and get the whole $60k, judge may give you $30k in costs so you are $35k better off than had you walked away. If you had been pragmatic at the start and managed to quickly negotiate a split the difference settlement you would have got $30k and spent $2k on legals. $7k for 8 months of stress and having to outlay $55k along the way is hardly an appealing outcome.

    Outcome 2.
    8 months later you lose and the judge may give your opponent $30k in costs so you are $115k worse off than had you walked away.

    Above example is showing the black and white rather than the grey that is more than often the case, costs awards vary etc.

    You can always lose the unloseable case and always win the unwinable case.

    We have ongoing litigation where the clients are averaging $20-$30k a month for a year or more but that is for large sums of money and/or ongoing losses. Also we have run a few defamation cases this year and they are not cheap either (ask Joe Hockey).

    Litigation is all about vast amounts of words (often numbers too) and every word needs to meticulously checked, drafted etc. An errant comma can change the meaning of a sentence, etc.

    I can't even remember what word it was now, but we once spent half a day (as part of a longer trial) in court with a barrister (otherside had a QC and a junior barrister) arguing about the meaning of a single word. So my clients would have spent ~$3,500 in legal fees and the otherside would have been close to double that on determining how that word should been interpreted actually in court, not to mention the time spent finding case law on that word. The interpretation was obviously important to the case and there was significant case law to go with it. A lot of money is spent on want seems like minor details but in the legal word the minor can make the difference.

    Summary
    If it is part of a conveyance then the lawyers are already involved and you have little choice but to keep them involved.

    If it is a small amount and you can agree to settlement without formally getting lawyers involved (getting some basic advice is often still a good idea but then write the letter yourself or not have it on lawyers letterhead).

    Try a commercial mediator

    But if the otherside has already lawyered up then you should too.

    Unless it is:
    1. clear cut;
    2. for a significant sum;
    3. an ongoing loss;
    4. you have the money to fund it and you are happy to do so without financial return based on the principle etc

    Then consider carefully how far you want to progress, what the stages are that you could pull out settle etc.

    If you go and see a lawyer and their first response is to go into a let's get these b*@tards and playing on the emotional side of it go and get a second opinion, otherwise they may end up getting more out of it then you.

    And finally if you go down the litigation route don't go to a suburban lawyer or generalist etc, litigation is unique set of skills suited to a particular personality type and you need to use someone that all they do is litigation.
     
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  2. Samten

    Samten Well-Known Member

    Joined:
    25th Jun, 2015
    Posts:
    275
    Location:
    Sydney
    Great advice.
    Have been there done that so to speak and the "Stress factor" is something that people don't take into consideration.
    Bought our current PPOR about 6 years ago based on BP report. We had inspected house and it all looked good, recently renovated so nice and fresh. Organised inspections thru lawyer while we were overseas doing a trade show in Hong Kong. Still remember reading the report at the Convention Centre internet kiosk. Nothing was raised in the report that would cause any major alarm bells also rang solictior and asked after having read the report if there was anything that they could see afterall they see dozens of these so could spot something. No, all good so we transfered funds and went unconditional.
    Moved in Nov and at Christmas had house full of family and guests when sewerage starts coming out of the downstairs bathroom waste in the floor! Turned out that the overflow was 300mmm above the floor level of the downstairs bathroom...clever. Then a bit of timber dropped out of one of the joists from the top deck, started investigating and it was almost all rotten and had been bogged up and painted., big problem. Got new building report that would stand up in court at $8000 and discovered there was over $130,000 worth of defects! I can't begin to tell you how we felt.
    We were assurred that it was an unloseable case and to go to XYZ as they were experts in these matters. Well they stuffed up big time so much so that we had a case of negligence begun against them and then that solicitor went gaga, literally!!.
    Insurance companies wriggled out of paying as the Building inspector changed firms just prior to claim being lodged, don't get me started on Ins cos! Then discovered that he had company set up where he owned 1% and wife the rest of the $200 listed capital. Bank mortgage over house etc etc.
    At the end we negotiated with him directly to replace the deck at his cost approx $50,000 worth of work so got the main result we wanted but still left with the rest which we dealt with.
    Legal fees were around $40,000 for nothing in the end. What I can't put a price on is the absolute stress we went through as a couple trying to resolve this and it was over 2 years of constant heartache.
    If we had negotiated directly in the first place we would have been so much better off and so would the builder but hindsight is percfect.
    The only people that win in litigation (usually) are the lawyers and I'm not having a go at you, it's just the way the adversarial justice system we have is set up.
     
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  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,970
    Location:
    Sydney
    Look at the Joe Hockey defamation case of last week. He won, but lost as only a small part of his legal costs were payable by the otherside. Estimates that he would be $500k out of pocket.

    And yes the only ones win are the lawyers as they get paid whether the client wins or loses.
     
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  4. Owlet

    Owlet Well-Known Member

    Joined:
    25th Jun, 2015
    Posts:
    124
    Location:
    VIC
    [​IMG]
    [​IMG]
     
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  5. Samten

    Samten Well-Known Member

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    275
    Location:
    Sydney
  6. pinkboy

    pinkboy Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
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    911
    Location:
    Mackay, Qld
    Imagine a world without lawyers!

    [​IMG]

    pinkboy
     
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  7. thatbum

    thatbum Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    894
    Location:
    Perth, WA
    *shudder*
     
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