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I NEED THE MONEY, BUT I WANT THE CAR!

Actions have consequences, we have to make decisions.  Is the bird (or the money) in the hand better than what is behind the curtain?

I NEED THE MONEY, BUT I WANT THE CAR!

Actions have consequences, we have to make decisions.  Is the bird (or the money) in the hand better than what is behind the curtain?

Is it really a car?  Just like on Monty Hall on ‘Let’s make a Deal!’, we need to weigh up the value of what is here today against what might be available another day.

 

ACTIONS HAVE CONSEQUENCES

There is a real debate at the moment about actions and consequences.  Worldwide, governments have imposed severe restrictions on their citizens ability to operate normally. A great cost (in terms of jobs, welfare, debt etc) is being incurred to (in this case) avoid an uncertain and highly contested outcome.   There are a number of factors at play including the political motivations of governments, the changing profile of health officials, the accuracy of modelling, the future of welfare, security, trade, and other factors.

In essence, it is the measurement of a particular outcome and whether steps should be taken to speed the process towards a conclusion, where that is in the measured interests of a certain outcome.

CASH OR A NEW DATSUN? Settle now or fight on?

In a recent article ‘there’s a whole lot of relevance in the circus’ we discussed the pros and cons of litigation.

Litigation requires investment and preparation, whilst it grinds out a result, it comes at a price.  The process is difficult to control, uncertain, expensive, and polarises opponents.  It is important to ensure the cost of the process matches the benefits, in quantum and timing.  The owner of the process (a Director, or a Liquidator, etc) must consider whether, in commencing a Proceeding, there is the prospect of either an early or very significant return from managing the process correctly.  When was the money advanced?  What connection does a return in three, five or eight years have to the original advance?  Are the stakeholders still there and how relevant is the outcome?  Who are the winners?

Moral authority is a big issue here.  There is a responsibility to get it right and dispassionately look at the context of the dispute.  It is unwise to look at a particular legal action in isolation of the issues that resulted in the failure of the issue or the company.  Sometimes failed entities put significant store into one large legal action that will “save the day” and generate the big dividend.   The full context of a failed companies activities needs to be understood so that defences to an action are considered.  Why did the company fail?  What representations did it make? Are we going to ‘win’ and do we deserve to?

MEDIATION AND SETTLEMENT

We should set a high standard in relation to litigation they commence and opportunities to settle or mediate should be sought.   Provided the principals are not emotional, each party can “afford to lose”, neither is betting on a long shot, or one party is in possession of some “dynamite” evidence, the prospect of a settlement should be considered actively.

The advantages of formal or informal mediation as a settlement tool include:

Efficiency
  • An average mediation takes only a couple of weeks preparation and a couple of days to achieve, much less than expended in preparing for a trial
Discovery
  • Depending on the trial strategy and time chosen to try and mediate, some discovery may be avoided by focusing on the key parts of the dispute in a structured position paper.  There is also less formality in relation to witness preparation and discussions are off the record
Promotes a ‘roadmap’ to settle
  • If both sides approach their dispute with a desire to put it behind them, a ‘spirit’ of settlement, then good mediator can help them find a way to do so
No first mover advantage
  • The parties are less likely to be standing on ‘scorched earth’, first mover disadvantage is eliminated, and parties are more likely to continue to engage with a view to settlement
Usually some outcome
  • Even where a party’s attitude leaves no room for compromise, mediation can nonetheless help define and hopefully limit the issues to be decided
Control
  • Since the whole process is voluntary, the parties have complete control over the outcome; if they do not agree, there is no resolution and you can still kick the issue into touch for a judge to decide
Confidentiality
  • The process is private and confidential. This allows people to openly discuss issues without the possibility of public exposure

TAKE THE PAIN TODAY

After you weigh up the potential impact of litigation delay and expense, consider initiating pre-dispute settlement:  Anecdotal evidence says that best chance of settling a dispute is before proceedings are commenced.  If a recovery lawsuit could take (say) a year to resolve in court, then I would be looking for alternatives as part of the process.  This is because one can never predict how long the litigation process will take with any degree of certainty.   It can take a long time before a court gets to hearing a case after the original dispute occurred – often many years.   In the case of (say) the Bell Resources litigation, a generation passed by whilst the matter works its way through the Courts

There is no short route to pain relief.  If you commence litigation without a process to settle it, it can be a long process.  The longer the litigation progresses the less relevant the outcome becomes to stakeholders So – set up the process to settle, build settlement into your strategy.

Disclaimer

Wexted Advisors communications are intended to provide commentary and general information. They should not be relied upon as financial or legal advice. Formal financial or legal advice should be sought in particular transactions or on matters of interest arising from this communication.