What’s the real cost of commercial litigation?

You’ve got into a commercial dispute.  May be with a supplier, client or business partner.

You’re angry and want “justice”.  Your first though is “Let’s engage a lawyer” and threaten to take them to court.

Or you’re on the receiving end.

Either way, before things escalate, stop and reconsider.  The true cost of litigation may shock you!

These figures are based on typical commercial litigation in the District Court of NSW, which as a jurisdiction up to $750,000.

  • Up to filing a formal statement of claim in court – one month; legal costs $3,000 to $10,000.
  • Up to being served with other party’s defence and maybe a cross-claim – 2-3 months; each party’s legal costs $7,000 to $15,000.
  • Up to completion of document discovery, subpoenas, affidavits and pre-trial motions – 3-8 months; each party’s legal costs $15,000 to $30,000.
  • Completion of each party’s evidence – 8-12 months; each party’s legal costs $30,000 – $50,000.
  • Conclusion of a trial – 10-14 months; each party’s legal costs $60,000 – $120,000.
  • Receipt of a formal judgement from the Court – 12- 18 months.

Best case estimate $60,000.  Worst case could set you back $120,000. Each party! And in some cases the costs could be a lot higher.

Even if you win it doesn’t stop there.

The losing party can lodge an appeal within 28 days of the trial decision.  That can take between 6-12 months to finalise, adding a further $10,000 to $20,000 to your legal costs.

Getting a judgement in your favour is one thing.  Actually getting the money out of the other party is quite another!

You may encounter problems in enforcing your judgement against a defendant who either doesn’t want to pay or lacks the financial means to pay.  This could take a further 3 – 6 months of time and a further $10,000 or more in legal costs.

Finally, the loser, who is ordered to pay your legal costs, may challenge the quantum of your costs and force you to take it to formal costs assessment. This could take a further 6-12 months to finalise.

Bottom line, if you choose to litigate, the whole process could consume 1-2 years of your valuable time and be a significant drain on your cash flow.

Not a choice to be made lightly.

Is there a viable better alternative?   Not always, but very often there is.

Engage an Alternative Dispute Resolution (ADR) expert who could help you find a mutually satisfactory outcome at a fraction of the time and cost.

This is an indication of how much you could save:

  • ADR Expert triages the dispute and creates an effective dispute management blueprint – 1 week. Cost $660;
  • Conducting the pre-Mediation steps to elicit each party’s perspective, identify the core issues, highlight the commercial interests, managing inter-party communications to deescalate and contain the dispute while gaining both parties cooperation to brainstorm the issues and look for creative workable solutions and outcomes – 2-3 weeks. Cost $1,500 per party
  • Final Mediation – half day $1,500; full day $3,300 shared equally.

Bottom line – 3-6 weeks at total cost of $5,000 – $10,000 shared between the parties – $2,500 – $5,000 each.

Big difference wouldn’t you say?  And there’s a pretty good chance your relationship stays intact.