Why Businesses Should Avoid Legal Uncertainties

By Valentino-Buoro

A few weeks ago, a mediation advocate narrated how he attempted to persuade a corporate client to resolve the dispute between his organisation and another through the mediation process. The client rejected the advice on the grounds that such a move would portray his organisation as standing on weak legal grounds.

Few months after trial commenced, the opposing party slammed the client with a counterclaim that has now thrown the company into a financial crisis following the judgement of court which upheld the counterclaim.

There is nothing as unsettling as a counterclaim, which turns the table in contentious litigation. In a plethora of cases, businesses and individuals that file law suits with the objective of righting perceived wrongs and making monetary gains in damages, have returned with battered faces as a result of unexpected counterclaims from the opponent. It is doubtful if the claimants foresaw the probability of a counterclaim. If they did, they would be circumspect about initiating the lawsuit in the first instance.

Counterclaims, as the name suggests, are claims that a defendant may file, independent of his defence – some kind of a legal reprisal. In a 2014 case, the Court of Appeal stated that “… for the purposes of pleading, a counterclaim is the equivalent of a statement of claim and the defendant making it is in the position of a claimant and the person against whom it is made is in the position of a defendant. Accordingly, the principles of pleading which govern a counterclaim are substantially the same as those which would apply to a statement of claim. By the rules of pleadings, a defendant is allowed to file a counterclaim along with his defence in an action. What is expected for him is to have the word “counterclaim” prefixed to it as a heading, so as to distinguish it from what is pleaded merely as matter of defence to the claimant’s claim…’’

When the foregoing is thrown back at the claimant, he finds out, rather late in the day, that his organisation had no monopoly of hurts and must now be accountable for statements and actions that he may have overlooked or did not appreciate the gravity of their impact. Interestingly, a number of cases have been won and lost on counterclaims. Anecdotal evidence would appear to indicate that individuals and corporations are attracted to the litigation route largely because of the coercive authority of courts. What they however fail to understand is that litigation and mediation are not mutually exclusive. Indeed, some writers outright assert that mediation takes place under the shadows of the courts. The foundation for this assertion is that where a dispute is resolved by mediation, enforcement of its terms, when breached, is usually through the courts. Put differently, the courts now recognise mediation as an integral part of the judicial processes and accord its settlement agreements the same judicial imprimatur that is accorded a court judgement.

Perhaps the weakest link in the chain of the mediation process is the fact that no one may be compelled to attend a mediation. Thus, when an opponent is invited to mediate a dispute, he or she may decline such summons without any legal consequences. However, with the current state of development of mediation, professionals in that field have found a way around that challenge. Thus, where you invite a party to mediation and he declines, you may file a lawsuit which willy-nilly brings him before a judge. Soon as he appears, you should apply to court to stay proceedings and allow parties to go and explore mediation. The respondent, at that point, is compelled to appear before a mediation on the consenting order of the court based on claimant’s application.

The likelihood of a counterclaim is only but one of the uncertainties businesses may face when they do not take steps to manage risks in dispute resolution. Small businesses, for instance, make legal mistakes all the time — some of which can erode the bottom line and make it difficult to recover from. There have been cases when the seemingly unending drag in litigation have dealt devastating blows and hindered diligent prosecution of their cases. Sometimes too, parties glaringly notice that their instructed lawyers are burning out of competence to match the firing powers of counsel of their adversaries. Rather than change counsel or hire another to lead him, the businesses are stuck for lack of funds. The inability to retain experienced counsel may even have been at the root of the issues that trigger the lawsuit.

The foregoing challenges and many more give credence to the advocacy for businesses to explore mediation or other processes of alternative dispute resolution before heading for the courtrooms. The point has been made over and again that even though mediation may not resolve a dispute, its dynamics narrow the areas of contention between disputing parties in a consequent litigation.