With the likelihood of a global recession in 2023 and the concerning fall in the value of the Rand against the major currencies, it is clear that South Africa will continue to face tough economic times.
For businesses, this means operating in a cautious manner and cutting costs where possible. Businesses must be cautious about incurring costs, and this includes their approach to the use of legal remedies in conflicts with other businesses.
And so, it is important to highlight the risk of excessive costs when solving business-related conflicts through court litigation. Going this route can involve time-consuming processes which are costly and stressful. Lengthy litigation proceedings can also negatively affect the reputation of parties.
It is therefore not always prudent to resolve a dispute through court proceedings as this may lead to exorbitant costs, hours of management time wasted, and the order granted may not always yield the best possible outcome. However, if a dispute is assessed and managed well, litigation could be avoided altogether, and the parties may then work together to achieve the best possible result. Simply put, litigious court proceedings need not be the fate of every organisation. There are practical ways to neatly curb this, such as through Dispute Avoidance.
Dispute Avoidance is an emerging legal concept in South Africa. It is a process in which parties to a contract can take note at an early stage of the potential risks of disputes; it aims to dispose of those risks amicably and before the matter becomes litigious. This is the proactive management of risk avoidance, and it is essential in business today more than ever.
How does the Dispute Avoidance concept work?
In instances such as when contractual disputes arise, a dispute resolution practitioner who understands Dispute Avoidance will seek to manage the dispute to avoid litigation. This is the primary goal of the concept of Dispute Avoidance. This can be achieved when a legal professional fully understands the dispute-related risks and, as a result, is able to formulate sound advice on mechanisms that can be employed to ensure that dispute resolution and litigating through Courts are used as a last resort in dealing with a dispute.
After consultation with clients, a practitioner knowledgeable about dispute avoidance will assess the dispute through project management to uncover the crux or merits of the matter and they then evaluate the risks present and options available to the client to avoid litigation. This includes allowing for negotiation to achieve an early resolution.
With effective project management of disputes, a business can also expect a legal practitioner to identify the position of the counterparty which allows them to immediately see the strengths and weaknesses of the case. Therefore, for the practitioner, communication with the business client and discussions with the counterparty are key for dispute avoidance as parties are encouraged to raise any concerns regarding the dispute, thus preventing an escalation to litigation.
Another element is keeping track of dispute-related documents such as contracts and related correspondence that can be used to persuade or negotiate with the counterparty to reduce the chances of potential litigation.
Other key considerations for managing disputes and which become vitally important if the dispute cannot be avoided include the following:
- Identifying grounds for the claim which allows the practitioner to have a set structure and approach in dealing with the issues and to streamline the information and documentation to focus on the key elements of the dispute.
- Determining the appropriate forum to resolve the dispute; and
- Adequate preparation of evidence if the matter becomes litigious.
The advantages of Dispute Avoidance, especially in the South African context, include:
- The promotion of active participation by allowing the participants to engage and explain their viewpoints and experiences.
- Opening up the parties to other ways of resolving their dispute that may not be available via litigation.
- The reduction of the stress of having to follow compulsory court processes; and
- Confidentiality for both parties.
The process of Dispute Avoidance allows for legal practitioners to assist clients effectively and efficiently with their disputes and to find a way through an effective project management strategy to avoid litigation - or to sufficiently prepare for litigation if avoidance efforts were not successful. It is an essential legal process that offers South African businesses and industry the opportunity to avoid lengthy, onerous, and costly litigation proceedings.
Written by Siphokazi Kayana, Partner: Head of Dispute Resolution; Nomfundo Mkatshwa-Jackson, Senior Associate; and Lesego Modise, Candidate Attorney at corporate law firm CMS South Africa