How to ensure your business survives a law suit

The fear of facing a lawsuit certainly has the capacity to keep a business owner awake at night.

However, businesses do face lawsuits and survive, so while it may be a stressful time, a lawsuit doesn't have to spell disaster. Much of how the lawsuit goes and how your business gets through it depend on how you handle the proceedings, and whether you get the right help.

Here are some points to consider in order to assist your business survive that dreaded lawsuit, should it come.

Respond quickly

It's easy to panic when you open an innocuous looking envelope to find a statement of claim - a document notifying you of another party's intent to undertake legal proceedings against you. However, the most damaging thing you can do at this stage is ignore the situation.

Under Australian law, you have 28 days from the date the statement of claim is served to respond to it - if you don't, you risk a judgment being made against you.  

At this point it's a good idea to engage your own lawyer.

Having sound legal advice can make all the difference to how your case goes. A lawyer will be able to advise you on how to respond, and how to handle the proceedings.

Open a dialog

Don't assume that receiving a statement of claim means a messy court case is inevitable.

You may find it beneficial to contact the party who has filed the claim, to see if some sort of agreement can be reached. If you are in New South Wales, the Small Business Commissioner Bill 2013 means mediation is a legal requirement before court proceedings - if you are not, it still makes good business sense to try and reach an agreement with the other party, negating the need to go to court.

If you decide to write or email with the intent of settling the issue between your business and the other party, be sure your correspondence is professional, calm, and measured.

Only make statements or offers that you can back up, and don't give in to the temptation to make it personal or overly emotional.

Know your plan

If it becomes clear that your case is going to proceed, you and your lawyer will need to draw up a plan.

The first thing to decide is whether to admit the claim or defend it. It's easy to say "I want to win!", but the best thing you can do for your business is to discuss with your lawyer which path and which outcome are going to be less damaging to your business in the long term.

In some cases, the better choice is to defend the claim, in others to settle it as quickly as possible.

A case in point is that of Annie Young, owner of a Sydney family business which produces a range of teas known as Honest Tea.

When Coca Cola started legal proceedings against the company for the right to use the trademark, Young was certain that standing her ground was the right thing to do.

The case was eventually dropped.

Document everything

Once court proceedings have begun, it's vital that you document everything - any contact from the other party or their lawyer and any actions you take. However, documenting everything starts before the case.

Of course you hope you will never end up in court, but if you do the chances are your businesses records will be under scrutiny.

Keeping good records and copies of correspondence with clients now could help you in the future.

Take the case of Jason Bouman versus Australian Traffic Network.

When ATN transferred him from his post, citing issues with his appearance and presentation, Bouman was able to provide copies of emails from the National Operations Manager, confirming that ATN was happy with his work.

The case was eventually settled out of court.

As Bouman's case shows, everything you say really can be taken down and used as evidence against you.

Should you find yourself entangled in court proceedings, make public statements only when you must, and remain professional at all times when speaking of the case. To shore up against potential future problems, be mindful of the words you choose when dealing with others.

There's no doubt that facing a court case is a difficult and trying time for any business.

However, your business can survive and get back on its feet if you are organized, think your actions through, and take legal advice at the earliest opportunity.

About the author

Tristan Anwyn is an author who writes on subjects as diverse as health, marketing, how to improve reviews, and SEO.