Some business owners invest considerable time and resources seeking legal counsel about whether they can pursue litigation against someone for a grievance.

While obtaining such advice is prudent, it doesn't necessarily address the more fundamental question many should be asking: not just can you sue, but should you?

Legal Costs

Most businesses understand that lawyers will estimate initial litigation expenses before proceeding. However, several important considerations about these costs deserve attention.

First, legal fees rarely feature in negotiated settlements. As most matters resolve through negotiation rather than trial, this reality is crucial when deciding to litigate. Second, even when securing a favourable court decision, cost orders typically cover only a portion of your actual legal expenditures, not the complete amount spent on attorney fees.

Opportunity Cost

Consider the time demands on you, your executives, and key personnel who must assist lawyers by answering questions, providing statements, and supporting the litigation process.

Beyond the time investment itself, factor in the distraction and disruption to their normal business responsibilities. Since you won't recover compensation for these costs, evaluate whether this burden outweighs potential financial gains. Have candid discussions with your legal team about realistic time commitments so you can assess litigation's genuine business impact.

Recoverability

If you're pursuing a lawsuit expecting monetary recovery, ask a critical question: “Can the defendant actually afford to pay what you're seeking?”

While lawyers can conduct searches providing general information about a defendant's financial position, determining actual payment capacity often proves difficult. Circumstances may also change – someone with sufficient resources today might lack them at settlement or judgment time. Winning without receiving payment can feel hollow.

Business Reputation

Standard commercial litigation typically doesn't significantly harm your business reputation. However, several nuances warrant consideration.

Some businesses fear that forgiving a debt signals weakness in the marketplace, making collection from others difficult. Generally, this concern is unfounded unless you repeatedly write off debts without compelling reasons.

Additionally, litigation involvement can affect tender eligibility and due diligence processes if you're considering selling your business. Since litigation creates public records, consider potential consequences for future business opportunities.

Suing on Principle

Many business owners pursue litigation based on principle – the perceived wrongdoing offends their morality, and allowing the defendant to escape consequences feels unjust.

While understandable, only you can determine whether defending this principle justifies litigation's costs and risks. Experience shows that many who initially sue on principle find their resolve weakening over time as expenses accumulate and events recede into the past.

Should you Sue?

Before litigating, thoroughly examine the overall advantages and disadvantages with your legal advisors, considering all of the secondary factors outlined above. If you're contemplating litigation but uncertain whether it's strategically sound for your business, we welcome discussing these considerations with you.