See you in court!?

When business owners think of lawyers assisting them in the resolution of their disputes – they often envisage ending up before a judge with a wig and bailiff calling for ‘order in court’, whilst their lawyer poetically defends their case.

Unfortunately, the television series have lied. Your day in court will probably not be as glamourous as you imagined it would be, sorry. To add insult to injury, preparing for your day in court may disrupt your business operations and dig deep into your business’s pocket. Although courts certainly offer a platform for fair and just adjudication of disputes – they are not always ideal for business.

It is no secret that the cost implications of an often protracted litigation process can be debilitating. This is particularly so for small businesses which, when operating through juristic persons, do not even have access to the more user-friendly judicial processes offered by the Small Claims Court. As a result, businesses are usually faced with the choice of either taking action at the risk of incurring hefty legal costs or taking no action at all. While the latter is often viewed as the lesser of the two evils – businesses need not adopt this sacrificial approach to resolving their commercial disputes.

Alternative dispute resolution (ADR) is a quick and more economical option for resolving disputes that may arise from time to time in the lifespan of a business. The three most common forms of ADR are conciliation, mediation and arbitration. Although in practice the lines between conciliation and mediation are often blurred, the primary distinction lies in the level of involvement of the independent third party who is brought in either as a conciliator or a mediator. While a conciliator generally simply facilitates conversation between the disputing parties with the view to assisting them to find a common ground; a mediator usually has a more active function and may, in certain instances, provide the parties with non-binding recommendations on how they may resolve their dispute. However, this distinction is not cast in stone and it varies from jurisdiction to jurisdiction. On the whole, the non-confrontational, flexible, simple and speedy environment created in conciliation and mediation settings is conducive to voluntarily settlements on amicable terms.

The last commonly known form of ADR is arbitration in terms of which an arbitrator plays an adjudicative role to assess the dispute and issues an arbitration award which is final and binding on the parties. An arbitration award is appealable in certain instances. Arbitration proceedings are similar to court proceedings, but may be beneficial from a cost / time-saving perspective.

There are a number of private institutions that provide ADR services in South Africa, including certain legal consultancies and law firms. It is thus prudent for businesses entering into any commercial arrangements to include mechanisms in their transaction documents for the resolution of disputes through the various ADR options available. This will ensure that where any dispute arises, pursuant to the breach of a commercial term for instance, the parties to the commercial arrangement have a quick and effective tool at their disposal to resolve it and to ensure that material commercial obligations are honoured.

Even the ordinary courts have realised the benefits of ADR. Court-annexed mediation has been piloted and implemented in a number of Magistrates’ Courts across South Africa as part of the state’s effort to “transform civil justice and enhance access to justice”. Accordingly, at any stage of civil proceedings (but before judgment is delivered) a matter may be referred for mediation. Although there are no court fees payable when the matter is referred for mediation, the mediator may charge a fee in terms of a fixed tariff. In such instances, the parties are required to make equal contributions to the fee before the mediation proceedings begin. The courtannexed mediation proceedings can take between a few days to a few weeks; and where parties are able to reach a settlement, their agreement can be made an order of the court.

Certain statutory frameworks, such as the Labour Relations Act 66 of 1995 (LRA) and the Consumer Protection Act 68 of 2008 (CPA) have also introduced specialised enforcement frameworks that encourage the use of ADR as a precursor to approaching the traditional courts. Whilst the labour law dispensation is important to all businesses, given that they are often employers; the consumer protection dispensation is relevant to small businesses with an annual turnover of less than R2 million, as they would fall under the definition of “consumers” in terms of the CPA’s provisions.

Of course, prevention is better than cure, and having watertight commercial documents has the potential to reduce the prospects of often costly disputes arising. However, if the ‘paw-paw hits the fan’, consider ADR before dashing to court.

Tshepiso Scott – Managing Director