Perspective

Important note: This post does not provide legal or financial advice; it reflects my perspective, based on decades of private, corporate, and in-house legal practice in New Zealand and my experience collaborating with lawyers in many other countries.

What you should do when you have a legal problem

The first step is to define your problem or need clearly. Is it a legal, accounting, or tax issue, or a combination of them? If you’re unsure, consult your lawyer or accountant. Tax is technically legal, although accountants primarily advise on tax. You will likely need specialist legal and accounting advice if you have a serious tax problem.

Assuming you need legal advice, where do you go? If you have a regular lawyer, you will go to them unless you are sure they can’t help you. If you have doubts, ask your lawyer if they are experienced and confident in dealing with your issues. If you are not convinced, ask for recommendations. Your lawyer can brief another lawyer or a barrister.

A lawyer or professional advisor who knows their limitations and is secure and mature enough to seek help is much better than one who pretends expertise. Many lawyers struggle to refer work to another member of their firm or another firm because they fear the other lawyer or firm will “steal the client.” Whatever your lawyer’s sensibilities, the choice is yours, not theirs. Clients are not owned by the firms that represent them.

How do you prepare for legal advice?

To receive the best advice, you must be fully prepared. This means providing all relevant information, even if it's something you'd rather not disclose.  Lawyers’ clients are often like doctors’ patients who withhold crucial information. They do so, fearing that full disclosure will lead to a serious diagnosis or advice to change a radical lifestyle. That’s human nature, but it has consequences.

If you have been in negotiations, disclose the paper or email trail and any conversations. You may fear that you have said or written something compromising. If so, disclose it upfront. You don’t want your lawyer to be ambushed by an embarrassing disclosure at a critical moment. A problem confronted early can often be managed. However, one that is suppressed and erupts when someone discloses it against you can be catastrophic.

If you conceal vital information from your lawyer, they will not trust you. If they don’t trust you, they will be reluctant to take your calls, and your case will suffer. This lack of trust means you will have a less effective legal strategy.

A key part of legal practice is realistically managing expectations, which requires honest communication and mutual respect. Without that mutual respect, you will pay more and get less. The lawyer/client relationship should be respectful and cordial, but if it is too friendly, your lawyer will find it hard to be objective and give you tough advice.

Remember, your input is crucial. You are not just a passive recipient of legal advice, but an active participant in the process.

How to avoid wasting money on legal advice

Legal services are expensive, but you can avoid wasting money by following some steps.

When seeking legal advice, clearly outline your situation and objectives. Be ready to reconsider your position, but don’t proceed until you and your lawyers agree. Provide all relevant information. Your lawyer will determine what is needed, which will inform your strategy. Don’t conceal information that could be used against you. Don’t be like the patient who hides symptoms from the doctor.

Request estimates or quotes. Most lawyers can offer estimates and update them as necessary for prolonged matters. Quotes are less frequent because they are fixed prices, and many legal projects are too unpredictable to be quoted. A quote with numerous conditions isn’t a quote; instead, obtain an estimate. Estimates of legal costs are often presented as a range from low to high.

You need to understand the hourly rates of those working on your job and additional costs such as third-party expenses and administration charges. If you encounter financial difficulties during the engagement, discuss the situation with your lawyers and find a solution. Transparency about payment terms is key. You are free to negotiate terms that differ from the standard terms. Have a plan. Most legal matters that are too costly for their value begin and persist without a solid strategy or an exit plan.

Don’t expect documents and emails until the facts and strategies are agreed upon. Premature drafting is a common problem that wastes time and money. Ensure your facts and reasoning are clear before rushing to print. Once a document is created, everyone concentrates on its contents rather than what has been omitted. Often, a hastily created document is set aside and never utilised.

Clear and open communication with your lawyer is key. It enables you to understand the process and maintain control. You are not an observer but an active participant in it. Follow legal guidance, particularly when interacting with other parties.

Actively monitor your transaction or case and regularly review long-running matters. Your active involvement is not only beneficial but also necessary for the successful resolution of your legal issues. If you don’t understand the advice or tactics, ask for an explanation. That is being smart, not stupid, and it will enhance your client/lawyer relationship. If your lawyer refuses to explain, you need to find another one.  You must understand what is happening and why.

If things are going poorly or the relationship with your lawyer is strained, explore ways to improve the relationship. If you can’t mend it, you need to find alternatives.

When your matter is completed, ensure clarity regarding record-keeping and your approach to addressing post-transaction developments such as claims, filings, and official notices. You don’t want loose ends to entangle you months or years later.

If your transaction is likely to be repeated, discuss how it went and share lessons for the next one.

What you should do if you are involved in litigation

First, as a senior barrister and an eminent QC once told me, litigation is not an investment, and there is no such thing as an open-and-shut case. Of course, there are exceptions, but these are sound guidelines.

Be prepared, honest, and fully disclose your circumstances, including your financial position. You don’t want to be ambushed by something you thought would stay hidden, and you don’t want to initiate something you can’t afford to complete because it’s akin to starting a war that can’t be won. Litigation should not be taken lightly. It is time-consuming, stressful, and requires a significant emotional and financial investment. It can distract you and jeopardise your business and personal relationships. Sometimes, there are no true winners.

You may excel in your business, but that doesn’t mean you understand the legal system. It's a different realm with its language and customs that you will need to learn. Many legal systems favour defendants over plaintiffs, which is another reason to think carefully before initiating litigation. You may have a strong case, but it can be undermined by frivolous defences, unnecessary delays, and judicial leniency towards clever defendants.

Litigation should begin with a clear assessment of your case's merits (strengths and weaknesses). If you initiate or respond to litigation reactively (for example, amid a flurry of correspondence), you will likely spend too much and fail. It is easy and natural to get caught up in the emotion and heat of battle, but to succeed in litigation, you need to step back from the front line and calmly consider your case. Vast sums are wasted on legal correspondence that does not significantly affect the outcome. This occurs in commercial transactions, litigation, and transactions that may give rise to litigation.

If litigation is inevitable, get into court. Long emails asserting your position, countered by lengthy responses from the other side refuting your claims, tend to be ignored or heavily discounted by judges, regardless of how carefully or artfully they are crafted, and can deplete your budget well before you reach court.

What is the alternative to endless emails and legal filings? Face-to-face meetings. Getting out of the trenches and talking to the enemy can be challenging, but it can clarify issues and positions more effectively than correspondence. It is easy to be tough and aggressive when hiding behind the phone or email, yet most people are more reasonable in person. Meetings can lead to settlement and prevent or end court proceedings. Sometimes, the parties should meet without leaders; other times, it is better to have lawyers present. If you agree to meet without lawyers, you must be well briefed, take notes or agree to a recording, and, as a rule, try to listen more than you speak. You are much more likely to get into trouble for talking too much than too little.

If lawyers are present with clients, the atmosphere will become more adversarial and formal, but that may be necessary. The choice is ultimately a matter of judgment.

When is legal expense an investment?

Legal expenses are an investment when they create or protect value. If you create high-quality templates, policies, procedures, or processes using legal services, they can enhance the value of your business and safeguard it against adverse claims.

If obtaining legal advice provides you with an advantage or safeguards an asset, it is an investment.

Protecting intellectual property (IP) through trademark registrations or other means exemplifies how legal expenses can enhance the value and protectability of your business. I have seen clients decline to spend $2,000 to $3,000 registering a key trademark only to spend tens of thousands of dollars trying to defend it, sometimes unsuccessfully.

Legal expenses are not an investment when incurred for work that you, your staff, or another provider could perform more efficiently. Legal expenses are not investments when the job lacks direction or a clear endgame. This situation is common in both commercial negotiations and litigation.

Has your transaction or case become an expensive habit instead of an investment?