What’s Law Got To Do With It?

There is an old saying that a jury consists of twelve people who are selected to determine who has the better lawyer. Whatever the truth of that saying, there is no doubt that the people who prevail in legal disputes are not necessarily the people who are legally “right”.

I learned this in my first year of practice. A client had signed a promissory note with an interest rate of 48% per annum. He owed a substantial amount of money under the note, most of which was interest. My advice to him was that since the note was drafted in a manner which contravened the Interest Act, he was only legally obligated to pay the original principal amount plus interest at 5% per annum. This significantly reduced the amount that he owed. I was immensely proud of myself because I knew the law and I gave him excellent advice.

A few weeks later I spoke to the client and asked him how the matter had turned out. He replied that he had paid the entire amount owing, including the interest at 48%. I asked him if he had not understood my advice, to which he replied: “Oh, I understood it, all right, but it occurred to me that the type of people who charge 48% interest are not the type of people who care much about the Interest Act, and it was safer for me to pay the entire amount.”

From that experience, I learned that there are often more important considerations in a legal dispute than the law. Similarly, the legal system is not necessarily about justice.

I often told clients who came to me looking for help to resolve a legal dispute that we have a legal system, not a justice system. Our system will resolve the client’s dispute one way or the other, but clients who expect justice will often be disappointed.

However, inexperienced clients were often looking for justice, and it was not unusual for them to tell me that “it is not about the money, it is the principle of the thing.” (Generally speaking, when clients say that, it is about the money.)

The problem is that very often clients do not have enough money to continue to pursue their principles, and when the money runs out, they often blame the lawyer, sometimes with good reason, and sometimes without good reason. (As an aside, I once told a client that he could not afford his principles, which did not go over well. As I matured, I found ways to bring clients to the same conclusion without offending them.)

I frequently told my clients that whether they were right or wrong, if they did not have the psychological, physical, and financial capacity to see the dispute through to the end of the litigation process, the best approach was do whatever was necessary to bring the dispute to an early end.  Sometimes that meant that I was advising them to pay an amount to the bad guy to settle a claim for an amount that they did not owe, or to walk away from an amount that was owing to them. They did not like to hear that. 

Which brings us to how disputes really get resolved. What I found the most surprising as a young lawyer was how often the deciding factor in a dispute had nothing to do with the law, and everything to do with other factors, the most important of which was money.

Of course, who is legally right and who is legally wrong is important, especially in the rare occasions when the situation is not only clear but is so clear that even a good lawyer cannot create doubt about who is right. In those circumstances, a lawyer can stick to her or his guns secure in the knowledge that if the other side does not comply with whatever the lawyer’s demand is, a judge will (most of the time) not only rule in favour of the good guy, but (in Canada, at least) will also order the bad guy to pay costs.  

But often the situation is not that clear. In those cases, the respective bargaining position of the parties is crucial. There are many things to understand and consider which are more important than the law before settling on a strategy to settle a dispute. Here are just some of those:

1.     Can the client afford litigation, both at first instance and through an appeal?

2.     Can the other side afford litigation?

3.     Does the other side have a reputation for being unreasonable?

4.     Does the other side have a reputation for being litigious?

5.     Is someone on the other side going to look bad to his or her bosses if our client makes a demand or our client does not comply with their demand (making it likely that litigation will be pursued to cover up that someone’s mistakes)?

6.     Do we understand enough about the other side’s finances to know if they can actually pay an award and/or legal costs if we win, or do we run the risk of spending time and money to win a hollow judgment?

7.     Do we understand enough about the other side’s corporate structure to know if the entity that we dealt with is the entity with the money?

8.     Do we need evidence from our suppliers, customers, or employees to prove our case? How willing are they to be involved? 

9.     Will litigation result in negative publicity which might affect our client’s business?

10. Does our client need to preserve a relationship with the other side?

11. Will we have to disclose confidential information to pursue our claim?

The list of questions can go on and on, but the bottom line is often the same. When contemplating litigation, the client must first determine that there is light at the end of the tunnel, and that it is not a train. Then, the client must understand that unless he or she is willing to see it through to the very end, the other side will eventually figure that out, and the settlement will end up being on the other side’s terms.

Good lawyers not only know the law, but they understand how the legal system works, including how matters can be delayed or accelerated to bring financial pressure on the other side. They know their own clients and their tolerance for the process, and they make sure that their clients know what may happen in a dispute. Most importantly, with exceedingly rare exceptions, they make sure that their clients never start litigation that they cannot afford to finish or allow themselves to be dragged into litigation that can be avoided.

Smart clients find pragmatic lawyers who tell it like it is, and then they listen to them.

Whenever you hear a story about a client who got involved in litigation and then had to bail out on bad terms part way through, the usual explanation is either a bad lawyer or a client that would not listen to good advice, perhaps because they were intent on getting justice when it was never there to be had.