I recently, together with DW Fox Tucker colleagues Mark Minarelli and Girish Rao, presented to the Australian Institute of Landscape Architects on the age old topic of what is best termed “risk management”. As the broad concept of risk management is not a topic that mutates – but rather evolves over time – the content of that talk could not be said to have touched upon a lot of new ground. Having said this, the discussion was a timely reminder (at least to me) that one of the best risk management tools is the periodic review of businesses practices to ensure that, to the extent possible, they are in line with recommended practice. To enable (or perhaps encourage) our clients to review their risk management practices, I have reproduced the body of that talk below.
Risk management is not about excluding your exposure to liability. That is only possible in the event you can selfishly control human nature. Most times, disputes arise at the hand of those who are disingenuous and who merely seek to gain an unfair benefit at the cost of others. Those people are the most damaging because for them litigation (as distinct from the law) is a tool to be used for commercial prosperity. They tend to be experienced litigants who, if you are particularly unfortunate, do not perceive that commercial dishonesty is tantamount to criminality.
Litigation is extremely time-consuming, stressful and expensive. More often than not, litigation does not run to a final judgement – as parties eventually agree to a compromise of the dispute. However, too often litigation is capitulated by one party who simply cannot afford the toll it takes on their time and finances. As was said by the former Irish Judge Sir James Mathew “In England, Justice is open to all, like the Ritz hotel“. Unfortunately, such a sentiment is perhaps even more accurate today than it was in the late 19th century.
It is with this in mind that I describe risk management as a concept of reducing exposure to potential liability by implementing practices in everyday business dealings to ensure that, if a dispute does arise, you are placed in the best possible position to prosecute or defend your case.
So what is the key to reducing risk? The answer is a solid paper trail. Why? Well, as was said by Abraham Lincoln: “no man has a good enough memory to be a successful liar“. But given an absence of documentary evidence, some people have enough acting talent that, when combined with a lack of honesty, it can cause history to become skewed in the eyes of the Court and, at times, in your own memory.
If I take what I would assume to be a common scenario to you, being the entering into of an agreement with a client for work, too often I see the scenario in which parties subsequently fall into dispute – each party claiming (whether honestly or not) that the other has failed to perform his or her obligation. However, the negotiations surrounding the entering into of the agreement, the day-to-day performance of the agreement, and indeed the agreement itself, have never been documented.
In the absence of a well drafted agreement, it can be difficult to advise a party on their rights and obligations under an agreement and, more importantly, the prospects of successfully prosecuting or defending the dispute.
It is my experience that the time, stress and expense of litigation is often directly caused by having to establish the existence of an agreement, establish what its terms are, what the effect of an agreement is, and establish what did or did not happen prior to or during the course of the agreement giving rise to the dispute.
Where these matters are not documented, a lawyer (and subsequently a court) will be required to consider the merits of a dispute largely on the basis of oral evidence. In that event, the most credible witness will be preferred. This is not necessarily the person who is the most truthful. I have seen impressive, educated and honest clients fall under the pressure of a good cross-examination largely because their honesty permits them to give concessions that their somewhat less honest opponent is not prepared to give.
It is much harder to discredit a document which appears to be a document created by a person or business in the course of the operation of that business.
Combining oral evidence with supporting documentary evidence will put you in the best possible position to be successful in stemming a dispute before it becomes actively litigious and, in doing so, you successfully mitigate your potential exposure.
To this end, I encourage the following to become a common practice in your day-to-day business operations:
Joe De Ruvo
Director
p. +61 8 8124 1872
e. Email me
This communication provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Should you wish to discuss any matter raised in this report, or what it means for you, your business or your clients' businesses, please feel free to contact us.