Lawyers, how to choose them and how to use them to save you money

Business owners can often be apprehensive about engaging lawyers: they charge too much, they take too long, they don’t listen properly to what your priorities are, they don’t speak the language of your industry, they cause disputes to escalate rather than resolve, and signing a costs agreement can feel like writing a blank cheque. But this need not be the case.

If you know how to choose the right lawyer for you, and how to use them in the right way, they can actually save you a lot of money and help you move forward with confidence.

How to choose the right lawyer

Common experience

A great start is to look for a lawyer who has experience in your industry or situation. For example, my father, Peter Kelso, spent 13 years in foster care as a State ward. He now has a significant practice representing former State wards. Why? Because he speaks their language, he understands the challenges they face, and because he relates to them they know that he will go the extra mile for them.

Many excellent lawyers have come to the law having previously trained or worked in other industries. There are lawyers with backgrounds in medicine, psychology, engineering, building, small business, media, and the list goes on.

Lawyers love to fight for a cause, so look for a lawyer who relates to your situation and chances are they will go above and beyond for you.

Systematic methods

When you approach a lawyer about a problem they may not be able to give you a solution off the cuff. This is because legal issues usually involve too many variables – much like the ground conditions on a construction project, you can never know with certainty what you’re going to be up against until you start digging.

However, they should be able to give you an outline of how they will go about designing the strategy, executing it, and the usual milestones along the way. Lawyers who have a methodical, systematic, ‘project management’ approach to their work are far more likely to deliver on time and on budget.

Temperament

Employing the most aggressive or ‘alpha male’ lawyer in town can often work against you. The significant majority of disputes are now resolved by various forms of negotiation or mediation. These methods require a lawyer with emotional intelligence who can change gears and use a range of tactics, from the adversarial to the relational to the courteous diplomatic deal-maker. Using only aggressive tactics will put the other side on the defensive and leave them in no frame of mind to rationally consider the weaknesses of their own case.

A good indicator in choosing a lawyer is how well they engage with you when discussing the work you need them to do. Is the conversation focused on understanding your situation, your priorities, and how to achieve your objectives? If it’s all about them, or you don’t feel listened to, that’s not a good start.

How to use your lawyer

Prevention is cheaper than cure

A significant cause of the cost of engaging lawyers is that people often engage them only after things have gone pear-shaped. When you consider the losses you’ll have to wear, the disruption to your business, and the legal costs involved in litigation, there is significant money to be saved by engaging a lawyer early to help you weed out the risks and resolve disputes before they escalate. Engaging a lawyer in this way will make their fees affordable, and all the more so because you’ll be able to spend more time focused on running your business.

Mitigating the risk of disputes

The terms of the contracts you enter are a major source of disputes. If they are vague, incomplete, too ridged, impractically allocate the risks to parties who can’t control or contain them, rely on shaky assumptions, or are open to a variety of interpretations then this is fertile ground for disputes to arise.

If the contact has not yet been signed, your lawyer can negotiate amendments to mitigate these risks. If the contract has already been entered into, your lawyer can assist you to clarify the operation of the contract with the other party, and may be able to negotiate variations to head off potential issues. Your lawyer can also advise you on the systems, procedures and record-keeping needed to ensure that you are in a strong position should a dispute arise. (Being organised and following the contract procedures will also make a big difference to how much work your lawyer has to do to).

Resolving disputes before they escalate

Getting legal advice early can help see a dispute resolved in just a few emails. Your lawyer can assist you in responding to the other party in a way that leaves them uncertain about the strength of their position and far more willing to resolve the matter in a mutually suitable manner. While the standard threatening letter can cause things to escalate quickly, a skillful and persuasive response can help resolve the dispute and maintain the business relationship.

I recently had a matter where one well-worded email was able to achieve a written apology, the payment of several thousand dollars in previously disputed invoices, and an invitation to discuss further business. Disputes need not escalate to ‘lawyers at twelve paces’.

Appeals are expensive

The recent case of Shade Systems Pty Ltd v Probuild Constructions (Aust) Pty Ltd (No 2) [2016] NSWCA 379 shows just how expensive things can get when disputes escalate. In that case, Shade Systems served a progress payment claim on Probuild for construction work. Probuild served a payment schedule on Shade Systems stating that no amount was payable because the liquidated damages cancelled out the value of the work claimed. The dispute when went to an adjudicator who misinterpreted the contract and awarded about $277,000 to Shade Systems. The matter then went to the Supreme Court who quashed the adjudicator’s decision, and then to the Court of Appeal who set aside the previous order.

Now, imagine the expense that could have been saved had the parties used lawyers who could communicate and resolve the disagreement over the interpretation of the liquidated damages clause without resorting to the adjudicator; or failing that, had Probuild provided persuasive submissions to the adjudicator to guide his/her interpretation of the contract. Sometimes (and perhaps in that case), the other side is determined to litigate, or a decision-maker will inexplicably decide against you anyway. However, on average, a lawyer who can anticipate the sticking points and resolve them with clear communication will save you a lot money.

When to contact your lawyer

Running a problem by your lawyer need not be big deal or a formal occasion. The sooner your lawyer is told about an issue the better the chance they can resolve it. If you’ve picked the right lawyer, you should feel free to email or pick up the phone for a casual conversation about the issue. A good approach can be to email an outline of the issue, and schedule a follow up phone call. This will give your lawyer a chance to think about the problem first, and the conversation should be more productive.

See our services page, or contact us to find out what Australaw can do for you.

Outline of the Building and Construction Industry Security of Payment Act

Regular cash flow is the lifeblood of any business. This is particularly so for those in the construction industry, which has led to the Building and Construction Industry Security of Payment Act 1999 (NSW). Similar legislation exists in most Australian jurisdictions:

  • Building and Construction Industry Payments Act 2004 (QLD)
  • Building and Construction Industry Security of Payment Act 2002 (VIC)
  • Building and Construction Industry Payments Act 2004 (WA)
  • Building and Construction Industry Security of Payment Act 2009 (TAS)
  • Building and Construction Industry Security of Payment Act 2009 (SA)
  • Building and Construction Industry (Security of Payment) Act 2009 (ACT)
  • Construction Contracts (Security of Payments) Act (NT)

The main purpose of these Acts is to ensure that progress payments on construction projects don’t get held up by disputes, which can easily lead to contractors going under. Litigation can quickly become a war of attrition, and meanwhile people have businesses to run and bills to pay.

The graphic below provides a general outline of the process of enforcing progress payments. The process is comparable in most jurisdictions, and the courts generally seek to interpret these Acts consistently with each other.

Due to the very limited scope for challenging an adjudicator’s determination, it is strongly recommended that you have the assistance of a lawyer throughout this process – as the saying goes ‘measure twice, cut once’ prevention is always less expensive than cure.

It is also good practice to seek legal advice on how to comply with the procedural requirements of the Security of Payment process for your particular project. This advice will be a very valuable addition to your contract management plan.

outline-of-building-and-construction-industry-security-of-payment-actNotes:

  • ‘Construction Work’ includes the supply of goods or services related to the completion of construction work.
  • ‘Reference Dates’ are the dates or events (or milestones) in the contract that trigger progress payments. If the contract does not specify these triggers then the reference date is the last day of each month, starting with the last date of the month in which the construction work was first carried out.
  • ‘Respondent’ is the party to the contract with the Claimant who has undertaken to pay for the Construction Work.
  • ‘Payment Claim’ is a claim for payment for Construction Work carried out on or before the Reference Date. (Note: there can only be one Payment Claim served per Reference Date, but you can claim for work that was included in a previous Payment Claim that the Respondent has not yet paid for).
  • ‘Payment Schedule’ sets out the amount that the Respondent considers is due and owing to the Claimant, and the reasons for withholding payment for work claimed by the Claimant in the Payment Claim.

AustraLaw can assist with all payment claim issues, including:

  • Advice on complying with the procedural requirements to enforce or respond to payment claims;
  • Preparation of Payment Claims and Payment Schedules;
  • Preparation of Adjudication Applications and Adjudication Responses;
  • Enforcement or challenging of Adjudicator Determinations.

See our services page, or contact us to find out what Australaw can do for you.

Employee or Contractor – What’s in a Name?

construction-worker

The signed contract clearly states that the person you hired is an independent contractor, so that makes them an independent contractor…right? Ahh…if only it were that simple.

Establishing whether the legal relationship created under contract is that of employer/employee or principal/contractor isn’t always straightforward, and if you get it wrong it could end up costing you a lot of money.

Simply including a clause in the contract labelling a person as a contractor will not be sufficient to create that type of arrangement. If a dispute arises, a court will look beyond this label and examine the terms of the contract and the relationship as a whole.

An employer who deliberately or recklessly misrepresents an employee as an independent contractor will find themselves in hot water with the Fair Work Commission.

Additionally, a contract of employment can entitle an employee to numerous rights including:

  • Minimum wage and modern awards
  • Working conditions
  • Leave entitlements
  • Occupational health and safety protections
  • Workers Compensation
  • Superannuation contributions
  • Withholding of income tax
  • Protections against unfair dismissal
  • Reimbursement for work-related expenses; and
  • Union membership and industrial action

Failing to meet employer obligations exposes individuals and companies to a wide range of liabilities under civil and criminal law. This can all be avoided by getting the right legal advice before hiring.

Every case has its own peculiarities- see our engineering and construction page, or contact us to find out what Australaw can do for you.

The Contract as a Project Planning Tool

contract-planning-toolAs a lawyer I’ve found that people tend to see contracts as a boring formality in the path of getting to the result (e.g. getting the settlement funds, starting the project, starting the case etc etc). The contract is often read with about the same enthusiasm and focus as a child reading a card at Christmas before pocketing the money.

In some situations such absence of alacrity for this stage of the transaction may be warranted, particularly in the case of a standard form contract for a small value transaction of a routine nature. However, in engineering work the contract is a core planning tool for the parties. As the saying goes, proper preparation prevents poor performance.

As observed in ‘Managing Risk in Construction Projects’ (Smith et al, 2nd ed, pp. 41-42, 142) The core functions of a construction contract are to:

  1. Identify and allocate responsibility for risks
  2. Identify and allocate responsibility for work
  3. Align motives of the contractor with the objectives of the client

In this way, the contract serves as a planning tool. Through drafting and negotiation the parties consciously identify the project outcomes (and corresponding risks). They can then assess what they involve, plan how to address them, and allocate responsibility.

Obviously then, time spent on this stage can make a strong contribution to project success.

  1. There will be fewer unknown unknowns. Meaning fewer claims for variations and time extensions, and therefore fewer disputes.
  2. The responsibility (and liability) for the known unknowns will be allocated to the parties best able to control impact or likelihood, or to absorb the impact of the risk materialising. Reduced cost of risk management (e.g. Contingencies and insurance policies) allows for leaner pricing of the work.
  3. Better selection of motive alignment mechanisms will incentivise the resolution of disputes through collaboration rather than litigation.

This coupled with some of the early engagement practices being experimented with in the area of collaborative contracting (e.g. The new suite of prototype Defence estate management contracts) goes along way to de-risking the project.

This corresponds with my experience on the other side of the fence as a project manager. My roles in the Department of Defence seemed to always morph in to that of ‘the fixer’. A project would have gone off track, progress had ground to a halt, motivation between the parties had gone stale, and then it would land on my desk.

Rarely was the heart of the problem a technical hurdle, almost always it was due to cutting corners at the planning phase or ineffective communication practices between the stakeholders. Of course, technical issues were often involved, but it was generally poor planning or ineffective communication between the parties that was preventing these issues being solved.

What was required was a process of revisiting and clarifying the project outcomes, and then addressing the tangible issues by establishing effective methods of collaboration between the parties. Typically this meant arranging a stakeholder meeting, identifying what each party needed and why they needed it, and work-shopping our way to a solution. Sometimes this could be resolved with minor concessions, other times entire elements of the agreement would have to be re-written (typically the scope, as this was often unhelpfully vague and yet at the same time unworkably inflexible).

Ultimately everyone really just wants to get the job done, get paid, and go home. However, foregoing the proper advice and time required to consider the contract could see you accepting more risk than you bargained for.

Contact AustraLaw today.

By Ashley Kelso