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Issue 7, January 2016 - Cost-effective litigation

Cost-effective litigation in Singapore

By Mr Jonathan Yuen and Mr Francis Chan

SMEs in Singapore are no strangers to disputes. More often than not, disputes end up hurting the businesses’ bottom line either by the amount of legal fees incurred in pursuing or defending a claim, or even worse, when a company feels compelled to write-off a debt owed because the legal cost of pursuing the debt may be disproportionate to the amount recoverable. There are also unfortunately, unethical businesses who intentionally do not honour their payment obligations, relying on the perception that a legal claim against them is unlikely to be made because it would be too expensive and too troublesome.   

This has resulted in SME owners and businesses being placed in a difficult position – if their dispute is in excess of $10,000 then they are not able to raise a claim at the Small Claims Tribunal themselves. Instead, they have to file a Writ of Summons in accordance with the Rules of Court which usually requires the engagement of a lawyer.

Introducing the Simplified Process at the State Courts

The Simplified Process, introduced in Order 108 in the Rules of Court in late 2014, aims to simplify the usually more complex Court processes for disputes involving sums of $60,000 or less. This was done to allow parties to the dispute to quickly identify the main issues of the case and, based on the merits of each party’s case, to achieve a quick settlement with the help of a facilitating Judge or mediator. 

Some salient features of the Simplified Process are:

a.         Upfront disclosure of documents:  Parties are now required to disclose all documents that they wish to rely on, right at the onset when they file their claim or Defence. This process of disclosing documents is typically undertaken midway through the case, which can be up to 2 – 4 months after the lawsuit is commenced.  This saves parties a lot of time and also helps parties to evaluate their case early by being able to see what documents are in the other side’s possession and which will be relied upon.

b.         Removal of certain applications: Parties can no longer apply for summary judgment, discovery and interrogatories under the Simplified Process as these processes are usually more relevant for complex cases and may not be necessary or cost-effective for simple matters.

c.         Judge-led Case Management Conferences (“CMC”) / Mediation: The CMC process is directly managed by a District Judge who takes an active approach to identify and narrow issues.  Significantly, the District Judge offers a non-binding view of each party’s case so as to manage the expectations of both parties.

In certain cases, parties are directed to attend mediation at the State Courts Centre for Dispute Resolution.  Statistically, 90% of cases referred to mediation are resolved with 70% of these cases being resolved on the first day.

d.         Simplified Trial Process: In the event that parties are still unable to resolve their differences at mediation, the Simplified Process provides for a much shorter trial process and requires parties to finish the trial in half a day.

What’s in it for SMEs?

The good news for SMEs is that with the Simplified Process, business owners need not be put-off by the perceived complexity of the legal framework and can enforce their legal or contractual rights by bringing claims against errant parties with confidence. Business owners will also have the assurance that their legal fees will not be disproportionate to their claim.

Rajah & Tann’s Business Fundamentals Practice Group has been a strong supporter of the Simplified Process since its inception. We have found the Simplified Process to be so useful and cost-effective that we have also advised our clients whose claims are above $60,000, (and thus not automatically subject to the Simplified Process), to also utilize the Simplified Process by writing in to Court to ask that their cases be transferred accordingly. This has resulted in quick, convenient and cost-efficient dispute resolution.

Prevention of disputes

Whilst the new Simplified Process is definitely a step in the right direction in making it easier for SMEs to assert their legal rights, the old adage of “Prevention is better than cure” still holds true. In our experience, many of the disputes faced by SMEs arise because of poorly drafted or vague agreements and commercial terms. This is because SMEs, understandably, want to focus on building their business and lack the time and resources to carefully consider the legal framework in which their business operates.

SMEs neglect legal considerations at their own peril. Payments are not made on time because crafty customers rely on loopholes in poorly drafted agreements to avoid payment, disputes arise because the terms of engagement and the scope of work are not properly set-out, and employees betray their employers by misusing confidential information and diverting customers when employment contracts are not comprehensive enough – these are some of the more common cases that plague business owners.

Worse still are cases where SME owners or business founders end up in a shareholders’ or directors’ fight, simply because parties entered into the business without first establishing their legal rights by way of a shareholders’ or founders’ or management agreement. 

The fact is that many of these disputes, which can easily end up in the High Court, can be prevented or mitigated if the business owners had first obtained proper legal advice and have established the proper legal frameworks and documentation; and while business owners may question whether they can afford legal services, the real question is, can they afford not to?

Food for thought

The Simplified Process in the State Courts provides a convenient and cost-effective framework for SMEs to assert their legal rights, but SMEs should also invest the time and resources in obtaining proper legal advice and documentation to protect their business. After all, receiving the correct legal advice and documentation increases business credibility and protects the business and its owners.

 

About the writers:

Jonathan Yuen is a partner and head of Rajah & Tann’s Business Fundamentals Practice Group and Francis Chan is an associate. They focus on delivering practical and cost-effective growth-stage appropriate legal solutions to SMEs by advising on contentious and non-contentious issues relevant to SMEs. They can be reached at jonathan.yuen@rajahtann.com and francis.chan@rajahtann.com.

Last updated on 14 Jan 2016 .