A Legal Costs-Benefit Analysis – What is it?

KEY TAKE-OUTS:

• The decision to proceed with a court matter, or pursuing entitlements owed to you, can be an extremely overwhelming and daunting task – especially when there are various options and actions available to you.
• A cost-benefit analysis is a systematic process that a client can use in these circumstances, to assist in analysing which decisions to make and which to forgo.
• The cost-benefit analysis sums the potential benefits expected from a situation or action and then subtracts the total costs associated with taking that action.
• Coutts Lawyers and Conveyancers can not only assist you with advising you on the actions available to you, but we can also assist by discussing the value of intangible items, such as the benefits and costs associated with proceeding with litigation, and your decision whether to proceed or not.

The decision to proceed with a court matter, or pursuing entitlements owed to you, can be an extremely overwhelming and daunting task – especially when there are various options and actions available to you.

The role of a lawyer is not always to encourage and proceed with litigation in order to have the court determine the outcome of a client’s matter. Parties in many areas of law, whether it be family, personal injury and especially commercial law, can agree to settle their matter by agreement or consent (outside of court) and can sometimes make that agreement enforceable by the court in court orders or judgments.

When weighing up the decision to proceed with court action or not, clients (and their lawyers) can engage in a cost/benefit analysis to assess the matter from a broad perspective.

A cost/benefit analysis is a comparative tool that aims to calculate what efforts are required in pursuing the benefits, and these costs, compared with the actual benefits received after having pursued them. A determination (or mathematical equation) is then made to conclude which is greater, and therefore, whether the efforts in pursuing the benefit will be “worth it”. In some circumstances, costs can be either one-time or may even be ongoing, whilst the benefits are most often received over time. In its simplest form, a cost/benefit analysis is carried out using only financial costs and financial benefits (however it is extremely important to still consider the non-financial costs and benefits involved in court proceedings, for example, the stress and anxiety caused by the court proceedings versus the satisfaction of being successful in a judgment).

Costs or tangible costs can include the following:

• Court related fees (such as filing fees);
• Ongoing solicitor and barrister’s fees;
• Expert evidence collection fees; and
• Other disbursement fees.

In some circumstances, these fees can be collected by way of cost orders at the conclusion of a matter. It is important to note that even if you are successful in a court litigated matter, you are not guaranteed to recoup your expenses. There are sometimes avenues available to successful litigants to recoup these expenses, but these are never guaranteed (for example, the party that you are trying to recoup your expenses from, may not have assets or the means to re-pay your expenses, or, may go into liquidation or bankruptcy). However, whether you are successful or not, these fees may need to be funded upfront which still may leave the client out of pocket with no real guarantee of seeking reimbursement. These are the tangible costs that need to be taken into consideration when compared to the potential benefits.

From a legal perspective, it is rarely this simple. The more accurate description of the cost/benefit analysis is to try to put a financial value on the intangible costs and benefits, and to ensure that these intangible costs are considered by the client prior to proceeding with a court matter. These intangible costs are highly subjective depending on the client’s needs and wants.

The potential intangible costs of a court matter can include, but are not limited to, the following:

• Emotional distress;
• Phycological stress;
• Physical stress;
• Loss of time;
• Breakdown in relationships; and
• Financial hardship.

Unlike the tangible costs mentioned above, these intangible costs cannot be collected by way of cost orders at the conclusion of a matter. It is important to consider these types of potential personal costs as part of a cost/benefit analysis when determining if a matter should be pursued. Whatever financial benefit received at the conclusion of a matter may not be worth the financial and personal costs required to pursue such an outcome at the outset.

At Coutts Lawyers and Conveyancers, we provide quality and easy to understand legal advice, with your best interests always at the forefront of our minds. Part of this service involves taking time to discuss the options available to our clients when considering both these tangible and intangible costs in relation to the matter at hand. We encourage clients to take the time to consider all of the above before being put themselves through any unnecessary financial and personal stresses, ensuring our advice to you is communicated with care and clarity. If you are struggling with making a decision regarding your rights and entitlements, our friendly dispute resolution team will be more than happy to assist and guide you in making this decision.