Why startups should seriously rethink suing their opponents

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Mark is a TIA Star Contributor and publishes high-value content that serves the Asian tech community. Read more from TIA Star Contributors here.

My firm, VanillaLaw LLC, has made small-medium enterprises (SMEs) and startups the focus of our business for the past 25 years. Every time a client comes to us wanting to sue another party or if they’re being sued by someone else, my advice is always to consider other options.

This is because, very often, emotions run high, and the temptation to sue is just as high. I have found that many business owners, especially if they have never been in a legal situation before, think that suing somebody is straightforward.

The reality is quite the opposite.

Litigation is the most time consuming and costly form of legal action. As such, I usually recommend that my clients consider mediation first, and there are three simple reasons for this.

Cost

Cases that have to be litigated at the High Court level are the most expensive.

In Singapore, if the dispute involves more than S$250,000 (~US$180,000) it has to be litigated in the High Court.

How this amount is derived is determined by either (a) the amount of money that is being contested or (b) the value of the shares involved in the case (if no immediate sum is clear). For SMEs and startups, it’s common that the case needs to be litigated at the High Court because there are usually multiple investors and shareholders involved.

With all the fees needed for litigation, you can expect to spend anywhere between S$150,000 and S$500,000 (~US$100,000 to US$160,000). But we did have a client about 10 years ago who spent close to S$1 million to sue a top employee for stealing the company’s trade secrets.

Mediation cases at the High Court level, on the other hand, would only cost around S$15,000 to S$20,000 (~US$10,000 to US$15,000).

Time

Litigation is a long and tedious process.

There are multiple stages—from gathering information, preparing documents, filing applications, to waiting for an available date. In the most ideal situation, litigation will take at least two years from the beginning to the receipt of a judgment.

The reality is that most litigation cases take between about two to four years to complete because of all the procedures. The same client I mentioned before took up to five years to complete the process.

Technicalities

Key takeaway