In conducting its business, companies often encounter problems, among other things, facing a civil lawsuit. Dealing with a civil lawsuit without cautious could cause big losses (e.g. material loss, company’s credibility issue or losing company’s assets are real threats). Therefore it is important for the companies to understand how to deal with civil lawsuit, particularly in this article is in the court. These are some important things that should be prepared when facing a civil lawsuit.
Understanding The Cause of Action in The Statement of Claim
It is very important for the respondent to understand the cause of action in the Statement of Claim. According to the doctrines and the Indonesian Civil Code (ICC), the Cause of Action in the civil lawsuit shall divide into two kinds, Breach of Contract[1] or Unlawful Act (Tortious Act)[2]. There are significant distinctions between the Breach of Contract and the Unlawful Act and by understanding what is the cause of action of the Statement of Claim could lead you in making good legal defenses.
The Breach of Contract Lawsuit shall rely onto the existence of an agreement (or a contract arrangement), which gives legal right and obligation among the parties (i.e. the claimant(s) and the respondent(s)). According to the doctrines, the right and obligation herein manifested as the “performance” (i.e. prestasi in Indonesian Language). In the event that one party not fulfills or implements their obligation in accordance with the agreement without any probable cause, then it, principally, shall be deemed committing a default or breach of contract, however there are some different requirements to call the party committing a default in certain conditions.
According to the doctrines, not fulfill or not implement an obligation or a performance (i.e. default) can be divided into four conditions[3]:
The debtor failed to perform the agreement at all; or
The debtor fulfilled his obligation but failed to perform it in a timely manner; or
The debtor failed to perform the obligation in a proper manner (contrary to the term(s) in the agreement); or
The debtor performs a prohibited action specified in the agreement.
Since the Breach of Contract Lawsuit shall rely onto the existence of the contract arrangement between the claimant and the respondent, therefore, it is important for the respondent to understand each of their performances (i.e. right and obligation) according the contract.
On the other hand, the Unlawful Act (Tortious Act) generally is not a contractual event. It shall be considered as every unlawful act that causes damage onto another person. According to the Article 1365 of ICC, an unlawful act shall contain the following conditions:
The existence on an “act”;
The act considered as against the law;
The act contain element of error;
There is a loss for the victim; and
There is a causal relation between the loss and the act.
Collecting Every Evidences to Support Your Legal Defenses
Evidentiary phase is often considered as one of the important part in the court proceeding. It could be very complex because each party (i.e. the claimant(s) and the respondent(s)) is required to reconstruct the past events to be disclosed before the court so that it can be considered as a fact by the judges.
Any defenses raised by the respondent shall be supported with good evidences. Although principally the claimant has the burden to prove the truth of the arguments of his claim, the respondent as the party who provided the defense, generally, shall have the same burden to prove the truth of the arguments of his defense. However the respondent’s burden of proof remains subject to the type of each case.
It would be better if the respondent, before the first day of the trial carried out, have started to collect all the evidences in order to support his defense. In collecting evidences, keep in mind, that Indonesian Civil Procedural Law[4] only recognizes five kinds of evidences, namely:
Written evidence;
Witnesses;
Inference;
Confession; and
Oath
Although Indonesian Civil Procedural Law does not give minimum evidences requirement for the judges before giving their Decision, as in the Indonesian Criminal Procedural Law[5], it would be better if the respondent collecting more than one evidence. Moreover, it would be better if the respondent could collect authentic written evidence that prove the truth of the respondent’s legal defenses.
Seeking A Possibility For An Amicable Settlement In Mediation
Mediation is one of stages that shall be taken by the parties in the civil proceedings. According to the Indonesian Supreme Court Regulation the parties shall execute a mediation process for a maximum of 30 (thirty) days since the judges give an order to the parties[6]. With the opportunity to carry out the mediation, it would be better if the parties could use this opportunity to resolve their dispute. Although the respondent have understood the contents of the claimant’s Statement of Claim and has prepared good defenses that supported with the necessary evidences, the amicable settlement through mediation has its own advantages. Some notable advantages of mediation are, among others:
Faster procedure
A court examination may take months before the judges give their decision, while mediation takes only maximum 30 days. Moreover, an Amicable Settlement of a mediation process, which has been validated with the Deed of Settlement by the judges, shall be final and binding (could not be appealed either to the high court or supreme court). Therefore, the parties could implement the resolution in the amicable settlement immediately.
Less cost
Since mediation may take shorter time, so the cost of mediation will be less than dealing the case through proceeding. The companies can use the fund for solving the problem or repairing the caused damages. Even a partial settlement can lessen the cost for the companies.
Preserve relationship
One of the benefits of mediation is that it can help preserve relationship between the company with their business associates or clients, which would likely be destroyed through a court examination (i.e. litigation). Because mediation provides the opportunity for the parties to decide what is the best settlement for them.
Greater flexibility and control
The discussion in mediation is not limited to the Position (i.e. Posita in Indonesian Language) and Petition (i.e. Petitum in Indonesian Language) of Statement of Claim[7], therefore the parties have greater control over the outcome.
Better result
Since in the mediation there is no winner or loser and no admission of fault or guilt, and also the settlement is mutually agreed upon, so the parties are typically more satisfied with mediation.
Appointing a Company’s Representative
According to the Indonesian Limited Liability Company Law[8], the board of directors shall represent the company inside and outside of the court. However, the board of directors may give a written power of attorney to one or more employee of the company or to other person(s) for and on behalf of the company to perform specific legal actions as described in the power of attorney[9].
In the event that the board of directors decides to appoint their employee to represent the company in the court proceeding, the board of directors shall comply with Article 97 point (2) Limited Liability Company Law Number 40 of 2007[10], whereas the delegation of authority to the employee to represent the company in the proceeding shall be perform with cautious.
Although the board of directors could appoint their employee(s) to represent the company before the court, however employees mostly are not familiar to handle cases in the court or not having good litigation knowledge. As a company representative, the employee(s) should have good litigation knowledge (i.e. how to prepare good legal defenses and Statement of Defense, how to deal with security seizure, how to prepare and to submit evidences, how to cross-exam witnesses and expert witnesses, or even to reply the claimant’s argument directly in the hearing). To appoint the employee(s) as the company representative without considering the competency of the employee could be considered as a non-cautious decision, which also could be considered as an un-good faith or irresponsibility action.
As an alternative, the board of directors could appoint a lawyer(s) to assist and/or represent the company in the court proceeding. In the event that the company decided to appoint a lawyer(s), it is better for the board of directors to choose a lawyer(s) that has specialization in Dispute Resolution (or Litigation), while having additional expertise in the area of the dispute is a plus point.
[1] Article 1243 of ICC “Compensation for costs, damages and interests for the breach of an obligation only becomes obligatory, if the debtor, after having been declared to be in default remains in default, or in case of obligations where the party must give of produce something, is only given after the lapse of a period of time.”
[2] Article 1365 of ICC “Every unlawful act that causes damage onto another person obliges the person who cause the loss compensate such damage.”
[3] Doctrine of Prof. Subekti, S.H.
[4] Article 1866 of ICC, Article 164 of Indonesian Civil Procedural Law in Java and Madura, and Article 284 of Indonesian Civil Procedural Law outside of Java and Madura.
[5] Article 184 of Indonesian Criminal Procedural Law.
[6] Article 24 point (4) of Indonesian Supreme Court Regulation Number 1 of 2016.
[7] Article 25 point (1) of Indonesian Supreme Court Regulation Number 1 of 2016.
[8] Article 98 point (1) of Limited Liability Company Law Number 40 of 2007 “Board of Directors shall represent Companies inside and outside of the court.”
[9] Article 103 of Limited Liability Company Law Number 40 of 2007.
[10] Article 97 point (2) of Limited Liability Company Law Number 40 of 2007 “The management as stipulated in Paragraph (1) shall be performed by each member of board of directors in good faith and full responsibility."