When a Commercial Dispute Is Worth Fighting For (and When It Isn't)

One of the main driving forces in any business is cost-benefit analysis. Is increasing funding towards marketing going to bring in more clients and revenue? Is employing another person going to assist with administration, client serviceability, and increase profitability? Can the business afford to expand into another store, another state or overseas?

Disputes in business are no different. It is the bane of any business to chase outstanding debtors or deal with any contractual breaches. With each individual dispute, it is important apply the most appropriate cost-effective strategy that will provide the best return on your investment.

Prevention is the most effective cure

Having these procedures in place will ensure that you never need to step into a lawyer's office:

1. Well-drafted contracts: these include employee contracts, leases, partnership agreements, share agreements, etc. These documents are the foundation of clear expectations, rights and obligations for all parties involved.
2. Consistent Communication: Maintaining communication ensures that expectations written down in the contract are maintained, and any issues that arise can be addressed before they become a serious issue.
3. Clear procedures relating to rights, obligations and dispute resolution: Having these procedures in place will allow you to address concerns at the lowest and most benign level. Saving money, time and mental energy.

Alternate Dispute Resolution

There are multiple avenues of dispute resolution that are available to resolve conflicts that arise in the conduct of business.

1. Mediation: This is often the most cost-effective professional dispute resolution available. Parties can attend either in-person or online, with or without legal representation, to discuss and cooperatively discover pathways that attempt to resolve disputes to the satisfaction of both parties. Well-established, professional mediators such as Nicole Davidson of Nicole Davidson Negotiation are an excellent first step. Nicole’s article How Much Does it Cost to Litigate a Small Business Dispute? Provides an understanding of the average legal cost of litigation for you to consider retaining legal representation.
2. VCAT: The Victorian Civil and Administrative Tribunal is another avenue to consider to avoid the substantive legal costs of the court system. VCAT provides fair, efficient and affordable justice in a wide range of areas. Some examples include Goods and Services, Building and Construction, Retail and Commercial Leases and Equal Opportunity. The fees involved in VCAT are lower than other courts but VCAT orders will need to be certified with the Magistrate’s court before enforcement proceedings can commence and can limit an outstanding debt to $15,000.
3. Magistrate/County Courts: This approach takes the formal litigation pathway. Magistrate’s Court can hear claims up to $100,000 and the County Courts above this amount. The Supreme Court, handles complex and high-value debt recovery matters and is the most expensive option to pursue. Those who consider using the courts, and anticipate that cost orders will reimburse the expenses, keep in mind that costs are only considered after a trial and are rarely paid in full. Courts can determine costs on a court scale or a proportionate basis depending on the strength of the case, the efforts made by both sides to resolve the matter and the extent of compliance with procedural orders as a various considerations in relation to costs.

The most important takeaway is to be very cautious of litigating a matter on the basis of “principal”. Many unfortunate Applicants have wasted tens of thousands on a crusade that could have ended amicably from the start, and often comes at the cost of the business itself.