How Should I Deal with a Business Dispute?

Picture this common scenario: You are swamped running your business when, with little warning, a dispute crops up that demands your immediate attention. Unfamiliar with the legal process, you panic about where this could lead and if it will end up in costly and prolonged litigation. 

Aside from managing your tax obligations, handling disputes is undoubtedly the least enjoyable part of running a business. Most small businesses do not have the benefit of  in-house counsel, and if a dispute arises, the dispute can eat up precious resources and detract from the main activities of your business. However, the stress of a nasty dispute can be alleviated by putting in measures to protect your business. We discuss some of these below.  

Help me! What should I do if a dispute occurs?

1. Always have a dispute resolution clause in your contracts: this will streamline the dispute process and at the very least you will know what to expect when a dispute occurs. The best practice is to have a dispute resolution clause which puts an obligation of good faith on both parties, and requires the parties to meet first to resolve the issue informally, before either party can take the matter to court.
2. Put a dispute resolution or complaint procedure in place: Putting a procedure in place helps a business deal with complaints fairly, quickly and consistently. Putting in guidance as to how you should deal with the other party also sets in place clear parameters, to ensure you remain professional and as objective as possible when communicating with the other party. This will minimise any potential harm caused by the dispute, including to your reputation. 
3. Don’t sit on your rights: Often, people will procrastinate when dealing with a dispute because they want to avoid the stress and difficulty of it all. However, there are limitation periods in place which limit the time you are able to make a claim. It is important that as soon as a dispute arises, you make yourself aware of any relevant time limits and act accordingly. Sitting on your rights will adversely affect your ability to pursue your claim if you miss this deadline. In particular, regulators have very strict deadlines in place and often take a hard position about granting extensions. 
4. Understand the dispute: you need to know all the facts before you can make an informed decision on how to move forward. Avoid making an impulsive and emotional decision. Collect all relevant documentation and correspondence so you have a clear picture of all the circumstances. 
5. Discuss the dispute: sounds easy enough right? You should always speak with the other party to try to resolve the dispute amicably before considering litigation. This will also help preserve the relationship and your reputation.  However, never make any uninformed statements and avoid making any admissions without seeking legal advice first. 
6. Get an opinion: Even where you are unsure or feel the incident may not amount to a substantial issue,  seek advice early before it escalates. 
7. Try alternative ways to resolve a dispute: there are various alternative dispute resolution (ADR) options available, which are far more economical than court proceedings. These include: mediation, conciliation and arbitration. For international disputes, the Arbitration and Mediation Center of the World Intellectual Property Organization (the WIPO Center) provides several ADR services to assist in IP and technology disputes. 

I’ve tried all of the above, with no luck. How do I prepare for battle?

If you have exhausted other remedies and litigation is appropriate, you will need to be prepared. Below are our tips for dealing with court proceedings: 

Always have a lawyer present or be fully briefed 

We live in a world where there is a will, there is a lawsuit. Having a lawyer can be costly, however it pays dividends to pay an expert who can look at the facts objectively, provide you with proper advice on the risks, your legal position, and your prospects of success. It’s important to remember that you can’t do everything and there is help available! 

Never admit liability or make any agreements to settle the dispute if you have not sought legal advice

All too often we have seen clients prejudice their position by simply making a statement that they thought would help the situation. Without seeking legal advice, you may unknowingly make admissions of liability or seek a settlement which is not in your best interest.  

If you do have any direct communication with the other party, you should make your lawyer aware immediately.

Only inform those who must be aware of any discussions 

Before revealing any details of a potential or active lawsuit, ask your lawyer whether this is a good idea (the answer is probably “no”). This includes your family, friends, clients, suppliers – anyone. 

You should also avoid posting details of a dispute online. This could open the risk of a defamation claim- particularly if you have said some nasty things about the other party. 

What are my obligations regarding document handling?

You need to be very careful when handling documents that could be relevant to the dispute, as severe consequences and penalties can follow for mishandling. You should not destroy, delete or amend any documents. 

The destruction of documents prior to a court proceeding can be prejudicial for the party who wished to rely on it. Australian law requires that documents which are the subject of litigation must be retained.

If you are uncertain on how to handle documentation, your lawyer can assist to avoid making mistakes. 

What documents do not need to be disclosed? 

Not all documents that you have need to be disclosed. Generally, any correspondence between the company and its internal or external lawyers is in most cases covered by legal professional privilege and therefore does not require disclosure.  

However, do not assume that any documents which are simply marked as ‘privileged or confidential’ will automatically be entitled to these protections. 

What should my role be in court proceedings? 

It can be daunting to face legal proceedings, particularly if you are being sued personally or the funding for the proceedings come straight from your pockets. However, working actively with your lawyer can set you up for the best position possible. There are several steps you can also take to assist: 

- You can help to gather evidence by preserving any relevant documentation and contacting any employees involved to check if they have done the same. 

- You can help to find witnesses and make your lawyer aware of anyone relevant to the case. 

- If you become aware of the other side attempting to clear their assets to avoid potentially making payment, you can make your lawyer aware and initiate proceedings to obtain a court order to prevent this.

- Sometimes it is difficult to avoid finding out third party information where a dispute has been made public, but you should avoid looking at any media where relevant to prevent distorting your memory of the facts. 

Should we aim to litigate, or just settle a dispute? 

You should always weigh up the options to settle a dispute outside of court before looking into litigation. There are various advantages to your company in aiming to settle a dispute:

- It can take substantial resources to litigate and costs involved can be excessive. However, seeking outside legal counsel could significantly reduce these costs by providing expert assistance.

- There are potential negative impacts on the reputation of your business and relationships. 

- Litigation is highly unpredictable and often is like rolling a dice. Factors can crop up at any point even where you may think you have the winning hand, but, having expert legal advice can assist to mitigate this.  

- Court cases are generally a “loser pays” system and if you lose, you may be required to pay the other party’s legal costs. 

- Even if you are in the midst of litigation, settlements can take place at any point.

There are certain circumstances where it would be best to litigate and having assistance in this decision-making process can help to alleviate your concerns. Below are some circumstances where you should aim to litigate: 

- Where the company feels it has strong prospects in successfully proving its case and your lawyer agrees.

- Where there is a commercial advantage to the company in proceeding with litigation. 

- Where the other side is able to make payment should your company win. Always a bonus!

Biztech Lawyers can assist you with dealing with disputes and can provide outside general counsel services tailored to your needs. We can address issues early on and help you cope with making difficult decisions. We speak your language and understand your challenges through expertise and innovation. Please see our ‘About’ page to find out more on how we can help you make legal processes more efficient or fill out our Contact Form to reach us directly.

Interested in chatting with us?

Contact us here. Or shoot us an email at hello@biztechlawyers.com.au. And of course you can always pick up the phone +61 2 9043 1376.

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