Commercial & Civil Dispute

The type of business structure in place will determine how the assets and liabilities of the business are dealt with when the relationship between business partners is beyond repair, or they have agreed to go their separate ways.

In a private company situation, the most common outcome is for the company to obtain a valuation and for one party to purchase the other parties’ interest. Where the parties are in dispute in relation to the valuation, the disputing party should make an application to the Supreme Court of Victoria seeking that the courts determine the value of the business and subsequently determine how the business is to be dealt with such as winding up of the business, buy out of a party, appointment of a receiver to manage affairs, or restraining the parties from engaging in specific conduct.

In a partnership arrangement, not to dissimilar from private companies, the assets of the partnership will be called in, and valued with the proceeds of the partnership split in accordance with the partners share in the business. The partnership will be dissolved by a formal agreement and the dissolution is required to be advertised in the local gazette. Any partnership arrangements such as leases or supply agreements will need to be renegotiated by the continuing partner, or the party that intends to “carry on” the business as a sole trader or other corporate structure.

The first step in recovering an unpaid invoice from a customer or a bad debtor is to review the terms of payment or any contract you entered into with the customer.

Secondly, if the relationship permits, you should informally contact the debtor to enquire as to the status of payment. They may have simply forgotten particularly if the invoice was payable on terms, for example, within 30 days.

Where your enquiry is met with opposition, we suggest a formal letter of demand either prepared by you or with our assistance. If the debtor fails to make payment in accordance with the terms of the letter of demand, a final notice should be sent, notifying the debtor of your intentions to commence legal action.

The amount owed to you will determine which court you seek recovery of the debt through. However, for matters under $100,000 they will usually be heard in the Magistrates Court of Victoria or in some cases the Victorian Civil and Administrative Tribunal.

You may then commence action through the appropriate court, and if successful, obtain a court order against the debtor for repayment of the debt plus interests and costs.

In the event that the debtor fails to pay the amount ordered by the court, you will then be required to enforce the court orders. There are various methods of enforcement including warrants to seize property, oral examination, and winding up of the debtor (if it is a company).

A Statutory Demand is a document that you can send to a company when the company owes you money. It is a common tool used for demanding debts owed by companies and can be a viable alternative if you do not want to take court action against the company for the recovery of the debt.

A Statutory Demand can only be used when the value of the debt exceeds $2,000.00 and the debt itself must be due and payable and free from any uncertainty that it is actually owed to the party making the Statutory Demand.

Once served on the company, the company will have 21 days to pay the debt or it may face the prospect of being presumed as insolvent and then subject to winding up proceedings.

It is important that a Statutory Demand is compliant if it is to be successful. Some of the factors of a compliant Statutory Demand are as follows:

1. It must be in writing and correctly identify the creditor, the Company and where the debt can be paid;
2. It must state the amount and nature of the debt;
3. A court judgment or affidavit must support the Statutory Demand; and
4. It must be served on the company correctly.

As well as a Statutory Demand being set aside due to failure to comply with the factors detailed above, a Statutory Demand may be set aside if there is a genuine dispute that the debt is actually owed.

In the event a Statutory Demand is set aside the party making the demand may face an adverse cost order against them. A Statutory Demand requires careful consideration and precise drafting and the circumstances of the debt should always be reviewed before proceeding.

Mediation is a common form of Alternative Dispute Resolution that is often favoured by parties to attempt to resolve disputes between them without having the matter proceed to trial. Almost all jurisdictions now have compulsory mediation that must take place before the matter proceeds to trial.

The role of a mediator is to try and assist the parties in reaching an agreement. A mediator is often a Barrister but can also be a solicitor or other person with specific training in the area of mediation. Typically, before mediation the parties will have to agree on who they want to appoint as a mediator and then organise a venue to conduct the mediation.

In the Magistrates Court of Victoria, there is a mediation service known as the Dispute Settlement Centre of Victoria (DSCV) which provides a service for compulsory mediation where the amount of a claim in dispute is less than $40,000.00. The service is free and is provided by the Court.

A typical mediation session will first involve all the parties and the mediator being together in the same room for a ‘joint session’. The mediator will first invite the plaintiff to summarise their claim and will then ask for the defendant to summarise theirs. It is common for the mediator to ask questions of the presenting party at this point in time. Sometimes the parties may remain in the joint session, but often following the joint session the parties will break off to individual rooms and the mediator will shuttle between the rooms to assist the parties in making offers or reaching resolutions.

If a mediation is successful, the parties will sign terms of settlement detailing the agreement reached and the matter will not proceed any further in the court system. If the mediation is not successful, the parties will then proceed to the next stage on the court’s timetabling of the matter. It is important to understand that mediation is held on a without prejudice basis, which means that should the matter not resolve at mediation, the other party cannot use what was discussed at mediation against you.