Commercial Disputes

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).

Where a creditor has obtained a judgement debt against you for an unpaid sum of money, you will need to undertake the following steps to have judgement debt set aside:

1. Write to the judgement creditor and negotiate terms of repayment;
2. Upon repayment of the judgement debt, the parties sign consent orders agreeing to have the judgement set aside by the court; or
3. The judgement debtor makes an application to the court seeking that the judgement be set aside by way of consent between the parties, or if the judgement debtor is unable to obtain consent of the judgement creditor, by way of court order.

In the event that you disagree with the judgement debt but never opposed the creditors application in court, you may seek to have the default judgement set aside in which your application must address the following:

1. The reason you failed to file a defence or response within the requisite time frame (usually 21 – 30 days from the date of service);
2. Any legitimate legal defence you in respect of the judgement debt; and
3. Why you delayed in making an application to have the judgement debt set aside.

If you are successful in your application to the court, or defending any proceedings commenced against you, you are likely to recover a portion of your legal expenses incurred.

The State and Federal based courts operate on a “scale” meaning that you will recover your costs incurred based on the court scale and not the costs incurred with your solicitor.

In some cases, there are occasions where you will recover your costs on an indemnity basis meaning that the unsuccessful party will cover the costs that you have actually paid (assuming such costs are reasonable).

Costs are always at the discretion of the court and costs orders will generally reflect the way the proceeding has been conducted and whether the costs incurred by the successful party have been reasonable.