Dispute resolution for small business – what are the options?

It’s no secret that COVID-19 has caused unimaginable strain on small business, with many now unable to meet obligations entered into pre-pandemic. From contracts with suppliers to commercial leases, these disputes are now almost unavoidable, but it is how businesses handle these issues that will set them up to come out of this crisis.

Resolving disputes can often come at a significant cost to small-business owners, not only in terms of legal services, but also surrounding time away from their business, lost productivity and income, and stress and emotional toll.

It is important that businesses understand their options for navigating dispute resolution – what is available and how accessible are these options?

1. Direct negotiations between parties

In any contractual dispute, an important first step is to try and resolve the dispute directly by contacting the other party. It’s often useful to have an informal ‘round table’ meeting or video conference.

To make the most of these negotiations, businesses should not think about ‘winning’ or ‘losing’, but about finding a solution they can both live with. If these discussions do not yield a result, businesses should consider dispute resolution processes via government agencies, state civil and administrative tribunals, or via private mediation.

2. Australian Small Business and Family Enterprise Ombudsman

Small businesses can seek support from the Australian Small Business and Family Enterprise Ombudsman, which provides guidance for direct negotiations and an online tool to identify specialist dispute resolution channels.

The Ombudsman’s online tool and case-management support can connect businesses with dispute resolution channels across all states and territories, including their own internal dispute resolution service. Negotiation support and the online tool are free, however the costs of any dispute resolution processes are split evenly between parties.

3. State civil and administrative tribunals

In all Australian states and territories, small businesses can access dispute resolution services via civil and administrative tribunals. Most issues encountered by small businesses can be brough to these tribunals, provided the disputes do not exceed $25,000.

While fees to access these tribunals are small, wait times can be lengthy, and in peak times can be in excess of 6-12 months. It is important for businesses to consider whether a time delay is suitable for the problem at hand, or whether it may potentially exacerbate any financial hardship.

4. Private mediation

Private mediation is when disputing parties directly engage a mediator. The mediation process supports parties to find common ground and a mutually agreeable outcome. The mediator uses various techniques to facilitate discussions and encourages parties to compromise.

The benefit of private mediation is that sessions can be arranged at any time so that parties can quickly resolve disputes, maintain working relationships and move on with their lives. The mediation process is private and confidential, and anything said in mediation cannot be used in court proceedings.

While more expensive than tribunals, many small businesses find the cost of private mediation is minimal when compared to the ongoing costs – both financial and otherwise – encountered during lengthy delays, as well as the risk of litigation if disputes are not resolved.

5. Litigation

Litigation is technically an option, however is rarely a viable choice for small businesses. The costs of court proceedings are significant at best and prohibitive at worst, easily costing tens of thousands of dollars. Small businesses should look to exhaust all other options before considering litigation.

Dr Claudine Kasselis, barrister and accredited mediator

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