We have all experienced and witnessed situations both personally and with our clients regarding a breakdown in a relationship that has led to a dispute. The most common dispute that we experience, or witness is that of a shareholder dispute or business partner dispute.
Often these disputes are very emotional and the motivation of maximising one’s personal financial position from resolving the dispute often becomes secondary to just wanting to win at all costs. As a restructuring practitioner, I have been appointed as a court-appointed receiver or statutory trustee to deal with these unresolved disputes. These engagements are often expensive and lengthy involving numerous court proceedings and directions.
When I’m presented with the facts of the situation, most of the time the way these disputes have started have been because there is a breakdown in the relationship caused by inadequate documenting of shareholder agreements, inadequate policies, procedures and rules in place for the business, and inadequate documenting of decisions being agreed upon.
I believe that parties should try to avoid court proceedings to resolve their disputes, simply because the cost and time spent in litigation can be substantial.
It is worthwhile considering options to settle, whether directly or via mediation, soon after a dispute arises to avoid potentially unnecessary and lengthy court proceedings, which may cause irreparable damage to a business and the parties involved.
John Vohralik, a Nationally accredited mediator, has significant experience mediating commercial disputes.
John says:
“I am often presented with a request to undertake a mediation of a dispute after the parties have obtained legal advice and commenced court proceedings to fight the dispute. After considerable angst and costs have been incurred either the court or the lawyers suggest that mediation may be the most appropriate and cost-effective way to resolve the matter.”
John also says that:
“Some of the benefits of mediation are as follows:
- The cost is manageable, compared with the very substantial cost of court or tribunal litigation arbitration.
- The process is flexible and can be moulded to the requirements of the parties.
- The mediation session, including discussions and documents prepared, are confidential, and, subject to minor exceptions, cannot be used in subsequent court cases.
- There is no requirement to give evidence or be cross-examined.
- The mediation can be arranged within a few days, whereas court cases can run for several years.
- Once the issues are addressed and known and the parties state their needs and positions in respect of the dispute, the mediation process focuses on attempting to achieve a settlement.
- It avoids lengthy arguments about case law and the meaning and interpretation of documents or factual disputes.
- Any solution that is reached is one in which the parties have direct control over, compared to a court proceeding, where the judge becomes the decider of the outcome.
- Findings of fact or credit of witnesses, which can hurt reputations are not made by a mediator.
- The mediator does not impose a judgement on the parties whereas a Judge or Tribunal member must issue a judgement, which in certain cases can be the subject of an appeal process, which again can take several more years and incur substantial costs.
- Where continuing business relationships exist, solutions can be agreed upon which enhance or vary the relationships or contracts, to provide a better framework for continued business interaction between the parties.
- The parties own any solution reached the mediation session – generally considered a win-win outcome.
- Mediation can preserve commercial relationships rather than destroy them, as often happens in litigious processes.”
When you look at the above benefits of mediation as an advisor or yourself as the client, you may wish to want to explore a mediation process much earlier to avoid lengthy court proceedings and costly legal fees.
It does seem incredible to me that many parties do not want to explore such an option when a dispute arises. Whilst the likely outcome of mediation is that the warring parties go their separate ways after an agreement is reached, there is always a chance that these relationships may well be repaired and that the warring parties can remain in business and return to times when parties were all working well together and building a strong business.
At Cathro & Partners, we are experienced acting as Court-appointed receivers or statutory trustees. Clients who wish to head down the path of seeking Court-appointed roles should be prepared to accept the large cost that is usually incurred when such appointments are made. At Cathro & Partners, we would like to see more disputes resolved through mediation. Even when we take on Court-appointed roles, we will, if appropriate, consider arranging an early mediation session. As advisers, you should strongly push your clients to seek mediation early in the dispute process, to avoid potentially unnecessary legal and Court costs.
