Commercial disputes

The first six weeks

1. Read the contract before you write anything. Most commercial contracts contain a dispute clause requiring notice, a meeting and mediation before proceedings. Ignoring it can result in your proceeding being stayed, with costs.
2. Stop the informal correspondence. Emails sent in anger become annexures. Anything you write from now on should assume a judge will read it.
3. Secure the evidence. Contract, variations, invoices, delivery records, file notes, text messages. Preserve them properly, because destroying documents once a dispute is on foot creates its own problem.
4. Work out the real number. What you are owed, what you might have to concede, and what recovery is realistically worth after costs and after the risk that the other side cannot pay.
5. Check the other party's solvency. An ASIC search, a PPSR search and a court records search. A judgment against an empty company is an expensive piece of paper.
6. Send a proper letter of demand. Identifying the agreement, the breach, the loss, what you require and by when, and what happens next. A demand that is specific is far more likely to be paid than one that is angry.

Which forum, and what it costs

Costs generally follow the event, which means the loser pays a portion of the winner's costs. That portion is assessed and is usually well short of what was actually spent, so winning a small case can still leave you out of pocket. This is the single most important thing to understand before starting a proceeding over a modest sum.

Statutory demands, and when not to use one

Where the debtor is a company and the debt is genuinely undisputed and above the statutory minimum, a creditor's statutory demand under section 459E of the Corporations Act 2001 (Cth) is the fastest lever available. The company has 21 days to pay, to compromise the debt, or to apply to set the demand aside. If it does none of those, it is presumed insolvent and you can apply to wind it up.

The 21 day period is strict and is not extendable. That cuts both ways: if you receive one, you must act immediately, because a company that misses the deadline loses the right to argue about the debt in that context altogether.

The trap is using a statutory demand where there is a genuine dispute or an offsetting claim. The court will set it aside, and you will pay the costs. Statutory demands are a debt collection tool, not a way to apply pressure in a commercial argument. If the other side has raised any arguable defence, sue in the ordinary way instead.

Mediation, offers, and knowing when to settle

The overwhelming majority of commercial proceedings settle. The question is only how much has been spent by the time they do. Mediation, whether required by the contract, ordered by the court or agreed between the parties, is the mechanism that gets there fastest.

Formal offers matter. Under the Uniform Civil Procedure Rules 1999 (Qld) a party can make an offer to settle, and if the other side rejects it and does not do better at trial, the costs consequences shift significantly from the date of the offer. A well-timed offer is often the most effective piece of tactical work in a commercial file. A Calderbank offer, made outside the rules and marked without prejudice save as to costs, can have similar effect.

Time limits are the hard boundary. Most contract and tort claims in Queensland must be commenced within six years under section 10 of the Limitation of Actions Act 1974 (Qld), running from when the cause of action accrued. Deeds have a longer period. Some claims, including under the Australian Consumer Law, have their own shorter periods. If you are near a limitation date, that becomes the first priority regardless of everything else in this list.

For disputes between the owners of a company, start at shareholders agreements. For franchise disputes, the Franchising Code imposes its own mandatory process, set out at franchise disputes.