By Dominique Engelter
Last year the Australian Small Business and Family Enterprise Ombudsman surveyed 1,600 Australian businesses about disputes and access to justice.
The survey sample included 167 WA businesses (about 10% of the total survey) across a broad range of industry sectors. Nearly 90% of the survey respondents were small businesses with less than 20 employees. 40% of the respondents were reasonably new businesses (operating for less than 10 years).
- More than 1 in 5 businesses had been involved in a dispute in the last 5 years (some of them multiple), and almost 9 out of 10 disputes were business-to-business;
- There was a fairly even split between disputes with suppliers, and disputes with customers;
- Payment times were the biggest cause of disputes, with either the full amount not being paid or payment being made late.
Some businesses were able to resolve the dispute informally without having to escalate it to a more formal process. The overall majority of respondents who did escalate their dispute either had it conclude in their favour (about 40%) or obtained what they considered to be a mutually beneficial result (about 26%). This demonstrates you should at least consider pursuing claims – don’t just automatically let them go assuming it is all too hard.
About 1 in 5 respondents who escalated their dispute then abandoned it. The main reasons given were the cost of proceeding or that the cost outweighed the potential gains. This brings two matters into focus.
Firstly, advice should be sought before escalating matters so that a cost-benefit analysis can be undertaken before significant funds are sunk into an exercise that is then abandoned. The small investment in initial legal advice can be worth its weight in gold, if it avoids the time expense and heartache of proceeding down a dead-end.
Secondly, the more uncertain or complicated a matter is, the more costly it will be to litigate and the higher the risk of proceeding. If you have clear and detailed terms and conditions, you have a much cleaner and easier legal pathway to success in your dispute. If you have reasonable record keeping and good invoicing practices, this will support your claim. If you have some form of security for payment, you are more likely to be able to actually recover your money at the end.
Obviously some disputes simply can’t be avoided. However, of the respondents that said something could be done differently in future to prevent such disputes:
- about 15% said they should have had a formal contract in place;
- nearly a third said they needed more clarity or detail in their contract;
- 14% said they had to pay more attention to the implications of the contract; and
- nearly 1 in 5 had administrative issues – like poor invoicing practices or poor record keeping.
Williams + Hughes can talk to you about your business processes – how you engage with your customers and suppliers and therefore how you can limit payment disputes arising or, if a dispute arises, how you can be best placed to achieve a successful and cost-effective outcome.
 Information in this article is based on The Australian Small Business and Family Enterprise Ombudsman data.
Dominique is a commercial litigation and dispute resolution lawyer, specialising in complex dispute resolution in the Western Australian jurisdiction; focused predominantly in the Supreme Court.
Dominique acts as counsel in trials in both the State and Federal Courts, as well as the State Administrative Tribunal. He has a wide range of experience including insolvency litigation, mining, commercial lease and property disputes, and trusts and estate litigation.