Best practice when a commercial dispute arises

Aaron McDonald

Director, Pragma Legal

Overview of presentation

• An opening comment on politeness;

• Best Practice in Issuing Demands;• Letters of Demand; and

• Statutory Demands;

• Adhering to Dispute Resolution Clauses;

• Calderbank Letters; and

• Early Mediation of Disputes.

Being polite

Letters of demand

Letters of demand

Letters of demand

Letters of demand

Letters of demand

• Identify who you act for;

• Set out the factual instructions you have received from the client;

• Enclose relevant documents;

• Insert an adverse inference statement;

• Set out the law as it applies to your instructions;

• State what action you are requesting the recipient to take;

• Set a reasonable timeframe for compliance;

• Know your audience and write for it; and

• Enclose draft originating process marked draft so as not to mislead.

Letters of demand

Statutory Demands

• Statutory Demands should not be issued without first issuing a letter of demand.

• Statutory Demands are not a debt recovery mechanism: Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85 at [2] per His Honour W Martin:

“Th[e] purpose [of a statutory demand] is to provide a means whereby the insolvency of a company may be established for the purposes of an application to wind up that company. Its purpose is not to provide a means whereby those claiming a genuinely disputed debt can avoid the obligation of establishing their entitlement to that debt in a court of appropriate jurisdiction by placing commercial pressure on the party resisting payment. There is a clear inference from the evidence that Createc's purpose in issuing the statutory demand was the improper purpose of using the statutory demand process to enforce payment of a debt which it knew to be genuinely disputed. That is an abuse of process.”

• Statutory Demands can be withdrawn: Cempro Pty Ltd v Dennis M Brown Pty Ltd (1994) 50 FCR 426.

Statutory Demands

• Where a clause is mandatory the Court has the power to stay proceedings pending compliance with the clause.

• Courts however will refuse to grant specific performance of a party’s obligation to participate in a dispute resolution process due to its inability to supervise compliance; Hooper Bailie Associated Ltd v Natcon Group Pty Ltd (1992) 28 NSWLR 194.

Adhering to Dispute Resolution ClausesMandatory clauses

Adhering to Dispute Resolution Clauses Non-mandatory clauses

• Courts will not have the power to stay a proceeding where the dispute resolution clause is non-mandatory.

• The courts have recently tended to give effect to a dispute resolution clause despite some ambiguity or vagueness, provided that judicial assistance is not required to rewrite the clause.

Calderbank offers

• A Court considering a submission that it was unreasonable to have rejected a Calderbank offer, should ordinarily have regard to at least the following factors:• stage of the proceeding at which the offer was received; • the time allowed to the offeree to consider the offer; Tonkin v

Heilongjiang Feng AO Agricultural & Animal Husbandry Group Co Pty Ltd [2015] WASC 378 (S)

• the extent of the compromise offered;• the offeree’s prospects of success, assessed as at the date of the offer; • the clarity with which the terms of the offer were expressed; and • whether the offer foreshadowed an application for ... indemnity costs in

the event of the offeree's rejecting it. [25].

• Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435, cited with approval in Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115.

• Mediation is a process and not just an event.

• There is no advantage in reserving mediation until the case is about to be tried.

• Referring a dispute to mediation early:

• increases the prospects of resolving the dispute at an early stage;

• reduces the likelihood of lengthy, protracted and expensive proceedings; and

• allows parties to come to more flexible solutions that would not be possible at trial.

• The benefit of referring cases to mediation early is that even if they do not settle at a first mediation conference, an assessment can be made of further steps to be taken that will increase the prospects of settlement at a later conference.

• Provides an opportunity for parties to come face to face, to talk and to listen which may not have occurred prior to a mediation.

When to mediate?The early bird gets the worm

District Court Claim for $96,094 by Company A against Director B

19 Nov 2015

23 Nov 2015

25 Nov 2015

5 Jan 2016

8 Jan 2016

27 Jan 2016

15 Feb 2016

Company C exited administration

Writ filed with Court

Writ personally served on Director B

Defence filed with Court

Attended Court and listed for matter for mediation

Early mediation

Settlement reached for $65,000

Monies received and sent to client

Conclusion

• Acting in your client’s best interests usually means doing what you can to resolve the dispute as quickly as possible.

• Be polite to colleagues and other adverse parties.

• Reacting in anger or annoyance does not advance ones ability to persuade.