UNCLASSIFIED Develop good business practices and avoid business disputes Webinars for Law Week 2015 UNCLASSIFIED
UNCLASSIFIED Commercial disputes are a part of doing business (unfortunately) • 3%-5% of small businesses experience a serious commercial dispute with another business each year UNCLASSIFIED
UNCLASSIFIED • What can you do to prevent a dispute arising? • If it does arise, how can you resolve it effectively? UNCLASSIFIED
UNCLASSIFIED Four broad areas of state government assistance for small business SMALL BUSINESS COMMISSIONER Dispute resolution / Policy / Legislation fair market practices Assistance Program Regulatory burden design /delivery reduction UNCLASSIFIED
UNCLASSIFIED Type of disputes? • Any commercial agreement between businesses, or business-to-government or not-for-profits Licensing / agency agreement Franchises Buying a business Leases Supply chain Distribution Services • No definition of ‘small business’ UNCLASSIFIED
UNCLASSIFIED For example … • The business sale contract had a ‘not compete’ clause, but the vendor is operating in breach of this • The lease says 300 sq. metres but the shop is only 237 sq. metres • The accountant is not fulfilling the terms of our contract • I signed up for Search Engine Optimisation but it’s had no effect, and I’m locked into a 24 month contract • The franchisor is not providing me with the number of business referrals promised UNCLASSIFIED
UNCLASSIFIED Statutory referral of some disputes Retail Leases Owner Drivers / Forestry Contractors Farm Debt 75% of our business UNCLASSIFIED
UNCLASSIFIED Our dispute resolution services • Information & Assistance No Cost • Pre-mediation dispute resolution No Cost • Mediation $195* per party half day session CBD, Metro or regional locations Scheduled within 6-8 weeks Can occur rapidly if parties agree * For most mediations. May change in 2015-16 UNCLASSIFIED
UNCLASSIFIED High levels of customer satisfaction 100.0% 93.6% 93.5% 93.4% 95.0% 90.0% 85.0% 80.0% 75.0% 70.0% 65.0% 60.0% Total Applicant Respondent 2013-14 feedback from mediation participants UNCLASSIFIED
UNCLASSIFIED Completed disputes 2013-14 Unsuccessful mediation, 8.1% Settled prior, 26.6% Successful mediation, Can’t find/ 38.8% No mediation/ Refusal, 26.5% 83% mediation settlement rate UNCLASSIFIED
UNCLASSIFIED Avoid the costs of litigation $30,000 $25,352 $25,000 Costs incurred per party $20,000 $15,808 $15,000 Direct costs Total Costs $10,000 $9,069 $5,000 $2,204 $2,130 $1,308 $1,297 $1,119 $224 $269 $174 $141 $- <$1k $1-2k $2-5k $5-10k $10-20k >$20k Amount of dispute Survey of businesses in certain business-to-business disputes at VCAT in 2012 UNCLASSIFIED
UNCLASSIFIED ... and other adverse effects of litigation Litigation had an adverse impact on: The performance of your business Your overall level of work- related stress Your health and wellbeing 0% 10% 20% 30% 40% 50% 60% 70% 0-4 employees 5+ employees ORIMA 2013 research for VSBC: certain business to business disputes at VCAT in 2012 UNCLASSIFIED
UNCLASSIFIED ... and other adverse effects of litigation % ‘High’ impact Litigation had an adverse impact on: The performance of your business Your overall level of work- related stress Your health and wellbeing 0% 20% 40% 60% 80% 0% 10% 20% 30% 40% 50% 60% 70% 0-4 employees 5+ employees ORIMA 2013 research for VSBC: certain business to business disputes at VCAT in 2012 UNCLASSIFIED
UNCLASSIFIED Build good relationships and prevent disputes • Put it in writing. Don’t rely on oral assurances. • Read and understand a contract before you sign it • Recognise mutual interests (not a win-lose arrangement) • Communicate early and often • Be accountable and responsible for your obligations • Treat each interaction as the start of a long term relationship • Interact with businesses of like-values • Conduct yourself professionally • Have pre-agreed, effective, quick and fair dispute resolution procedures UNCLASSIFIED •
UNCLASSIFIED Top Retail Lease dispute characteristics 35.0% 1. Payment of outstanding monies by tenant 30.0% 2. Repairs and Maintenance 3. Value of expenses, 25.0% outgoings, rent 4. Security Deposit 20.0% 5. Premature termination of lease 15.0% 6. Options and renewals 7. Make good on expiry 10.0% 8. Transfer/ assignment of lease 5.0% 0.0% 1 2 3 4 5 6 7 8 2010-11 2011-12 2012-13 2013-14 UNCLASSIFIED
UNCLASSIFIED ‘Unfair’ contract terms in business contracts • No statutory protections for businesses signing up to ‘standard form’ contracts • No cooling off periods for unsolicited sales • Watch out for: Unilateral variation clauses Extreme indemnities Roll-over contracts with impractical termination rights Unequal termination provisions / payout obligations • Good news: announced extension of consumer protections to small businesses <20 employees; and Transaction <$100k in 1 year or <$250k in multiple years UNCLASSIFIED
UNCLASSIFIED May Webinars – Law Week • Mon11 th 3.15 pm Build relationships and avoid disputes • Tue 12 th 10 am Retail leases • Wed 13 th 12.15 pm Build relationships and avoid disputes • Thu 14 th 3 pm. Retail leases • Fri 15 th 3.15 pm Build relationships and avoid disputes UNCLASSIFIED
UNCLASSIFIED Don’t let a commercial dispute drag your business down Contact the VSBC for Information Assistance Guidance Dispute resolution vsbc.vic.gov.au 13 VSBC (13 8722) enquiries@vsbc.vic.gov.au UNCLASSIFIED
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