LexisNexis Practical Guidance®

When the nature of a business dispute has been determined the remedy or outcome that is most suited to the problem must be identified. There are a number of remedies available under the law, and it may be appropriate to seek a range of remedies to deal with a single dispute.

Generally, damages are compensatory in nature. Damages are viewed as a “substitute” for performance. Consequently, they are designed to put the non-defaulting party in the position they would have been in had the contract been performed.

An award of damages will be made if:

• •there has been a breach of contract;
• •loss or injury has occurred as a result of the breach of contract; and
• •the loss or damage is not too remote from the breach of contract.

See Damages.

An account of profits is a discretionary remedy whereby a party that has been wronged by another party may obtain the profits that the wrongful party has acquired as a result of the wrong committed.

Unlike damages, an account of profits is not designed to put the wronged party in the position in which it would have been if the wrong was not committed. Accordingly, the wronged party does not need to show that it has suffered damage in order to avail itself of the remedy.

Generally a successful wronged party must elect between the remedies of damages or an account of profits.

See Account of profits.

An injunction orders a person to perform an act or restrains a person from committing or continuing to commit a wrongful act. The majority of applications for an injunction seek to restrain.

It is a discretionary remedy, often sought on an urgent interim basis.

See Injunctions.

Specific performance is a remedy for the purpose of compelling a party to perform a contract.

Like all equitable remedies, specific performance is discretionary.

See Specific performance.

Restitution is essentially a return to, or restoration of, a previous state or position and an order for restitution requires the defendant to give up his or her gain to the plaintiff.

Originally, restitution was based on implied promise and known as “quasi-contract”. Now it is used to prevent unjust enrichment in defined circumstances. It acts to restore to the rightful owner something that has been unjustly taken away, lost, or surrendered.

See Restitution.

A declaratory judgment is a formal statement by a court confirming the existence or non-existence of a state of affairs. A party in proceedings may seek an order that the court declare the existence of a right or obligation of itself or of another party. It is not a creation of rights, but an indication of what rights already exist.

See Declarations.

A liquidated debt is an amount which can be ascertained by calculation or fixed by a scale of charges, or other positive data. By comparison, damages that are not mathematically calculable and which are therefore uncertain and subject to assessment are categorised as unliquidated damages.

Claims for liquidated damages include claims for debts, remuneration, quantum meruit claims, and claims for breach of a contract in which the amount of damages is specified, or can be calculated.

See Liquidated sum claims.

This group of remedies is appropriate for the dissolution or termination of businesses, and/or the structure under which a business is being conducted. Differing principles apply according to whether the business is being conducted by a natural person or persons, or by a legal structure, and according to whether the business and in the case of a structure, the structure itself, is or is not solvent.

See Solvent and insolvent dissolution and distribution.

Outside the area of landlord and tenant, the remedy of possession of land generally arises in circumstances where a mortgagee seeks to enforce a legal (or registered) mortgage.

See Possession.

Corrective orders can be made by the courts in a number of contexts, and for a number of purposes including rectification of wrongly drafted documents that do not reflect the intentions of the parties, correction of misleading statements and advertising, and restoring records of shareholding wrongly omitted or removed from a share register.

See Corrective orders.

Once the nature of a business dispute has been determined and the outcome (or remedy) that is sought has been identified, the process best suited to achieving that outcome in the particular circumstances must be chosen and pursued.

There are numerous processes available to the parties. Some can be very informal and unstructured, such as negotiation. Others are very formal and structured, such as litigation. Still, others are partly formal and partly informal, and flexible to varying degrees.

It is sometimes possible to pursue two or more processes simultaneously, such as holding a mediation after litigation has been commenced.

Before engaging in any dispute process, it is necessary to identify the appropriate individuals and/or corporations relevant to the process in order to have any prospect of achieving the desired outcome.

For example, it is pointless suing an individual in his or her personal capacity when that individual has signed a contract in his or her role as a director of a company and not in his or her own right.

See Identifying the proper parties for resolution of business disputes.

Litigation is a very formal and structured process that may be pursued in the State and Federal courts and tribunals. Litigation is generally the most expensive and time-consuming method of dispute resolution.

The procedure in each court or tribunal is governed by strict rules of procedure that are set out in statutes and regulations. Often, a court or tribunal will supplement the applicable legislation by issuing practice notes. Decided cases can also determine correct procedure where the legislation is otherwise deficient, inadequate or unclear.

The basic steps followed in most courts and tribunals are:

• •an application identifying the relief sought and which outlines the facts on which the applicant claims to be entitled to that relief is filed by the moving (also called the originating, initiating or aggrieved) party;
• •the party against whom the claim is brought files an answer to the allegations in the application;
• •the parties exchange documents in their possession that are relevant to the issues in the dispute;
• •documents in the possession of third parties are obtained pursuant to orders issued by the court or tribunal;
• •the parties exchange the evidence their witnesses will give at the trial in the form of affidavits or written statements;
• •a trial is held at which the formal rules of evidence apply to varying degrees; and
• •the judge or other judicial officer that presides at the trial gives a judgment.

See Using litigation to resolve business disputes.

Arbitration refers to a process whereby two or more parties, generally by agreement, have a dispute heard and determined by one or more private individuals, and generally those individuals are of their own choosing.

It is usual for parties to be legally represented at commercial arbitrations.

The arbitration agreement may detail procedural aspects of the arbitration. Usually, however, the arbitrator has full discretion as to how the arbitration is to proceed subject to agreed limitations. Depending on whether the arbitration is domestic or international, the Commercial Arbitration Act 2010 (NSW) or the International Arbitration Act 1974 (Cth) set out certain matters relevant to the rights and obligations of the parties to a commercial arbitration and of the arbitral tribunal, as well as to the circumstances and scope of any court involvement.

The process for the arbitration would usually consist of:

• •one or more preliminary conferences to agree procedure and define the dispute;
• •provision of evidence, generally by way of statements;
• •a form of hearing either on the papers or with oral evidence; and
• •written determination of the dispute (with reasons) by the arbitrator (an “award”)

A court can be approached for recognition and enforcement of arbitration awards.

See Arbitration.

The adjudication process in NSW is only applicable to commercial construction contracts, and particular construction work or related goods and services.

• •a party (“the claimant”) that is or may be entitled to a progress payment serves a payment claim on a person (“the respondent”) who is or may be liable to make that payment;
• •the respondent must reply to the payment claim by serving a payment schedule on the claimant stating (with reasons) how much of the payment claim the respondent agrees to pay;
• •if the claimant disputes the respondent's reasons for withholding some or all of the claimed amount or the respondent fails to provide a payment schedule or the respondent fails to pay the scheduled amount the claimant files an adjudication application with an adjudicator chosen from a panel appointed by the Minister;
• •the respondent lodges a response to the adjudication application; and
• •the adjudicator then determines the dispute, usually on the basis only of the written adjudication application and the response.

The adjudicatory decision is enforceable through the courts. There is no appeal but the decision can be reviewed on limited administrative law grounds.

See Adjudication.

Mediation is a process by which parties involved in a dispute meet to negotiate an appropriate resolution. The key feature of mediation is the mediator; an impartial person chosen by the parties to chair the meeting and conduct the process, assist the participants in negotiations and facilitate settlement.

Although fees are charged by the mediator and there are other expenses, it is an efficient, informal, flexible and less expensive way to resolve a dispute than litigation or arbitration. Mediation is confidential and attracts negotiation privilege.

There is no compulsion to reach an agreement at the conclusion of the process.

See Mediation.

The most common form of alternative dispute resolution is direct negotiation between parties to the dispute. The structure of such negotiations, and how they are commenced, will vary in almost all business disputes.

Negotiation is as flexible as the parties may desire. The process of negotiation is private, and its processes are generally privileged from disclosure in existing or subsequent proceedings.

See Negotiation.

In addition to commonly known and utilised means of alternative dispute resolution, such as mediation, arbitration and adjudication, there are many other processes by which to resolve business disputes. All are intended to save time and money, and ideally to preserve business relationships.

Some of the more common alternatives to the standard alternative dispute resolution processes are:

• •mini trial;
• •expert appraisal/neutral evaluation;
• •expert determination;
• •assisted negotiation;
• •ombudsmen;
• •complaints handling; and
• •legislative alternative dispute resolution.

See Other types of alternative dispute resolution.

In the event of a dispute arising under a construction contract, the parties may have resort to litigation, adjudication or other forms of alternative dispute resolution. Typically, construction contracts contain provisions that require the parties to engage in some form of alternative dispute resolution before commencing proceedings in a court or tribunal. Most often, this takes the form of structured negotiation, mediation, arbitration or expert determination.

See Resolving disputes in construction.