Going to court over a dispute
For most people, going to court over a dispute is the least preferred way to resolve a dispute. The court experience can be costly, stressful and time-consuming for you and the hirer, so it's often best to try other dispute resolution options first.
However, if ADR does not work or is inappropriate for your circumstances, a court or tribunal decision may provide you and the hirer with a definite outcome. Some states and territories have civil and administrative tribunals, which are similar to local or magistrates courts. Most courts and tribunals will encourage you and the hirer to try to reach an agreement yourselves. In the Federal Court, this can be a requirement.
After you apply or file a claim in a court or civil and administrative tribunal, you and the hirer may be expected to participate in mediation or a pre-trial conference as part of the process. A court or tribunal will need to see evidence. Before going to court, you should make a record of your efforts to resolve the problem. Make notes of conversations and copies of emails, faxes and letters. It is best if you make the record on the same day that the action occurs. These documents will form part of your evidence in court.
Before you file a claim in court or apply to a civil and administrative tribunal, it's worth weighing up the cost and effort involved in taking this action and the effect it may have on your business.
How much will it cost?
The total cost of going to court will depend on:
- the size of the debt (determines which court you and the hirer go to)
- the complexity of the situation
- the fees charged by the court
- whether you and the hirer are represented by lawyers
- the cost of taking time away from your business to prepare and attend court
- any travel and accommodation costs to get to court or to meet with lawyers.
Going to court checklist
- Is the hirer able to pay?
- Is there a genuine dispute or is the court process an opportunity for the hirer to delay paying?
- Does a time limit apply to your claim?
- Can you afford it? (Costs will include court fees, legal fees, your time, and possibly the hirer's legal costs.)
- Will the time, money and stress be worth the outcome?
- What will happen if the decision goes against you?
- How will a court case affect your business or reputation? (Whatever is said in court will be on the public record.)
Example: legal fees associated with going to court
Carmen is an independent contractor who provides human resources advice to small businesses. Daniel, the owner of an accounting firm, hired Carmen to work for a six-week period to assist with staff moves and settling new employees.
At the end of the six-week period, three employees had resigned. Daniel blamed Carmen and said she had done more harm than good. He refused to pay her invoice of $5,200 (including GST). Daniel and Carmen met twice to discuss the issue and Carmen defended her work, but Daniel still refused to pay.
Carmen's lawyer advised that she could send Daniel a letter of demand for Carmen. The lawyer asked Carmen whether she was prepared to take court action against Daniel if the letter of demand did not result in payment. Carmen asked how much it would cost.
She advised that her hourly rate was $300 and estimated as follows:
- legal fee to take detailed instructions and prepare the court documents $1,200 (4 hours)
- a court filing fee of $197
- if the claim is not defended: legal fee of $600 (2 hours) to prepare court documents for default judgment
- if the claim is defended: legal fee of $1,200 (4 hours) to read the defence and advise on whether the firm is likely to be successful
- legal fee for attending initial court appearance $900 (3 hours).
Carmen's lawyer explained that those were the fees 'just to get things started' because this particular case could turn out to be complex. Carmen decided that it was not worth the cost. She instructed her lawyer to write to Daniel to try to negotiate a settlement instead.
Which court or tribunal?
Deciding on the right court or tribunal to hear your dispute will depend on:
- the state or territory where the contract was undertaken
- the reasons for your claim
- the amount of money in dispute.
Australia has two separate sets of courts and these include; federal courts and state and territory courts.
The courts in each state and territory, however, are separate from each other. Some states and territories, such as the Australian Capital Territory, Queensland, Victoria and Western Australia, have civil and administrative tribunals where small claims can be heard more cheaply and informally than the magistrates courts. The other states and the Northern Territory have small (or minor) claims divisions in the magistrates courts that hear small claims in a similar manner.