What to Do When Business Partnerships Turn Sour
Blog All Personal Injury Property & Conveyancing Commercial Law Estate Planning Immigration Commercial Law /March 11, 2025 What to Do When Business Partnerships Turn Sour Throughout the lifespan of a business, the relationship between partners can function effectively and is often a crucial factor in the success of the business. However, as time goes on the relationship between partners can change. Partners may no longer prioritise the business in the same way they once did or take a view that their contributions to the business are greater than others and they should be entitled to more. There may even be a rogue partner, who starts making decisions without consulting the others, or in the worse situations a partner starts to deflect business opportunities away from the business to themselves. In our experience, business partnerships often break down subtly over time with fallout slowly building up until it escalates to a critical breaking point. At this stage, with so many issues unresolved the dysfunction can cause the business to collapse. Potential signs to look for which may indicate that a business partnership is in decline include: a lack of communication; consistently being late for critical meetings; double-checking or reviewing insignificant decisions (indicating a lack of trust); lack of interest in the management of the business; making decisions without consulting partners; and unexplained transactions or expenses. If partners see any of the conduct listed above, it is important to address it appropriately and in proportion to the conduct that is in issue. For example, if there is a lack of communication it may be more suitable to flag it with the partner, organise a coffee or lunch and just be honest and say ‘hey, I feel like you’ve stopped responding to me, are we good?’. This simple attempt at communication can save you thousands in legal fees. Rather than doubling down with emails, texts or calls demanding in person meetings which may make matters worse. Beyond talking If communication attempts have been made and the issue is still unresolved, we consider the potential options available in this situation. We will assume the directors are also shareholders of the company, common in most small to medium businesses. If the business is a partnership or trust, there are different ways to manage a business breakdown and will require reviewing the trust documents or partnership agreements. Review any agreements When a breakdown in a business relationship occurs it’s important to review and follow the relevant clauses within the shareholder agreement or company constitution. Any clauses which address how disputes are resolved, and if necessary, how the sale of shares is to be conducted. A typical dispute resolution clause will require the parties to notify the other party in writing of the nature of the dispute and provide them with a few days to respond. If there is no response, the aggrieved party is generally able to proceed to litigation provided the clause does not limit their rights any further. If the party responds and there is still no resolution, the clause will likely stipulate that the parties are to engage in a predetermined form of alternative dispute resolution within a specified time frame such as conciliation, mediation, expert determination or arbitration. Choosing to not follow a dispute resolution clause and proceeding with litigation may result in the proceedings being stayed or adjourned pending compliance with the dispute resolution clause. This can be challenging because if the matter is resolved through dispute resolution and proceedings were started, the other party may look to recover their legal costs for responding to the proceedings. This issue will just add further complexity and costs to the dispute, when it could be avoided if the agreement was consulted and the dispute resolution clause was followed, even if there is resistance from the other party, the attempt is the important aspect. Sell Shares Selling shares in a business after a dispute can be a pragmatic solution to resolve conflicts and move forward. When partners are unable to reconcile their differences despite tries at communication and alternative dispute resolution, selling shares allows one or more partners to exit the business amicably. This can prevent prolonged legal disputes and financial strain. It is crucial to ensure that the sale of shares is conducted in accordance with any existing agreements, such as the company constitution or shareholder agreement, to avoid potential legal issues. A frequent issue in share sales arises when a fractured business relationship complicates the shareholder agreement’s independent valuation clause. Disputes may occur over the expert’s methods or data. Even if the share value is agreed upon, finding a willing buyer can be difficult. Other shareholders might decide whether to buy the shares themselves or approve another purchaser. The shareholder agreement will guide these decisions, often allowing a vote by most shareholders. Mediation Although in some circumstances there may not be a requirement to engage in mediation, we recommend that all our clients consider it early in the dispute. Mediation involves an independent third party being retained to aid the parties in reaching a mutually agreeable resolution. The costs of the mediator are usually shared 50/50 between the parties and the total costs of the mediator largely depend on the mediator’s experience and reputation. There is a mediator available for every budget. A mediator can be retained for any length of time. The mediator prior to the mediation date (which is agreed by both parties) will request position papers from the parties, these are not intended to be a complete detailed recount of the whole dispute (in most cases the mediator sets a limit on how much can be written) but rather it should identify the parties, their relationship, the nature of the dispute, your position, and the damages or relief sought. The mediator will review all the parties position papers prior to the mediation to aid with carrying out the mediation. Mediation offers several advantages in resolving business disputes, with the primary benefit being a reduction in costs. Unlike litigation,
How to Prepare for Your First Legal Consultation
Blog All Personal Injury Property & Conveyancing Commercial Law Estate Planning Immigration Immigration,Personal Injury,Property & Conveyancing /March 11, 2025 How to Prepare for Your First Legal Consultation Seeking legal advice for the first time can be a daunting experience, filled with many questions and uncertainties. Whether you are facing a personal injury case, dealing with family law matters, or navigating complex business disputes, the first consultation with a lawyer sets the tone for your experience. This guide provides practical tips to help you prepare for your first legal consultation, ensuring that you make the most of your first legal consultation. Where and when Most lawyers now offer phone or video consultations. We recommend that you state your preference early on, so an in-person meeting can be arranged by the law firm, particularly if your preference is in person over video calls. However, if you are content with a phone call or video conference, we strongly recommend that you schedule a few conferences with different lawyers to get a feel of their distinctive styles because it is easier to arrange a few over a day. As h a lawyer, is unlike any other service, take the time to know who you are dealing with and whether they are the right person not just to deal with the matter, but also whether their personality gels with you. Fees and Charges Prior to the consultation, you should confirm or clarify whether the law firm charges for a consultation to avoid any unexpected fees. In most situations, it will be obvious as to whether there is a fee but to avoid any doubt, it is all advisable to clarify. If a firm does charge a consultation fee it should not be considered a negative. The fee charged may reflect the method in which the firm conducts consultations, which is to undertake a detailed review of all the documents, correspondence and evidence provided by you prior to the consultation, with a view of giving you a substantive preliminary advice at the consultation. After which, you will then receive a cost agreement detailing the next steps in your matter and the estimated costs and disbursements. In this scenario, the consultation fee covers the time spent by the firm reviewing the materials provided and their time spent in undertaking a more substantive consultation. Alternatively, a firm may offer a free consultation, which usually involves a lawyer meeting with you to discuss the matter at a high level without having reviewed in detail the material, resulting in only a general outline of the next steps in the consultation. After which, the firm will send a more detailed cost agreement outlining the first steps and associated costs to proceed. The cost agreement following a free consultation is likely then to include the costs or time spent for the lawyer to review any materials provided to the firm and preparing an initial advice. In both scenarios, the client ends up paying for the costs of the advice whether the consultation is free or not, the major difference is when the costs are incurred either up front or later down the track. So, it is important to speak to the lawyer beforehand and inform them of what you want to achieve from the consultation, so that you are not disappointed when you attend a consultation thinking that you will receive substantive advice. Whether a fee is charged will also depend on what area of law. In personal injury matters involving compensation for workplace accidents the cost of a consultation can be covered by WIRO (Independent Review Office) which was set up to assist in funding claims made by workers injured at work. It was established by the government to provide financial assistance to workers who may be burdened by workplace injuries, aiming to alleviate this financial strain. Be cautious when doing your own research. The law is and should be accessible to everyone and any individual has the right and option to deal with their legal affairs as a self-represented litigant. There are several resources available that people can review and use to assist them in navigating the legal landscape. We do not discourage clients from doing their own research, but we suggest that a cautious approach is taken when assessing the available information. For example, common mistakes that we have observed is referring to legislation which is not applicable because it is from another state or has been repealed. Further, legislation is subject to interpretation and case law, which should be reviewed in conjunction with the applicable legislation. The point is that while the law is open and accessible to everyone, it is complex and the role of the lawyer is to simplify that complexity to assist you, so having a general background read of articles on your issue can help, it should be treated with caution. Prepare a timeline The more prepared you are, the more productive the consultation can be. Prior to your consultation you should be able to state the who, what, where and how of your matter. The more detail the better. For example, if you’re a plumber working as subcontractor, have your own entity ACN ready and the head contractors company name, ACN, and email address of the person you deal with. If you are injured at a public place, know the address, date, time or the name and details of any people you have reported the incident to. Any witnesses that can be contacted and their contact details. Even prepare a brief statement which you can provide to the solicitor. The benefit of being able to provide these details upfront or as early as possible is that the law firm can conduct what is known as a conflict-of-interest search. At its highest a law firm can be conflicted if they represent two clients with the same interests at the same time, or act for a client in the past, and subsequently act for another client. Bring the right mindset Approaching a lawyer, is
Option exercised outside of exclusive agency period disentitles agent to commission
Blog All Personal Injury Property & Conveyancing Commercial Law Estate Planning Immigration Immigration, Personal Injury, Property & Conveyancing /March 11, 2025 Option exercised outside of exclusive agency period disentitles agent to commission In the decision of Southwell Holdings Pty Ltd v Topple [2025] NSWSC 59, the Supreme Court of New South Wales considered whether an agent was entitled to remuneration under an agency agreement when an option deed was executed during the exclusive agency period, but the option was exercised after its expiry. This decision provides valuable insights into the construction of standard form agency agreements, particularly regarding remuneration clauses linked to option deeds. Background The dispute arose from an agency agreement between Southwell Holdings Pty Ltd (Southwell) and Barry Topple for the sale of Topple’s property in Marchmont, New South Wales. The agreement appointed Southwell as the exclusive selling agent from 23 October 2019 to 13 February 2020, followed by a non-exclusive agency period until the property’s sale or termination of the agreement. During the exclusive agency period, Topple entered into a put and call option deed with Byron and Lea McIntyre on 11 December 2019. The call option was exercisable until 31 December 2021. The McIntyres exercised this option on 1 July 2021, leading to a sale of the property for $1.4 million on 15 July 2021. Southwell claimed $42,000 in remuneration, arguing entitlement under clause 3.1(a) of the agency agreement, which stipulated remuneration when a contract for the property’s sale was entered into during the exclusive agency period, including by way of an option being exercised. Key Legal Issues The primary issue was the construction of clause 3.1(a) of the agency agreement. Southwell argued that the clause should be interpreted to entitle remuneration if an option was granted during the exclusive agency period and subsequently exercised, irrespective of when the exercise occurred. Conversely, Topple contended that the clause only entitled remuneration if the option was exercised during the exclusive agency period. The Court was tasked with interpreting the following key provision: “If during the Exclusive Agency Period the Principal enters into a contract (which includes by way of an option being exercised) for the sale of the Property, or of an interest in the property, to any person (including a co-owner), whether or not that person was introduced to the Principal or to the Property by the Licensee.” Southwell’s Arguments Southwell proposed three potential interpretations: An option exercised during the exclusive agency period, regardless of when granted. An option granted and exercised during the exclusive agency period. An option granted during the exclusive agency period and exercised at any time thereafter. Southwell contended that the third interpretation was most consistent with the commercial purpose of the agency agreement. It argued that excluding remuneration when the option was exercised post-expiry would undermine the value of the exclusive agency period, effectively allowing the principal to benefit from the agent’s efforts without compensating them. Topple’s Counterarguments Topple maintained that the clause was unambiguous and should be construed according to its ordinary meaning. Specifically, the parenthetical words “(which includes by way of an option being exercised)” focused on the timing of the option’s exercise, not the timing of its grant. Therefore, remuneration was only payable if the option was exercised within the exclusive agency period. Court’s Analysis and Decision The Court (Mitchelmore J) held that the construction of clause 3.1(a) turned on the ordinary meaning of the words used, particularly the parenthetical phrase “by way of an option being exercised.” It concluded that this language unequivocally related to the timing of the option’s exercise, not its grant. The Court found that: The words in clause 3.1(a) clearly required the exercise of the option to occur during the exclusive agency period for remuneration to be payable. The clause did not contemplate remuneration for an option granted during the exclusive period but exercised thereafter. Clause 3.1(c) addressed scenarios where an agent introduced a purchaser during the exclusive or non-exclusive agency period, ensuring remuneration if a sale occurred subsequently. This provision balanced the commercial risks for both the principal and the agent. The Court rejected Southwell’s interpretation, noting that its proposed construction necessitated supplementing the clause’s wording to include options exercised after the exclusive agency period, which contradicted established contractual interpretation principles. Precedent and Legal Principles Applied The decision reinforces several key principles of contract interpretation: Commercial agreements must be construed according to their ordinary and natural meaning, considering the context and commercial purpose (Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7). Courts must not depart from the contract’s language to achieve a more commercially desirable outcome unless the wording is ambiguous or leads to an absurd result (Jireh International Pty Ltd). Supplementing or correcting contractual language is only permissible where a clear intention is apparent and necessary to avoid absurdity or inconsistency (Fitzgerald v Masters [1956] HCA 53). Implications and Significance This case underscores the importance of precise drafting in agency agreements, particularly concerning remuneration linked to option deeds. It highlights the necessity for agents to clearly delineate remuneration entitlements concerning both the grant and exercise of options within agency agreements. The decision also illustrates the judiciary’s reluctance to expand the scope of contractual clauses beyond their plain meaning, reinforcing predictability in contract law. It serves as a cautionary tale for agents and principals alike to ensure the language of agency agreements unambiguously reflects their commercial intentions. Conclusion The Supreme Court’s decision to dismiss Southwell’s claim, with costs awarded to Topple, reinforces strict adherence to the language of commercial contracts. It illustrates that, absent ambiguity or absurdity, the court will uphold the ordinary meaning of the contract’s terms, even if it leads to a commercially disadvantageous outcome for one party. Real estate agents and individuals entering into an agency agreement should carefully consider the drafting of the agreement. While standard form contracts can save time and costs in the short term, they may lead to situations where agents miss out on agency fees. BLOG Our Blogs
