The legal process of commercial litigation: what to expect

Commercial litigation can be a daunting prospect, often involving complex legal proceedings and processes that can significantly impact your time, operations and finances. Whether you’re an individual, a small business owner or part of a large organisation, understanding the litigation process is critical when it comes to effectively navigating disputes.

The focus of this article is on civil disputes, and does not discuss any legal proceedings relating to criminal matters.

What is commercial litigation?

Commercial litigation refers to legal disputes between two or more parties, often arising from business transactions, contracts, or relationships. This can include issues related to breach of contract, shareholder disputes, breach of restraints of trade, debt recovery, partnership and shareholder disputes.

The Pre-litigation Stage

Initial assessment

Before engaging in any litigation, it’s crucial to properly assess the merits of your case with a lawyer well versed in commercial law, to provide valuable insights when it comes to the strength of your position. This includes gathering all relevant documents, understanding the legal basis of your claim or defence, and considering the potential costs involved (including time, money and emotions).

An important fact that is often overlooked is whether the costs of getting involved in litigation will outweigh the benefits obtained. While an initial starting point might be to want to litigate ‘on a matter of principle’, closer scrutiny might reveal this could be a very expensive exercise and that the costs outweigh the benefits, meaning it might not be viable to litigate.

Alternative Dispute Resolution (ADR)

In Australia, Courts often encourage parties to resolve disputes through alternative methods before proceeding to litigation. In some Courts, the parties are required to demonstrate they have explored ADR before the commencement of any legal proceedings. ADR can include mediation or arbitration, which are generally less formal and more cost-effective than Court proceedings.

• Mediation: A neutral third party helps facilitate negotiations between the disputing parties. The aim is to reach a mutually acceptable resolution. The mediator does not determine any issues in dispute.
• Arbitration: A more formal process where an arbitrator is presented with each party’s evidence and submissions about their case, before making a decision that is binding on the parties.

Many contracts include clauses mandating ADR before litigation can commence, so it’s essential to check any existing agreements.

Commencement of proceedings

Filing a claim

If ADR does not resolve the dispute, the next step is to file a claim in the appropriate Court. In Australia, commercial disputes can typically be taken to:

• State or Territory Courts: For less complex matters, often with lower financial stakes.
• Federal Court of Australia: For matters involving federal or constitutional law.
• Supreme Court: For high-value claims or significant legal issues.
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In some instances, the choice of Court may be determined by the legislation that applies and specifies which Court has the power to determine any disputes.

The pleadings stage

Issuing a Statement of Claim

The party initiating the proceedings (the plaintiff or claimant) must prepare and file a document known as a Statement of Claim. This document outlines the nature of the dispute, the relevant facts, the legal basis of the dispute and the relief sought. This document must be served on the defendant (or respondent).

Defendant’s response

Upon receiving the Statement of Claim, the defendant typically responds with a document known as a Defence (and sometimes called a Defence and Counterclaim). This document will address the claims made by the plaintiff and set out the basis on which the defendant opposes the claim by the plaintiff and may also raise any counterclaim against the plaintiff. A counterclaim is a claim made by the defendant against the plaintiff seeking relief from the Court in the same way a Statement of Claim by the plaintiff does. Sometimes it is referred to as a claim within a claim.

A plaintiff once served with a Defence and Counterclaim must file a Defence to the Counterclaim in the same way that the defendant filed a Defence to the Statement of Claim.

Further Pleadings

The Court may allow for further pleadings to be filed to clarify the issues at hand. This can include a Reply which responds to new issues raised by a party in a Defence, or a document known as Further and Better Particulars, which provides additional information about a claim or defence.

Often parties will make amendments to the initial pleading documents as a matter progresses, ensuring that all relevant facts and arguments are ultimately presented to the Court.

Discovery phase

Discovery process

Discovery is a crucial stage in commercial litigation where both parties exchange all relevant documents and information, regardless of whether it assists or harms that party’s case. This process aims to ensure that both sides have access to the evidence that will be presented in Court.

• Disclosure of documents: Each party must provide documents relevant to the case, which can include contracts, correspondence, and financial records
• Interrogatories: These are written questions that one party sends to the other to elicit further information.
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Depending on the size of a dispute, discovery can be time-consuming and may lead to disputes over what should be disclosed, requiring Court intervention in some cases. In some instances, a party may seek orders before discovery is provided to limit the scope of the discovery to be provided.

Discovery from a third party

In some instances, a party to litigation might know or suspect that a third party holds documents that might be relevant to a case. The Court can be requested to require the third party to provide relevant documents to the Court for the parties to access. This is known as a subpoena to produce documents or sometimes a summons to produce documents. A third party served with a subpoena is required to produce the required documents to the Court or to lodge any objection to producing those documents within a specified time frame.

Trial preparation

Pre-trial conference

Before the trial begins, the Court is likely to hold a pre-trial conference to discuss the issues, set timelines, and encourage settlement discussions. Depending on the Court, this could be in the form of a mediation before a Registrar or Judge of the Court or a less formal process. This can be an opportunity to resolve some disputes without proceeding to a full trial and the statistics provided by the Courts from time to time suggest a large number of disputes are resolved at this stage.

Trial preparation

If the case does not settle at a pre-trial conference, then it will be set down for a trial. Both parties must prepare their arguments to be advanced at trial to support their case and to answer the other party’s case, gather witnesses to identify what evidence a witness is likely to give at trial, and ensure all evidence is organised so it can be presented at trial in an acceptable form. This stage often involves significant collaboration between lawyers and clients to build a strong case. It will often involve the lawyer instructing a barrister, who is a trial lawyer, to present the case to the Court at the trial.

The trial

Conducting the trial

The trial itself involves presenting evidence and arguments to a Judge. Key aspects of the trial include:

• Opening statements: Each party presents an overview of their case.
• Witness testimony: Witnesses provide evidence to support each party’s position, often subject to cross-examination.
• Tendering exhibits: Each party formally produces to the Court any documents they want the Court to consider and take into account.
• Closing arguments: Each party summarises their case and argues why the Court should rule in their favour.

Judgment

After the trial is concluded, the Judge will deliver a judgment. In some cases the judgment will be handed down immediately after the trial is concluded but in the majority of cases, a Judge will indicate that the decision will be handed down at a later date once the Judge has had the opportunity tp review the evidence and the submissions made by the parties in detail. This decision will outline the findings of the Judge based on the evidence, who may be liable and what remedies are awarded, which may include damages, injunctions, or orders for specific performance.

Post-Trial

Appeals

If one party is dissatisfied with the judgment, they may have the right to appeal to a higher Court. Appeals are generally available where a party can demonstrate that the Judge has made an error in applying the law. The appeal process can be complex, requiring legal expertise to navigate procedural requirements and establish valid grounds for appeal.

In some Appellate Courts, it is necessary to apply to the Appellate Court for leave to appeal. The leave application might be determined before the appeal is filed or it might be determined at the same time that the appeal is heard. If the Appellate Court is satisfied that an appeal should be brought, then leave is granted to appeal. If the Appellate Court is not satisfied that the appeal might be arguable, then leave might be refused.

Conclusion

Commercial litigation is a multifaceted process that requires careful navigation from initial assessment through to trial and potential appeals. Understanding the stages of litigation can help individuals and businesses prepare for what lies ahead, minimising surprises and enabling informed decision-making.

Whether you’re facing a commercial dispute or considering litigation, seeking the right professional legal advice early in the process is crucial. An experienced lawyer can guide you through the complexities of the legal system, ensuring that your rights and interests are effectively represented. By being proactive and informed, you can approach commercial litigation with greater confidence, enabling you to be more informed on the decision making that lies ahead ultimately, working with us as we help safeguarding your interests and assets, looking to achieve a better outcome.