Unfortunately, disputes arise in business all the time.  They are generally dealt with by dialogue and negotiation between the parties to commence with, followed by the engagement of lawyers if the matter cannot be resolved. Once lawyers are involved, the next step can be going to Court.

Whilst the commencement of proceedings can initially cause parties to become entrenched and prepare for battle, generally speaking, few cases proceed to trial because alternative dispute resolution processes such as mediation and conciliation (which the Courts embrace and indeed compel), provide the framework for parties to come together to try and achieve a mutually acceptable settlement. 

More often than not, once businesses cross swords in Court, whatever business relationship they had usually disintegrates, or the rivalry and competitiveness between them can become so intense that sometimes bad business decisions are made.

It is against this backdrop that you are asked to imagine what happens when a dispute arises in a family business.  Not only do you have the standard recipe for a commercial dispute, you also have family members and the intricate web of family relationships to contend with.  Let’s refer to that as “the F factor”.

Airing dirty “business” laundry in Court is one thing, but airing dirty “family” (business) laundry in Court is another.  The repercussions of the latter generally far exceed what anyone could reasonably expect.

The “F” factor brings into play:

1. Feelings;
2. Family members’ expectations of their entitlements;
3. Allegiances between family members;
4. Questions of trust and perceived breaches thereof;
5. The “what about the children?” wildcard;
6. The “what about the parents and grandparents?” wildcard;
7. “Family money”;
8. Denial of the existence of the dispute (or turning a blind eye); and
9. At times, complacency or indifference because it is believed that the problem will fix itself.

In commercial disputes, in order to achieve a negotiated settlement (either prior to the engagement of lawyers or as part of the Court process), there needs to be full and frank discussion between the parties so as to find a middle ground.

The reality facing family businesses is that, to a large extent, they can be hindered in their attempts to negotiate a settlement because full and frank discussion does not and sometimes cannot take place.  Put another way, it is unlikely that the family members charged with the task of trying to negotiating a way out of the dispute are going to be up front and personal (leaving nothing to the imagination) when talking to other family members.  To do so may very well aggravate the situation, entrench the other party even more and, at worst, result in the break up of the family.

Having said that, the issue of proceedings in the context of a family business dispute is more likely than not to do more harm than good.

It is therefore a choice between two evils:

1. Try to talk it through (whilst at the same time treading a fine line); or
2. Issue proceedings if discussions do not produce results.

We recommend a third option, namely obtaining assistance from a trained faciitator or mediator to assist in discussions to be held directly between family members.  The process needs to be shrouded in confidentiality therefore no one is exposed.  Indeed, in our experience this is generally the best way to promote and facilitate full and frank discussion. This way, the parties can “get things off their chest” using the mediator or facilitator as their sounding board.

Elizabeth Guerra-Stolfa is a trained mediator and conciliator who specialises in mediating family disputes (both as the mediator and as the legal representative for a party) and in family business generally.

For more information, please contact Elizabeth Guerra-Stolfa on +613 9608 2144 or email e.guerra@cornwalls.com.au