Missing out on a tender process

The situation: The applicant had a cleaning contract with the respondent to clean a number of suburban buildings. After a number of years, the arrangement is terminated in accordance with the contract.

The respondent puts the cleaning job out for tender, which results in the appointment of a new cleaning firm.

The applicant had not been approached to re-tender for the contract and is upset about this. The respondent acknowledges that the applicant has been inadvertently left out of the list of businesses it approached to tender.

However, it is too late to do anything about it as a new contract has been signed with another firm.

The VSBC: The applicant contacts the VSBC to understand their rights and obligations in regards to the dispute.

The resolution: The VSBC negotiates with all parties to arrive at a satisfactory resolution. In this case, the applicant is engaged by the new contractor as an employee, with the agreement of all parties.

Dealing with a dispute through preliminary assistance

The situation: A small business (the applicant) complains to the VSBC about a commercial dispute with an oil company. The business is concerned that it had been paying too high a price for services, compared to some competitors who had been receiving a discounted rate.

The process: The VSBC contacts the oil company (the respondent), who refers the matter to its solicitors. The oil company’s solicitors provide a formal response, which indicates that their client had sought to resolve the matter, however, the applicant had refused to compromise its claim. Accordingly, the response from the solicitors indicates that their client refuses to attend VSBC mediation.

The resolution: Notwithstanding this response, the applicant advises the VSBC that the respondent has continued to seek to resolve the dispute by direct negotiation.

This process resolves the dispute between the parties. The applicant is appreciative of the preliminary assistance provided by the VSBC, without which the applicant considers the matter would not have resolved.

Fixing a problem with the supply of farm equipment 

The situation: A farmer had purchased a new tractor, but discovered after delivery that poor assembly had led to a number of apparent defects, including nuts and bolts being lost, hydraulic oil leaking, the keys not fitting the doors (preventing the tractor from being locked) and cracked mirrors.

The farmer contacted the supplier about the issues, and was assured that these matters would be addressed, but nothing happened for two months.

When the farmer engaged the tractor in 4WD for the first time and after only 19 hours’ use, oil leaked from a broken transfer box. He ordered a replacement transfer box, which took two months to be delivered.

Following receipt and installation, the same problem occurred when the tractor was put into 4WD, suggesting a fault elsewhere in the tractor. The supplier subsequently refused to discuss the matter with the farmer.

The VSBC: The farmer lodged an application with the VSBC, seeking a $30,000 refund or a replacement tractor. When contacted by the VSBC, the supplier agrees to attend mediation.

The resolution: Mediation is successful and the supplier agrees to take back the tractor at its expense. It also agrees to supply a new tractor with warranties, paper work and assurances of follow-up service if necessary.

Assisting in a franchise dispute

The situation: A franchisee entered into a contract with a franchisor for a business. The franchisee alleges that she has relied on representations made by the franchisor about the earning capacity of a franchise store, the cost of goods sold and fit-out commitments.

Those expectations have not been realised, and the franchisee is seeking substantial damages, including a return of the franchise purchase price and trading losses.

The process: The franchisee lodges a dispute application against the franchisor with the VSBC under the Small Business Commissioner Act 2003. Both parties agree to attend mediation, and both bring legal representation on the day.

The resolution:

The mediation is successful. Key terms of settlement include:

  • waiving the monthly franchise fee and monthly marketing fee for specified periods;
  • progressive repayment of outstanding rent by the franchisee to the franchisor until arrears are cleared;
  • the franchisor (as head tenant) agreeing to endeavour to negotiate further rent relief from the head lessor;
  • the franchisor, at its cost, undertaking or completing designated fit-out works;
  • the franchisor assisting the franchisee to sell the franchised business at fair market value for a specified period of time in a number of specific ways.
Addressing the supply of problem equipment

The situation: A sporting services business operator has paid more than $100,000 for a ball management system. The system has not worked properly for more than 12 months, despite efforts by the supplier to fix the problems over an extended period.

The operator eventually installs an alternative system provided by another supplier, and seeks recompense from the original supplier.

The VSBC: The operator approaches the VSBC to seek assistance through mediation. A dispute resolution officer is able to convince the supplier to attend mediation to attempt to address the long-running problem.

The resolution: Settlement is reached at mediation with the original supplier agreeing to pay a substantial sum to the operator.

Addressing wholesale supply issues

The situation: The applicant is a business that provides a range of complete products to the building and home renovation sector. These products utilise components from another business.

The applicant claims that the supplier has over-charged and double-charged for orders, has not met size specifications, and has then charged again when the supply of the components has been corrected .

Despite assurances that these matters would be addressed, the latest invoice from the supplier makes no adjustments to the outstanding amount.

The supplier addresses some issues by credit note, but rejects other claims of over-charging, double-charging and incorrect provision of components. The supplier maintains that the current outstanding amount is around $15,000 and is threatening legal action if the account isn’t paid.

The VSBC: The parties agree to mediate, and both provide large amounts of documents to the VSBC to justify their positions. A succinct summary by the applicant of its claim and the supplier's responses both assist in the mediation process.

The resolution: The parties settle their dispute at mediation with the applicant paying the supplier $10,000 in full and final settlement of all matters in dispute.

Assisting businesses of all sizes

The situation: The applicant, a major facilities management company, was supplied with two fans for its large premises as per a quote detailing the cost and capacity of the fans.

The fans were custom-built by a manufacturer, and distributed by a supplier. Upon delivery it was discovered the wrong fans had been provided, but the supplier, a small to medium-sized Victorian business, refused to accept the return of the fans.

It was later discovered that the quoted technical specification for the fans was incorrect and the fans were too heavy for the roof of the premises to withstand. The supplier nonetheless is seeking payment of an invoice of $14,000.

The VSBC: Usually, the VSBC receives commercial complaints from smaller businesses. However, in this case, the applicant was a much larger business than the supplier. There is no legislative constraint on the VSBC to accept complaints by the size of a company -- instead the prospect of a mediated outcome that avoids litigation for both companies is consistent with the objectives of the VSBC.

In this case the applicant and the supplier (the respondent) both agree to mediation.

The resolution: The customised nature of the fans means that the supplier cannot accept their return. The mediator proposes contacting the manufacturer of the fans. Although the manufacturer is not a party to the mediation, the parties agree to this proposal. The mediator speaks with the manufacturer by telephone, explains the situation and seeks assistance (without any suggestion of liability) from the manufacturer in helping to resolve the dispute.

The manufacturer is unwilling to provide a full refund for the fans as they have been custom-built, but is willing to take the fans back to extract parts that could be re-used (the fans are still in their original packaging). The manufacturer offers to provide a credit note to the supplier of $4000, and this is confirmed by email.

With the outstanding matter in dispute now $10,000, the mediator notes that both the applicant and the supplier had contributed in some way to the dispute arising, and the parties agree to split the difference. The applicant agrees to pay $5000 to the supplier, and transport the fans at its own cost to the supplier’s premises.

Resolving a trade breach

The situation: The applicant bought an importing business from the respondent's company. The contract of sale provided that the respondent was not allowed to trade in a similar business in Australia for a period of four years.

The respondent continued to work in the import business as a contractor for three-and-a-half years, initially in a full time capacity and then part time.

The applicant became aware that the respondent, while contracting part time, had travelled overseas to promote the applicant’s products to prospective customers, but that he was also discussing the production of similar products with prospective suppliers.

Furthermore, a current supplier advised the applicant that the respondent had ordered three 40-foot containers of products from that supplier for the respondent’s own business.

The VSBC: The applicant sought compensation of $60,000 in loss of sales and breach of contract. The matter is referred to the VSBC for dispute resolution. The respondent agrees to mediation

The resolution: With the mediator’s help, the parties reach a settlement whereby the respondent agrees to pay the applicant $25,000 to put an end to the dispute.

Mediating a shareholder dispute

The situation: There was a major falling out between one of the shareholders of a private company (the shareholder) and the other shareholders (the remainder).

To complicate matters, the shareholders were made up of companies, as well as individuals, and shareholdings were not uniform. After the company was established, a shareholders’ agreement was prepared, but it was never executed.

The shareholder had worked at the company as an employee after it began trading, but the company had terminated his employment due to alleged breaches of a number of the company’s policies.

The shareholder, who was one of the initial directors of the company but had since resigned this position, was the sole guarantor in the retail lease entered into by the company.

The VSBC: The shareholder and the remainder were in dispute around a number of issues including: shareholdings and share entitlements; employee entitlements and conduct; valuation of the business; the sole guarantor role of the shareholder; alleged loans; and allegations of defamatory comments and threatening behaviour.

Solicitors for both the shareholder and the remainder requested mediation through the VSBC to resolve these issues without litigation. The mediation is attended by all shareholders or their authorised nominees, and both sides have solicitors present.

The resolution: The mediator assists the parties to reach a settlement, which results in the shareholder agreeing to sell his shares to the remainder in equal amounts, for a specified sum, within 30 days.

The company agrees to approach the landlord of the retail premises to remove the shareholder as guarantor, replacing him with either: a substantial additional security deposit provided by the remainder; joint and several guarantees by the remainder; or indemnities by the remainder to the shareholder if the landlord will not amend the lease guarantee.

All employment and loan related matters are agreed to be settled with no further action by any party.

Finally, each party withdraws allegations of impropriety, and all parties agree not to make disparaging comments in any form about the other party or the business. The shareholder agrees he would not make any representations that he was associated with the company.

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