Do you remember what you were doing in 2006?

This morning one of the matters in the Registrar's list in the Supreme Court of NSW was a case which was started in 2006. The young solicitor who appeared knew very little about the dispute except that it involved a partnership and that it is not yet ready for a final hearing.

Can you imagine having to live through a court case with your business partner that drags on for 11 years with no end in sight?

It has stuck with me because earlier this week I helped some business owners resolve a difficult dispute which had been hanging over their business for just over two years. I could clearly see that both sides of the dispute were very relieved to put an end to the expense, the uncertainty, the bad blood and get back to the work they all loved doing.

I don't know the reasons for the delay in resolving the partnership dispute I saw this morning but I can make a few educated guesses about some likely root causes.

Ambiguity about the legal position

I have seen this occur in a partnership dispute when:

• there is no written partnership agreement and the parties are fighting about one of the many issues not covered by the Partnership Act (which dates from 1892);
• there is a partnership agreement but it is ambiguous or does not deal with the issue; or
• the business owners wrote their own agreement (perhaps a misguided attempt to save money) and they are arguing about what it means.

Different perception of whether a grievance is legitimate

Sometimes each partner's perception of the events which lead to a dispute are so different that it is an unbridgeable chasm. For instance, if one of the partners:

• takes a valuable partnership asset for reasons which they consider completely justify their actions;
• is perceived by the others to not be pulling their weight in the business; or
• behaves in a way that the other partners find morally or ethically unacceptable.

A similar chasm can arise if one partner has legal right but uses it so unfairly that the other side believes they are entitled to ask the court for help. Depending on the circumstances the court may be able to vary unfair contractual obligations or prevent a business partner dealing with partnership assets.

Where there is fierce dispute about what happened, and the legal consequences, it can be hard to resolve the dispute because neither side can be certain which way the particular judge who decides the dispute will go.

Irreconcilable personal differences

Just like a vicious divorce, sometimes hatred and desire for revenge outweigh commercial reality. Once mutual trust and respect has gone some people would prefer to pay lawyers than agree on anything with their former partner.

Engaging in litigation when you can not agree with the other side on any issue will take much longer and be very expensive.

How to avoid protracted partnership disputes

No one starts a court case thinking it will take over 11 years. Most court cases don't take anything like that long and most court cases are resolved by agreement before they get to a final hearing.

If you are in business with someone else and want to make sure you do not get stuck in a nightmare of protracted litigation, I suggest you:

• have a written agreement and review it regularly as the business changes;
• use an lawyer who is experienced with disputes between business owners and who gives you realistic and practical advice about your prospects;
• make a genuine attempt to resolve the dispute - sometimes an early resolution on slightly worse terms than you hoped for is a better financial decision than prolonging litigation; and
• if your lawyer is dragging their feet preparing your case, be proactive. Speak to them about it and if you still are not satisfied, get an opinion from another lawyer.

I help business owners resolve disputes in a way that minimizes the disruption and expense those disputes can cause. I share posts regularly and tweet @BreakupBusiness. If you wish to keep up to date with issues affecting setting up, and breaking up, businesses follow me or Harris Freidman. If you'd like to talk to someone confidentially about your particular situation, give me a call on +61 2 9023 9114 or email at [email protected].