Peter Veldhuizen | Managing Director | Gillan & Veldhuizen Inc | mail me |
There is a moment in most disputes when emotion overtakes economics. Pride digs in. Letters become sharper. Threats of court proceedings follow. Yet, by the time a matter reaches trial, the real question often lingers in the background: was the game worth the candle?
For business owners and Small and Medium Enterprises (SMEs), disputes are not abstract legal battles. They affect cash flow, management, time, staff morale and reputation. How you choose to resolve a dispute can either drain the business or protect it. You need to move on. You can’t afford lengthy delays and exorbitant legal costs.
In business, robust, immediate justice often beats a theoretical victory years later. Resolving business disputes, therefore, requires a practical assessment of the available options. Below is a practical look at the four primary routes to resolve disputes, and when and why each makes sense.
Mediation – start here
Mediation is a structured, voluntary process in which a neutral third party helps the parties reach their own solution. It is confidential and becomes binding when the parties enter into a written settlement agreement. It is also usually far quicker and more cost-effective than going to court.
Typical scenarios:
- Shareholder or partnership deadlocks.
- Supplier or service-level disputes.
- Family business fallouts.
- Customer complaints that have escalated beyond repair.
Consider a business where two shareholders are deadlocked or complain of unfairly oppressive conduct. Instead of issuing court papers and fighting for years, mediation can narrow the dispute to the real issue.
For example, the parties could determine how to value and split the business or agree on a buy-out mechanism. I often remind clients that mediation is not about capitulation. You don’t have to settle everything. Sometimes what you settle is simply the way forward.
This thinking aligns with David Hoffman’s The Art of Impasse Breaking: A Handbook for Mediation, which emphasises that impasse is not failure. Instead, it is information. Hoffman writes that the mediator’s task is to help parties “move from positions to interests” and design processes that allow progress. This remains possible even when agreement on the substance seems out of reach. In business terms, if you cannot agree on price, agree on the method to determine price.
For businesses, mediation preserves relationships and management bandwidth. It keeps the dispute out of the public domain. It also allows the kind of commercial creativity that a court simply cannot offer.
Adjudication – quick, focused determination
Adjudication is often overlooked in mainstream commercial disputes. Yet, it can be one of the most practical tools available to business owners. It involves appointing a respected, independent third party to make a binding, or sometimes temporarily binding, decision on a clearly defined issue.
Typical scenarios:
- Disputes about professional fees, for example, trustee or executor remuneration.
- Contractual penalties or forfeited deposits.
- Valuation disagreements in shareholder exits.
- Interpretation of a specific clause in a commercial agreement.
- Deadlocks over earn-outs or performance-based payments in a sale of business.
Take a sale agreement where a purchaser cancels, and the seller retains the deposit as pre-estimated damages. The purchaser claims it is an unenforceable penalty. The seller says it is commercially justified. More so, the facts are not in dispute. The agreement, payment and cancellation are common causes. The real issue is whether the amount is proportionate under the Conventional Penalties Act.
Instead of issuing summons and waiting years for a court date while costs mount and cash remains tied up, the parties could appoint senior counsel or a suitable nominee. That person could then decide the narrow question: should the deposit stand, be reduced or be refunded?
The facts are the facts. If there’s no real dispute of fact, why not appoint someone you both respect, get a decision, and move on?
Adjudication is controlled, contained and issue-specific. It avoids the sprawl of litigation. For a business that needs certainty, especially where contingent liabilities affect its books, speed matters. As a result, adjudication can play an important role in resolving business disputes without exposing companies to the time and cost of prolonged litigation.
Arbitration – private court, with control
Arbitration is often described as a private court. The parties appoint an arbitrator, define the procedure and obtain a binding award.
Typical scenarios:
- Complex commercial disputes.
- Cross-border contracts.
- High-value shareholder litigation.
- Matters requiring specialist expertise.
The advantages include speed, usually confidentiality and the ability to choose a decision-maker with commercial experience. The downside involves potential costs. The parties pay the arbitrator, the venue and the administrative infrastructure.
Arbitration is not a panacea. It’s still a formal process. You’re just paying the judge. However, its real strength lies in control. Parties can limit arbitration to a single issue, such as liability only, and leave quantum, or damages, to negotiation. In insurance disputes, this approach is common. An insurer may accept negligence but arbitrate only the amount payable. The parties can tailor the scope.
For businesses dealing with technical or industry-specific matters, arbitration can offer expertise that a generalist court may not provide.
Litigation – the last resort
Litigation has its place. Some disputes require judicial authority. Some opponents refuse to engage. Some matters involve public law, fraud or precedent-setting issues.
Typical scenarios:
- Enforcement against a wayward debtor.
- Urgent interdicts.
- Matters involving constitutional or statutory interpretation.
- Opponents acting in bad faith.
However, litigation is slow. It is public. It is also expensive. Even a relatively straightforward commercial matter can take years to finalise. Appeals can extend the timeline further. There is also a psychological trap. There’s a sunk-cost fallacy. You just keep going. Pride and anger drive the process long after the economics have ceased to make sense.
In many smaller consumer or contractual disputes, such as a defective vehicle or a telecoms contract gone wrong, “the game is not worth the candle”. The legal costs will exceed the value at stake.
Designing the process, not just fighting the case
The real shift for business owners is this: dispute resolution is not two-fold. It is not “court or nothing”.
You can:
- Mediate to identify and narrow issues.
- Adjudicate on a discrete question.
- Arbitrate liability but negotiate damages.
- Use litigation only where necessary.
Hoffman’s work on impasse emphasises that parties can design layered processes. They can resolve what they can, defer what they must and prevent stalemate from becoming paralysis. For businesses, this approach protects liquidity, management focus and reputation.
Resolving business disputes effectively, therefore, starts with choosing the right process rather than automatically choosing the most adversarial one.
Before instructing attorneys to “go all in”, ask yourself:
- What is the real issue?
- What does success look like commercially?
- How long can the business carry this?
- Is there a faster, controlled way to get a decision?
In conclusion
You are never going to get everything you want, not in mediation, not in arbitration and not in court. The question is how quickly and cost-effectively you can reach an outcome that allows you to move forward.
In business, forward motion is often the real victory. When disputes arise, the smartest strategy is not always to fight harder. Instead, it is to choose the forum, or battlefield, that makes the most commercial sense. That is ultimately the foundation of resolving business disputes in a way that protects the business while achieving a commercially sensible outcome.