Litigation

Shareholder and partnership disputes are among the most damaging conflicts a business can face. When two or more people who built something together reach an impasse — over strategy, profit distribution, management decisions, or alleged breaches of duty — the fallout can be swift and severe. Assets get frozen. Operations stall. Key staff leave. And if the dispute reaches court, the legal costs alone can cripple even a healthy business.

Australia is currently experiencing elevated levels of corporate stress. Rising interest rates, tightening credit, and inflationary pressure have made boardroom tensions more common. Disagreements that might have been managed during growth periods are now escalating into formal disputes. Against this backdrop, mediation offers shareholders and business partners a structured, confidential, and commercially sensible path forward.

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What Triggers Shareholder and Partnership Disputes?

The most common sources of conflict include:

• Deadlock in decision-making — where equal or near-equal shareholders cannot agree on a material direction for the company
• Alleged breaches of directors’ duties — under the Corporations Act 2001 (Cth), directors owe duties of care, good faith, and to act in the best interests of the company
• Unfair prejudice and oppressive conduct — where a minority shareholder argues their interests are being oppressed by the majority
• Profit distribution disputes — disagreements over dividends, drawings, or reinvestment
• Exit and buyout disagreements — when one party wants out but cannot agree on a valuation or mechanism
• Breaches of shareholder or partnership agreements — including restraint of trade, confidentiality, or non-compete provisions
• Valuation disputes — where parties disagree fundamentally on what the business or a shareholding is worth

ASIC provides guidance on directors’ duties and corporate governance at asic.gov.au, and many disputes that reach mediation involve at least one alleged breach of these obligations.

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The Corporations Act 2001: Key Provisions in Dispute

Oppressive Conduct — Part 2F.1

One of the most significant — and frequently invoked — provisions in shareholder disputes is Part 2F.1 of the Corporations Act 2001 (Cth), which deals with conduct that is “oppressive” to, or “unfairly prejudicial” to, or “unfairly discriminatory” against, a member or members of a company.

A minority shareholder who believes the majority is exercising their power in a way that is commercially unfair — including exclusion from management, withholding of dividends without justification, or dilution of their shareholding — may bring an oppression claim. The courts have broad remedies available, including ordering the purchase of shares, appointing a receiver, modifying the company’s constitution, or winding up the company.

But court proceedings under Part 2F.1 are expensive, slow, and disruptive. Mediation offers an opportunity to address the underlying grievance before the relationship deteriorates to the point of formal oppression proceedings.

Directors’ Duties

Directors of Australian companies owe statutory duties under the Corporations Act, including:

• A duty to act in good faith in the best interests of the corporation (s 181)
• A duty to use their powers for a proper purpose (s 181)
• A duty to avoid conflicts of interest (s 182, s 183)
• A duty to act with care and diligence (s 180)

When one director accuses another of breaching these duties — for example, by diverting business opportunities to a related entity, or by failing to disclose a conflict — the dispute is often better resolved through mediation than through costly litigation. Mediation allows both parties to surface concerns, exchange information, and negotiate remedies (such as payment of compensation, restructuring of arrangements, or departure terms) without the reputational damage of a public proceeding.

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Deadlock Clauses in Shareholder Agreements

A well-drafted shareholder agreement will contain provisions for resolving deadlock — situations where two equal shareholders (often 50/50) are unable to agree on a key decision. Common mechanisms include:

• Casting vote provisions — giving one director or shareholder a casting vote on specific categories of decision
• Mediation and arbitration clauses — requiring the parties to engage a mediator or arbitrator before any legal action
• Russian roulette clauses — where one party offers to buy the other out at a specified price, and the other party can either accept or reverse the offer at the same price
• Shotgun clauses — where one party names a price and the other must either buy or sell at that price
• Bring-along and drag-along provisions — to facilitate agreed exits

If your shareholder agreement contains a dispute resolution clause — typically requiring mediation before legal proceedings — you may be contractually obliged to engage that process first. Failing to do so can expose you to adverse cost orders if you commence litigation prematurely.

Even in the absence of a formal agreement, courts across Australia increasingly expect parties to genuine commercial disputes to have attempted mediation before filing proceedings.

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Valuation Disputes in Business Exits

One of the most common practical obstacles to resolving a shareholder or partnership dispute is disagreement over what the business — or a particular shareholding — is actually worth.

Valuation disputes arise in several contexts:

• Buy-sell provisions triggered by retirement, death, or dispute
• Compulsory share acquisition proceedings under the Corporations Act
• Exit negotiations where one party wants to sell and the parties cannot agree on price
• Compensation calculations in oppression or breach of duty claims

Valuations for private companies are notoriously difficult. There is no single correct methodology — different approaches (discounted cash flow, earnings multiples, net asset value) can produce widely divergent results. Expert valuers employed by opposing parties will often produce significantly different figures.

Mediation can be particularly effective in valuation disputes because it allows a conversation about the valuation methodology itself — not just the numbers — and can help parties reach a compromise that avoids the cost and uncertainty of a contested expert process. Some mediators will also facilitate the appointment of a single jointly instructed expert, which substantially reduces cost and removes the adversarial dynamic from the valuation exercise.

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Exit Mechanisms and Buyouts

When one party wants to exit a business and the other does not (or cannot agree on terms), the consequences for both the business and the parties can be severe. Common scenarios include:

• A co-founder who wants to exit after a personal or strategic falling-out
• A shareholder who has become a passive investor and wants liquidity
• A family business where one generation wants to exit and the other wants to continue
• A partner who retires and whose interest needs to be acquired by the continuing partners

In the absence of agreement on exit terms, the exiting party’s options are limited: commence oppression proceedings under the Corporations Act, apply for a winding-up order, or attempt to sell their shares to a third party (which may be restricted by the shareholders agreement).

None of these outcomes is particularly desirable. Winding up a viable business destroys value for everyone. Selling to a third party may be impossible or undesirable. And oppression proceedings are expensive and time-consuming.

Mediation creates a structured environment for the parties to negotiate exit terms — including price, payment arrangements, restraint obligations, and transition support — without the cost and disruption of litigation. Many business exits that begin as adversarial disputes are resolved through mediation on terms that both parties can accept.

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The Legal Framework for Resolving Business Disputes

The Corporations Act 2001 (Cth) governs the conduct of companies and their officers. It does not mandate mediation, but it does provide pathways that courts often expect parties to have genuinely attempted before proceeding to litigation.

Most professionally drafted shareholder agreements and partnership agreements contain multi-tiered dispute resolution clauses. These typically require:

1. Direct negotiation between the parties within a set timeframe
2. Formal mediation with an accredited mediator if negotiation fails
3. Arbitration or litigation only as a last resort

If your agreement contains such a clause, you may be contractually obliged to attempt mediation before commencing legal proceedings. Skipping that step can expose a party to adverse cost orders.

Even where no such clause exists, courts across Australia — including the Federal Court and state Supreme Courts — routinely refer commercial disputes to mediation under their case management powers. Mediation is no longer optional in commercial litigation; in many cases, it is expected.

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Mediation vs Court-Ordered Winding Up

A court-ordered winding up is often the last resort when a business relationship has completely broken down. But it is also one of the most destructive outcomes available: it destroys the business, deprives both parties of the going concern value of the enterprise, and typically leaves both worse off than a negotiated resolution would have.

Courts have consistently shown reluctance to wind up an otherwise solvent and viable business simply because the shareholders cannot agree. Before making a winding-up order in a shareholder dispute context, courts will typically want to be satisfied that all other options — including mediation and buy-out — have been genuinely explored.

Mediation offers a genuine alternative. Even in deeply adversarial situations, a skilled mediator can help parties understand the cost of the alternatives (including the value destruction inherent in winding up) and reach a negotiated outcome — whether that is a structured buyout, a managed exit, or a business sale to a third party on terms both can accept.

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Why Mediation Works for Business Disputes

1. Confidentiality

Unlike court proceedings, mediation is private. What is said in the session cannot be used in subsequent litigation (with limited exceptions). For businesses, this is critical — disputes about finances, operations, or director conduct that become public can damage customer confidence, supplier relationships, and the company’s market position.

2. Speed

Commercial litigation in the Supreme Court or Federal Court can take two to four years from filing to judgment, and often longer. Mediation can typically be scheduled within weeks and resolved within one or two sessions. When a business is deadlocked, time is money.

3. Commercial outcomes

A court can grant specific forms of relief — winding up orders, buy-out orders, injunctions. But a court cannot design a commercial solution that accounts for tax implications, supplier relationships, financing arrangements, or the personal circumstances of the parties. Mediation allows parties to craft outcomes that a judge simply could not impose.

4. Preservation of the business and relationships

Many shareholders have long histories — as friends, family members, or long-term colleagues. Even when the relationship has fractured, mediation provides space to resolve the legal dispute without the adversarial dynamics of litigation, which tend to deepen animosity and make future co-operation impossible.

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What Mediation Looks Like in a Business Context

Business mediation typically involves:

• Pre-mediation preparation — each party prepares a position paper and shares key documents with the mediator
• Opening session — the mediator explains the process and sets ground rules; each party briefly outlines their position
• Private caucuses — the mediator meets separately with each party to explore interests, options, and flexibility
• Joint negotiation — where the parties and mediator work toward a written agreement
• Settlement deed — if resolved, the parties execute a binding document on the day (often reviewed by their lawyers before signing)

You can read more about what to expect in preparing for mediation and how long mediation takes.

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When Is Mediation Not Appropriate?

Mediation requires both parties to engage in good faith. It may not be suitable where:

• There is evidence of fraud, asset dissipation, or serious criminal conduct requiring urgent court intervention
• One party is using mediation purely as a delaying tactic
• There is a severe power imbalance that cannot be managed by the mediator
• Urgent injunctive relief is needed to protect assets

In those cases, legal advice should be sought immediately and interim court orders may be necessary alongside — or before — any mediation attempt.

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The Cost Argument Is Compelling

The difference in cost between mediation and commercial litigation is substantial. Costs of mediation are typically shared between the parties and are generally a fraction of what each side would spend on legal fees in a contested proceeding. When the future of a business is at stake, that distinction matters enormously.

For further context on the financial toll of adversarial dispute resolution, see our piece on the costs of going to court.

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Ready to Resolve Your Shareholder Dispute?

Mediations Australia works with business owners, directors, and shareholders to resolve complex commercial disputes efficiently and confidentially. Our accredited mediators understand the commercial and legal landscape.

Book a consultation to discuss your situation and find out whether mediation is the right next step.

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This article is general information only and does not constitute legal advice. The law applicable to your situation may differ depending on your jurisdiction and individual circumstances. If you are involved in a shareholder or partnership dispute, you should seek independent legal advice from a qualified Australian solicitor.

When a commercial lease dispute erupts between a landlord and tenant, the consequences can be serious. A retailer forced to close. A landlord watching rental income dry up. A business relationship that once worked perfectly now reduced to letters from solicitors and mounting legal bills.

For Australian business owners and property managers, commercial lease disputes are an increasingly common reality. Rising insolvencies — up 57% in the year to November 2024 according to CreditorWatch — have placed enormous pressure on lease obligations across the country. Melbourne’s office vacancy rate hit 19.6% in late 2024, the highest since 1995, while retail and industrial sectors face their own pressures. In this environment, disputes over rent, outgoings, and make-good obligations are inevitable.

The good news: the vast majority of commercial lease disputes can be resolved without setting foot in a courtroom. Mediation is not only faster and cheaper than litigation — in most Australian states, it is legally required before a dispute can proceed to a tribunal or court.

This article explains how commercial lease disputes arise, what the law requires, and why mediation is the most effective path to resolution.

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What Is a Commercial Lease Dispute?

A commercial lease dispute is any disagreement between a landlord and tenant (or subtenant) over the terms, obligations, or performance of a commercial, retail, or industrial lease agreement.

These disputes can arise at any point during the lease term — at inception, during the tenancy, at renewal, or at the end of the lease when make-good obligations come into play.

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The Most Common Causes of Commercial Lease Disputes in Australia

Rent Arrears and Rent Reviews

Unpaid rent is the most common trigger. But disputes also frequently arise over how rent reviews are conducted — particularly market rent reviews, where landlords and tenants may have very different views on what the market rate actually is. Ambiguous review clauses, informal arrangements, and disagreements over the timing and method of review can all lead to conflict.

Under most commercial and retail lease legislation, rent review mechanisms must be clearly specified. Disputes often arise when leases contain generic CPI review clauses but market conditions have diverged significantly from inflation, or where fixed percentage increases have become commercially unworkable. A mediator can help both parties reach a pragmatic rent adjustment without requiring a formal valuation dispute process.

Outgoings and Unexpected Charges

Commercial leases typically pass property-related expenses — rates, insurance, maintenance, management fees — to the tenant as “outgoings.” Disputes arise when outgoings are poorly disclosed upfront, exceed estimates, or include charges the tenant disputes as recoverable (such as capital works or land tax).

Under state-based retail leases legislation, landlords have specific disclosure obligations. Failure to comply can render parts of the lease unenforceable, which is itself a source of dispute.

Make-Good Obligations

At the end of a lease, tenants are typically required to restore the premises to their original condition — removing fit-out, repairing damage, and reinstating the space. The scope of this obligation is frequently disputed, particularly when lease terms are vague or the premises have changed significantly during the tenancy.

Make-good disputes are particularly amenable to mediation. Often, the real issue is not who is legally right but rather reaching a practical and cost-effective agreement about what work needs to be done and who will fund it. Landlords frequently prefer a cash settlement over insisting on costly reinstatement that may simply be demolished before the next fit-out anyway.

Repairs and Maintenance Responsibilities

Who is responsible for a leaking roof, a broken HVAC system, or structural damage? Lease agreements often draw a line between landlord and tenant responsibilities, but that line is frequently contested — especially in older buildings where the distinction between fair wear and tear and actual damage is blurred.

Early Termination and Lease Break Clauses

When a business fails or circumstances change, tenants sometimes need to exit a lease before its expiry. Disputes over whether a break clause applies, what notice is required, and what the financial consequences are can quickly become adversarial.

Lease Renewal and Option Disputes

Tenants who have invested in fit-out and built a customer base at a location have a strong interest in lease renewal. Disputes over whether an option was validly exercised, what terms apply on renewal, and whether the landlord is obliged to grant a new lease are common — and can have significant consequences for both parties.

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What the Law Requires: State-by-State Overview

Australia’s approach to retail and commercial lease disputes is governed by state and territory legislation. In most jurisdictions, mediation is a mandatory step before a dispute can be escalated to a tribunal or court.

New South Wales

The Retail Leases Act 1994 (NSW) requires parties to retail lease disputes to apply to the NSW Small Business Commissioner for mediation before the matter can proceed to the NSW Civil and Administrative Tribunal (NCAT). The cost of mediation is typically shared equally between the parties. The Commissioner’s mediation service is available for disputes involving retail leases, including disputes about rent, outgoings, make-good, and lease renewal. If mediation fails, the Commissioner issues a certificate that must accompany any application to NCAT.

Victoria

The Retail Leases Act 2003 (Vic) requires retail lease disputes to be referred to the Victorian Small Business Commission (VSBC) before proceeding to VCAT. The VSBC offers free preliminary assistance and low-cost mediation — an accessible entry point for businesses of all sizes. The VSBC can also assist with disputes about the disclosure statement or the validity of the lease itself.

Queensland

The Retail Shop Leases Act 1994 (Qld) directs retail lease disputes through the Queensland Small Business Commissioner (QSBC), which provides mediation services. Disputes unresolved at mediation can proceed to QCAT, which can hear retail shop lease disputes up to $750,000 in value.

South Australia

South Australia’s Retail and Commercial Leases Act 1995 (SA) governs both retail and commercial leases in certain circumstances. The Small Business Commissioner SA provides mediation services for tenancy disputes before parties can access SACAT (the South Australian Civil and Administrative Tribunal).

Western Australia

The Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) and the Small Business Commissioner Act 2012 (WA) establish a mediation pathway for retail lease disputes in Western Australia. The Small Business Development Corporation provides free dispute resolution assistance.

Australian Capital Territory and Northern Territory

Similar frameworks operate in the ACT and NT. The Leases (Commercial and Retail) Act 2001 (ACT) requires parties to attempt mediation before proceeding to ACAT. Northern Territory tenancy disputes can be referred to the Tenancy Dispute Resolution Service.

For non-retail commercial leases — office, industrial, or mixed-use — mandatory mediation may not apply, but private mediation through a service like Mediations Australia remains the most practical and cost-effective first step.

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Cost Comparison: Mediation vs Litigation

The financial case for mediation is compelling. Consider the realistic cost comparison for a mid-range commercial lease dispute:

Pathway	Approximate Cost (each party)	Timeframe
Mediation (Small Business Commissioner)	$0–$500	2–8 weeks
Private mediation	$1,500–$4,000	1–4 weeks
Tribunal hearing (NCAT/VCAT/QCAT)	$5,000–$20,000+	3–12 months
Supreme Court litigation	$30,000–$150,000+	1–4 years

These are indicative ranges only. Costs vary significantly depending on the complexity of the dispute, legal representation, and jurisdiction.

Even in a relatively straightforward dispute over unpaid rent of $30,000, the cost of litigating through a Supreme Court could easily exceed the value of the claim. Mediation, in contrast, can produce a binding agreement at a fraction of the cost — often within a few weeks.

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Why Mediation Is the Right Choice for Commercial Lease Disputes

Cost

Commercial litigation is expensive. Legal fees, tribunal filing fees, and the time cost of drawn-out proceedings can quickly eclipse the value of the original dispute. A mediated outcome — even one that involves a rent reduction or a negotiated lease exit — is almost always cheaper than the alternative.

Speed

Tribunal and court proceedings for commercial lease matters can take months or years to resolve. Mediation can be arranged within days or weeks, and many disputes are resolved in a single session. For a business operating under the cloud of an unresolved dispute, speed matters enormously.

Confidentiality

Court proceedings create a public record. Mediation is entirely confidential — what is said in the room stays in the room. For businesses concerned about reputation, client relationships, or competitive sensitivity, this is a significant advantage.

Preservation of the Commercial Relationship

Not every lease dispute ends the tenancy. In many cases, both parties want to continue the relationship — just on terms that work. A mediator facilitates a conversation that courts cannot: one that acknowledges both parties’ legitimate interests and works toward a solution both can live with. The adversarial posturing of litigation makes this kind of resolution almost impossible.

Control Over the Outcome

When a dispute goes to a tribunal or court, the decision is made by someone with no understanding of your business, your circumstances, or your relationship with the other party. Mediation puts decision-making power back in the hands of the people who actually have to live with the outcome.

You can read more about how mediation works and what to expect from the process on our resources page.

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What Happens in a Commercial Lease Mediation Session?

A typical commercial lease mediation follows this structure:

1. Pre-mediation preparation
Both parties are asked to prepare a brief summary of their position and the key issues in dispute. Relevant documents — the lease agreement, correspondence, financial records — are gathered. You can review our guide on preparing for mediation for practical tips.

2. Opening statements
Each party has an opportunity to explain their perspective without interruption. The mediator listens, asks clarifying questions, and begins to map the issues.

3. Joint and private sessions
The mediator may facilitate joint discussion between the parties, or conduct separate private sessions (“shuttle mediation”) where confidential conversations take place with each party. This is particularly useful where the relationship has broken down or emotions are running high. Learn more about shuttle mediation and whether it might suit your situation.

4. Negotiation and agreement
The mediator helps the parties explore options, test proposals, and move toward agreement. When an agreement is reached, it is documented and signed by both parties — creating an enforceable record of the resolution.

5. If mediation is unsuccessful
If the parties cannot reach agreement, the mediator (or the relevant Small Business Commissioner) issues a certificate confirming that mediation has been attempted. This certificate is typically required to proceed to a tribunal or court.

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Common Mistakes in Commercial Lease Disputes

Understanding what not to do is just as important as knowing the process. Here are the most common mistakes parties make when navigating commercial lease disputes:

Escalating too early

Many landlords issue formal breach notices or termination notices before attempting any direct conversation. This immediately entrenches the dispute and often triggers defensive responses from tenants. A phone call or meeting — or an early referral to mediation — can resolve many issues before they harden into formal disputes.

Ignoring disclosure obligations

Landlords who fail to meet their disclosure obligations under the relevant retail leases legislation may find that their ability to enforce certain lease terms is compromised. Before taking action in a dispute, it is important to understand whether your own conduct under the lease has been technically compliant.

Treating the dispute as purely legal

Commercial lease disputes are business disputes. The best outcomes account for the practical and commercial realities facing both parties — the landlord’s need for cash flow and an occupied tenancy, the tenant’s need for a viable operating cost base. Focusing purely on legal rights often produces pyrrhic victories.

Not preparing adequately for mediation

Arriving at mediation without a clear understanding of your own legal position, the documents supporting your case, and your desired outcome wastes the process. Good preparation — including, where appropriate, obtaining legal advice before the session — dramatically improves the prospects of resolution.

Delaying too long

The longer a dispute festers, the more expensive it becomes and the more entrenched the parties’ positions become. Early mediation — even before formal legal action is threatened — is almost always more productive than mediation that occurs only after litigation has been filed.

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What Happens After Mediation Fails?

In the minority of cases where mediation does not produce a resolution, the parties are not left without options. The pathway depends on the jurisdiction and the nature of the lease:

• Retail leases: The mediating body (Small Business Commissioner or equivalent) will issue a certificate of failed mediation, which is required before proceeding to the relevant tribunal.
• Non-retail commercial leases: The parties may pursue their dispute through the relevant state Supreme Court or District Court, depending on the value of the claim. In NSW, the District Court has jurisdiction up to $750,000; above that, the Supreme Court.
• Urgent matters: Where a tenant faces imminent eviction or a landlord faces immediate loss, urgent injunctive relief can be sought from a court even before or during a mediation process.

It is also worth noting that failed mediation does not foreclose the possibility of later settlement. Many commercial lease disputes that do not resolve at mediation are subsequently settled through solicitor-to-solicitor negotiation, often on the eve of a tribunal hearing. The mediation process, even when it does not produce an agreement on the day, typically narrows the issues and brings the parties closer together.

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Tips for Preparing for Commercial Lease Mediation

• Gather your documents early. Bring the full lease agreement, all correspondence, financial records relevant to the dispute, and any notices or demands issued.
• Know your bottom line. Before you enter mediation, be clear on what outcome you need and what you are prepared to accept.
• Focus on interests, not positions. The most productive mediations happen when parties explain what they actually need, not just what they are demanding. A landlord may need cash flow certainty; a tenant may need reduced outgoings in the short term. Understanding each other’s underlying interests opens up solutions that pure positional bargaining cannot.
• Be prepared to compromise. Mediation is not a win-lose process. Both parties will likely move from their opening positions. That is not weakness — it is pragmatism.
• Consider whether legal advice is appropriate. While you do not need a lawyer in mediation, it can be helpful to obtain independent legal advice before the session to understand your rights and obligations under the lease and the relevant legislation.

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Key Takeaways

• Commercial lease disputes are increasingly common in Australia, driven by economic pressure, rising insolvencies, and complex lease obligations
• The most frequent causes are rent arrears, outgoings disputes, make-good obligations, and repair responsibilities
• In most Australian states, mediation is legally required before a retail lease dispute can proceed to a tribunal or court
• The cost of mediation is a fraction of litigation — even in relatively modest disputes
• Mediation is faster, cheaper, confidential, and more likely to preserve the commercial relationship than litigation
• Both landlords and tenants benefit from early engagement with mediation rather than allowing disputes to escalate

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Resolve Your Commercial Lease Dispute Without Going to Court

Whether you are a landlord dealing with a tenant in arrears, a tenant disputing excessive outgoings, or either party facing a make-good claim at the end of a lease, mediation offers a faster, cheaper, and less damaging path to resolution.

At Mediations Australia, our accredited mediators have extensive experience with commercial lease disputes across all Australian states and territories. We can arrange mediation quickly and help both parties reach a durable, enforceable agreement.

Book a consultation with Mediations Australia →

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This article is for general information purposes only and does not constitute legal advice. For personalised guidance regarding your specific situation, please consult a qualified legal professional or accredited mediator.