Guides · Australian Business Legal Guide · Chapter 6 of 7
Risk, disputes and getting paid
Last reviewed 14 August 2026
Managing counterparty risk, security over debts, letters of demand, and what litigation actually costs before you start it.
In short
Most commercial disputes in Australia settle. The parties who do best are the ones who documented the arrangement, preserved their evidence, took security where it was available, and moved early rather than after twelve months of goodwill invoices.
Disputes are a cash-flow problem before they are a legal problem. The decisions that determine the outcome are usually made long before anyone speaks to a lawyer — at the point of extending credit, agreeing payment terms, or letting an unsigned variation proceed.
Reducing counterparty risk up front
- Check who you are actually contracting with — an ABN and ACN search tells you whether the entity exists, is registered for GST, and is under external administration.
- Use a credit application that incorporates your terms of trade and, where the risk warrants it, takes a director's guarantee.
- Register a security interest on the PPSR where you supply goods on retention of title, lease equipment, or take a general security agreement. Registration must be timely and correct; a defective registration can leave you unsecured in an insolvency.
- Set payment terms you will actually enforce, with interest and suspension rights, and stop supplying when they are breached.
The escalation ladder
- Commercial follow-up. A documented reminder from the account owner, then from a director.
- Letter of demand. Sets out the contract, the amount, the basis of the claim and a deadline. A well-drafted demand resolves a large share of debts because it signals seriousness without cost.
- Statutory demand (companies only, for undisputed debts above the statutory minimum). Powerful, but misuse where a genuine dispute exists is a costly mistake.
- Negotiation or mediation. Often contractually required before proceedings, and usually cheaper than the alternative.
- Proceedings. The forum depends on quantum and subject matter — small claims tribunals, state courts, or the Federal Court.
Construction has its own faster route: the security of payment regimes in each state allow adjudication of payment claims on short statutory timeframes. See construction debt recovery.
What litigation actually involves
Before commencing, it is worth being blunt about the economics: legal costs, the time your team will spend on discovery and evidence, the delay to judgment, the general rule that costs follow the event but are only ever partially recovered, and — most importantly — whether the defendant can actually pay. A judgment against an empty company is an expensive piece of paper. Our note on what litigation involves sets out the stages.
Envision Legal does not run contested litigation. We advise on position, strategy and settlement, and where proceedings are necessary we work alongside dispute specialists and our debt recovery partners.
Limitation periods
Every claim has a deadline. In most Australian jurisdictions the limitation period for a contract claim is six years from the breach (twelve for a deed), with different periods for other causes of action. Sitting on a claim while a counterparty promises to pay is how good claims quietly expire.
Insurance is part of your legal risk position
Public liability, professional indemnity, product liability, cyber and management liability all interact with what you have agreed contractually. Two habits prevent most of the trouble: check that the liability cap and indemnities you sign are within your policy limits, and notify your insurer of a circumstance early — late notification is a common reason cover is declined.
Where this fits
We review terms of trade, prepare demands, and advise on dispute strategy on fixed fees. If you are chasing money, send us the contract and the invoice history and we will tell you what your position is worth before you spend on it.
Talk to us
Want this applied to your business?
Send us a note about what you're working on. We'll respond within one business day and, if we're a fit, book a free 15-minute consultation with a senior lawyer.
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