Commercial litigation can be a risky and costly proposition for Ontario small business owners, particularly when caught up in a legal dispute with a partner on whom the smooth functioning of your joint business enterprise depends.   It is all the more crucial, therefore, to find a client-focused lawyer who is equipped to offer you creative solutions for mediating and settling your small business partner disputes.

One of the most common reasons for a breakdown in partnerships is due to lack of trust arising from one or both parties taking strong positions that are more in their individual respective interests than in their common interests in, and duties to, the partnership.  

When a legal dispute erupts between partners, it’s important to take immediate measures to avoid litigation, primarily by positioning for a reasonable settlement.  Lawyer mediation can be a cost-effective means to break an otherwise stubborn impasse between disputing partners.  

As a small business owner, you may be particularly vulnerable to the tolling of costs.  Time may be of the essence.  Debts may need to be resolved, while revenues have to be maintained in order to meet monthly operating expenses.   The last thing you need at this delicate stage is to hire an expensive lawyer to add fuel to an already complicated adversarial relationship with your business partner.   

Consider instead hiring a lawyer to repair your broken business relationship, either with the goal of planning a mutually profitable parting of the ways, or to restructure your partnership around a newly amended – and more clarifying – partnership or shareholder agreement.   

In pursuit of such goals, it’s important to find legal counsel who is a good fit – who is able to communicate well with you, to understand the complexities of your business situation, and who stands ready to assist in getting past the psychological blocks and misunderstandings that are in many cases the cause of the breakdown in the business partnership.   

You ideally want to find a lawyer who is both client-focused and equipped to craft creative, reasonable settlement positions that are designed to extricate you from current conflicts and to avoid future business disputes. 

In this context, you want to employ a lawyer as your agent to reset the terms of a currently toxic partner relationship, to repair the broken trust between the parties, by presenting your lawyer as your good faith representative who stands ready to listen to and address the reasonable concerns put forward by your partner, while working to gain the trust of your partner to address your reasonable concerns.   

What if your partner remains unreasonable, sticking to positions that are guided solely by their self-interest?  One important trait of a mediation-minded lawyer is to remind both parties that, in the event their dispute cannot be amicably settled, any resolution by the courts (or by way of arbitration) will most likely be determined by the evidence of their conduct with one another, in line with the applicable legal principles pertinent to their fact situation.  

As a principle of civil and commercial litigation, the courts generally rule in favour of the party taking the most reasonable position.  “Reasonableness”, in this context, is generally determined by an evaluation of similar fact case law that may assist the court in making a credibility assessment on each party’s evidence, examining the provisions of a shareholder/partnership agreement, while looking to each party’s reasonable expectations and conduct on the agreement.  

Most crucially, with respect to business partners, the court will often look at the extent to which a party has acted in conformity with the fiduciary duties they owe both to each other and to the business they share.  Put simply, the court may look at the extent to which each party appears to be acting more in their own selfish interest rather than in their common interest – an assessment that can come with devastating cost consequences to the party deemed to be acting unreasonably selfish.  

If you are concerned about your legal dispute with your partner eating up your limited time and financial resources, you may want to find a settlement-minded lawyer who is well equipped to assist you in avoiding costly and destructive litigation.  That may require not only excellent communication and listening skills, but also the ability to signal to the opposing party that you are prepared to offer a reasonable settlement position that is in line with similar fact case law, and not just structured around what you subjectively regard as the most profitable solution to you.   

To get to the end goal of resolving your dispute in a mutually amicable manner, you need to be open to your lawyer telling you what you need to hear, not necessarily what you want to hear.  That means that you should stand ready to listen to your lawyer when they inform you that your position may not be reasonable.  

In my own legal practice, I use case law research as a means to get past my own biases and uncertainties.  I have found that similar fact case law research can assist a client with crafting an informed settlement position – ideally, one that is neither unjustifiably generous nor unreasonably stringent.  

As an aid for settlement, similar fact case law research may also be employed as a trust-building exercise to put your cards on the table, as you signal to your partner that you are now equipped with a case law precedent map by which to re-evaluate the reasonableness of your own position and to recalibrate accordingly.   

In turn, you want to invite your partner to be similarly mindful, to attempt to objectively engage with the relevant case law principles in play so that together you can craft a mutually agreeable resolution of your dispute.  

Though there is no guarantee that your partner will retrench to a more reasonable position, you should be aware that a reasonable settlement position on your end may act as a kind of “insurance” toward protecting you on legal costs in the event your dispute inevitably carries through to a trial.   

In Ontario, though legal costs are generally awarded in favour of the winning party, the courts look to the presence of settlement offers in determining the extent of legal costs to be recouped by a party.  If your settlement offer is as good as or better than the litigation result achieved by the other party, then you may be able to recoup a substantial portion of your legal costs, or at least a partial indemnity on the higher end of the scale.   

In the end, a settlement-minded lawyer may simultaneously be employed by you to assist in avoiding litigation while – if such cannot be avoided – positioning you to mitigate against the cost consequences that might accompany an unreasonable position at court.  

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The preceding should not be relied on as legal advice.  It is offered as general information only, on an as is basis.

James Cooper, a Toronto area lawyer, provides flexible limited scope retainer arrangements and affordable legal help for self-represented litigants and for sophisticated small business owners concerned with managing their legal fees. He offers a creative, client-focused approach to negotiating reasonable settlement positions that are guided by similar fact case law precedent, to increase the chances of a successful partnership dispute mediation.

Mr. Cooper also provides quality professional legal research assistance and civil litigation support services to lawyers, law firms, and members of the public throughout the Greater Toronto Area (including Markham, Mississauga, Thornhill, Oshawa, Etobicoke, and Richmond Hill) and throughout the Province of Ontario.

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