How much does it cost to litigate a small business dispute?

Imagine you are the owner of a small architecture practice. You have a client that has outstanding invoices of $60,000 and they have been unpaid for some time.  Initially, the client kept promising that payment would be made “next week”.  After numerous follow ups by you, the client has started avoiding your calls and not responding to your emails. It looks like litigation is your only option.  But what does that actually look like?

Do I need a lawyer?

Generally, the legal system is not well-designed for self-represented parties.  There are plenty of technical requirements which can be missed by a non-lawyer.  Technical errors can result in additional costs down the path. It is also important to consider what the impact will be of spending your time on litigation preparation rather than revenue-earning client work.

Of course, it may be tempting to outsource your drafting to ChatGPT rather than a lawyer. In order to test the effectiveness of this, I requested ChatGPT to draft a statement of claim covering this situation. As a former lecturer for the College of Law, I can honestly say, that if ChatGPT’s attempt had been submitted to me for review, it would have been sent back for substantial rewrites. I would not recommend it.

How much will it cost to start legal proceedings?

There are several components to consider here. Firstly, you will need to engage a lawyer who will do an initial review of the situation to confirm if you have a case with “reasonable prospects of success”. At an average rate for a principal solicitor of $450 to $600 an hour, your preliminary advice is likely to cost somewhere between $450 and $1,200.

Assuming your solicitor determines that you have a good claim, they will then need to draft the relevant court documents to commence a claim. The court’s scale of costs provides a fee of $1,249 for this process. However, the court scale is a little like the Medicare schedule of fees and your solicitor may charge more than this.

Once the claim is drafted, it needs to be filed with the court at a cost of $1,633.90 and served on the defendant. A process server will charge between $99 and $165 to serve the documents.

So, the overall cost of initiating the proceedings will be a minimum of $3,431 and possibly more than $6,000 depending on your choice of solicitor.

What happens after I start the proceedings?

Once your client has been served with the statement of claim, they have 21 days to file a defence.  If they don’t do this, you can apply for default judgment which will give you a court order that they pay the money to you.  You will have to pay the court $1,089.30 to make the application, and your lawyer will most likely charge around $500 to $1,000.

If you are successful, you will either be lucky enough that the client hands over the money, including interest from the time you issued the claim or you will need to spend more legal fees on enforcing the judgment.

If the defendant does file a defence, you will need to pay your lawyer to review the defence and potentially prepare a reply to the defence. This will involve an hour or two of work and will typically cost around $250 to $600.

The parties may then enter a process called discovery, where the parties exchange documents that are relevant to the dispute. The lawyers on either side may also request “further and better particulars” which is basically further information about the claim. The cost of all this will largely depend on the complexity of the dispute and the behaviour of the lawyers. Some lawyers may choose to take a practical approach and focus on the points that will have the most practical difference to the outcome. Other lawyers may take up every legal point (at your cost and the cost of the defendant), even where it has little practical impact.

You may also find that the client makes a counterclaim, arguing that your work was defective or caused them damage of some sort.  In that case, you will need to incur further costs responding to this counterclaim – even if the counterclaim is poor and is just being used as a negotiation technique.

When does the court get involved?

After the defence is filed, it is likely that there will be a “mentions hearing" at the court. This hearing deals with procedural compliance and aims to ensure that the parties are ready for future steps. The scale fee for a mentions hearing is $218 but it is likely that your solicitor will charge you $300 to $600.

It is likely that at the first mentions hearing, the court will order the parties to attend a mediation. This may be half a day or a full day where a mediator will assist the parties to negotiate an outcome. The court has a list of mediators who will cap their fees at $1,540 for a half-day and $2,200 for a full-day.  Private mediators may cost more than that.

As a mediator who mediates many matters in the Magistrates’ Court, my experience tells me that parties have generally spent a minimum of $10,000 before getting to mediation and often significantly more than that. Not all of these costs will be recoverable if the matter proceeds to trial.

So, is litigation worth it?

By the time you reach mediation through the court process, you’ve likely spent upwards of $10,000 — and that’s without any guarantee that you will win your case. If the mediation doesn’t achieve a settlement, you’re looking at further costs for preparing evidence, attending hearings, and potentially going to trial. And even if you win, enforcement can be another costly and time-consuming hurdle.

I’m yet to find a lawyer who will guarantee 100% you will win your case. This means that there is always a chance that you will lose and be responsible for paying money to the defendant for their legal costs.  If you win, you still need to get the money from the other side, which can cost more money if they resist.

Beyond the financial cost, litigation takes a toll on your time, energy, and focus. It can strain relationships, distract from your core business, and create ongoing stress.

Why mediate early?

Mediation offers a chance to resolve disputes faster, more affordably, and with greater control over the outcome. It allows both parties to be heard, explore creative solutions, and preserve relationships where possible. Importantly, it can be done before legal proceedings are commenced — saving thousands in legal fees and months of uncertainty.

While you will need to compromise your claim to get an outcome in mediation, you get the benefit of certainty. Even the winner in a legal claim never gets back 100% of what they are entitled because of the out of pocket legal costs. Factoring in the risk of losing, whether minimal or not, gives even more scope for resolving the dispute.

As a mediator, I’ve seen firsthand how early intervention can turn a potential legal battle into a practical resolution. When parties come to the table with a willingness to talk, even complex disputes can be resolved without stepping foot in a courtroom.

Final thought

Before you head down the litigation path, ask yourself: Is there a better way to resolve this? Mediation might not guarantee a perfect outcome, but it often delivers a better one — faster, cheaper, and with far less stress.

If you are not sure how to get the side to agree to an early mediation, reach out to me for a confidential chat.

About the Author

Nicole Davidson is a leading mediator focussing on commercial disputes. She can be contacted at nicole@nicoledavidsonnegotiation.com.au or + 61 403 523 700.