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A ridiculous situation has many caught short looking for justice

Every small business deserves the right to be able to rely upon the safeguards, legal protections and business “bumper rails” that support fair conduct and competition in our economy.

Every business should be assured of the opportunity to compete on merit not just economic muscle and be able to defend their economic interest when these rules of the road are infringed upon and their business is harmed.

If a small business dispute arises under state law, they can in most cases go to a small claims tribunal for a simple, quick and cost-effective way of seeking justice.

But if it is a federal matter, the constitution decrees it must be decided by a court. And that is the Federal Court of Australia.

It will require a small business to have at least $200,000 ready to spend on their own case. And you can wait two years to get an outcome.


If that’s not frightening enough, one other thing that can be truly terrifying for a small business is the “cost order gorilla” – a COG in the federal machine of justice that a litigant has to be able to meet before the case is heard. Put simply, if you lose, you pay for the other party’s costs.

It’s not unfamiliar for a small business to be introduced to the legal team of a big business they’re up against. “As a courtesy,” the other side might say, “I thought I’d introduce you to these King’s Counsels so you can know their names as you’ll get to pay for them.”

No wonder most cases never make it to court. A small business has not the cash, the legal horsepower, or the ability to wait years for the chance of a timely restorative outcome that will put things right so they can get back to business.

How does this system encourage and empower a small business to defend their own economic interest? This is a massive power imbalance that prevents a small business getting access to justice.

The Australian Small Business and Family Enterprise Ombudsman can be called upon to try and resolve the underlying dispute through case management and mediation but that doesn’t remedy unlawful conduct and harm it has caused.

Plainly, this is a ridiculous situation. It is neither an affordable or timely solution and they may go out of business waiting.

It leaves a small business with just one option: to hope and pray a regulator, like the ACCC or ASIC, picks up the baton and decides that their case is worth spending its scarce taxpayer-funded resources on.

Understandably, these regulators go for the big-impact cases that have a meaningful economy-wide effect, represent a systemic failure with many examples of similar wrong-doing, a show-trial value to warn others against breaching the law or have a major public profile.

And here’s the next problem.

We have competition law protections around misuse of market power, unconscionable conduct, false and misleading representations, unfair contract terms, and those sorts of things.

There are consumer-like protections for small businesses and numerous codes where there are inherent power imbalances, and even proposals for more anti-competitive safeguards and bumper rails, such as unfair business practice protections to give small business a chance to compete and win customers on merit, not muscle.

These promise so much – but too often there’s woefully little follow through to enforce them and make sure there’s actually consequences.

Unfortunately, a small business could be deeply aggrieved, their personal and team members livelihoods ruined, their lifesavings gone because the law is being infringed upon by a blatant breach of a code or law that’s supposed to protect them.

Yet that is not enough to get action because it doesn’t get through the enforcement gates of the regulator. For the devastated small business owner who thought the law was there to support them, the safeguards may as well not exist and the regulators are just not there for them.

So, the law looks like it’s a hunting dog that won’t leave the porch because it won’t get up and bark and pursue the wrong-doing and a remedy for the harmed small businesses, even though they’ve been infringed upon.

The solution, without running afoul of chapter III of the constitution, is to have an agile, cost-effective court arrangement that can mimic the virtue of those small claims tribunals in a state jurisdiction.

The answer, in my view, is to introduce a Federal Small Business and Codes List into the business agenda of the Federal Circuit and Family Court of Australia.

This would provide small businesses with a pathway that’s right-sized, affordable and timely, and empower the individual to defend their own economic interest without a two-year delay, eye-watering expense and the cost-order threat from the other party. It is a simple change to give them a chance to restore whatever harm’s being caused and get harmed small businesses back to business.

It would be low-cost and without cost-orders, except where a judge determines the matter is vexatious or frivolous. We suggest capping disputes at $1 million for awards and penalties, and proceedings could be delivered via online hearings, significantly reducing the time and cost burden on a small business.

It would require compulsory alternative dispute resolution before you even get to the court gate.

The Federal Small Business and Codes List would deal with matters that are day-to-day commerce. They’re not huge numbers in proportion to the overall economy, but, if you pay $600,000 as a deposit on a franchise and decide, under the law, to exercise your cooling-off right and you can’t get your money back, that 600 grand is a very big deal to the parties involved.

It is important to include codes because there is an inherent power imbalance in franchise, in horticulture and in the food and grocery sectors.

This jurisdiction could also facilitate enforcement by regulators, as well as free up the ACCC and higher courts to deal with litigation focused on the big systemic and significant market issues.

The regulators could more readily bring lower-value matters that are still essential for demonstrating that the law matters and to establish the legal meaning and operation of concepts in the law that haven’t been tested.

Clear Court decisions would enable regulators to be more sure-footed in providing guidance on what the law means and how it is to be fairly applied by business.

Time and time again we see matters in the federal jurisdiction where there is no prospect of a satisfactory remedy for a small business because of the cost in turning up, and the time waiting for a decision.

Let’s make better use of the bumper rails designed to support fair and reasonable commerce and competition in our economy to deliver access to justice that is right-sized, accessible, timely, affordable and so desperately needed.

By Bruce Billson, Ombudsman.


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