Calls for legal aid for small businesses as dispute resolution enters the spotlight

Royal Commission

Small business ombudsman Kate Carnell. Source: Supplied.

Small Business Ombudsman Kate Carnell says Australia should consider giving small operators access to legal aid or other forms of financial support to fight legal disputes with bigger players, with the small business community marking access to justice as a top priority for 2018.

Carnell has previously signalled to SmartCompany her office will continue to focus on the difficulties small businesses face when entering legal disputes, and speaking to Fairfax last week, she said her office is examining the possibility of opening up legal aid to businesses as part of its research into small business disputes in Australia.

While Australian individuals can access legal aid in Australia, this is not available to businesses. Carnell says the challenge for small businesses is that larger operators with “deep pockets” have more resources to pour into cases that take a long time.

Another suggestion floated for investigation is the possibility of a “no-cost” jurisdiction, which would allow smaller operators to take cases to dispute resolution with the assurance they would not have costs awarded against them even if they were unsuccessful.

In 2017, the federal government committed to establishing a “one-stop shop” for dispute resolution through the formation of the Australian Financial Complaints Authority to improve resolution between consumers or small businesses and the finance sector.

Council of Small Business Australia chief executive Peter Strong tells SmartCompany he believes momentum is building to get small businesses a better deal when it comes to fighting businesses of all sizes, reflecting that often SMEs struggle when they face disputes with other companies of a similar size.

“It’s also a problem when you have small versus small,” he says.

Strong supports investigating whether small businesses should have access to legal aid or other support. He says it’s just as important for legal experts to inform businesses when they shouldn’t pursue another party in a dispute.

Some small businesses pursue issues they probably shouldn’t, he says, because they haven’t had access to the right advice.

“That’s a common problem. Or worse still, a good solicitor will say, ‘you’ll probably win this, but you might not and it’s going to cost you $40,000’,” Strong says. 

Given the ombudsman’s office, federal government and small business commissioners have all been focused on low-cost dispute resolution over the past year, Strong is optimistic for change.

We’ve got a few parties in my opinion that seem to understand the problem. Now we have to come up with a proper solution.” 

The Australian Small Business and Family Enterprise Ombudsman’s office told SmartCompany in December it intends to launch a small business survey focusing on dispute resolution in early 2018.

Never miss a story: sign up to SmartCompany’s free daily newsletter and find our best stories on TwitterFacebookLinkedIn and Instagram.


Notify of
Newest Most Voted
Inline Feedbacks
View all comments
Michael Kaff
4 years ago

Great idea. Small Businesses often struggle with funds, time and legal knowledge. A small business owner has to be a “Jack of all trades” but can’t know everything at all times. The more low or nil cost legal support they can receive the better they can protect their rights and investment (business).

4 years ago

Great idea but far far better option would be for the ACCC & ASIC to get off their arses and prosecute ALL instances of breaches of laws under their jurisdiction.

4 years ago

Before everyone starts jumping on any External Dispute Resolution (“EDR”) scheme bandwagon, there may well be unintended consequences for small businesses, depending on how it’s set up and who it covers. Under the EDR, for example, you could find your customers have the ability to take their disputes with you to it rather than it being used solely for small business complaints with larger business entities. There could also be a fee to cover running costs and it may be everyone will need to contribute so it won’t necessarily be free.

There is already a relatively low cost avenue of settling most small business disputes and that’s the Small Claims Court or equivalent (such as NSWCAT, QCAT or VCAT) and that has greater standing legally than any EDR scheme. In some states, it’s also possible for businesses to get some free legal advice through University-run Law Clinics .e.g. Bond Law Clinic at Bond University.

The finance industry is still reeling from complaints and demands, mostly fuelled by consumer advocates, seeking the return of money lent and interest, fees and charges paid. Some consumers and small businesses have had genuine complaints but there have been a significant number of consumer complaints were the complaint has been ‘manufactured’ after the event. Whilst one of the EDR provider’s does have regard to case law, the other one doesn’t and as a result, we’ve seen that one in particular dispense social justice. The lender will be found liable, no matter whether they followed the law or not, and so many lenders now simply capitulate to consumer requests rather than fight for what’s right because the cost of defending them is often greater and more time-consuming than it’s worth to the business. We have yet to see whether the monopolistic AFCA, set up despite a Senate recommendation for a proper Tribunal, will be any different. The value of contract law for credit Is fast becoming worthless because so little now goes before a Court for a proper decision and only those with deep pockets can afford it. This is why Kate Carnell should push for a proper Tribunal with a capital “T” rather than one with a small “t”.

So, be careful what you wish for – what you end up getting might not be what you’d thought you were going to get.