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.

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