A radical plan to shake up the Federal Circuit Court by adding a specialist small business jurisdiction would rectify an “outdated” system that has bankrupted families and favoured deep-pocketed big companies over Australia’s 800,000 small businesses, the ombudsman says.
Australian Small Business and Family Enterprise Ombudsman Kate Carnell says a new small business jurisdiction, which is widely backed by the legal profession, would dramatically reduce the number of small businesses who “go bankrupt due to excessive legal fees”.
As part of a bid to overhaul arbitration processes across the country, the new jurisdiction would cap damages at $5m and matters would be aimed to be resolved within 60 days. And in a major victory for small business owners, they would also be able to take legal action against bigger rivals without the threat of a costs order being made against them.
Ms Carnell, who has used the devastation wrought by COVID-19 to launch a fresh lobbying effort in Canberra, said the current system was“prohibitively expensive and time consuming”.
“We know small businesses are more likely to abandon both the dispute and the commercial relationship than suffer the cost and mental load of taking legal action,” Ms Carnell said.
“Trying to resolve a dispute through the courts is just not a viable option for most small businesses. There also needs to be a cost effective, timely and binding judicial process for those small businesses that need it.”
The ugly feud between General Motors and Holden Dealers is chief among the reasons given by aggrieved small business owners for why the Federal Circuit Court should be expanded.
In a statement, a spokesman for the Department of Industry said the Morrison government would consider Ms Carnell’s report.
“Conferral of jurisdiction to the courts is an important and complex matter and therefore requires detailed consideration,” he said.
Pauline Wright, the president of the Law Council of Australia, said the influential legal body would back the addition of a small business jurisdiction to the Federal Circuit Court.