Chapter 2
Key issues and committee view
2.1
The submissions received by the inquiry overwhelmingly supported the
establishment of the ASBFE Ombudsman position, and its proposed role of
supporting small business though advocacy and assistance.
2.2
Submitters did, nonetheless, raise some issues of concern and proposals
for strengthening the ASBFE Ombudsman bill. This chapter discusses the main
issues drawn to the committee's attention, and concludes with the committee's
views on these issues and on the bills.
The title of ombudsman
2.3
Six submissions received by the committee expressed concern about the
use of the title 'ombudsman' for this position.[1]
2.4
The Commonwealth Ombudsman argued that the ASBFE Ombudsman 'would not
meet the set of criteria widely considered necessary in order to be described
as an Ombudsman', and such a title was therefore misleading.[2]
The Australian and New Zealand Ombudsman Association (ANZOA) provided the
committee with a policy statement endorsed by its members entitled 'Essential
criteria for describing a body as an ombudsman', in support of its argument
that the ASBFE Ombudsman did not fit within the accepted definition of an
ombudsman.[3]
2.5
Both the Commonwealth Ombudsman and ANZOA cited in particular the
explicit advocacy role to be played by the ASBFE Ombudsman, and that dispute
resolution was not the core function of the position, as key reasons why '[t]he
office as proposed is not an Ombudsman and should not, in our view, be called
one'.[4]
The Commonwealth Ombudsman said that:
It is generally understood that the fundamental role of an
Ombudsman is to receive and independently investigate complaints made by
citizens or consumers, and a body that is largely concerned with advocacy for a
particular group therefore cannot fall within the accepted definition of an
Ombudsman. An independent and impartial Ombudsman cannot be an advocate for a
complainant, Government, or a particular group or class of people.
While it is noted that the Explanatory Memorandum explains
that the advocacy role of the ASBFE Ombudsman will be functionally separate
from the ASBFE Ombudsman's other activities, this is insufficient to cure the
partiality that is inherent in adopting an advocacy role.[5]
2.6
A related concern for these submitters was perceived limitations on the
independence of the position: drawing attention to the minister's powers to
direct the ASBFE Ombudsman in relation to various aspects of the performance of
its functions, and the Ombudsman's reliance upon the department for staffing
and resources, the Commonwealth Ombudsman and ANZOA argued that the ASBFE
Ombudsman lacked the independence necessary for a true ombudsman.[6]
2.7
ANZOA saw two key risks in using the title of ombudsman for the ASBFE
Ombudsman: that it may erode community trust in (other) ombudsmen and their complaint
handling function, and that it may confuse people or organisations who dealt
with the ASBFE Ombudsman about its role, because it did not conform to the
usual practices of an ombudsman.[7]
The Commonwealth Ombudsman believed that the proposed name had the potential to
damage the ombudsman 'brand' in Australia, saying that 'public respect for the
independence, integrity and impartiality of Ombudsman offices is at risk if
bodies that do not conform to the accepted model are inappropriately described
as an Ombudsman'.[8]
2.8
The Small Business Commissioner of Western Australia agreed, saying:
I am concerned that the use of the term 'Ombudsman' may be
problematic for small business operators, particularly those with a
preconceived notion of what a 'traditional' Ombudsman does.
This confusion may result in small business owners missing
out on obtaining the assistance available from the Ombudsman, resulting in an
underutilization of the Ombudsman's services by its intended target market.[9]
2.9
Restaurant & Catering Australia advised that the title of
'ombudsman' did not have positive connotations in the hospitality industry, and
'hospitality organisations are more likely to avoid this organisation
altogether with "Ombudsman" in the title'.[10]
2.10
Submitters proposed that the nomenclature of 'Small Business
Commissioner' should be retained, with additional reference to family
enterprises if required, or otherwise suggested alternative names for the ASBFE
Ombudsman, such as Australian Small Business and Family Enterprise Advocate, or
Agent-General of Small Business and Family Enterprise.[11]
2.11
The government emphasised that the statutory appointment of the ASBFE
Ombudsman by the Governor-General was a clear indication of the independence of
the position, in contrast to the ASBC who was employed directly by the
government under contract.[12]
2.12
The Explanatory Memorandum stated that:
The Government considers that the 'Ombudsman' title reflects
the expanded functions and powers of the position and emphasises the
independence of the role. Recognising the need for an Ombudsman to be
impartial, the Office of the Ombudsman will be structured to that there is a
clear separation between its dispute resolution and advocacy functions.[13]
2.13
In a letter to the committee, Minister Billson observed that:
No two ombudsmen are identical, and as for the use of the
title 'Ombudsman', it was chosen because the new Ombudsman will differ
considerably from the current Commissioner – in terms of having expanded
functions and powers.[14]
2.14
The minister acknowledged that 'an Ombudsman who advocates a position
regarding a particular issue would not be perceived as impartial in dealing
with disputes relating to that issue'. The minister explained that it was for
this reason that neither the ASBFE Ombudsman nor the ombudsman's staff would
conduct any dispute resolution process, but would instead refer disputes to an
outsourced alternative dispute resolution service.[15]
Cooperation not duplication: interaction with other bodies
2.15
Submitters to the inquiry were concerned to ensure that the
establishment of the ASBFE Ombudsman would enhance rather than duplicate the
support to small business currently provided by other agencies, particularly the
state small business commissioners.
2.16
The South Australian Small Business Commissioner (SASBC), while broadly
supportive of the establishment of the ASBFE Ombudsman, expressed concern that
'there remains the potential for overlap and confusion between the functions of
the Ombudsman and the State-based Small Business Commissioners'.[16]
The SASBC believed that the actions listed in the bill in relation to which a
person may request assistance from the ASBFE Ombudsman overlapped significantly
with matters within the SASBC's purview, creating the potential for confusion
among small businesses about which body to approach, and also for 'forum
shopping'.[17]
2.17
The Small Business Development Corporation of Western Australia (SBDC)
believed there was 'a need for further clarification in relation to areas of
clear State responsibility, especially regarding retail lease enquiries and
disputes'.[18]
2.18
The NSW Small Business Commissioner expressed the view that the bill was
unclear about how referrals between the ASBFE Ombudsman and the state
commissioners would work in practice, and would be confusing for small
businesses or their representatives, who may have difficulty ascertaining
whether to approach the ASBFE Ombudsman or a state commissioner.[19]
2.19
SASBC was also concerned about the discretion conferred on the ASBFE
Ombudsman to refer matters to other agencies where the Ombudsman 'reasonably
believed' that the matter could be 'more conveniently or effectively' dealt
with by another agency, and suggested that the discretion and the 'more
conveniently or effectively' test should be removed, such that the ASBFE
Ombudsman would be required to refer matters whenever another agency had legal
power to deal with them.[20]
The NSW Small Business Commissioner agreed that the 'more conveniently or
effectively' test was 'a vague phrase which creates unnecessary ambiguity' and
should be removed.[21]
2.20
SBDC emphasised 'the importance of collaborative working relationships
and effective information sharing mechanisms' between the ASBFE Ombudsman and
state agencies.[22]
SBDC, SASBC and the NSW Small Business Commissioner all agreed that Memoranda
of Understanding (MoU) should be concluded between the ASBFE Ombudsman and the
state commissioners to ensure clarity of roles.[23]
Restaurant & Catering Australia also recommended that the ASBFE Ombudsman
negotiate MoU with industry associations to provide for cooperation on relevant
matters, including referrals where appropriate.[24]
2.21
The Commonwealth Ombudsman noted the importance of dealing with
potential overlap and avoiding duplication between the ASBFE Ombudsman and its
own role, saying that it looked forward to close cooperation with the ASBFE
Ombudsman in that regard.[25]
2.22
The Treasury submitted that:
By working co-operatively with the Commonwealth Ombudsman,
the state small business commissioners, other state and territory officials and
peak industry bodies, the new Ombudsman will ensure that small businesses and
family enterprises have their matters dealt with, conveniently and effectively,
by the most appropriate agency. The new Ombudsman will therefore, as per the
2013 election commitment, refer people to, for example, state-based options,
or, if the circumstances permit, the Ombudsman's own outsourced dispute
resolution service to help resolve disputes involving Commonwealth agencies...
The Ombudsman, by working co-operatively with existing
Commonwealth, state and territory agencies, will avoid duplicating the services
of other agencies, and instead complement the services they provide.[26]
2.23
In relation to potential confusion about the respective roles of the
ASBFE Ombudsman and other agencies, the government advised that such a risk
would be mitigated through a targeted communication and engagement strategy,
particularly in the first year of the Ombudsman's operation, to educate small
businesses and the broader community about the role and powers of the new
office.[27]
2.24
The Treasury also noted that the ASBFE Ombudsman would not have the
authority to re-open decisions taken by other agencies, and confirmed the
government's intention to conclude arrangements such as MoU with existing
agencies to facilitate cooperation and referrals.[28]
Dispute resolution
2.25
Independent Contractors Australia (ICA) emphasised the importance of the
ASBFE Ombudsman's proposed mediation function, given the power imbalance in
disputes between small businesses and large businesses or government agencies.
For this reason, ICA sought strengthening of the mediation provisions for the ASBFE
Ombudsman, including empowering the ASBFE Ombudsman to compel parties'
participation in mediation; making alternative dispute resolution (ADR)
compulsory for Commonwealth agencies; making attempted resolution through ADR a
prerequisite to any court action by the parties; and providing for the
Ombudsman to report to a court on the outcome of ADR undertaken.[29]
2.26
Restaurant & Catering Australia (R&CA) expressed disappointment
with what it described as the 'minimal and limited' dispute resolution services
to be provided by the ASBFE Ombudsman, expressing the view that the position's
'diminished dispute resolution capacity reduces the avenues with which small
business can access advice should state-based commissioners be unable to
provide tailored and technical support on business-to-business disputes'.[30]
2.27
While open to the outsourcing model, ICA was concerned that using
private ADR providers may make mediation very expensive, in comparison with the
subsidised low-cost services provided directly by state small business
commissioners. ICA said it 'would want to see some guarantees around ensuring
low-cost mediation where mediation is recommended'.[31]
The NSW Small Business Commissioner expressed a similar concern, and also noted
the need for the ASBFE Ombudsman to monitor the quality and cost-effectiveness
of the ADR services provided.[32]
2.28
The Treasury expressed the view that the outsourcing of dispute
resolution services 'will give everyone confidence in the integrity of the
process'. The Treasury also noted that seeking the Ombudsman's assistance would
not curtail stakeholders' rights to take matters to court.[33]
Estimates in the Explanatory Memorandum indicated that mediation of disputes
referred by the ASBFE Ombudsman would cost around $8500 to each party in
out-of-pocket and staff expenses,[34]
compared to average costs of approximately $118,000 per applicant for the
resolution of matters through the Federal Court.[35]
Definition of 'agency'
2.29
The Financial Ombudsman Service (FOS), an independent dispute resolution
scheme operating within the financial sector on a contractual (rather than
legislative) basis, raised concern that the definition of 'agency' in the bill
may not adequately provide for the ASBFE Ombudsman to transfer disputes to FOS.[36]
FOS acknowledged that the bill allowed the minister to designate agencies for this
purpose via legislative instrument. However, FOS sought further amendments to
various provisions of the ASBFE Ombudsman bill to create a separate category of
'agency', and explicitly recognise bodies established under contract rather
than legislation.
2.30
The Australian Bankers' Association endorsed the concerns of FOS, and recommended
that clause 72 of the bill should require (not just empower) the ASBFE
Ombudsman to publish a list of ADR providers to whom disputes may be referred,
and that such a list must include any dispute resolution schemes approved under
financial services legislation, including FOS.[37]
2.31
The Explanatory Memorandum advised that:
The Bill is intended to cover a wide range of agencies, to
ensure that the functions of the Ombudsman are not duplicating the functions
[of] other Commonwealth, state or territory officials. The term 'agency' is
very broad and includes a department of state or a local government body. It
also includes any other agency, authority or body (whether incorporated or not)
established for a public purpose by or under a law of the Commonwealth, a state
or a territory. Additionally, any entity (whether incorporated or not) may be
prescribed as an agency for the purposes of the Bill.[38]
"Naming and shaming"
2.32
Submitters were divided in their views on the ASBFE Ombudsman's proposed
power to "name and shame" parties who refused to participate in, or
withdrew from, ADR processes referred under the bill. The NSW Small Business
Commissioner believed that these powers may compromise parties' willingness to
deal with the ASBFE Ombudsman, and should be removed.[39]
Other submitters such as ICA supported this power, and argued that the ASBFE
Ombudsman should have even greater power to compel participation by parties in
ADR.[40]
2.33
Minister Billson advised the committee that the Victorian Small Business
Commissioner was granted a similar power in 2014, 'and feedback indicates that
the mere existence of such a power is effective in encouraging parties to
participate' in ADR processes.[41]
Definition of 'small business'
2.34
Some submitters queried the definition of small business adopted in the
bills, as a business with fewer than 100 employees or annual revenue under $5
million, noting that this was different to definitions adopted in other
legislation. The NSW Small Business Commissioner believed that the definition
was too prescriptive and overly complicated.[42]
The Australian Automotive Dealer Association (AADA) was concerned that the
definition would exclude many of its members, and proposed that the concept of
'relative size' should be used to allow the ASBFE Ombudsman to assist in cases
of a 'significant imbalance of economic or market power' between parties.[43]
2.35
The Australian Bankers' Association, on the other hand, submitted that
the definition of small business was too broad, and would capture enterprises
significantly larger than those generally considered to be small businesses.[44]
2.36
The Explanatory Memorandum stated that the government had chosen an
'inclusive' definition over other common definitions which it considered would
be too restrictive and would unduly limit the scope of the ASBFE Ombudsman's
role.[45]
It cited a recent report of the Productivity Commission which 'warned against
governments imposing a single definition of small business', recommending
instead that policy makers and regulators define small business in 'ways that
are practical and appropriate for their regulatory area'. The government argued
that the definition adopted in the bills would 'provide the Ombudsman with a
clear remit, and provide clarity to the public on the extent of the Ombudsman's
role'. The Explanatory Memorandum further noted that family enterprise was a
particularly difficult entity to define, and that family enterprises could also
be large or medium-sized. The definition of small business in the bill would
therefore include an appropriate subset of family enterprises. [46]
Committee view
2.37
The committee welcomes the creation of the Australian Small Business and
Family Enterprise Ombudsman. As The Treasury advised, the ASBFE Ombudsman 'will
build on the role of the [Australian] Small Business Commissioner, but also
extend it'.[47]
While submitters offered various proposals with a view to improving the
legislation, all were supportive of strengthening the government's support for
small businesses and family enterprises by creating a role with more powers, to
fill gaps in the current system of largely state-based resources, and to
enhance advocacy and assistance at the Commonwealth level.
2.38
The committee has considered the concerns raised by submitters, including
those relating to the use of the title of 'ombudsman'. The committee notes the
government's position that the statutory appointment of the ASBFE Ombudsman,
and the clear separation between its advocacy role and its (outsourced) dispute
resolution function, provide for appropriate independence and impartiality.
2.39
The committee is not convinced that the title of 'ombudsman' is
inappropriate for this position, but notes concerns that it may confuse or
deter potential clients. The committee suggests that this should be monitored
during the early operation of the office.
2.40
In relation to the other issues and suggestions raised by submitters,
the committee believes that these should not delay implementation of this
important new initiative, but are matters that may also be taken under
consideration as the ASBFE Ombudsman commences work and the success of the
mechanism is tested.
2.41
To that end the committee notes that the legislation requires the ASBFE
Ombudsman's assistance role to be regularly reviewed, with the first review to
take place within two years of its commencement. The committee is of the view
that the minister should not take a narrow approach when commissioning such a
review, particularly the first one, but allow wide scope for consideration of
all issues relevant to how well the legislation, and the ASBFE Ombudsman
position, is working.
2.42
The committee recommends that, should the bills enter into law, the
first review of the legislation include examination of the following issues:
-
whether the nomenclature of the position has caused any confusion
for prospective clients or the broader community, or made small businesses or
family enterprises reluctant to use the service;
-
whether the provisions relating to cooperation with and referrals
to other agencies have been effective in allowing the ASBFE Ombudsman to work
appropriately with all relevant bodies, or whether these have created any
procedural or legal difficulties for the ASBFE Ombudsman or for other agencies;
and
-
the extent to which the alternative dispute resolution services
referred by the ASBFE Ombudsman have provided a successful and cost-effective means
for small businesses and family enterprises to resolve relevant disputes.
2.43
In conclusion, bearing in mind the potential value of the position to
small businesses and family enterprises and to the broader economy; the support
it has drawn from stakeholders during a lengthy consultation process; and the
opportunity to further review and strengthen the legislation in future, if
needed; the committee is of the view that establishment of the ASBFE Ombudsman
should proceed.
Recommendation 1
2.44
The committee recommends that the bills be passed.
Senator the
Hon Ian Macdonald
Chair
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