Victorian small businesses have reduced costs significantly by using mediation and alternative dispute resolution and avoiding lengthy and expensive litigation, the inaugural report of Victoria’s Small Business Commissioner has revealed. Between 1 May 2003 and 30 June 2004, the Office of the Small Business Commissioner (OSBC) handled retail tenancy and business disputes valued at almost $30 million and successfully resolved nearly 70 per cent of them, according to the report, which was tabled in state Parliament earlier this month.

Victoria is the first state to appoint a Small Business Commissioner and the results not only suggest the initiative has been successful but also confirm the benefits of using mediation, where possible, and avoiding protracted court and tribunal proceedings. This is a significant benefit for small and even medium-sized businesses for whom a long, drawn out court case can prove crippling in terms of time and costs — particularly if the business is pitted against a large corporation with access to considerably more resources.

“The impact on the Victorian economy of the freeing up of disputed funds is not insignificant,” the report said. “The experience of the OSBC in its first year suggests an expected growth in demand for the Small Business Commissioner’s services and scope for a commensurate increase in impact on the economy.”

By 30 June 2004, disputes were typically being resolved in seven weeks (from application to mediation) — “significantly faster”, according to the report, than through the Victorian Civil and Administrative Tribunal process. In addition, 150 per cent more retail tenancy disputes were resolved than would have been the case without OSBC involvement, it said.

Established under Victoria’s Small Business Commissioner Act 2003, the OSBC’s functions include encouraging the fair treatment of small businesses in their commercial dealings with other business in the marketplace. Dispute minimisation and mediation between parties is a key part of this role. In particular, the Commissioner has substantial responsibilities under the Victorian Retail Leases Act 2003 to resolve, by mediation or alternative dispute resolution, disagreements between landlords and tenants in an informal and low-cost way.

Parties to a dispute over a retail lease covered under the Act cannot begin proceedings before the Victorian Civil and Administrative Tribunal until the dispute has been referred to the OSBC and the Commissioner subsequently certifies either that mediation or other alternative dispute resolution has not been possible, or that it has been attempted but failed.

“The focus of the mediation and alternative dispute resolution activities of the Small Business Commissioner is on pragmatic commercial settlements,” the current Commissioner, Mark Brennan, said in the report. “These must be consistent with the law, but allow all parties concerned to re-establish fractured landlord/tenant or business relationships or to move on without the debilitating effects of a lingering commercial dispute.”

“The low cost, informal nature of the process established by the OSBC is appreciated by most parties, and significant retail tenancy or commercial disputes not amenable to mediation can still proceed through court or tribunal processes.”

Amendments to the Victorian Civil and Administrative Tribunal Act 1998 allow the Commissioner to intervene at any stage in proceedings before the Tribunal concerning a retail tenancy dispute or proceedings under s8A of Victoria’s Fair Trading Act 1999. If the Commissioner intervenes, he becomes a party to the proceedings and has all the rights of a party, including rights of appeal.

The OSBC’s first 14 months of operations doubtless will have pleased the Bracks Government, and the Minister for Small Business, Marsha Thomson, is reported as saying the report “reveals results beyond all expectations”.

Between 1 May 2003 and 30 June 2004, 527 disputes were referred to the Commissioner, including complaints regarding unfair market practices under the Small Business Commissioner Act. By the end of June, 420 had gone through the OSBC dispute resolution process. Of these 420 disputes, 111 (26.4 per cent) were successfully settled prior to mediation; 179 (42.6 per cent) were settled at mediation; in 71 cases (16.9 per cent) mediation was unsuccessful; and 59 disputes (14 per cent) were not mediated and were unsuccessful. Sixty-nine per cent of referred cases were thus successfully resolved, either through pre-mediation activities or at OSBC-organised mediation.

Thomson said the success of the Victorian initiative is reflected in the ACT Government’s plans to introduce legislation to establish a small business commissioner position of its own, Melbourne’s Herald Sun reported.