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The Shadow Minister for Small Business in New South Wales, the Honourable Adam Searle MLC, has this week highlighted the flaw when installing Small Business Commissioners but then giving them no real power to act.
Electorates must determine whether such flaws are the deliberate result of empty election promises. The New South Wales government made a halfway move when Small Business Minister Yasmin King was appointed in July last year.
But with the government leaving the gate open for so long the Opposition’s Small Business Minister Adam Searle has this week taken the opportunity of tabling a comprehensive Small Business Commissioner and Small Business Protection Bill 2012. The draft document for the Bill has been uploaded to the bottom of this article. The Bill is thorough with only one concern.
I have consulted with small business operators across a range of industries about the challenges they face and how a Small Business Commissioner could help them in practical ways. The result of those discussions is this Bill, which is now released for further and more formal consultation with small business operators, representative organisations, and other interested persons.
When questioned regarding good faith obligations the Shadow Minister responded saying good faith is catered to within ‘the ability to create legally enforceable Codes of Practice. These can be enforced either by way of penalty for breach or by the Small Business Commissioner seeking injunctions in court.’
New South Wales Courts have long dabbled with a broad incursion into the application of ‘good faith’.
Is there a contractual duty of good faith?
At least in New South Wales, the question must be answered “yes”. It has been settled by the decision to which I have referred, and by other decisions such as Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (1993) 31 NSWLR 91, in which Mason P said at 93 that, despite his lack of enthusiasm for the principle, he was bound by what had been decided in Renard. As the later cases to which I will refer show, there has been no retreat from that position.
Certainly, since the decision in Burger King v Hungry Jack’s Pty Ltd  NSWCA 187, it has been clear – at least in New South Wales – that a duty of good faith in the performance of obligations, and the exercise of rights, may be imposed by implication on the parties to a contract. In New South Wales, the remaining issue is as to the limits of the doctrine. Robert McDougal
For the Small Business Commissioner and Small Business Protection Bill to be truly effective in meeting it's intent in small business dealings with bigger business, there will be a need to introduce an explicit duty of ‘good faith’ on all parties to a contract so as to remove the uncertainty of implied good faith obligations and a small business dispute history suggesting bigger business default wins in bad faith interpretations.
Yet certainty, whilst very important, is not an overwhelming or dominating consideration in human existence. The certainty of a beating by a brutal father is as unwanted as the certainty of clear strict rules that overly favour banker over customer, shipowner over charterer, franchisor over franchisee, or domestic over foreign merchant. James Allsop
Explicit good faith obligations is the critical deterrent where its mere existence becomes the key to minimizing complaints and therefore minimizing the need to waste government and small business resourses in bad faith small business dealings.
Meanwhile over at the federal Labor government the search has begun for someone prepared to take on the role of federal Small Business Commissioner, but without the supporting legislation needed to achieve much at all.
Perhaps Australian governments need to look toward Canada;
“duty of good faith [that] exists at common law in the context of a franchisor/franchisee relationship. The standard of good faith permits a party to act self-interestedly, but qualifies this by positively requiring that party, in his decisions and actions, to have regard to the legitimate interests of the other … it must give consideration to the other’s interests, as well as its own, before exercising its power. This requires dealing honestly and reasonably with the other. Whether or not a party under a duty of good faith has breached that duty will depend on all the circumstances of the case, including whether the party, subject to the duty, conducted itself fairly throughout the process … courts of this Province repeatedly have characterized Franchise Agreements as one giving rise to a duty of utmost good faith.
Related BMM Reading:
|Small Business Protection Bill 2012.pdf||233.81 KB|