Where is the protection for small business?

By Steve Marsten

It’s rare that we comment on Commercial matters however this week I feel the recent actions against some local businesses has caused us to raise the issue to warn others. It makes me wonder - what is the point of the Law?

Last year a local business provided equipment to a major industrial builder who had won a significant local contract. They had worked with the contractor on several occasions over the past 3 years with no hint of trouble.

The contractor went into administration early last year owing the local business less then $4,000. So that’s not such a big deal - we would think. Unfortunately, the administrators have come back and asked for all funds paid over the past 6 months which is well over $120,000. These are funds that have been paid to his employees; his suppliers and maintained his equipment and are no longer has sitting in his bank account.

Naturally, one expects that the law would protect this business. After all - the business owners operated in good faith. When the contractor was slow to pay - he followed up the debt. The follow ups were not excessive. No demands had to be issued. There were no long outstanding debts and a remittance advice was issued with each payment. No cash was received and no payments were dishonored. Everything was carried out in a business like manner. There was nothing to indicate that the contractor was at anytime in trouble. This is known as the Good Faith Defense. One would think the law is on the “law abiding reasonable business operator’s” side. But alas – No! Legal advice indicates one should settle for something much larger than the last payment received from the contractor of around $3,000! By the time you consider the need for a Queens Council; a legal advisor and the cost of court - the estimated costs to defend the “moral actions” of an honest small business is over $110,000.

This is something that is simply not right and unacceptable to small business. It’s immoral. We at Sothertons would love to see serious changes to our commercial laws that strengthen the Good Faith Defense so that it has teeth to protect the Small Businesses operator who do the right thing. Call us on 49721300 for more information.