External dispute resolution and the Ombudsman

Ms Kate Carnell, the Australian Small Business and Family Enterprise Ombudsman, is reported to have called “on the insolvency sector to improve its accountability and transparency or face louder calls for increased regulation”.


According to a media release, only, Carnell said at the ARITA conference that there should be an external dispute resolution (EDR) process or tribunal to hear complaints. She is reported as saying that “small business operators are often confused about the role of receivers, how they charge and what their timeframes are and that there needs to be greater accountability and a simple way to resolve disputes.” She then herself attempts to explain the confusing law.

As we have reported, under the helpful heading – Senate Committee report on “impaired loans”, 2016 – ASBFEO / Carnell recommendations, 2017, Ramsay Report 2017 – there have been a variety of inquiries into ADR in the financial services sector, and aspects are on-going. 

In her report, Ms Carnell’s own recommendation 13 was that the current EDR schemes be expanded beyond the banks themselves to include disputes with third parties appointed by the banks, such as valuers, investigating accountants and receivers.

As we have also explained, the Ramsay Report rejected that argument, being unable to substantiate problems with the existing arrangements. 


In any event, the government has in fact accepted all 11 of Ramsay’s recommendations and, as to one, is proceeding with the proposed Australian Financial Complaints Authority – AFCA, amalgamating CIO, FOS and SCT.

AFCA is to provide a ‘one-stop shop’ for financial complaints, removing what has been the confusion and inconsistent outcomes and gaps and overlaps between the three schemes. 

A transition team has been appointed to advise the government on AFCA’s terms of reference, its governance and its funding arrangements. Dr Malcolm Edey has been appointed to head the team and oversee this process. 


Ms Carnell has also made the recommendation for a nationally consistent approach to farm debt meditation – FDM.  Ramsay noted that the federal Minister was consulting with his state and territory counterparts to assess ways to implement this.  This has not stopped a review of the NSW FDM laws, nor the recent introduction of the Farm Business Debt Mediation Act 2017 in Queensland. Nevertheless a national scheme might proceed by way of an agreed law adopted by all the states, similar to that now applying to co-operatives.

APES 110

One extra level of regulation of banks that may provide comfort to some is the new breach reporting obligations of bank accountants under their international Code of Ethics, APES 110. From 1 January 2018, professional accountants will be required to report on relevant breaches of the law of both their banking customers and of their own employer bank. The usefulness of such a professional obligation has been raised in current debates about banking regulation.  The Banking Act includes whistle blower provisions, including for protection and compensation. In so far as these Code obligations apply to receivers, and insolvency practitioners generally, there is no similar protection under the Corporations Act.


Others can debate Ms Carnell’s call for even more accountability and transparency in insolvency practice, let alone business and banking practice. But, given that I was able to assess Ms Carnell’s views via only a media release, those who heard her words may have other views.


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