Magistrates Court (WA) Update – Corporations are not small business (for now anyway)

It recently came to our attention that corporations have mysteriously fallen out of the “small business” definition in the Magistrates Court (Fees) Regulations 2005 (WA). As a result, owners of small, incorporated businesses may not qualify for the small business fee exemption.

We did some background digging and found the culprit – the Attorney General Regulations Amendment (Fees) Regulations 2016 (WA), which came into force on 14 June 2016, deleted the part of the definition that previously referred to corporations.

While “corporation” is still defined elsewhere in the regulations, the subsection of the small business definition that used to refer to corporations now refers to: “a business undertaking that is wholly owned and operated by an individual or individuals in partnership and has less than 20 full-time equivalent employees or partners.”

A “business undertaking” is not defined in the regulations and common sense might suggest that it would be wide enough to include corporations.

However, the requirement that the business undertaking is “wholly owned and operated by an individual or individuals in partnership” seems to rule out any corporations where the shares are held by, for example, a corporate trustee of a family trust. And a partnership is a very different legal concept to shareholding in that the “business undertaking” of a company is owned by the company itself, rather than the shareholders.

Further, the definition of “small business” in the Supreme Court (Fees) Regulations 2002 (WA) refers to both corporations and business undertakings, which suggests that the removal of corporations from the Magistrates Court regulations might have been a drafting oversight.

Based on all of that, we think it would be difficult to shoehorn corporations back into the existing definition.

We spoke to an officer at the Magistrates Court and they were just as surprised as we were. The concerning thing for lawyers practising in the Magistrates Court is that some of their clients (or the practitioners themselves) may have unwittingly made false declarations to the Court since the amendments came into force.

We understand that the wheels are in motion to reinsert corporations to the definition of small business but, in the meantime, we recommend that lawyers keep a close eye on the regulations to ensure that they are correctly advising their clients.