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ESTIMATES COMMITTEE ESTIMATES COMMITTEE E - 05/09/1991 - ATTORNEY-GENERAL'S DEPARTMENT - Program 2-BUSINESS AND CONSUMER AFFAIRS - Subprogram 2.1-Insolvency and Trustee Service, Australia

SENATOR MACDONALD -On page 36, one of the strategies mentioned in this program is for the repeal of the Bankruptcy Act and its replacement with some new legislation. How will this assist in the achievement of the Insolvency and Trustee Service's objectives?

MR SKEHILL -The aim in a comprehensive review of the legislation is to make sure that it is as well attuned to present day needs and to present day methods of administration as possible. At the moment there is a split of functions, for example, between the Department through the Insolvency and Trustee Service and the Federal Court, which we think is an unnecessary imposition on the Federal Court's resources which is not particularly efficient. This is a source of some confusion and frustration in a systematic sense to those people who need to seek bankruptcy or to deal as creditors with the bankruptcy administration. So we are rationalising that and generally reviewing the underlying policy and its suitability. That is being done through a series of discussion papers that are being sent out to insolvency practitioners and others with an interest in the area.

SENATOR MACDONALD -Will there be some major changes in the Bankruptcy Act as we know it?

SENATOR TATE -I have foreshadowed trying to bring forward in anticipation of, or before this whole exercise is completed, some matters that arose out of the recent concern about high-flier bankrupts and, of course, they will be quite significant changes. Firstly, in relation to permission for a bankrupt to go abroad; the trustee will not be able to give permission unless all the creditors claims have been satisfied but a court may, in certain circumstances . For example, we will be trying to find an administrative rather than a cumbersome judicial process to enable creditors to tap into the income stream of bankrupts. At the moment whilst there is provision for it, it is very difficult for them, and it is more or less assumed whilst you can pursue assets you really cannot go after the income. We hope to streamline those procedures and tap into the income.

SENATOR MACDONALD -Will that be done, would you think, Minister, before a complete rewrite of the Act. Would they be coming in as amendments to the existing Act?

SENATOR TATE -I would hope to have them available for the Senate by the end of this session.

SENATOR MACDONALD -The amendments to the existing Act?

SENATOR TATE -The ones that I have foreshadowed over the last few weeks. Considerable work has been undertaken. Drafting instructions have been formulated and it is now a question of trying to get the Bill drafted.

SENATOR MACDONALD -You have consulted widely with groups on the changes needed , you said?

SENATOR TATE -No. On those particular ones, that is a decision as to policy which I have taken. I have received plenty of representations since announcing them and have taken them into account.

SENATOR MACDONALD -Fair enough. Looking at page 37 there is an increase in staff years on this program from 341 to 404; last year's actual to this year's estimate. What is the basis of that estimated increase?

MR SKEHILL -The figures there are not precisely accurate because but they are based on derivations from average salary figures. At the moment there are around 334 staff in the insolvency trustee service. We expect that number to rise to around 360 by the end of the calendar year. The reason for that increase is simply an increasing number of bankrupt estates requiring administration. As foreshadowed in the paragraph immediately below that table, there was additional supplementation provided during the last financial year to reflect those increases and there is likely to be further discussions with the Department of Finance as to whether changes in the rate of growth in new bankruptcies might require further supplementation.

SENATOR MACDONALD -Where are you getting the additional staff from?

MR SKEHILL -Recruiting generally both within the Public Service and outside.

SENATOR MACDONALD -Would they be long term permanent appointments? We are all hoping that the enormous increase in bankruptcies in the last 12 months will not continue forever. Are those new appointments permanent appointments?

MR SKEHILL -I would expect, Senator, that it is a mix of both. I cannot give you a precise answer. A number of those new appointees, even if the number of new bankruptcies were to fall off immediately, would be required for a period of years because of the time it takes to administer an estate. The formula approach we are building with the Department of Finance would mean that our funding for staffing would decline as estates requiring administration declined. Any additional staff who were taken on permanently would not be replaced in an ordinary staff turnover situation. There may well be some short term recruitment being undertaken by the Service. I do not have detail on that with me.

SENATOR MACDONALD -Are you able to employ people on a two or three year contract basis?

MR SKEHILL -There is some capacity for doing that. There is certainly capacity for taking on temporary employees.

MR A. ROSE -The managing of the staff numbers; this business is fairly counter -cyclical. We suffer great deprivations in staff once the economy starts moving. So the attrition rate, both of permanent and temporary contract staff, gets fairly heavy once the economy is back on its feet. At the height of the boom we are in the reverse position. That is, we are finding it very difficult to recruit staff at all.

SENATOR MACDONALD -To recruit staff?

MR A. ROSE -Yes. At the same time we are losing staff. Your question implied to me a difficulty in managing numbers. If you look at any long term assessment, unless there is a radical change in the remuneration structure and so forth within the public sector, those business cycles in the real economy tend to make that management task not as difficult as you are portraying. If we took on permanent staff now, our attrition rate as such, our movement of staff as such-given that the principal professionals here are accountants- makes it much easier to recruit at the moment by comparison with 1988-89. So, we do have an in and out, and dynamic equilibrium is not difficult to maintain .

SENATOR MACDONALD -Fine. You have identified my concern that you are not lumbered with a huge amount of staff that you have to put on for this but then cannot get rid of without huge redundancy payments and that sort of thing.

MR A. ROSE -No, we do not.

SENATOR MACDONALD -When the economy improves those people go themselves?

MR A. ROSE -Demand and supply works against us in that.

SENATOR VANSTONE -As I recall, in the Additional Estimates in April, we were looking at roughly the same idea as is expressed on the bottom of page 37. That is, that it would be necessary to develop, in conjunction with the Department of Finance, an agreed workload resources formula. I thought you would have done that by now.

MR SKEHILL -It is a relatively long term task to get it to a point of final negotiation. It is a matter of deriving appropriate workload measures; examining statistics as to lags between inflow of new bankruptcy and the time when estates are finalised, and so on. We have done a lot of work on it internally. We have not yet got to the point of detailed negotiation with the Department of Finance. The arrangement to which we referred last time was that we would develop that formula basis over the period of the next two years.

SENATOR VANSTONE -That was originally? So, now it will be over the next year you expect to be finished?

MR SKEHILL -I would certainly hope so. We are keen to do that.

SENATOR VANSTONE -On page 36 you listed your strategies to give emphasis to the prevention of bankruptcy. I have some pretty good ideas on how to do that. It might relate to which box people should put a tick in at the next election , or the number 1, or whatever we are allowed to put now. How can you assist people in not going broke, given the storm of adverse economic situations and tight labour markets and high interest rates. What can you do?

SENATOR TATE -I think that is reference to the fact that now if you approach the counter of one of these consultancy service offices and say you want to become a bankrupt and everything is becoming too much for you, you are sent away for a short time, offered a video, pointed in the direction of a financial counselling service to see whether indeed you have reached that point where this particular step ought to be taken. I think that is a reference to that process rather than one where you are allowed to sign the documents over the counter in the heat of the moment.

MR A. ROSE -It also refers to the work that individual official receivers' officers do with both community and other financial counselling organisations in explaining and providing detail on the services that are provided by the Insolvency and Trustee Service.

But it also refers, in effect, to some fairly basic defensive approaches that particularly consumers might adopt in managing their own personal affairs. We do a lot more now in participating with those counselling groups, in a sense in explaining the traps of unwise use of credit or a range of those difficulties.

SENATOR MACDONALD -Is there any psychological counselling? I think it was the Minister for Industrial Relations in the Senate the other day who was quite scathing about people who were bankrupt and it was in the wake of answering a question that he was suggesting that they were the scrum of the earth and should never be allowed to get near money again. I thought that was a bit unfair of the Minister, since it was his Government that put most of them where they are.

CHAIRMAN -You are not getting political?

SENATOR MACDONALD -No. Does bankruptcy have psychological effects on people that are the province of your Department, or is that getting out of it a bit?

SENATOR TATE -I do not know that any psychological profile has been attempted to be put together and I do not think personnel in our various insolvency and service offices around Australia are in a position to undertake such an assessment. In fact, it would be just out of the question.

I do not know whether it might be worth our approaching the financial counselling services' peak organisation to see whether they, through their various networks, have done any work in relation to trying to predict the sorts of personalities that find themselves in this sort of strife.

SENATOR MACDONALD -I do not know what you can do about it, but it must be an enormous change of lifestyle, not so much lifestyle, but your self-respect must suffer an enormous change.

Looking at page 40, there are some comments about complaints on the Service's performance. There is a reference to a complaint found to be justified about the relationship between the service and agents selling assets; there is also a reference to a justified complaint about problems arising from the interaction of the family and bankruptcy laws in regard to interest in real estate. Was there any substance in those complaints? Do the complainants feel they have been satisfactorily looked at?

MR SKEHILL -Those complaints were found to be justified. The first one was a complaint by an agent who believed that he had been given an exclusive licence to sell a piece of property that had been taken into trusteeship and, before he had the opportunity to sell that property, it was sold by the official receiver. The dispute was as to whether the agent's licence to sell was exclusive or not. While at the end of the day it was found from our perspective that he did not have an exclusive licence, it was accepted that he had grounds for thinking that he did have an exclusive licence and so procedural guidelines designed to avoid a recurrence of that were issued.

The other one to which you refer, problems arising from the interaction of bankruptcy and family laws, is an ongoing situation. I do not know the facts that are referred to there, but the outcome was a referral of the issues to the Family Law Council with whom the insolvency people are working on that very issue.

SENATOR MACDONALD -Thank you. On page 41 you mention that not all registered trustees were audited last year. Do you think, or do you hope, or do you plan to have all registered trustees audited in this financial year?

Mr Skehill-We hope that in the coming two-year period, which is the standard- each registered trustee audited at least every two years-that we will make that standard. This is a role that has been given renewed emphasis in recent times. The totality of our reason for not meeting the standard in this period was difficulties in filling new positions for this purpose. We perhaps set the standard a little adventurously for that initial period, but we certainly hope to meet it in the next.

SENATOR MACDONALD -On the next page you refer to your aim to improve the current standard of providing information and advice to financial counsellors within 72 hours. Is that your aim to do that within 72 hours, or to provide training within three months?

Mr Skehill-I am sure that is the aim, Senator.

SENATOR MACDONALD -What are you doing to achieve that aim?

Mr Skehill-It is a question of detail of which I would have to take advice from the Inspector-General. I am happy to take that on notice.

SENATOR MACDONALD -Could you do that? On page 43 you talk about some initiatives set out in the revised business plan. How many of those initiatives can realistically be expected to be achieved?

Mr Skehill-I hope that we would not have put them there if we did not think we could realistically achieve them. They are all matters that, subject only to intervening extraordinary events or changes in Government decision, we would be able to meet, as they are written, during the period.

SENATOR MACDONALD -You do not think that has become more difficult because of the increased workload in your Department at the moment?

Mr Skehill-They are things that are never easy but if you take the model Bankruptcy Bill, it is the sort of thing that if you do not make the effort it will never get done, and it is necessary. If you take the new computer system , OTISS, it is something for which we have a clear need because the existing computer system is inadequate to effectively process the estates that are there now, so it is something that must be done. Also, a national training program, because you have to have properly trained staff.

SENATOR MACDONALD -Have you prioritised those aims?

Mr Skehill-I cannot answer that. I think the true answer is probably that they are all priority items to which we would be devoting attention. The amendments to the legislation and the computer system are very high on our list, certainly higher than, for example, the input into the INSOL conference. They are mainly dealt with by different people within the service. So, on most of those there is not a clash of priorities for the individual officers who are working on them.

SENATOR MACDONALD -Thank you for that.