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Thursday, 17 October 2002
Page: 8031


Mr LATHAM (11:46 AM) —This has been a very wide-ranging debate on the Insurance and Aviation Liability Legislation Amendment Bill 2002. We have debated the war against Iraq. We have debated the tragedy in Bali. We have even debated the Prime Minister's retirement plans. These are all crucial matters. I want to come to the question of aviation insurance and in particular the impact on the aviation insurance industry of the collapse of HIH, so let me provide the committee with some of the background.

The HIH bid for FAI began on 23 September with an on market purchase of 50 per cent of Adler's holding in the company. The following day Rodney Adler agreed to FAI paying Malcolm Turnbull $1.5 million in fees. At every stage they looked after each other. On 10 October Turnbull recommended to FAI acceptance of a full takeover bid by HIH. Incredibly, for the purpose of this exercise, he valued FAI at between $157 million and $378 million and then allowed HIH to pay $300 million for the company, so, in effect, Turnbull ripped them off by $280 million. To cover his tracks he convinced the FAI board that there was no need to conduct another valuation of the company in response to the HIH bid. On 28 September, the board resolved to appoint an independent valuer for the purpose of the part B statement. Turnbull then talked them out of it. As the counsel to the Royal Commission, Norman O'Bryan, said:

Mr Turnbull had advised that Goldman Sachs had undertaken have undertaken an extensive review of the group's operations and, on that basis, would be in a position to provide a letter of advice to the board of the recommendation to be made to the shareholders.

In the end this advice only examined one option, the recommendation to sell into the bid. In the words of Mr O'Bryan:

There was no reference to whether they would be better off selling immediately on-market, as Mr Adler had done a couple of days earlier, and grabbing as much cash as they could while the share price on-market was being underwritten by this bid.

Turnbull ensured that Adler had exclusive access to these arrangements. This matter requires further investigation and that is why the government has appointed a royal commission. The government is keen to ensure that the collapse of HIH does not further impact on the insurance industry in Australia, particularly the aviation insurance industry, which is under stress, particularly now given the tragedy in Bali and the need for further terrorism insurance—


Fran Bailey —Madam Deputy Speaker, I rise on a point of order. In his opening statements the member for Werriwa referred to the wide-ranging debate that we have had from the previous members. I suggest that the member for Werriwa address this particular legislation. I do not think anyone objects to a wide-ranging debate but we have specific legislation before us and, while the general comments made by the previous two speakers were indirectly related to the aviation industry, I am having difficulty seeing where the member for Werriwa's comments are in any way related to this particular piece of legislation.


The DEPUTY SPEAKER (Ms Gambaro)—The member for Werriwa is very energetic today on this particular subject. I have just come from the main chamber, where he has raised similar areas of interest. In the main chamber a short while ago, the areas of sub judice and royal commissions were highlighted. I ask the member for Werriwa to come back to the topic of debate in this chamber—that is, the Insurance and Aviation Liability Legislation Amendment Bill 2002.


Mr LATHAM —Thank you, Madam Deputy Speaker. It was a curious point of order, because I was talking about terrorism insurance just as the member for McEwen took the point of order. While not wanting to reflect on the chair, it is a curious ruling. I provided a bit of background and then moved on to the subject of terrorism insurance and the specific matter in this legislation which has been the subject of wide-ranging debate. If there is a connection between the Prime Minister's retirement plans and the war in Iraq and this particular legislation, I would be happy to hear it. But let us be consistent.


The DEPUTY SPEAKER —I ask the member for Werriwa to address the bill before the chamber.


Mr LATHAM —I was addressing the question of terrorism insurance, which has been made much more difficult in Australia by the collapse of HIH, which followed the sale of FAI. The government has appointed a royal commission. That was referred to earlier in this debate by the member for Blaxland. I think it is valid to make the point that, under the Corporations Law, a takeover offer must be made to all shareholders and the offer must be the same for all shareholders. Clearly, this did not occur under the Turnbull-Adler arrangement. The FAI purchase came with liabilities unknown to HIH, including $100 million in bad reinsurance contracts. It was the Trojan Horse that ultimately destroyed HIH and sent the Australian insurance industry into crisis.


Fran Bailey —Madam Deputy Speaker, I rise to my feet on the same point of order that I raised previously, which was to have the member for Werriwa relate his comments directly to this legislation. As I rose to my feet, the member for Werriwa was giving specific details about FAI. I would remind the member for Werriwa again about the current legislation we are meant to be debating.


Mr Brendan O'Connor —On the point of order, Madam Deputy Speaker, that is the second occasion on which the member for McEwen has made this comment and raised the point of order with you. I have listened to four speakers debate this bill and the member for Werriwa has stuck closer to this bill than all preceding speakers. Madam Deputy Speaker, if you were to rule that he was actually irrelevant or out of order, I would have to say that there is some inconsistency in your chairmanship.


The DEPUTY SPEAKER —I will take your comments on board, but I do ask the member for Werriwa—and I am well aware of his comments in the main chamber a short time ago—to bring his comments to the relevance of the legislation that we debating here and to not enter into irrelevant discussions about royal commissions.


Mr LATHAM —I am not doing that. What I have mentioned is that the—


The DEPUTY SPEAKER —Your comments should be related to the bill at hand.


Mr LATHAM —FAI was the Trojan Horse that ultimately destroyed HIH and sent the Australian insurance industry into crisis. It is that crisis to which the government is responding with this legislation. As I mentioned earlier, responsibility for the collapse extends beyond Adler and Ray Williams. Turnbull is also culpable, damned by his silence. At every stage, he and Adler covered up the truth. If Turnbull had been up-front and honest with the FAI board and said what he knew to be true—that is, `I was involved in an attempt to privatise the company and, in any case, you are only worth $20 million'—he would never have been appointed. Moreover, the board would have included this information in its part B statement and disclosed it to the Stock Exchange. The sale to HIH would never have taken place. Australia's largest corporate collapse would have been avoided. If we could have avoided the collapse of HIH then surely it would have provided stronger underpinnings for the insurance industry in Australia—stronger underpinnings for this terrible problem of providing terrorism insurance and stronger underpinnings on the questions of public liability insurance and medical indemnity that were mentioned earlier. We need to learn the lessons. I think it is very important for us as a parliament to learn these lessons and to ensure that as we pass this legislation through the parliament we are equipped with a better understanding of the insurance industry and the need to avoid collapses like that of HIH.

Not only is Turnbull damned by his silence: documents were presented at the royal commission showing how he actively deceived the FAI board. On 28 September, for instance, he wrote to Mr Landerer about how he was on a `learning curve in respect of FAI'—that is, pretending that he had no prior knowledge of the company's finances. What was the bottom line? Turnbull failed in his duty of care out of greed—it is as simple as that. He gave a higher priority to pocketing $1.5 million than to the principles of truth and public decency.


Fran Bailey —Mr Deputy Speaker, I understand under the new workings of the Main Committee that I am entitled to ask the member for Werriwa a question.


The DEPUTY SPEAKER —Will the honourable member allow a question?


Mr LATHAM —Yes.


Fran Bailey —My question to the member for Werriwa is: how does the report that he referred in relation to Mr Turnbull and the company have a direct relationship to the legislation that we are debating here today? I concede to the member for Werriwa his general points about having a strong insurance industry and providing that strong underbelly—I think that is how he referred to it—to underpin the insurance industry, but could he answer my question. How do those specific details in relation to Mr Turnbull relate to this legislation?


Mr LATHAM —I thank the honourable member for McEwen for her question. As a shadow minister I have been waiting six years for someone to ask me a question than I can answer. This is what we live for. This is truly a moment to cherish—it is the thing we live for. Someone tell me it is not a dream. Tell me it is finally happening—I can stand up and answer a question.


Fran Bailey —These are the new forms of the House.


Mr LATHAM —Maybe we can have a day on that side down in the main chamber and answer questions. No, we will not take the forms that far. The honourable member for McEwen would appreciate that the government is moving two pieces of legislation through the parliament today: the Medical Indemnity Agreement (Financial Assistance—Binding Commonwealth Obligations) Bill 2002 and the Insurance and Aviation Liability Legislation Amendment Bill 2002. The latter bill is the legislation now before the Main Committee. This is happening basically for two reasons: the terrible terrorist attacks that we have had around the world, first on 11 September and now, tragically, on 12 October; and, beyond that, the general insecurity and instability of the insurance industry in Australia that was caused by the collapse of HIH.

What was the cause of the HIH collapse? The government is having a royal commission; it is an inquiry into the executive. I would have thought that, given that this legislation is before the parliament only because of the terrorist attacks and the collapse of HIH, it is valid in the debate to reflect on the reasons that HIH collapsed. One of the strongest reasons was the sale of FAI. That is the linkage. If we are to further protect the insurance industry in the future, if we are to provide decent medical and terrorist insurance arrangements in this country, then we must learn the lessons of the HIH experience, and that is what I am bringing before the parliament. Maybe the member for McEwen is also a bit worried that the Liberal Party has made Malcolm Turnbull its federal Liberal Party treasurer. He was responsible for the sale of FAI and, ultimately, the collapse of HIH. He is a bagman who can walk both sides of the street, look after his party mates and turn $20 million into $300 million.


The DEPUTY SPEAKER —I want to bring to the attention of the member for Werriwa a ruling made by Speaker Cameron in 1954 regarding inquiries and, in particular, findings. I want to highlight this for the member for Werriwa:

Where the proceedings are concerned with issues of fact or findings relating to the propriety of the actions of specific persons the House should be restrained in its references.

Again I ask the member for Werriwa to turn his comments away from any issues that are currently the subject of a royal commission or inquiry. I refer him to that particular ruling that was made by Speaker Cameron in 1954 and ask him to adhere to that ruling.


Mr LATHAM —Madam Deputy Speaker, on a point of order: if you turn to page 495 of that same book, the Harris edition of House of Representatives Practice, you will find a ruling by Speaker Snedden which very clearly stated that royal commissions are an inquiry of the executive; they are not an inquiry of the judiciary. It is not a court case; it is an inquiry of the executive that can be reflected on in the media, as it is, and can be reflected on in the parliament. The only caveat, the only restriction on members, is to ensure that they are not trying to influence the findings of the royal commission.

Madam Deputy Speaker, further to my point of order, you will appreciate that every second day in question time the Minister for Employment and Workplace Relations raises issues that flow from the building industry royal commission, which this government has also established. There is never any attempt by the Speaker to sit the minister down and say, `You can't talk about the building industry because there's a royal commission currently under way.' Under the ruling of Speaker Snedden, the minister is allowed to reflect on material currently before the building industry royal commission as long as he does not try and influence the findings of that commission. So I put it to you in my point of order that it is perfectly valid to talk about the royal commission—


The DEPUTY SPEAKER —I thank the member for Werriwa. As you quoted so avidly from House of Representatives Practice, I would also like to quote Speaker Martin, who stated:

(A) Matters before Royal Commissions or other similar bodies which are concerned with the conduct of particular persons should not be referred to in proceedings if, in the opinion of the Chair, there is a likelihood of prejudice being caused as a result of the references in the House.

Again, I ask the member for Werriwa to return to the bill that we are discussing here.


Mr LATHAM —I am happy to do so, Madam Deputy Speaker. This is a bill that tries to improve terrorism insurance arrangements in Australia. It responds to two very unfortunate events: firstly, the tragic terrorist attacks that have occurred in different parts of the world—most recently in Bali—and, secondly, the collapse of HIH. I would argue that Malcolm Turnbull's role in the collapse of HIH tells us as much about the Liberal Party as it does about him. They preach responsibility for society's poor, but they never practice it themselves—


Fran Bailey —I rise on a point of order. On several occasions now, Madam Deputy Speaker, you have requested that the member for Werriwa return to this legislation. I ask you to remind him of his obligations.


The DEPUTY SPEAKER —The shadow minister will return to the bill and again will refer to relevant aspects of the bill in the discussion in this chamber. Again, I know that the member for Werriwa quoted Speaker Snedden, but I have also have quoted from House of Representatives Practice and I ask him to respect the ruling of the chair.


Mr LATHAM —Madam Deputy Speaker, not only do I respect the ruling of the chair but I am pleased to report to the Main Committee that I have concluded my remarks.