Mr PEARCE (Parliamentary Secretary to the Treasurer) (6:06 PM) —in reply—I thank members for their participation in the second reading debate on the Corporations Amendment Bill (No. 1) 2005. This bill will clarify the scope of the personal liability of directors of corporate trustees. It will address concerns that have arisen in the light of the recent decision in Hanel and O’Neill, which extended the personal liability of these directors under subsection 197(1) of the Corporations Act 2001.

Prior to the December 2003 decision of the Full Court of the South Australian Supreme Court in Hanel, section 197and its predecessors had traditionally been interpreted as applying in very limited circumstances. These were where the corporate trustee’s right to be indemnified out of trust assets was lost due to the trustee’s conduct or where the terms of the trust deed were designed or could operate to deny creditors’ access to trust assets to meet liabilities incurred by the corporation. (Quorum formed)

Hanel and O’Neill significantly expanded the potential personal liability of directors of corporate trustees, from large superannuation trusts through to trading trusts running a small business. In essence, that decision effectively made directors of corporate trustees guarantors of trust liabilities. The proposed amendment contained in schedule 1 to this bill will, therefore, operate to restore the longstanding interpretation of subsection 197(1).

In addition to the clarification of subsection 197 of the Corporations Act, this bill also contains a technical amendment to clarify the operation of a transitional provision in the CLERP 9 legislation. This will ensure that the auditor independence provisions which applied before the enactment of that legislation continue to apply to financial years commencing prior to 1 July 2004.

I note that the Senate Scrutiny of Bills Committee has commented on the retrospective commencement of the amendment in schedule 2 to this bill. The committee noted that the amendment did nothing more than preserve and give effect to the intention of the pre-CLERP 9 legislation. In concluding, I take this opportunity to note that this bill will work to rebuild business confidence. Importantly, it will also preserve the application of the auditor independence provisions of the pre-CLERP 9 legislation. I commend the bill to the House.

Question agreed to.

Bill read a second time.