Senator FORSHAW (9:29 PM) —For a moment I thought I was back at law school.

Senator Ian Macdonald —I hope you had better lecturers than this one!

Senator FORSHAW —I said, `For a moment,' Senator Macdonald. The amendments raise the issue on which we received most evidence in the recent public hearing. As Senator Harris and Senator Woodley have acknowledged, we all have received many representations from people representing the group of lessors, particularly those in Victoria. It is clear that, when the original package was designed, they did not have a voice, and that is most regrettable. The industry should have been more cognisant of their concerns. As we were told, they were not regarded as part of the industry in the negotiations that took place between the dairy industry leaders and the government, and there was no-one to speak for them. It was fairly late in the piece, when the first legislation in this area was upon us last year, that we were alerted to some of their concerns.

Since then, we have had our attention drawn to the fact that, on the evidence that was presented to the committee—it was hearsay evidence and it could not be refuted at the time—many lessors have been left in a position where their lessee or tenant has legitimately got an entitlement under the scheme and then left the industry. We were told that in about 70 per cent of the 400 cases in Victoria—that is what was alleged—the lessee just walked out and abandoned the contract, which is an offence at law. As the minister correctly points out, it enables an action to be pursued by the lessor for breach of contract and to sue for damages.

However, that is not necessarily the situation in all cases. It is clear from other evidence—albeit that it was not as strong—that other lessees have worked out the remainder of their lease and taken the package. Because of the way the package was structured, they have done nothing wrong. From the outset, the package was structured on the basis that whoever was the producer who was receiving the milk cheque at a certain date was the person who became entitled to the payment under the scheme. The payment could be taken up-front as a facility or as periodic payments over eight years, and, whether they left or stayed in the industry, they got the lot. That is one of the fundamental flaws of the scheme that has now been brought to light most dramatically. The entitlement was never tied to the enterprise, even though it was described as a payment to assist dairy farmers through deregulation, to enable them to restructure, to reinvest, to cope with deregulation and falling prices, and to come out of that initial period with an improved, enhanced enterprise and, hopefully, as the market found its levels, continue on in a prosperous industry. What we see now is a scheme that paid all the money in one single entitlement to one producer and was never really tied to the enterprise. One can ask the rhetorical question: why wouldn't a lessee in such a situation think that they might be a lot better off than having to work in the industry, and take their entitlement?

Unfortunately, that has created real problems for a number of lessors, particularly those who have been unable to find a new lessee and therefore have ceased to receive the rental income that they received before. In some situations, the lessee has walked off the property and the lessor is faced with substantial court costs to pursue legal action. If owners wish to sell their property, they are trying to sell in what may well be a depressed market. Those are the problems that have been pointed out to us. We all recognise that in those cases the lessors have become the innocent victims. The question is: how do you solve their problem? Whilst we have tremendous sympathy with their problems, we do not and cannot accept the amendment, because we do not think that it does solve their problems. The reason is that the problems are not uniform. As I have outlined, there is a range of circumstances. You do not solve their problem by giving them an entitlement that is equal to the entitlement that the lessee may already have received, because, firstly, it blows out the cost of the scheme and, secondly, it can involve a windfall gain for lessors.

I have to agree with Senator Macdonald on this point—it is a unique situation, Senator Macdonald, so listen carefully: Senator Macdonald raised the legitimate point that this scheme is designed to assist the dairy industry and dairy farmers. In terms of their legal position, lessors were not earning their income from the dairying industry. Even though they held the asset and provided the means for the lessees to operate, they were earning their income from rent as landlords or lessors. In theory, they were not supposed to lose any income as a result of deregulation. The assumption was that they would continue to receive rental income on the property post deregulation the same as they had before. As we all know, that has not occurred. It has not occurred because of the way in which the scheme was structured in the first place. The dilemma we have is that we are now not in a position in this legislation to go back and unravel that scheme and recoup money, say, from lessees in order to pay it back to lessors. That might be the morally correct approach, particularly in the case of lessees who have taken an entitlement and broken their contract. But, under the way the scheme was set up, they had a legal entitlement to get the payment and they took it.

So we are left with this position. We are, as I have said, conscious of the issues. I, like other members of the committee, have indicated my feelings about this problem during the committee hearings. We do not believe that this will solve the problem. In fact, we are concerned that it could create a rash of other problems and a rash of other inequities which could lead to claims from other sections of the industry again. Our approach at this point is not to support the amendments, well intentioned as they are. We want to see how the proposal that is contained within the government's legislation works, that is, how the proposal with respect to discretionary payments, where lessors will be able to make application and argue their case, works. I understand that the evidence that was given to us is that the lessors' representatives claim that most of their members will not be able to receive any payments under that part of the scheme as it is proposed at the moment. That remains to be tested. We want to see how it works and then, once we have seen how the scheme operates, it will be a matter for the future as to whether or not the issue will need to be addressed at some subsequent stage.

This legislation is specifically intended to deal with the position of those farmers who are still in the industry and who are receiving a payment now but who, because of the impact of the greater than expected fall in milk prices, are still in desperate straits. That is the primary target group for this legislation, and it is not appropriate to try and graft onto this legislation a couple of amendments to try and fix a problem which is at this stage unquantifiable. It is not simple. It is not a uniform problem for all lessors, and this approach will probably cause more difficulties than it resolves.