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Thursday, 30 September 2010
Page: 537

Senator WILLIAMS (6:09 PM) —I move:

That the Senate take note of the report.

I would like to talk about the Economics References Committee interim report and its final report—The regulation, registration and remuneration of insolvency practitioners in Australia: the case for a new framework. I welcome this report. It was with pleasure that I proposed this inquiry nine or 10 months ago. The insolvency industry has a reputation such that it is not held in high regard by the general public. The reason is that when a company goes into administration and then, as many do, into liquidation, it seems to be that the liquidators charge extremely high fees. People told me about instances where $650 to $700 an hour was charged for liquidators’ fees, and it goes down through the ranks and the staff to $120 and $130 an hour for the lady who might bring you a cup of coffee when you visit the liquidator for a meeting. I think these fees are exorbitant, and that is why the inquiry was launched.

Some of the information we got was just mind-boggling. I could give you examples. A company in South Australia called Golden Chef went into liquidation and the assets were sold for $2.45 million. The liquidators’ fees and the solicitors’ fees amounted to $2 million, leaving just $450,000 for creditors. In 96 per cent of liquidations, less than 10c in the dollar is returned to the creditors—those small Aussie battlers in business who give credit to a company or a business that unfortunately collapses, and it seems that the lion’s share of the sale of assets goes to the liquidators.

The inquiry had many, many submissions—I think almost 100 submissions. Many talked about one infamous liquidator, Stuart Ariff, who has now been banned for life from practising as a liquidator. ASIC took him to court, he pleaded guilty on 83 counts of wrongdoing, and I believe he has now been charged by the DPP on various charges. We will leave that for the court to make their decisions on that finding. It was quite amazing to hear about the problems that we have in this industry. There were a lot of submissions and a lot of witnesses who were very critical of ASIC. ASIC is a governing body, the watchdog for the companies in Australia, and part of its duty is to oversee the insolvency practitioners industry. Yet we had people complaining to ASIC about wrongdoings, gouging and rorting. There were many questions to ASIC about liquidators. One that comes to mind is the case of Carlovers, a car wash industry in Australia owned by a Malaysian company. They went into liquidation with Stuart Ariff as a liquidator. They knew that Mr Ariff was doing the wrong thing, and to get Mr Ariff out of that company—because the liquidator becomes judge, jury and executioner; it has control of the whole industry—it cost that company $1.8 million in legal fees. This is an outrage. These are things that we raised with ASIC during our interviews with them. Mr D’Aloisio, the boss of ASIC, said it was very hard to deregister a liquidator. That was one of the concerns that the committee had. So we have recommended a licensing system where a licence can be suspended instantly if there is substantial evidence of wrongdoing by a liquidator or an administrator.

There were many complaints about the industry, and I think we have had seven inquiries into this industry in the last 20 years, but little or nothing has been done. I will give you more evidence, from Mr Bill Doherty:

If you make a complaint against ASIC you get on their website and fill in a complaint form and hope for the best. I did that three times. Nothing really happened except that I was going to get added to their database again and again. Most of the others also had the same experience. About six months after ASIC launched their court action I thought to myself, ‘I will just see how this system works’, so I put in another electronic complaint. Do you know what I got back? ‘Thank you for your correspondence of 1 May 2009. The issues you have raised will receive careful consideration and ASIC will contact you again in due course.’

I mentioned Carlovers, and this is from Ian Fong:

… I am amazed that there is no effective criminal justice system or harsh penalties to deal with white-collar crime. You have given incredible amount of powers and trust to a profit making industry and you do not back it up with a proper justice system or harsh penalties to deter abuse or misconduct or white-collar crime. To say the least, it is a disgrace.

From Ian Fong again:

To put something trivial into this, one of his staff charged $60 for reading an article in the newspaper about him.

Sixty dollars for reading an article? Us politicians would be paid a fortune if we got paid $60 for every article we read!

When we first broke this story to the media The Australian published an article. His staff charged $60 just to read an article about his boss doing something wrong.

From Jim Maher, Deputy Mayor, Armidale Dumaresq Council in relation to the destruction of the Armidale YCW Leagues Club by an unscrupulous action:

This is white-collar crime. This is criminal activity. We ought to be pursuing criminal sanctions through law enforcement agencies and, if the law is not tight enough, then we ought to be doing something about it.

As I said, seven inquiries in 20 years. I believe the committee has made 17 very good recommendations from this inquiry. One is to take the control of the insolvency industry away from ASIC and put it under the one umbrella with ITSA, which is responsible for personal bankruptcies. This umbrella body will look specifically at this industry, such as whether it should be licensed and whether liquidators have to renew their licence every three years and pass a test face-to-face with the authorities—not as it is now where you just lodge papers for references. We should have a situation where there is a flying squad, so when reports or complaints come to that body they can look at those businesses and give feedback to the people who are complaining. One of the most frustrating things that was raised in relation to this industry was that when people lodged complaints with ASIC there was virtually no reply and there seemed to be no action taken.

The committee has made some very strong recommendations, and when this went out to the media a couple of weeks ago I found it alarming that a spokesman from Treasurer Wayne Swan’s office said: ‘We don’t have any plans to change anything. We might have a look at the recommendations.’ That is alarming in itself. This inquiry went on for some nine months. A lot of work and a lot of money has gone into it, and I hope the government does not simply turn its back on this industry.

The day we released the recommendations, I had a call from a liquidator in Canberra who was telling me about an administrator who has charged in excess of $200,000 for less than four weeks work in a business in Canberra. The liquidator who phoned me said he could have done the work for $60,000 to $80,000. But, no, someone else has charged around $120,000 to $140,000 more for less than four weeks work. This is the problem with this industry, the perception of overcharging, the perception that money that rightly should be going to creditors is not going to creditors. We still have HIH and Ansett in liquidation. I am very keen to see what charges are finally made for the liquidation of those two companies. They will be into the tens of millions, and it seems to be that when there are a lot of assets and a lot of money in a company, the liquidation seems to go on forever.

This industry needs to change its reputation; it needs to be seen to be giving value for money to the public and to those creditors who rely on the liquidators to do their job. That is certainly not the interpretation or the perception of the general public now. The recommendations are firm; they are strong; I think they are very good. The committee worked closely together. We met in Canberra after the election to finalise our recommendations and the Labor, Liberal and National senators were in agreement with the recommendations. I would like to commend the staff—John Hawkins, Richard Grant and the other staff—who helped us through this inquiry. They were magnificent; they are very conscientious staff members of that committee and do a magnificent job and I appreciate their work.

If the government is not going to address these changes and adopt the recommendations of this committee, then—seeing how the numbers are in the House of Representatives—I look forward to working with shadow minister Bruce Billson, who is responsible for this portfolio. If the government is not going to act on this industry, after seven inquiries and 20 years, then I have no doubt the coalition will, and with the support of Independents and others in the House of Representatives we will be able to make the changes. That will be embarrassing for the government. So my strong recommendation to Mr Swan and to members of the government is to look at these recommendations, to act in accordance with the recommendations and to do the right thing in this industry so that the people of Australia can have more confidence in insolvency practitioners in the future.