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Wednesday, 3 December 2003
Page: 23544


Mr TRUSS (Minister for Agriculture, Fisheries and Forestry) (9:12 AM) —I move:

That this bill be now read a second time.

The Dairy Produce Amendment Bill 2003 seeks to amend the Dairy Produce Act 1986 to make provision for a number of activities of the industry services body, Dairy Australia, in relation to its administration of the Dairy Structural Adjustment Fund. These provisions, which are minor in nature, were not included in the Dairy Industry Service Reform Bill, which gave effect to the conversion of the Australian Dairy Corporation into a private company, limited by guarantee—Dairy Australia.

Dairy Australia has been declared the industry services body for the purposes of receiving the dairy service levy and undertaking functions on behalf of the industry. As the industry services body, Dairy Australia is also responsible for the management of the Dairy Structural Adjustment Fund. The fund is, by law, administered by the company as a trust.

During the course of the reform process undertaken earlier this year, it became clear that, as the company is the trustee of the structural adjustment fund trust, the directors of Dairy Australia, if not fully indemnified, could be personally liable under the Corporations Act for any liabilities arising that could not be satisfied from the fund. It is common, in such situations, for trustees to be fully indemnified, to ensure that any liabilities, should they arise, are not the personal responsibility of the trustees.

The risk of any liabilities arising in relation to the fund is remote, to say the least, as the Dairy Adjustment Levy will continue to fund the Dairy Structural Adjustment Fund until all payments have been met. Nevertheless, it is appropriate that the company be indemnified against any liabilities arising to ensure that there is no personal risk to the directors of the company in their role of undertaking this very important service to the dairy industry.

Therefore, these amendments provide for the industry services body to be fully indemnified, out of the assets of the Dairy Structural Adjustment Fund, for any liabilities incurred by it in keeping and administering the fund. The indemnity is to be paid out of the assets of the fund, and will apply to liabilities arising before, on or after commencement of these amendments.

Of course, these amendments do not serve to indemnify the industry services body against liabilities that arise as a result of activities related to negligence, fraud, a breach of trust or other actions not in accordance with the principles of trust law. Having said this, the existing provisions in the Dairy Produce Act, coupled with the strict provisions governing the company's management of the fund in the statutory funding agreement between the Commonwealth and the company, will ensure that the fund continues to be prudently and professionally managed into the future.

A second matter that arose in the course of the conversion of the Australian Dairy Corporation into Dairy Australia was whether the act makes it clear that in its capacity as trustee of the Dairy Structural Adjustment Fund, the industry services body has the power to enter into and perform financial accommodation arrangements other than borrowings and to enter into and perform contracts and other arrangements for managing risks associated with the administration of the fund.

To ensure the company can continue to deal appropriately with financial institutions, these amendments specify the financial activities the company can undertake in its role of keeping and administering the Dairy Structural Adjustment Fund.

Specifically, the amendments allow the company to borrow or raise money by dealing in securities. For the purposes of the act `dealing in securities' is to mean:

(a) creating, executing, entering into, drawing, making, accepting, endorsing, issuing, discounting, selling, purchasing or reselling securities;

(b) creating, selling, purchasing or reselling rights or options in respect of securities; and

(c) entering into agreements or other arrangements relating to securities.

`Securities' include stocks, debentures, debenture stocks, notes, bonds, promissory notes, bills of exchange and similar instruments or documents.

For consistency, it is also considered prudent to include a clause that expands on the interpretation of raising money other than by borrowing, to pick up examples of raising finance by way of acknowledgements of debt in relation to deposits and other arrangements.

Additionally, it is intended to insert a clause in relation to hedging through currency and other types of contracts in relation to borrowing or raising money other than by borrowing. Again, this is to make clear that the company has the ability to undertake such activities in relation to its management of the DSAF. This clause will apply to currency, interest rate and futures contracts as well as contracts relating to interest rate swaps, commodity swaps and options.

The amendments will provide for the company to apply money standing to the credit of the DSAF for the purposes outlined above. These financial arrangements were available to the Australian Dairy Corporation as a statutory corporation and it is considered appropriate to make clear in the act that these arrangements are also available to Dairy Australia in its role of managing and administering the Dairy Structural Adjustment Fund.

A consequential amendment will also be made in relation to the termination of the levy to provide that the levy termination day will not be declared until the obligations in relation to contracts entered as outlined above have, in all reasonable likelihood, been paid out of the DSAF. This provision currently exists in relation to all other purposes for which the money standing to the credit of the fund can be used.

Finally, the bill also amends the definition of an Australian deposit taking institution to include the Reserve Bank—as is appropriate.

The Dairy Produce Amendment Bill, while minor in nature, will assist Dairy Australia in its ongoing management of the Dairy Structural Adjustment Fund, and will ensure that prudent and practical financial management of the significant sums involved continues, for the benefit of the dairy industry and the Australian community.

I present the explanatory memorandum.

Debate (on motion by Mr Cox) adjourned.