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Wednesday, 27 March 1985
Page: 853

Senator DURACK(10.07) —The Bankruptcy Amendment Bill is a revamped version of a Bill that was introduced into the Senate last year by the former Attorney-General, Senator Gareth Evans. It will effect changes to five different areas of the existing bankruptcy legislation. First, in respect of maintenance creditors, amendments will be made to the Bankruptcy Act to facilitate the enforcement of maintenance orders. This will help to alleviate a growing problem recognised in 1980 by the Joint Select Committee on the Family Law Act which recommended these changes. The Opposition is pleased that the Government has now moved to implement that recommendation and will support it. Under the amendments, failure to pay maintenance due pursuant to a maintenance order for a period of 12 months will constitute an act of bankruptcy. Collection of maintenance and the enforcement of maintenance orders is, as we know, a serious and growing problem. Many maintenance debtors take it upon themselves to flout the orders of the Family Court of Australia, leaving the wives or former wives and children in financial difficulty. This amendment will have the useful effect of inducing these maintenance debtors to pay up and will be additional to the other means of enforcing maintenance orders which have not proved to be entirely successful. The Opposition believes this is a step in the right direction and will support these amendments.

The second area of the bankruptcy legislation to which this Bill is directed is to seek uniformity between the Bankruptcy Act and the Companies Act. The proposed amendments create uniformity between the treatment of creditors on the winding up of a company under the Companies Act and the treatment of creditors involved in sequestration proceedings and administration under the Bankruptcy Act. The proposed amendments change the priority of payments made under the Bankruptcy Act and bring them into line with those contained in the Companies Act relating to the order of payments of debts on the winding up of a company.

The proposal deals with the supervision and registration of trustees in bankruptcy. Under this proposal the Bankruptcy Act will specify the qualification necessary for a person to obtain registration modelled on the corresponding requirements or the Companies Act relating to liquidators and auditors. The third amendment proposes the introduction of a system of triennial reporting by registered trustees in bankruptcy. Again, that proposal is parallel with the requirements on liquidators under the Companies Act. The Opposition believes that these amendments are desirable. Creditors should receive substantially the same treatment and be subject to the same procedures whether the debtor is an individual or a company.

The third area covered by this Bill deals with some minor administrative improvements in bankruptcy administration. In summary, these amendments will assist the Inspector-General in Bankruptcy to obtain reports from registered trustees and facilitate the preparation of the Inspector-General's annual report on the operation of the Act. They will allow the Inspector-General to apply to the Federal Court of Australia for an inquiry into the conduct of a trustee in bankruptcy. They will also permit the Secretary to the Attorney-General's Department, rather than the Governor-General, to appoint people to a statutory office which has been created by the Act. This is a routine task. Much legislation requires routine statutory appointments to be made by the Governor-General. The Opposition believes that it is a step in the right direction to remove the requirement that appointment be made by the Governor-General, with its formal and added procedures, and enable such an appointment to be made by the Secretary to the Attorney-General's Department. The Opposition will support these proposed changes.

The fourth area covered by the Bill deals with the removal of a number of anomalies that have become apparent in light of early amendments to the Act which have been made at different times and in its administration. I do not propose to detail this group of amendments, which may come under the heading 'removal of anomalies'. Suffice it to say that the Opposition will support them. They are designed to improve the operation of the Act and, hopefully, they will have that effect.

The fifth area of bankruptcy law to which these amendments relate deals with what the Minister for Resources and Energy (Senator Gareth Evans) calls the modification of decisions by the Fraser Government's Review of Commonwealth Functions, better known as the razor gang. These modifications of those decisions of the former Government and their implementation into bankruptcy law are certainly the most important aspects of this Bill. The provisions of the present Act instituted by the Fraser Government's so-called razor gang dealt with and implemented the privatisation of the administration of the bulk of bankrupt estates.

Prior to 1981, when these amendments were made by the Fraser Government, virtually all bankrupt estates were administered by the Official Receiver; that is, by public officials. These officials operate under the control of the Official Receiver and the administration of the Attorney-General's Department. This situation arose because under the legislation as it existed then the courts were required upon the hearing of a creditor's or debtor's petition for bankruptcy to appoint the official receiver as the administrator of the estate on the making of the sequestration order. There was provision, however, in the former law for the appointment of a private registered trustee, usually a practising accountant, if a first meeting of creditors so determined. But that option was rarely exercised and private trustees were prohibited from soliciting or advertising the availability of their services.

Prior to 1981, for example, only 13 out of about 5,000 estates under bankruptcy administration were administered by private trustees. I interpolate that the bankruptcy legislation, of course, has always provided for private arrangements instead of bankruptcy proceedings. It provided for creditors to enter into private arrangements with the debtor, and that administration under the Act is administered by private trustees. I am speaking now only of cases in which there was actually a sequestration order made and, as I have said, prior to 1981 there was very little role indeed for private trustees under that administration.

The decision of the Fraser Government's razor gang and the implementation of that decision by legislation changed all that quite dramatically and provided the scheme by which the existing system was maintained for all estates valued at less than $10,000; the court was compelled to appoint an official receiver for those estates. Even in those cases, however, the first meeting of creditors could substitute a private trustee. Secondly, and this was the important aspect of the Fraser Government's decision, in respect of all estates valued at more than $10,000 it was mandatory that a private trustee be appointed to administer the estate. As a result of this change, in the following year, 1982-83, more than 1,000 of an estimated 5,000 estates under bankruptcy administration were in fact administered by private registered trustees. This was a major policy decision of the Fraser Government with which the Opposition still agrees. It was a major step in the privatisation policy which was being implemented by that Government as a result of the razor gang decisions. Certainly it is a policy that the Opposition supports. This aspect of the legislation before us will change that principle, and it will be opposed by the Opposition.

Since the implementation of the amendments of the Act in 1981 there has been a very much greater role by private administration of bankrupt estates. The Opposition believes that in the overwhelming majority of cases the private registered trustees have performed their duties with skill and dedication. However, no doubt it is true that the registered trustees, unlike official receivers, their counterparts under bankruptcy administration by official receivers, consider their primary function to be the realisation of the assets and the distribution of dividends to creditors of the bankrupt estates. I think they perform that very efficiently. However, the Attorney-General claims, and there is perhaps some evidence to support his view, that some resulting disregard by private trustees of their discretionary duties to investigate and report upon the conduct, dealings and affairs of bankrupts has occurred. So, as I have said, they are primarily devoting their skills and attention to realising assets and distributing dividends rather than simply conducting investigations and reporting on the conduct of the bankrupt. However, I do not think it would be fair to say that this has been a general failing by these trustees who have performed their duties satisfactorily.

In the Bill introduced last year by the former Attorney-General, Senator Gareth Evans, the Government claimed to be reversing that decision of the Fraser Government's razor gang. If the Bill as introduced by Senator Evans last year had been implemented there would have been a reversion to the pre-1981 situation, which I have already described, whereby the courts would be required to appoint an official receiver in every case, with the first meeting of the creditors having the right to reverse that decision and appoint a private trustee. Of course, the official receiver would have been responsible for conducting the investigatory and reporting roles in respect of any particular estate notwithstanding that the estate was administered by the registered trustee or an official receiver. Last year the then Attorney-General went so far as to say:

Some trustees have engaged in distinctly unprofessional conduct; statistics indicate that many trustees, even most trustees, do not take seriously the investigative and reporting duties which the Act imposes on the trustee of a bankrupt estate.

Apparently the former Attorney-General will repeat that wide claim although it seems that the present Attorney-General does not make it. No doubt we will hear more from the Attorney later. This claim has been rejected by the Insolvency Practitioners Association of Australia, the association of private registered trustees. In fact, it has taken the Government to task over that allegation. It has noted that most registered trustees are required by the terms of the legislation to have had prior experience in insolvency matters. Most have derived their experience from working as company auditors and liquidators. They have to have proper qualifications and they do have them. So, as I have said, by and large they are people of good standing and high qualifications. It would be surprising if those comments of the former Attorney-General applied to any but a very few of them. Perhaps that is all he did mean; I hope that is the case. In regard to the allegations of the former Attorney-General, the Association said:

Accordingly such persons are professional accountants with a background of investigation into the financial affairs of businesses and corporate entities and individuals . . . it is commonplace however that the reporting has developed in the accounting profession of matters of exception rather than on any reporting conformity.

The Association asserted that private trustees do in fact conduct investigations and file reports on matters when further investigation is warranted. The Opposition is prepared to accept the amendments in the present Bill, which are described as a modification of the RCF decision rather than a reversal of it, concerning the ability of the official receiver to conduct investigations if they are not carried out by a private trustee. We do not know whether they are really warranted but if the Government believes that they are, we cannot see any objection to them and they will alleviate the problem if one exists.

The Opposition notes that the provisions in this Bill are described as a modification of the razor gang decision. However, the provisions seem to be little different from those in the 1984 Bill. It seems to the Opposition that the provisions in the 1985 Bill will have an effect identical to that which would have occurred in 1984. This Bill repeals the requirement that estates valued at more than $10,000 will be administered by private trustees. If these provisions are enacted in respect of all those estates, the court will be compelled to appoint an official receiver. Although, at the first meeting of creditors they will have a right to appoint a private trustee, that right is rarely exercised at that stage. In practice, the official receiver will be the administrator of the overwhelming number of bankrupt estates, whether they are below $10,000 or above $10,000 in assets.

The Opposition is somewhat astounded that the Government described these changes as a mere modification. The former Attorney-General's description of them as a reversal is probably more accurate. The Government has offered no real explanation as to why the privatisation provisions are to be repealed, other than the comment I have already quoted from the former Attorney-General to the effect that some trustees engage in distinctly unprofessional conduct, and most trustees do not take their investigatory and reporting duties seriously. If that is the case, the provisions in the Bill, which the Opposition does not oppose, will enable the investigatory and reporting duties to be carried out by the official receiver if the private trustee does not carry them out. It also gives him power to apply to the court if the trustee is not carrying out his job properly. These provisions seem to be adequate to overcome the objection of the Government to the 1981 Bill. The Opposition supports the provisions, but the Government has not given any convincing reason why the basic privatisation policy should be reversed; except, as we know, the present Government has a socialist philosophy and attitude and it believes that things are done better by public servants and officials than by people in private practice or private enterprise. It is a doctrinaire approach to how Government is best carried on.

Senator Gareth Evans —Except in the case of cash bidding and off-shore petroleum leases.

Senator DURACK —That is a quite irrelevant matter; we will argue about that on another occasion. It seems to the Opposition that this is another example of the Government's socialist attitudes and philosophy. The former Government in its major review of Commonwealth functions in 1980-81, known as the razor gang, sought to reverse the trend of many years-even of previous Liberal governments-to set up public authorities and officials to carry out work which is properly the role of the private sector and which the private sector does better than government. This seems to be an issue of political philosophy and attitude. We in opposition, of course, adhere strongly to the view that privatisation should take the place of what have been hitherto public functions, wherever that is satisfactory. It has been done here and by and large it has worked satisfactorily. There have been some failings. This Bill has provisions which overcome those failings. In the Opposition's view that is where the matter should be left. Accordingly, although we substantially support this measure, we will oppose two clauses in the Bill which give effect to this reversal of the basic decision of the Fraser Government's privatisation policy. At the committee stage we will oppose clauses 15 and 17 of the Bill, which are the key clauses in reversing that policy. Otherwise, we support the measure. (Quorum formed)