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Friday, 15 November 2002
Page: 6524

Senator LUDWIG (1:45 PM) —by leave—I move opposition amendments (2) and (3) on sheet 2676:

(2) Schedule 1, page 37 (after line 19), after item 172, insert:

172A Subsection 215A(1)

Repeal the subsection, substitute:

(1) A resolution that is passed at a meeting of creditors and purports to:

(a) nominate one or more persons under subsection 204(4) to be a trustee or trustees; or

(b) appoint a person under subsection 220(1) to a vacant office of trustee of a deed of assignment, deed of arrangement or composition;

is void unless the person or each of the persons:

(c) gave written consent before the meeting to act as a trustee of the deed or composition; and

(d) made a declaration in writing of the person's professional, business and personal relationships and connections (if any) with the debtor and with the creditor or creditors who proposed the resolution, and gave all persons entitled to vote on the resolution a reasonable opportunity to inspect the declaration.

(3) Schedule 1, page 37 (after line 19), after item 172, insert:

172B Subsection 215A(1A)

Repeal the subsection, substitute:

(1A) As soon as possible after the resolution is passed, each person (except the Official Trustee) nominated or appointed by the resolution must give to the Official Receiver a copy of the consent and the declaration that relates to that person.

As I said in the second reading debate on this Bankruptcy Legislation Amendment Bill 2002, Labor are concerned that the proposals put forward by the government do not address loopholes in part X of the Bankruptcy Act, which are predominantly taken advantage of by high-income bankrupts. Labor recognise that the Attorney-General has finally announced a review of part X and, accordingly, we are proposing these amendments to stimulate debate. It is important to state for the record that Labor do not have a closed mind on the reforms of part X and that these amendments are not intended to foreclose alternative approaches that may be identified in the review by ITSA.

We do know that there is a task force report that is significantly overdue. The report was finalised but was never made public. It might have assisted the debate today if the government had produced that report. If it were in Senator Abetz's power to produce the report and make it available during this committee stage, it would be helpful in dealing with these matters, but I know that this secretive government is not going to make that report available—is it, Senator Abetz? I know that the task force report is going to be kept by the department. One wonders why. No reasonable explanation of why they will not provide it has been given, but we do now know that there is sufficient concern for a review to be undertaken. Labor welcome the review of part X and, as I have said, do not want to foreclose, by moving these amendments, any alternatives that may be identified. We would look at any recommendations that might come out of that review, should it end up in legislation. As with all other legislation, we would examine it in detail and come to a conclusion about it when the time arose.

In 1988 the Australian Law Reform Commission expressed concern that, as the part X procedure is initiated by the debtor, they may appoint a solicitor or trustee who is not impartial. The appointment of a person who favours the debtor could have serious implications for the quality of reports and statements produced by the controlling trustee. These reports are a crucial part of the information used by the meeting of creditors to decide on the appropriate course of action. To address these concerns, the ALRC recommended that a person appointed as the controlling trustee, or as a trustee administering an arrangement, should make a declaration of association at the time of the appointment. This statement would detail any previous or existing association with the debtor and declare that no circumstances are known to the appointee that would prevent the appointee from acting impartially.

The government accepted this recommendation in part by amending the law to require a declaration of association by trustees administering a deed or composition under part X of the act, but not by controlling trustees. This requirement was later removed from the act. However, as recently as this year concerns have been expressed about the independence of some trustees. Restoring the declaration of association provision would be one way of reassuring creditors of the independence of trustees. These amendments would require trustees administering a deed or composition under part X of the act to make a declaration of association. I note in passing that the New South Wales division of the Australian Institute of Credit Management has suggested that Labor's amendment may need to be strengthened by providing that a resolution nominating or appointing a person as a trustee is void where, in the previous six months, the person has been a debtor or creditor of the debtor in question or has provided professional legal or accounting services to the debtor or to a relative of the debtor. It is to be hoped that ITSA considers this proposal in its review of part X.

This matter has had a chequered history, but in our view it will ensure that there is less likelihood of people abusing their position or—perhaps even by omission—not ensuring that the controlling interests of a trustee are dealt with fairly. It upholds the idea of ensuring that, at the crucial time when you have to utilise part X, all hands are on the table, all things can be seen and there is confidence in the people who are sitting around the table. In our view, a lack of confidence in those people sitting around the table can cast a shadow over how those dealings are seen, perhaps even in a different light and much further down the track.