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Wednesday, 9 May 2012
Page: 2889


Senator THISTLETHWAITE (New South Wales) (10:55): The Corporations Amendment (Phoenixing and Other Measures) Bill 2012 is important legislation and is part of this government's Protecting Workers' Entitlements package, part of a continued process of ensuring workers' hard-worked-for entitlements are protected in circumstances where companies trade insolvently, go bust and go into liquidation, leaving workers stranded without access to important entitlements such as accumulated annual leave, accumulated long-service leave and redundancy entitlements.

This is not controversial legislation. It has been part of this government's process of ensuring that there are a suite of reforms that adequately protect workers' entitlements in this country. In fact, when this legislation was reported on by the House of Representatives Standing Committee on Economics, a member of that committee reported to the House on 27 February 2012:

The committee considers that the bill comprises uncontroversial measures that will assist in curbing the amoral practice of phoenixing. Indeed, in a briefing issued on 23 January 2012, the law firm Minter Ellison stated:

The … bill contains some reasonable measures for facilitating the protection of workers' entitlements. and these measures are unlikely to affect the position of the majority of directors.

Therefore, the committee has decided not to inquire into the bill and recommends that the House or the Federation Chamber consider the bill forthwith.

That was the determination of the House economics committee, clearly advising that this legislation is not controversial. That is why I find Senator Cormann's contribution to this debate somewhat amusing. Really the contributions from those opposite are all about protecting the interests of big business at the expense of those who will benefit from this legislation, and that is of course workers in this country who are seeking to avoid situations where their hard-fought-for and hard-won entitlements go unpaid in circumstances where companies go bust. This is an important improvement to our corporations power and an important addition in the fight against unethical and immoral practices within the corporate world.

The process of phoenixing is something that is abhorred by the Australian public and not supported by any member of this parliament. We have heard all the stories about businesses setting up one day, trading themselves to a point where they can no longer hope to repay their creditors and then completely walking away from obligations that they have entered into in good faith. We see failed businesses being left without being wound up, simply abandoned without any attempt to fulfil any of the company's obligations to its stakeholders, only to see that same enterprise, the same persons involved, begin trading soon after the failure, often within the same industry, often with the same directors and in some cases with an almost identical name. This practice leaves in its wake a destructive mess that costs the economy a great deal and hurts innocent people, both inside and outside the business. That is phoenixing.

I find Senator Cormann's comments regarding a lack of definition of the circumstances of phoenixing to be somewhat perplexing given that they are clearly defined in this legislation. They are defined in proposed section 489EA, which empowers ASIC to order the winding up of a company in four clearly separate and distinct sets of circumstances—and these are outlined in the provisions of the bill.

Phoenixing, in short, is a process of allowing a company to go broke—but never winding it up or paying out anything to its creditors—and then simply starting up a new company as if the destruction of the other one had never happened. We see this practice all too often in this country, particularly, unfortunately, in the construction industry and the textiles, clothing and footwear industry. According to the Australian Taxation Office, there are about 6,000 phoenix companies in Australia and between 7,500 and 9,000 directors of those companies. It is a practice which plagues many industries in Australia. We know the damage done to our economy by shonky practices in an industry that is this nation's lifeblood—I speak, of course, of the construction industry—although we are seeing this practice creep into other industries and we are seeing more and more people being hurt.

The Australian Security Industry Association, in response to a report into the security industry by Fair Work Australia, has called for greater compliance and enforce­ment to address issues such as rates of pay, sham contracting and, of course, phoenixing. Even in the energy industry, we are beginning to see reports that ASIC is investigating Mr Ben Polis over the collapse of his business, Polis Australia, trading at the time as Green Energy Australia. Unfortun­ately, we are starting to see a lot of this in the retail energy sector. Basically all you need to have to start up a company trading as a retailer in the energy industry these days is a laptop computer and a mobile phone—you can then begin taking and signing up customers. ASIC is looking into allegations that, in this particular case concerning Mr Ben Polis, the assets belonging to Polis Australia were transferred to his new business without payment. When it collapsed, Green Energy Australia owed $397,000 to creditors. We then see Mr Polis running a new company, which has risen from the ashes like the mythical bird itself, trading as EnergyWatch. At the same time, the Fair Work Ombudsman is investigating the failure to pay $500,000 in staff entitlements to employees of EnergyWatch.

In an article for the Sydney Morning Herald on 12 April this year, Maurice Blackburn Lawyers raised the example of the directors of a printing business telling a pregnant worker that she had 'caused an inconvenience' and giving her the sack just before Christmas. The directors of the company, Wongtas, were taken to court over this in 2010. Soon after, the directors of Wongtas placed this company into liquidation and registered a new company—Wangtas—which recommenced the same operations at the same location. The Federal Court has held that the liquidation of Wongtas had been carried out for the purpose of avoiding potential penalties under the Fair Work Act. Even with that Federal Court ruling, proceedings could not be maintained against Wongtas because the company no longer existed. Unfortunately, that means that this pregnant employee was not paid her wages—and of course she never got her job back. This bill introduces a series of measures to help people hurt by such practices by strengthening ASIC's capacity to deal with phoenixing. ASIC will be empowered to place companies into liquidation when they have been abandoned by their directors.

This bill also gives effect to commitments made to amend the process for access to the General Employee Entitlements Redundancy Scheme, GEERS. GEERS was established by the former government following the collapse of National Textiles. We all remember that National Textiles was a company owned and operated by the brother of then Prime Minister John Howard. The company had fallen in a heap, leaving all employee entitlements unfunded. GEERS was set up in its wake. GEERS allows employees to access entitlements in situations where unpaid wages, accrued long-service leave and other forms of applicable leave have been lost because a company has failed. GEERS aims to provide employees with access to these entitlements in a fair and reasonable time frame. However, a significant downfall of the current scheme is that it requires a failed company to be placed into liquidation before employees can seek, through GEERS, to access those unpaid entitlements. As I have pointed out, in phoenixing situations it is often the case that the company is simply abandoned rather than being wound up or liquidated. When this occurs, employees are not eligible to access GEERS. In order to have an abandoned company placed into liquidation, a court order must be sought, and this court process often takes a lengthy period of time at great cost to those seeking the order for liquidation. In the case of employees seeking such an order, a considerable amount of their entitlements are often eaten up in legal fees rather than going towards those next steps in life which inevitably flow from losing your job in the collapse of the company.

Even worse is the situation for employees who are seeking access to an abandoned company in the case where the company has been deregistered. In that scenario, orders must be sought to have the company reinstated and then you still have to go through the process I outlined to get it liquidated—all this to access a scheme which, in its current incarnation, is meant to be a last resort for employees to get the entitlements they need to move on with their lives. It is a government sponsored scheme which often takes an unbearable and unrealistic amount of time to access.

This bill will allow ASIC to place a company into liquidation in a reasonable time frame, therefore allowing employees to access GEERS in that reasonable time frame. That will mean that the pain and cost of litigation can be avoided. That is why this is a positive reform. The new ASIC powers will follow the same rules which apply when a company is deregistered by the com­mission. These new, common-sense powers will mean that companies which are clearly no longer trading and have been abandoned can be wound up and placed into liquidation. This will give employees caught up in a corporate collapse the certainty they deserve of access to their unpaid entitlements.

In addition, this bill introduces a provision requiring companies placed in administration to use a single website for the posting of public notices. At the moment, many companies going through such a liquidation process place such notices in metropolitan newspapers where they are often missed by creditors and employees who have an interest in ensuring that the liquidation process is completed. A new single website—a single point of call—for people in such situations will ensure they have access to the information they need to begin the process of regaining their entitlements. At the moment we see the administrators placing notices in the ASIC Gazette as well, and that is required by the Corporations Act. But, again, a single port of call through a website is a common-sense approach that allows administrators and stakeholders to keep up to date with developments and have easy access to the information that they require.

These measures make an important improvement to our corporations power. The bill means that employees caught up in unethical and unjustified phoenixing pro­cesses can have access to the government's GEER Scheme in a fair and timely manner. It delivers on the commitments that this government has made as part of its Protecting Workers' Entitlements package. It strengthens ASIC's powers to place companies into liquidation when they have been abandoned by their directors and allows for a cost-effective process involving the publication of insolvency notices in a single, publicly available website.

Phoenixing is corporate Australia at its worst. It is unethical, it is immoral and, importantly, it is un-Australian. This bill represents an important step in tackling this broad and far too wide problem in our economy. I commend the bill to the Senate.