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Monday, 22 February 2016
Page: 605

Senator WILLIAMS (New South Wales) (12:48): I would like to contribute to the debate on this very important bill: the Insolvency Law Reform Bill 2015. I am glad the opposition is supporting this legislation. I launched the inquiry into this matter many years ago, and it seems to have taken forever to finally get this legislation into the Senate. I note the unanimous recommendations—the very scathing recommendations—from the Economics References Committee, which I was part of during the inquiry. The previous government—those opposite when they were in government—did nothing. They did not bring it forward. This goes back many, many years to when I launched the inquiry and we needed changes in this industry.

It is amazing that, when I launched the inquiry, the Insolvency Practitioners Association—the IPA as they were known then; they have changed their name—said that the inquiry was not necessary; the insolvency practitioners industry is a good industry; it is well behaved. Well, I think McVeigh and Macdonald were gone within a few weeks of that being said. We can go on about Ariff, who went jail. Patterson has also gone, et cetera. There have certainly been some nasties in this industry.

I launched the inquiry after I spoke to John Viscariello—whom I have become good friends with—in South Australia. He told me what was wrong in the industry and what was happening in his case. He had just had a court ruling by Chief Justice Kourakis. It had cost him an enormous amount of resources, time and work. The liquidator had taken $500,000 from creditors, from the sale of assets, and spent the $500,000 suing a lady for $28,000 for bankruptcy. This was $500,000 that should have gone to the little Aussie battlers, the businesses that were owed money. Instead, the lawyers and the liquidators got hold of it and spent $500,000 suing a woman for $28,000. It is just crazy. That has now been appealed. We will let the judges make their decision on that as the court runs through its process. That was one of the reasons why I launched this inquiry.

The problem I have with the industry in its current form is that, when a business goes into administration, liquidation or receivership, the liquidator is the judge, jury and executioner. They are there; they are locked in at enormous cost. Some charge $900 to $1,000 an hour. When McGrathNicol went in as administrators to Cubbie Station, their costs were about $9 million to just simply manage the place until it was sold, even though the management of the station was already retained there.

The measures in this bill will make the process to become a registered insolvency practitioner more rigorous, while making it quicker and easier for the regulator to remove rogue practitioners from the industry. I certainly welcome that. So the situation is: instead of just doing an application online or on a piece of paper, you will actually have to front a three-man committee to see if you pass the proper character test. Another important thing about this bill is that creditors will be able to remove a poorly performing practitioner without going to court. Hooray at last! A majority vote value of creditors can sack the liquidators if they think the liquidators are doing a terrible job, charging too much, not being fair or whatever

Currently, the system is that they can remove the liquidator at the first meeting, but once the liquidator has been installed they are there forever. Well, under this legislation the creditors can team up and actually remove the liquidator. That will send the message to the industry, 'You'll do your job right, or you'll get sacked,' which is a pretty important message in my book. So the ability for creditors to remove and replace practitioners provides an important element of accountability to the insolvency framework, and that is a very good part of this legislation.

An applicant will also be required to satisfy a three-person panel that they are fit to be registered as a liquidator, instead of simply being assessed on the basis of a form and the payment of a fee. If the panel believes it is necessary, it may require the applicant to sit a written exam. Rules to be made under the bill will set out that tertiary study in relation to insolvency administration will be required in addition to general accounting and legal studies. That will raise standards, which is a good thing.

Registered practitioners will be required to renew their registration every three years. I hope that this puts some money into ASIC, because for many years ASIC has had its funding cut down with budget restrictions. Amazingly—from memory—ASIC spends $10 million a year policing the insolvency practitioners industry but collects just $40,000 in registration fees. Spending $10 million and collecting $40,000 is not fair, is it? So, hopefully, this will bring some money into ASIC's coffers so that they can do their job better. I have been a big critic of ASIC since I have been in this place. I do believe now they are lifting their game. They certainly have got the message from this Senate. But, clearly, for them to do their job they actually need funding, and I support that totally.

ASIC will also be given new powers to prevent practitioners from taking on new matters where they have failed to comply with directions by ASIC—another good move giving more powers to ASIC. Penalties for a wide range of offences will also be significantly increased in order to provide a more appropriate deterrent to practitioners breaching their duties. This includes increasing the penalty for intentionally or recklessly continuing to operate as a registered liquidator without insurance, to a maximum 1,000 penalty units or $180,000.

Where an insolvency practitioner has engaged in misconduct, disciplinary committees and the court will be able to prevent an individual from acting as a liquidator ever again—banned for life—as well as to prevent them from being employed by other liquidators for up to 10 years. AFSA and ASIC will have the power to directly suspend or deregister offending practitioners in limited circumstances—or to prevent practitioners from taking on new appointments where a practitioner is failing to lodge certain documents with the regulator or comply with a direction to hold a creditor meeting. In addition to the enhanced regulatory mechanisms, creditors will be empowered to replace practitioners by resolution if they are dissatisfied with their performance.

There are some really good things in this. We could have gone further; we can always go further—depending on opinions. But I think there are some really good regulations here to raise the standards. I think that probably 95 per cent—or even 99 per cent—of liquidators do the right thing. Yet it is the odd one out doing the wrong thing that smears the whole industry—like in politics. It is the same thing: we all get painted with the same brush. The industry has been smeared. Hopefully, this will build better standards and more competition to bring prices down, because I think that their charges are outrageous. When I was running a small business, I had two customers that went down. When I got the letters from the liquidators, I simply threw them in the bin knowing full well that I would never get a cent of money from them, which I did not, of course. Usually, with those small companies, the liquidator seems to get the lot with their fees. That is how it pans out when there are not large assets of big value to be cashed in.

These changes are something I have pursued for many years—probably since soon after I came to this place. As I said, the previous government sat on them, unfortunately. I am sure that when we were in opposition we would have supported change. It was a unanimous decision by the committee; we were all on the one page. There were no political games being played in that committee report. The changes are here, and I welcome the opposition's support. I hope that the Greens support it as well, and I look forward to the passage of this legislation and hopefully improving many things, including the powers of ASIC and increasing the fines. I am on the same page as Mr Medcraft, the boss of ASIC. As we discussed in Senate estimates recently, we need these changes and we need stiffer penalties. We are very soft in this country with the fines for people who are carrying out wrongdoings. Often the fines are far too soft. We look forward to the passage of this legislation and the changes it will bring. There will be more to come shortly, I believe.