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Tuesday, 16 April 1985
Page: 1191

Mr CADMAN(5.34) —I appreciate the presence of the Attorney-General (Mr Lionel Bowen) in the chamber. I intend to refer to the Bankruptcy Amendment Bill and to the processes of bankruptcy, citing one instance which concerns a constituent of mine, and drawing to the Attorney-General's attention factors which are still not included in the legislation. I refer in particular to the role of the Inspector-General in Bankruptcy and his powers and the way he can apply them. Under the Bill, the powers of the Inspector-General are somewhat extended. I am pleased to see that. His role has slightly changed. He has a greater specification of function and a greater opportunity to ensure on behalf of the Commonwealth that the progress of a bankruptcy case can be dealt with properly and effectively.

However, there are some areas in early clauses of the Bill which deal with the role of the Inspector-General that I would like the Attorney to consider. I refer him to clause 4 and the amendments proposed to section l2 of the Bankruptcy Act. The role of the Inspector-General is specified under proposed new paragraphs b (i), b (ii), b (iii), b (iv) and b (v). If one refers to the original Act, one sees that those paragraphs relate to the role of the Inspector-General, to the process of bankruptcy to which he can apply his mind and the minds of his officers. I see some deficiencies in that approach because I find that Division 2 of Part X, for instance, which deals with meetings of creditors, control of debtors' property and so on, is not an area to which generally the Inspector-General has access.

There is a process to protect the trustee's accounts and the making good of losses sustained by negligence, which can be referred to a court. That is proper and right. However, in the examples that I intend to give, there are still areas where the Inspector-General should have a right to assess the validity of creditors who are accepted by a trustee-the processes of minutes and meetings of creditors, areas related to the initial impetus when the trustee becomes involved in a bankruptcy case, the election of chairmen, adjournments, entitlement to vote, restriction on voting by proxy; all sorts of factors which a trustee has control of and, in fact, may not be supervised by the Inspector-General. I should like the Attorney to clarify that point for me because I cannot find within the Bill any provisions which extend the Inspector-General's powers into those areas. In fact, in one clause at a later stage, concerning the hearing in public, the powers of the trustee are such that there are no hearings in public unless the Official Receiver intervenes and says that he wants to have a hearing in public.

I wish to draw to the Attorney-General's attention the case of Latona. I know that he is aware of the case and I have here three thick files that I have accumulated during the progress of these affairs. The participants in this case are active, dynamic and forthright to the extreme in some circumstances. It is a very hotly contested process and my constituent, Mr Latona, is certainly very forceful in expressing himself, both to me and to everybody else. I have noticed that in the processing of his case before a trustee there are particular areas that spark action and that have created real difficulty. The admittance of creditors to a meeting has been a real factor. In discussions with the Inspector-General it appears that that is not an area where he currently can have much impact. Neither does it appear that the Registrar is able to intervene in the admittance of creditors. If that is not the case under the present law, it should be the case under the proposed law, and if it were possible under the existing law, something should have been done to clear up the matter of who were creditors in this case. The previous Attorney-General is fully aware of the case. The details were known to him. He instigated an inquiry by Mr Drennan to assess the case and Mr Drennan reported on it.

The admittance of creditors is a spark point. I draw the attention of the Government to that area in particular. The Latona case in fact highlights some of the difficulties. Providing the minutes on the progress of meetings, reporting to the registrar and hence to the bankrupt individual and providing information concerning the progress of the sale or disposal of the estate are steps which to the best of my knowledge have not been carried out in this instance. This matter has been in progress over a period of 18 months. No one is aware officially of what property has been sold at what price or to whom. I understand that in fact it may not be a requirement to inform the bankrupt of that process, but somebody ought to know that the thing is going properly and be able to vouch for the process of the sale of assets.

In the Latona case that apparently has not happened and it is of great concern to me. Mr Latona has been to see me on numerous occasions and has forcefully presented me with a valuation of his estate made by his own accountant. There may be some qualifications on the values that he has put on his estate but reputable valuers have carried out the valuations for him. It appears to me that the estate was disposed of at a price $800,000 or $900,000 less than the current market value. I regard that as being fairly serious. In relation to one property in particular, at Mackerel Beach, I will read for the Attorney-General an advertisement which appeared in Sydney newspapers about the property. An advertisement in the Sydney Morning Herald of 16 February stated:

Mackerel Beach. Lot 128 Diggers Crescent. Residential block with dilapidated home. Land value only. See auction columns today.

That is a description of the property from an agent in Rockdale. That is nowhere near Mackerel Beach, which is in the Palm Beach area. I understand the reserve price was $36,000, though another valuation was made by the trustee of $47,000. It is claimed that the property was sold at auction, after a number of bids, for $47,000. Anybody with a knowledge of that area and the house in particular would have to value property in this select area at a much greater amount than that because the Valuer-General's value for just the land was $60,000. There are certificates to show that. In this instance the valuation set, I understand, by the firm of Hookers and another independent valuer, was about $l00,000 to $ll0,000.

This process of disposal is something that the Inspector-General has to be able to deal with. I believe that under these amendments he can deal with these processes and he ought to be able to investigate something that is improper. I further draw to the attention of the Attorney-General Dun's Gazette for New South Wales, week No. l0 at page l5, where the following reference to the trustee in the Latona case appears:

Aitken Hargreaves and Turner (Aitken Lindsay Robert) l23 Clarence Street Sydney and 772A Henry Lawson Dve Picnic Point chartered accountant on petition of Trans-Tasman Timbers P/L. For hearing on 11/3/84.

It appears to me, as a non-legal entity but following discussion with lawyers, that the trustee himself in this instance is also under threat of bankruptcy. I do not know how that case can go on or how he can remain in that position. It may be legitimate and proper that he do so. It does not appear to me that that is a proper process of the law or the intention of the previous Government or this Government in regard to trustees of estates.

I believe the decision to register trustees was a good one but the way in which they operate must be properly scrutinised and supervised. The Government has moved in this legislation to tighten up some of those areas in which the Inspector-General may investigate matters but I do not believe it has gone far enough in some respects. The Government has attended to the special provisions applicable to deeds of assignment, to the special provisions applicable to deeds of arrangement, to the special provisions applicable to compositions, to the administration of estates of deceased persons and to a number of other areas which are picked up in the legislation before the House in clause 4(a), clause 4 (b) and clause 4 (ba).

I refer this matter to the Attorney-General because it has worried me for a long time. There was sufficient concern for the former Attorney-General to appoint a special investigator, whose report I have read and whose description of the problem does not quite match the conclusions he drew. I was sufficiently concerned at one stage to wonder whether the Commissioner of Police should be informed of this matter for I feared that some Commonwealth officers may have been involved in matters that were not proper. I have no evidence to conclude that they may have been but it appears that the process of the disposal over l8 months of an estate of over $2m if we take the broadest valuation-that may not be a factual valuation-has been such that the proceeds will not pay for the trustee. The creditors will get nothing and the trustee himself will get part of his fee only. I do not know to whom the properties have been sold but I think it is worth investigation.