Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document

MESSAGE FROM THE SENATE—BANKRUPTCY LEGISLATION AMENDMENT BILL 2002

Message No. 155, 15 November 2002, from the Senate was reported returning the Bankruptcy Legislation Amendment Bill 2002 with amendments.

Ordered—That the amendments be considered forthwith.

On the motion of Mr Williams (Attorney-General), the amendments were disagreed to, after debate.

Mr Williams presented reasons, which were circulated, and are as follows:

Reasons of the House of Representatives for disagreeing to the amendments of the Senate

Senate Amendment Number (1)

This amendment passed by the Senate would retain early discharge from bankruptcy but make it available after 2 years instead of 6 months. This does nothing to address the inequities and discrimination inherent in the current scheme. The length of time is not the issue. The fact is that the scheme is not meeting its intended policy objectives because the qualifying criteria are not an adequate test of whether the bankruptcy was brought about by `misfortune rather than misdeed' and was not due to `commercially reprehensible behaviour'. It also fails to address a fundamental issue of concern in the current bankruptcy system, namely that bankruptcy has become too easy and is viewed by some as a `soft option'.

Accordingly, the House of Representatives does not accept this amendment.

Senate Amendment Numbers (2), (3), (4), (5), (6) and (7)

Amendments (2), (3) and (7) would make a number of changes to the procedures for entering into arrangements under Part X of the Bankruptcy Act 1966. Amendments (4), (5) and (6) deal with the ability of the Inspector-General, a creditor or trustee to challenge a Part X arrangement. It is inappropriate to include these amendments in the current Bill. They appear to address an unsubstantiated perception that problems identified in a small number of Part X arrangements are widespread. There is no evidence that these amendments are needed. They change the basis of Part X in a way which may disadvantage the many people for whom it works well.

The amendments will add to the cost and complexity of Part X arrangements and detract from the fundamental purpose of Part X which is to provide debtors and creditors the opportunity to agree on arrangements which would allow the debtor to avoid bankruptcy.


In addition, the amendments have been developed without consultation. The Government has a well established consultative approach to bankruptcy reform through the Bankruptcy Reform Consultative Forum.

The Government has announced a comprehensive review of Part X which is currently under way. It is appropriate to wait for the findings of that review before making amendments to Part X which may be unnecessary or which may not address all the issues.

Accordingly, the House of Representatives does not accept these amendments.

Senate Amendment Number (8)

This amendment passed by the Senate would exclude `necessary personal or household' expenses from the scope of the offence contained in subsection 265(8) of the Bankruptcy Act 1966. That subsection makes it an offence for a debtor to contract a debt greater than $500 in the 2 years prior to bankruptcy where the debtor has no reasonable prospect of being able to repay it. The Bill proposes to remove the $500 threshold. This is to correct an anomaly in the current law which allows an insolvent debtor to contract a large number of debts, each of which is less than $500, and not be liable to prosecution. It is not aimed at debtors who fail to pay one or two small bills (such as utilities or groceries) which the prosecutor is unlikely to decide to prosecute. The Senate amendment is not necessary.

Accordingly, the House of Representatives does not accept this amendment.

Senate Amendment Number (9)

This amendment passed by the Senate would repeal section 271 of the Bankruptcy Act 1966. Section 271 creates an offence where a bankrupt has contributed to their insolvency by undertaking rash and hazardous gambling or speculations within two years prior to bankruptcy. The offence is rarely used but it is important that it exist for the small number of cases in which gambling or speculations are criminal in nature. It acts as a deterrent to such behaviour. The offence is not directed at gambling which results from an addiction and removing the offence will not address problems relating to such addiction. The existence of the offence also assists some trustees in the administration of estates. Trustees and creditors report that some mischievous bankrupts will often claim that they have incurred losses `at the races' or `at the casino' when they are questioned about what has happened to money they have borrowed. When trustees mention the offence, the bankrupt will often come up with a more truthful answer which helps locate assets.

Accordingly, the House of Representatives does not accept this amendment.

Senate Amendment Number (10)

This amendment passed by the Senate would make a company that is related to an insolvent company liable for the debts of the insolvent company. This is an amendment to the Corporations Act 2001. It is inappropriate to make amendments to that Act in a Bill which amends the Bankruptcy Act 1966.

Accordingly, the House of Representatives does not accept this amendment.

On the motion of Mr Williams, the reasons were adopted.