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Speech to the 7th ITSA National Bankruptcy Congress, Sydney.

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7th ITSA National Bankruptcy Congress

Four Seasons Hotel , Sydney

Thursday 30 October 2008, 9 :00 am CHECK AGAINST DELIVERY

[Acknowledgements ]

• First , may I acknowledge the traditional owners

of the land we meet on - and pay my respects to

their elders, both past and present.

[Other Acknowl edgements ]

• Chair, Mr David Bergman, Acting Chief

Executive and Inspector -General in Bankruptcy,

Insolvency and Trustee Service Australia

• Mr Rick Battellino, Deputy Governor, Reserve

Bank of Australia

• The Honourable Justice Victoria Bennett, Family

Court of Australia

7th ITSA National Bankruptcy C ongress 30 October 2008


• The Honourable Justice Judy Ryan, Family

Court of Australia

• Distinguished guests

• Ladies and gentlemen

7th ITSA National Bankruptcy C ongress 30 October 2008


[Introduction ]

1. Thank you for your welcome this morning.

It’s a great pleasure to be here to open the

7th ITSA Bankruptcy Congress .

2. This morning I propose to speak briefly about the

Rudd Government’s initiatives for bankruptcy

reform and Personal Property Securities.

3. I’ll then let you to get on with the rest of the

superb program ahead of you.

4. I generally agree wi th Mark Twain’s view that

“History doesn’t repeat itself but it does sometimes


Insolvency practitioners will, perhaps better than

some, see evidence of this in the present global

financial crisis.

5. Australia’s economy is in a strong position, and

re gulation of the Australian banking sector is

robust . But we should not pretend that we are

entirely immune from these global events .

7th ITSA National Bankruptcy C ongress 30 October 2008


6. Though as has been said, there is every reason to

expect that Australia will enjoy a softer landing

than most countries .

7. The Rudd Government has made a number of

important announcements in recent weeks to

respond to the situation and we are committed to

continuing that strong and decisive economic


8. An important - indeed essential - element of this

is a well develop ed and properly functioning

insolvency system.

9. Maintaining a strong position is not only up to

the Government .

Together, we have one goal but there are a

number of players who can contribute to its

achievement .

Trustees, financial counsellors, creditors, d ebt

agreement administrators, and lawyers are all

part of a properly functioning insolvency system .

As is the Government’s personal insolvency

regulator - ITSA .

7th ITSA National Bankruptcy C ongress 30 October 2008


10. It is encouraging to see so many delegates ready

to participate in the Congress and actively

co ntribute to the promotion of this system.

I hope that this Congress will allow you all to

share knowledge and insight and expand

professional networks.

11. I am impressed too by the calibre of speakers and

the range of topics to be considered over the next

two days.

12. Many of the issues you’ll be discussing are

current priorities for the Government :

• Personal property securities reform,

• Regulation of credit by the

Commonwealth , and

• Proposed changes to the credit reporting

rules under the Privacy Act.

13. But the two i ssues I’d lik e to focus on this

morning are b ankruptcy regulation reform and

Personal Properties Securities

7th ITSA National Bankruptcy C ongress 30 October 2008


[Bankruptcy R eform ]

14. You ’ll be aware of the considerable reform of

Australia’s personal bankruptcy laws in recent


15. The Rudd Government’s aim i s to ensure

Australia has a sound personal insolvency system

which provides those holding unmanageable debt

with access to relief from that debt - either

through bankruptcy or some other option.

16. Our view is that the system should allow

creditors to be paid as much as possible of what is

owed to them .

And w e also want to avoid the situation where

unscrupulous debtors can use bankruptcy laws to

hide assets and defeat creditors’ claims.

[Debt Agreements ]

17. It is important that debtors in financial trouble

don’t see bankruptcy as the ir only option.

Many want to pay their debts .

What those individuals need is access to

7th ITSA National Bankruptcy C ongress 30 October 2008


information .

And they need streamlined processes which will

assist them to repay debts as efficiently as

possible .

18. In that sense, d ebt agreements c ontinue to be a

significant part of the solution.

They now comprise around a quarter of all new

personal insolvency administrations.

19. They give the debtor the option of voluntarily

proposing a payment arrangement to creditors ,

based on the their own capacit y to pay.

20. Typically, creditors will receive much higher

returns under debt agreements than through

bankruptcy proceedings .

21. And by p utting some power in the debtors’

hands, debt agreements provide the opportunity

for debtors to acknowledge responsibility an d

improve their financial management skills -

hopefully reducing the likelihood of their falling

into financial difficulty in the future.

7th ITSA National Bankruptcy C ongress 30 October 2008


22. There were important reforms to the debt

agreement system in 2007 which aimed to

increase creditor confidence in the s ystem.

It is pleasing to see that creditors are now

accepting over 80% of all new debt agreement

proposals .

What do we read from that?

Confidence has improved and creditors are

generally making decisions based on the debtor’s

ability to pay - this is a pra ctical approach that is

critical to the success of the system.

23. Debt agreement administrators make up a small

and relatively new profession.

It’s important that - collectively - administrators

think as a profession .

And administrators and creditors must wor k

together with ITSA to continue improving

standards in this fast -growing area of insolvency


24. In 2010, the Government will review the

effectiveness of the 2007 reforms to determine

7th ITSA National Bankruptcy C ongress 30 October 2008


whether further improvements can be made.

We will be looking particula rly at the effect the

amendments have had on the previous ly high

failure rate of debt agreements .

But we’ll also be interested in the level of creditor

confidence in debt agreements.

Three years ’ experience will provide a good test.

[Trustee Remuneration ]

25. I’d like to speak briefly now about a couple of the

priority reform issues that are currently before


26. From time to time, the level of remuneration for

registered trustees can result in disputes which

are very costly to resolve.

27. Many of these ar ise because of a lack of

understanding of the mechanics of trustee


28. To attract and retain skilled and experienced

professionals to the personal insolvency industry

- of the calibre which instils public confidence in

7th ITSA National Bankruptcy C ongress 30 October 2008


the personal insolvency sys tem - trustees must

certainly be appropriately remunerated for their


Likewise, it ’s important that those who fund

trustee remuneration - the creditors - have

confidence in the process and are able to make

informed decisions about trustee remuneration .

29. As in all things , transparency and accountability

in the remuneration process will reduce the

likelihood of disputes arising.

30. In this regard, I’d like to announce this morning

that the Government has decided to improve the

rules for fixing and claiming trustee

remuneration .

As well as the regulations for resolving disputes.

31. This will not be a full -scale rewrite of the

remuneration provisions .

Rather , it will focus on those aspects that have

proven to be problematic.

32. The central principle will remain.

7th ITSA National Bankruptcy C ongress 30 October 2008


33. That is, trustee remuneration should be

primarily a matter for creditors.

But the changes will provide a more transparent

mechanism for remuneration in those situations

where the agreement of creditors can ’t be


34. Our proposals will also establish a mor e flexible

and efficient process for handling disputes .

I hope that this will encourage their swift

resolution at minimum cost.

35. You ’l l be hearing more about the details of the

reforms later this morning.

And I look forward to hearing any ideas you have

abo ut the details of the amendments as they’re

finalised over coming months .

[Offences ]

36. Earlier this year, I announced amendments to the

offences provisions in the Bankruptcy Act.

The intention behind these amendments is to

ensur e that the offences properly reflect

7th ITSA National Bankruptcy C ongress 30 October 2008


community expectations about behaviour which,

in the context of bankruptcy, should be

criminalised .

37. As well, the Government’s view is that the

penalties must be appropriate and in line with

similar offences in other legislation.

38. Among other things, t he amendments will

streamline the operation of certain offences .

Particularly o ffences of strict liability which will

now be subject to an infringement notice regime .

39. This will provide an efficient means of penalising

behaviour which, while relatively mi nor in terms

of criminal intent , can significantly affect the

integrity of the system.

40. We also intend to improve the Official Receiver’s

ability to compel a bankrupt to file a statement of


41. The statement of affairs is the most important

primary doc ument in the administration of an

estate .

A defiant bankrupt can often frustrate the

7th ITSA National Bankruptcy C ongress 30 October 2008


trustee, and therefore creditors, by refusing to

comply with this fundamental obligation.

The maximum penalty for failing to file the

statement after a demand from the Off icial

Receiver will now be 12 months imprisonment.

42. The Inspector -General in Bankruptcy will also be

given stronger powers to investigate offences

before referring them to law enforcement

agencies for prosecution.

43. We are aiming to have legislation to implem ent

these amendments introduced in coming months.

44. And I look forward to working with you all as we

implement these important changes.

[Personal Property Securities ]

45. In a similar vein - as we face these challenging

times - it is of critical importance that we work

hard to progress important national reform


46. Overcoming national hurdles that have stifled

many previous attempts at reform requires a new

7th ITSA National Bankruptcy C ongress 30 October 2008


way of doing business with the States and


47. In 2008 and beyond, our objective is to brin g

about a new era of co -operation and reform with

the States and Territories.

48. As the Prime Minister has made clear, it is time

put behind us the blame shifting and point


49. Personal Property Securities is a key area of

national reform that I am wor king on with the

States and Territories.

50. The current PPS system is unwieldy - regulated

through more than 70 different Commonwealth,

State and Territory Acts.

51. And each of the 70 plus pieces of legislation is an

element within a fragmented system. Different

legal mechanisms have been developed over years

to address identical problems.

52. We are committed to replacing this mess with a

single law, and a single national online register,

7th ITSA National Bankruptcy C ongress 30 October 2008


that will serve Australia for the 21st century and


53. Our reforms will improve certainty and

consistency, while reducing complexity and costs

to business and consumers.

54. And I’m pleased to say that we’re making good


55. The Council of Australian Governments signed

an Inter -Governmental Agreement earlier this

month, demon strating the commitment of all

jurisdictions to PPS reform.

56. In May this year I released a draft PPS Bill.

My Department is currently analysing the

submissions received and refining the Bill to take

account of those comments.

57. Progress is also being made on building the new

national Register - and I expect work to begin

shortly on building the Register.

58. This project, together with a number of matters

to be dealt with by COAG are part of our

ambitious deregulation agenda, designed to

7th ITSA National Bankruptcy C ongress 30 October 2008


increase economic producti vity by cutting red

tape and reducing the regulatory burden on

business and citizens.

[Conclusion ]

59. This work is part of the Rudd Government’s

commitment to economic stability and financial


And, as I’ve said, our personal insolvency system

form s an essential element of that plan.

60. In the end, the Australian personal insolvency

system is highly regarded internationally .

And a significant part of that success must be

attributed to the high quality of its professionals.

61. I believe one of the greatest strengths of our

system is the close dialogue that exists between all

key stakeholders and ITSA.

62. I encourage you to keep that engagement going .

To find better and more efficient ways of doing

things .

7th ITSA National Bankruptcy C ongress 30 October 2008


And to improve the performance of the system

for everyo ne involved.

63. I wish you well over the next two days - it’s a

great opportunity to learn about topical issues

and, of course, to network with colleagues and to

learn from the experience of others .

64. I wish each of you ongoing success in your

professional acti vities and I look forward to the

opportunity of working with you all in the future.

65. It is now my pleasure to officially open the

7th ITSA Bankruptcy Congress.