Mike Symon (Deakin, Australian Labor Party) Share this | Hansard source

I speak in support of the Corporations Amendment (Phoenixing and Other Measures) Bill 2012. This bill is part of the federal government's response to a growing problem of phoenix companies and phoenixing actions in companies, which are causing so much damage to people's lives—working people and suppliers and all sorts of other creditors who get burnt when phoenixing occurs. It is a huge problem, but it does not stop there; it also affects government because phoenixing is often done to avoid liabilities to the Australian Tax Office. I understand that the Australian Tax Office estimates the current stock of suspected phoenixing cases it is monitoring poses a risk to the revenue of around $600 million.

Unlike many people in this place, I have direct experience in what happens with phoenixing in companies. As some people will know I worked in the construction industry for over 20 years. Over that entire time the construction industry has been a really bad example of where companies have been set up, then been put into receivership and then trading again the next day with a slightly different name, from the same premises and with the same directors. It has happened time and time again. It is not only done to take entitlements off the workers of that company; it is done to get out of the debts the company may owe to other businesses and subcontractors.

When a company goes into receivership and a director takes that money, it has come from someone else it is owed to. Unfortunately, the system we have at the moment provides a get-out. It is not only small businesses of course but large businesses as well. These businesses are not always somewhere else. They can be right on your doorstep.

I have a very sordid example of one in the suburb of Mitcham, which is in my electorate of Deakin and is where my electorate office is located. It occurred in 2009 and involved a company called Forgecast Australia. The company has only one director, Mr Ian Beynon. When you read the history of Forgecast you will see that it is almost a model for anything that should be done in relation to phoenixing. Since 2003, this director has placed Forgecast, under various Forgecast names, into receivership, attempting to remove his liabilities to pay employee entitlements, trade creditors, subcontractors and tax debts—and, each time, after that the company has restarted with a very similar name and at the same location. If you visit the Forgecast website today it speaks to the company's 60 years of manufacturing in the eastern suburbs of Melbourne. I would like to quote from the Melbourne Herald Sun, which published an article back on 31 January 2010 titled 'Staff lose in buyouts'. I seek leave to table a copy of this article at the conclusion of my speech.

Leave granted.

This article was written by Samantha Amjadali. It is a particularly good article. It says: 'A millionaire businessman whose factory workers are allegedly owed $4.4 million in redundancy entitlements has been allowed to buy back the failed company for a third time but refuses to make payouts to workers. Employees at Forgecast in Mitcham claim owner Ian Beynon has been allowed to cheat workers again and again. Some have worked for the company for more than 40 years.' Mr Beynon is quoted in this article as referring to the concept of a phoenix company, under which the owners of a failed company can buy it back under another company's name, and said that he had followed all the correct legal process. He said, 'I just deal with what the law is and many people do this.'

An employee, John Huggett, who has worked as a polisher at Forgecast for 22 years and was owed $94,000, said that it was a huge betrayal. He went on to say, '57 of us went back after the first receivership to give Ian a chance. We even took reduced hours. But he's done it to us again.' The article went on to say, 'Dozens of former workers have maintained a 24-hour picket outside Forgecast's Cook Road premises for two months.' And that was the two months that covered Christmas of December 2009. I went down there and visited them on occasions, helping them unload firewood from trailers to keep their fires going. They sat there for two months and there was no great resolution for them at the time.

In the Herald Sun, John Huggett was quoted as saying, 'We haven't had a wage for two months and most of us are struggling with bills and mortgages.' That was the case when I visited those workers down there. Interestingly, it was not only workers down there. Subcontractors were camped outside the gates, too, and creditors were waiting to see if there was any way that they could get inside the locked gates to address what they were owed. Some were even lining up to remove equipment that had been delivered to the factory but which they had received no payment for.

This article then goes on to say: 'My Beynon first bought Forgecast, which makes metal fittings for cars and furniture, in 2003 and put it into receivership in 2004. He bought it back using one of his other companies, laid off 57 staff and then rehired the remaining staff on the condition that they worked fewer hours. Mr Beynon then laid off the workers again in November 2009.' That is the time frame when I visited. 'He liquidated the company soon after.' The article then goes on to say, 'Last week'—the second last week of January 2010—'the Mordialloc businessman again bought Forgecast and intended to reopen it and potentially rehire the picketing workers once the industrial action is over.'

On that point, the article in the paper is not quite right. I do not call it industrial action by workers if you are locked outside the gate and your boss is refusing to pay you for the work that you have done. That is not industrial action. To me, that is a breach of the employment contract. If a worker has done the work and earned the entitlements then I believe that the entitlements are theirs. They have earned them. For someone to come along and change the name of their employer and then say, 'I don't owe you any money,' is not right. That should never be right. It would not be accepted in many other areas that we deal with. Unfortunately, employment is an area in which it has gone on for an awful long time. Mr Beynon was quoted in the Herald Sun as saying, 'I don't owe them any money; the company owes them money.' You may remember that I said at the start of this speech that the company only has one director.

Cesar Melhem, the secretary of the Victorian branch of the AWU, said, 'Australian corporation law should be changed if it lets a company director get away with what Ian Beynon is getting away with today.' We are starting to do that now; this is the start. It is an important start, because for many years this has not been touched. There have been holes in corporation law as it applies to employees when their employer no longer pays them; when someone turns up to work one day and, instead of being able to go into work, finds a padlock on the gate.

As I mentioned earlier, when I worked in the construction industry this happened to me. I have worked for electrical contractors in the past. Although I was not there at the time—the industry is quite itinerant—this happened with the company that I had been working for two weeks before. The job that I had been on had finished. I had many friends still working there. It did exactly what I have been discussing. The company changed its name overnight—it added the word 'Australia' to the end of its name—and went back to work the next day. It was working on very large jobs at the time, such as the transurban tunnel in Melbourne. It continued working under a different name and escaped having to pay a lot of employee entitlements and escaped paying a lot of creditor entitlements as well. The tax office is usually the biggest one of those, but there were many others.

When we talk about employee entitlements, a lot of people may think that it is only a week's wage or a month's salary. But you have to look much deeper. You have to look at what else is in there. Those entitlements include things like superannuation. The workers at Forgecast were owed up to 15 months of superannuation. Where had the super money gone? It had not gone into their super accounts, even though it may well have shown up on their pay packets that they had received such money. They had not. The money had gone to the director of the company. If you multiply the superannuation contributions of 57 employees over the course of a month, a year or—even better—15 months to get the full figure, it rapidly adds up. It is also quite unfair in another way. It is unfair to legitimate businesses that do follow the law and do the right thing by their employees and do look after their staff, because it puts them at a competitive disadvantage. While someone is sitting back taking money that is not theirs and making a bigger profit out of their business, it can give them an opportunity to go out and undercut those that do the right thing. These sorts of things should not be allowed to happen. They should never have been allowed to happen. It is good that we as a government are starting to address these issues, because they go on around us now. From what I have read in regard to this, I think they are becoming more common. They have spread outside the construction industry and, obviously, Forgecast in Mitcham is an example of that. It is time that we really paid attention to this. I congratulate the parliamentary secretary who has brought in this bill because it is a recognition that this is not going to fix itself. It does not go away.

We hear a lot of talk about the General Employee Entitlements and Redundancy Scheme, as we have heard from those opposite, and I have spoken about it in this place on quite a few occasions before. I had to deal with that scheme many years ago when I was in a different job. It worked, but the biggest problem was waiting for a company to be placed in actual liquidation. If a company was in administration or receivership and not actually operating, workers then ended up in the twilight zone, because the GEER Scheme would not kick in at that point. So they could wait not only weeks but many months before there was any chance of a payout under GEERS. So although the scheme is a bit of a safety net, it has to be thought through a bit more as well because of this question: who is paying? The answer to that is that the Australia taxpayer pays for the funds that go into that scheme—and that is a good thing—whereas those who should pay should be the people who have run away with the workers' entitlements in the first place. That is why phoenixing is such a horrible thing to happen to anyone—not just the workers at a particular factory or with a particular employer but those right across the spectrum including everyone that is involved.

I go back to 2009 when I was talking to those local suppliers. In some cases they had, only a week or two before the factory gates were locked, provided $10,000, $20,000 or $30,000 worth of materials. Then they found that their materials were on the wrong side of the padlocked gate and, even though they might not have been unpacked from their boxes, they could not get in to retrieve them. That is not right and it is certainly not right that simply by a change of name somebody can wipe that out.

This legislation has a number of measures to stop phoenixing companies, so it is a good start. The first is to grant the Australian Securities and Investments Commission the power to order the winding-up of a company that has been abandoned to facilitate payment of employee entitlements. As I said, that is to give access to GEERS, and that is a good thing. Also, as I said earlier, employees have been able to recover some money through GEERS only once their company or employer has been placed into liquidation. This legislation will give ASIC the power to place a company into liquidation, meaning that the corporate watchdog can step in and wind up a company so workers can access GEERS, to have their entitlements paid out. This is also the case with companies that have been abandoned when their owners or directors have suddenly disappeared off the map. It is the same thing again with the GEER Scheme where there is a problem of actually delivering money to those that need it as the delivery could not occur until there had been a declaration along the way. To address this impediment to rights and to safeguard the rights of employees of failed companies to access GEERS, this legislation will provide ASIC with discretionary powers. It will give ASIC the power to place a company into liquidation in circumstances where ASIC currently has a power to deregister the company. It will give it the power to reinstate any deregistered company and immediately place it into liquidation. It will give ASIC the power to place a company into liquidation where ASIC has reason to believe that the company is no longer carrying on business.

I think this bill is a great measure to address the phoenixing of companies. The problems are wide but this is a fantastic first step that no-one has undertaken before. I commend the bill to the House. (Time expired)

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