Katy Gallagher (ACT, Australian Labor Party) Share this | Hansard source

by leave—I move opposition amendments (1) to (15) on sheet 8224, circulated in my name, together.

(1) Schedule 1, item 1, page 3 (lines 7 to 13), omit all the words from and including "evidence" to the end of subsection 588E(8A), substitute:

it has been proved that:

(a) subsection 588GA(1) applies in relation to a person and a debt; or

(b) subsection 588WA(1) applies in relation to a corporation and a debt;

it must be presumed that the relevant subsection applies in relation to the person or the corporation and the debt.

(2) Schedule 1, item 2, page 3 (line 16), after "harbour", insert "defence".

(3) Schedule 1, item 2, page 3 (lines 19 and 20), omit "Subsection 588G(2) does not apply in relation to a person and a debt if", substitute "In any proceedings against a person under subsection 588G(2), it is a defence if the person proves, in relation to a debt, that".

(4) Schedule 1, item 2, page 4 (line 7), omit "an evidential", substitute "a legal".

(5) Schedule 1, item 2, page 4 (lines 13 to 15), omit all the words from and including "For" to "whether", substitute "For the purposes of subsection (1), a course of action is reasonably likely to lead to a better outcome for the company only if".

(6) Schedule 1, item 2, page 4 (line 18), omit "or", substitute "and".

(7) Schedule 1, item 2, page 4 (line 21), omit "or", substitute "and".

(8) Schedule 1, item 2, page 4 (line 24), omit "or", substitute "and".

(9) Schedule 1, item 2, page 4 (line 27), omit "or", substitute "and".

(10) Schedule 1, item 2, page 4 (lines 31 and 32), omit "an evidential", substitute "a legal".

(11) Schedule 1, item 2, page 6 (lines 4 to 6), omit the definition of evidential burden in subsection 588GA(7), substitute:

legal burden, in relation to a matter, means the burden of proving the existence of the matter.

(12) Schedule 1, item 4, page 8 (line 15), after "harbour", insert "defence".

(13) Schedule 1, item 4, page 8 (lines 17 and 18), omit all words from and including "Subsection" to "debt, if", substitute "In any proceedings against a corporation under section 588W, it is a defence if".

(14) Schedule 1, item 4, page 8 (lines 27 and 28), omit "an evidential", substitute "a legal".

(15) Schedule 1, item 4, page 9 (lines 1 to 3), omit the definition of evidential burden in subsection 588WA(3), substitute:

legal burden, in relation to a matter, means the burden of proving the existence of the matter.

I did go into this in some detail in the second reading stage, but just for the benefit of senators I will cover it off again. With the way the government's bill is drafted, the directors don't have to prove that they have the benefit of the defence. Instead, once directors bring evidence that satisfies an evidentiary burden that suggests a reasonable possibility that the matters exist or do not exist in that they are entitled to the safe harbour, the burden of proof or the legal burden falls on the party bringing proceedings to prove that the director is not entitled to the safe harbour. Our amendments on sheet 8224 would mean that directors who want to access the safe harbour bear the burden of proof in showing that they are genuinely taking a reasonable course of action to turn the company around. This is consistent with other existing defences to liability for insolvent trading.

An evidential burden in relation to a matter means the burden of adducing, or pointing to, evidence that suggests a reasonable possibility that the matter exists or does not exist, whereas a legal burden in relation to a matter means the burden of proving the existence of the matter. In civil proceedings, this is required to be on the balance of probabilities. Under the government's bill, once directors point to some evidence—that is, they satisfy an evidentiary burden—the burden of proof then falls onto the person bringing proceedings to prove that the director is not entitled to the safe harbour. We think that directors should bear the full legal burden of proof because they are in the position to have the information and knowledge about what action they've taken and why. Placing the burden of proof on directors will also mean they are more likely to take proper care and show diligence when trying to turn around an insolvent company.

Through these amendments, we are also tightening the safeguards to make sure that directors are doing proper due diligence when they put into place a plan of action to trade out of insolvency. Currently the bill contains five sensible things that the court may have regard to in determining whether the safe harbour is available. We think that each of the five factors in the bill are good but that they should be non-negotiable. Our amendments will change these from being indicia—that a court may have regard to—to being five mandatory requirements. There should be no doubt that directors in this situation must be informing themselves of the company's financial position, taking appropriate steps to prevent misconduct by the company's employees or officers, ensuring that the company is keeping appropriate records, obtaining appropriate advice, and developing or implementing a restructuring plan. I hope the Senate can support these amendments.