Jane Hume (Victoria, Liberal Party, Minister for Superannuation, Financial Services and the Digital Economy) Share this | Hansard source

I don't have a list of the companies that you're referring to. I do remember having a conversation with Senator Patrick last time this came up. I think you tabled a list, Senator Patrick, and I think in return I tabled a list of donors to the LNP. Does that sound right? I know that we've been on this roundabout before.

The most important thing, though, is to recognise that this amendment has absolutely nothing to do with the bill at hand. We know, Senator Patrick, that what you're trying to do is delay the passage of this bill. This bill is exceptionally important, not just because it provides temporary relief to organisations that require the use of technology to meet their regulatory requirements in the Corporations Act to hold meetings, distribute materials and execute documents but also because these changes are sensible, incremental and permanent changes to Australia's continuous disclosure regime.

We know that we have discussed this before. In response to the COVID crisis, in May last year, we announced these temporary changes. They introduced a fault element to continuous disclosure regimes so that companies are only liable for failing to disclose certain price-sensitive information in the market if there has been knowledge, recklessness or negligence. That was given at the time, importantly, under the heightened level of uncertainty for companies issuing market guidance and the threat of opportunistic class actions, by litigation funders, against companies who made those announcements and whose reasonable forecasts were ultimately proved to be inaccurate, though they were reasonable forecasts at the time.

These issues and these changes were also considered by the Parliamentary Joint Committee on Corporations and Financial Services, which recommended in its report in December last year that these temporary changes, which were due to expire in March this year, be made permanent. So the Treasury Laws Amendment (2021 Measures No. 1) Bill 2021 does exactly that. It makes these important changes to the Corporations Act 2001, and they apply to both civil penalty provisions and private actions. They make those civil penalty provisions and private actions permanent.

Companies and officers will also not be liable for misleading and deceptive conduct where the continuous disclosure obligations have been contravened unless the requisite fault element is also proven. The introduction of this fault element for private actions also brings Australia's continuous disclosure regime far better into line with the approaches taken in both the United States and the United Kingdom. But, importantly, the changes don't affect ASIC's ability to prosecute criminal breaches or issue administrative penalties, and ASIC can continue to issue infringement notices without proving fault.

The reforms will allow businesses to reallocate resources towards improving efficiency and output as opposed to defending class actions, which are economically inefficient and do not contribute to the public good. As members of the PJC and members on this side of the house know, Federal Court data shows that class action filings have increased by 325 per cent in just the last decade and, according to industry data, this increase is almost entirely attributable to shareholder class actions. Shareholder class actions, above all else, generate windfall profits for class action law firms and for litigation funders and they do little, if anything, to compensate shareholders, particularly those mums and dads that those opposite are so fond of talking about. Indeed, the class action damages that actually go to legal costs can be as high as 60 per cent. As my good friend the member for Mackellar knows, in the Dick Smith case, $18.75 million, or 75 per cent of the settlement proceeds in that case, went to legal costs.

According to insurance provider Marsh in their submission to the PJC inquiry, companies in the ASX 200 saw the costs of their directors and officers insurance premiums increase by over 250 per cent between 2011 and 2018 and another 118 per cent in 2019. On top of that, smaller companies may be forced to not renew or significantly reduce their D&O cover. Of course the small percentage of money that does flow to a company's old shareholders is being funded by the company's new shareholders. This is a circular problem that doesn't serve shareholders' best interests. I also note that ASIC data shows that, when the period between 1 March and 31 March 2019 is compared with the same period of 2020, material announcement by disclosing entities increased 6.7 per cent year on year. That means 8,509 material announcements per day in 2019 compared to 9,015 per day in 2020.

Given the deep ties between the Labor Party and class action law firms and litigation funders, the government can well understand why those opposite may oppose these changes—although I am surprised, Senator Patrick, that you would assist them in that process.

Recommendation 29 of the PJC report said:

The committee recommends the Australian Government permanently legislate changes to continuous disclosure laws in the Corporations (Coronavirus Economic Response) Determination (No. 2) 2020.

That was backed up by Jennifer Westacott, the chair of the BCA, who said, 'These are very sensible changes that will let company directors focus on our biggest challenge, creating the jobs that we need to fuel our economic recovery.'

Temporary changes to continuous disclosure rules were a crucial measure that helped give businesses the certainty they needed to keep functioning through the pandemic. As we recover, permanent changes will be critical to building the confidence to power our recovery with new jobs. You, Senator Patrick, are standing in the way of that legislation proceeding. Angus Armour, the head of the Australian Institute of Company Directors, said: 'This is a critical step in acknowledging the challenges faced by the business community to rebuild in the wake of COVID-19. This measure allows for directors to provide greater disclosure in this uncertain environment at the same time as it maintains measures to discipline irresponsible companies to protect the community.' Daniel Moran of ASX Limited, in his submission to the PJC dated 17 June 2020, said:

As you can see, Senator Patrick, this is an exceptionally important piece of legislation, and while I understand that you love slapping this amendment onto everything that moves—everything that has a TLAB in front of it—it is simply a matter of showmanship. In fact, I think that you are making a mockery of what is a very serious and important issue and an important change for our business community and for our economy more broadly.