Australia’s new insolvency laws – introduced by the Insolvency Law Reform Act 2016 – are in place and the task is to understand and apply them. They are not legally difficult.
But they have been described in dramatic terms by eminent commentators as the worst insolvency reforms in 30 years; some may say the worst law reforms in recent times. The consequence for Australia’s international insolvency rating – already low at 21 – is potentially dire.
A 2012 article, itself criticising an article by a journalist, Adele Ferguson, which I unearthed in moving books and papers to our spectacular new office premises, gives an insight into how these laws came about.
And a recent Senate hearing indicates nothing much as changed.
If one accepts this negative assessment, it would be an interesting subject for a research thesis to analyse how this bad law came about, despite the input from a plethora of qualified and experienced professionals and academics at the time. My own on-going list of 20+ insolvency law reform recommendations unactioned by government over the years might well explain a community dissatisfaction with what I say is a dysfunctional system, economically, legally and more; hindered by an unrealistic expectation gap of what insolvency law can do. That the new law reform has compounded this dysfunctionality is an odd outcome.
Our new laws are highly regulatory, prescriptive and verbose, with novel and untested regulatory approaches, and with process requirements potentially adding to the cost of the regime. This despite an acknowledgement of the benefits of some harmonisation. They are out of kilter with international insolvency regulation and with the regulation of other comparable professions, lawyers in particular.
The sad history appeared to start with a Senate inquiry in 2010, which although antagonistic to the profession and its regulation by ASIC, in the end came out quite moderate in its reforms.
The newspapers were also there, critical of the profession in their own dramatic language – Adele Ferguson writing of a “system spiralling out of control”, resulting in numerous “victims” of unsatisfactory liquidators. That the proportion of unsatisfactory practitioners was probably comparable with other professions – lawyers and doctors for example; or with others – journalists or politicians, was not conceded.
The 2012 article
The 2012 article was written by ‘the Eye’, and published on a respected University of Adelaide insolvency website. The article takes serious issue with an article written at the time by a journalist, Adele Ferguson, as to content, langague and style. Ferguson has recently followed up on her topic, remaining critical of the system, despite her, and others’ achievement in having the Insolvency Law Reform Act become law.
The academic thesis that requires writing is to analyse how the newspapers can much influence the drafting of laws, in an unpopular and perhaps too little understood area of law and practice. That is coupled with politicians and the regulators themselves, joining in, each in their own way; and continuing to do so. The involvement of the profession itself, or industry as it now tellingly seems to call itself, would also need examining. An overlay might be the harsh attitudes many Australians have to unpaid debt, a culture the government is attempting to change, in the interests of encouraging reasonable business risk taking. A creditor’s externalization of its response to not being paid by looking at someone in charge to blame may be a useful psychological and social perspective.
It remains to disclose the author of the article. The Eye was in fact I, dramatic disclosure though that will be to many, the pseudonym necessary at the time to protect the faint hearted. The Eye had quite a following in its day, including from myself.
This is the article to which I refer – Insolvency Regulation proposals: casting a careful Eye.
Adele Ferguson has won many awards. Well done.