Chapter 1


Chapter 1

Introduction

Referral and summary of the Bill

1.1        On 5 July 2011, Senator Nick Xenophon introduced into the Senate the Bankruptcy Amendment (Exceptional Circumstances Exit Package) Bill 2011. The Bill seeks to amend the Bankruptcy Regulations 1996 to exempt grants made on or after 1 July 2010 under the Exceptional Circumstances Exit Package (EC Exit Package) from bankruptcy proceedings, so long as the final orders have not been made.

1.2        The EC Exit Package was part of the drought assistance measures announced in September 2007 by the Howard Government. The main component of the EC Exit Package, the $150,000 EC Exit Grant, offered 'time-limited, one-off exit assistance for those farmers within an EC declared area that sell their farm enterprise and leave farming'.[1] The EC Exit Package is currently not exempted from the laws governing bankruptcy proceedings, and therefore any grants received may be divisible among a recipient's creditors if they become bankrupt.

1.3        During his Second Reading Speech on the Bill, Senator Xenophon reasoned:

... it is vital that families who make the difficult decision to leave their farms—some of which have been in their family for generations—are able to fully utilise the money they receive under the package so they can start their new lives.[2]

1.4        On 7 July 2011, the Senate referred the Bill to the Economics Legislation Committee for inquiry and report by 21 September 2011.

Conduct of the inquiry

1.5        The committee advertised the inquiry in The Australian and on its website. The committee also wrote to the relevant Commonwealth departments and agencies, state governments, bankruptcy industry groups, peak farmer representative bodies and other stakeholders inviting submissions. The committee received nine submissions, which are listed in Appendix 1.

Outline of the report

1.6        This report consists of four chapters:

  • The remaining section of this chapter discusses the approach taken by the Bill of amending subordinate legislation via primary legislation and the consideration of the Bill by the Senate Standing Committee for the Scrutiny of Bills.
  • Chapter 2 provides an overview of the EC Exit Package, and outlines the current treatment of that program, and other government rural support schemes, under bankruptcy law.
  • Chapter 3 presents the views on the Bill outlined in evidence received from submitters.
  • The provisions of the Bill and remaining matters are discussed in chapter 4. The committee's views on the Bill and its recommendations can be found at the end of that chapter.

Bills amending regulations

1.7        It is rare for a bill to be proposed (or passed) which amends subordinate legislation, such as regulations. The Office of Parliamentary Counsel's advice to its drafters argues against using bills to amend regulations except for 'compelling reasons'. A number of practical concerns are raised, such as the need to ensure there are not any other regulations made with suspended commencements pending, or that other amendments to the regulations are not made which could affect the amendments to be made by the bill.[3]

1.8        The Legislative Instruments Act 2003 (LI Act), which commenced operation on 1 January 2005, provides a framework for the registration, publication, parliamentary scrutiny and sunsetting of subordinate legislation. The LI Act requires legislative instruments to be published on the Federal Register of Legislative Instruments. However, the LI Act envisages a situation in which an Act amends regulations—subsection 33(1) simply requires the department to cause a compilation of the amended principal legislative instrument as soon as practicable.

1.9        One example of a bill being introduced which sought to amend regulations (prior to the passage of the LI Act) is the Migration Legislation Amendment (Parents and Other Measures) Bill 2000. This was a government bill which amended primary legislation but also proposed amending the Migration Regulations 1994—although this aspect of the bill was subsequently opposed by the Senate. Nevertheless, the Bills Digest on this bill observed:

Whatever the merits of the proposed measures, it is at least possible that concern could be directed to the process adopted by the Bill. As indicated, Schedule 3 directly amends the Migration Regulations 1994. While the process of using principal legislation to amend subordinate legislation is unusual it would seem to be valid. But the approach is not standard practice and may cause unintended difficulties.[4] (footnotes omitted)

1.10      Returning to the Bill being examined by this committee, rather than amending primary legislation to give effect to the matters concerning the Bill, however, amendments to the regulations may be more appropriate. Such an approach was argued in 2006 when it was proposed that excluding government rural support schemes from bankruptcy proceedings should not require amendments to primary legislation, but should be made by regulations:

Grant schemes may be introduced (or amended) and payments to primary producers commenced within a short period. Rapid introduction (or amendment) of schemes may be necessitated by the circumstances giving rise to the creation (or amendment) of the schemes. Accompanying protections under the Bankruptcy Act for those payments must therefore also be capable of being introduced rapidly.[5]

Consideration by the Scrutiny of Bills Committee

1.11      The Senate Standing Committee for the Scrutiny of Bills assesses legislative proposals against a set of accountability standards that focus on the effect of proposed legislation on individual rights, liberties and obligations, and on parliamentary propriety.

1.12      The Scrutiny of Bills Committee has had the opportunity to review the Bill. That committee observed that clause 3 of the Bill may constitute a 'Henry VIII' clause[6], because it 'states that the amendments in schedule 1 to regulations can be amended or repealed by regulations made under the bankruptcy legislation'. The Scrutiny of Bills Committee concluded:

Technically, this enables regulations to modify the operation of primary legislation and may thus be thought to inappropriately delegate legislative power. However, given the proposed amendments in the bill relate to the operation of existing regulations, the Committee leaves the question of the appropriateness of this provision to the Senate as a whole.[7]

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