Explanatory Memorandum
(Circulated by the authority of the Minister for Small Business, Assistant Treasurer, the Hon Kelly O'Dwyer MP and the Attorney-General, the Hon Senator George Brandis)Chapter 8 - Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Insolvency Law Reform Bill 2015
8.1 This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview
8.2 This Bill is aimed at ensuring the framework for insolvency practitioners promotes a high level of professionalism and competence by practitioners, promotes market competition on price and quality, and encouraging greater transparency and communication between stakeholders.
8.3 Harmonisation of the personal and corporate insolvency systems is also a key aim of this package. The Government is committed to reducing unnecessary regulatory burdens stemming from the differing regulatory treatment of corporate and personal insolvency practitioners.
8.4 The Bill will also enhance regulators' powers to conduct surveillance and inquire into the conduct of practitioners. There will also be an overhaul of disciplinary mechanisms for insolvency practitioners with the adoption of the personal insolvency style disciplinary committee for both personal and corporate insolvency. These changes may have impacts on certain human rights, which are detailed below.
Human rights implications
8.5 This impact of this Bill on the following human rights has been considered:
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- the right to freedom of movement;
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- the right to a fair trial and the presumption of innocence;
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- the right to work and rights in work; and
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- the right to privacy and reputation.
The right to freedom of movement
8.6 Article 12 of the International Covenant on Civil and Political Rights (ICCPR) includes the freedom to leave any country, including his own. This right may be restricted in certain circumstances (such as to protect national security, public order, public health or morals or the rights and freedoms of others) so long as that restriction is consistent with other rights under the ICCPR.
8.7 The Bill preserves the requirement for a bankrupt to give to the trustee in bankruptcy any passport or document issued for the purposes of travel held by the bankrupt (under section 77 of the Bankruptcy Act 1966). This is to ensure a bankrupt does not abscond to avoid their debts to creditors and their obligation to assist in the administration of their bankruptcy.
8.8 If a bankrupt wishes to use their passport to travel overseas they must seek permission from their trustee, who has discretion to allow the bankrupt to travel. This discretion allow for overseas travel where, for example, a bankrupt is employed overseas (as this may assist creditors by increasing assets for distribution).
8.9 Provision for restrictions on the right to freedom of movement is permitted under Article 12(3), which contemplates public order and the rights and freedoms of others as reasons for restricting this right. To the extent that the existing provision restricts the right to freedom of movement under Article 12, the limitations are justified as they balance the need to protect the rights of innocent creditors against the need for a bankrupt's freedom to leave the country.
The right to a fair trial and the presumption of innocence
8.10 Article 14 of the ICCPR includes the right to a fair trial and the presumption of innocence. Specifically Article 14(2) provides that 'everyone charged with a criminal offence shall have the right to be presumed innocent until proved guilty according to law' and Article 14(3) provides for minimum guarantees in a fair trial. Reverse burden or strict liability provisions do not violate the presumption of innocence where they are reasonable and preserve the rights of defence.
8.11 The Bill engages with this right in relation to a number of strict liability offences. However, notwithstanding the reversed burden in strict liability offences, these offences are reasonable in that they:
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- are necessary given their regulatory function,
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- deal with matters where intention would be difficult to establish,
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- impose appropriate and proportionate penalties, and
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- preserve the defence of honest and reasonable mistake of fact.
8.12 Strict liability is particularly beneficial to the Australian Securities and Investments Commission and the Australian Financial Security Authority. As the regulatory bodies for corporate and personal insolvency industries (respectively) they need to deal with offences expeditiously to maintain public confidence in their regulatory regimes.
8.13 Many of the strict liability offences relate to conduct where a requirement for proof of intention would be difficult to establish and, as such, would render the offences unenforceable. For example, where the prosecution has to prove the accused intended to refrain from paying money into the appropriate administration account when he or she failed to do so. Further, a requirement to establish intent will draw a level of resources for investigation and prosecution from the regulators that cannot always be justified, especially for offences with such a low maximum penalty.
8.14 The penalties in relation to strict liability offences under the Bill are appropriate and proportionate. To safeguard the proportionality of strict liability offences, the fines for the offences do not exceed 60 penalty units for an individual. Further, more minor infringements relating to book keeping incur a penalty of 5 penalty units while more serious offences, such as inappropriate payment of monies out of an administration account, incur a penalty of 50 penalty units.
8.15 There are no absolute liability offences under the Bill. Strict liability offences under the Bill preserve the defence of honest and reasonable mistake of fact to be proved by the accused on the balance of probabilities. This ensures that an accused will have the right to a fair hearing and to defend any charges laid against them.
8.16 Section 60-21 creates an offence (in personal insolvency) for a person to offer an inducement to securing the appointment or nomination of their preferred trustee. It provides that a person commits an offence of strict liability with a penalty of 50 penalty units, or 3 months imprisonment, or both. This provision, and its corresponding penalty, is modelled on section 595 of the Corporations Act. The severity of the penalty recognises the importance of appointing an impartial trustee who would have significant power to determine the outcome of an estate for creditors and for the regulated debtor. The conduct described in this offence amounts to an abuse of the insolvency process that could see favourable treatment for the creditors involved in the breach at the expense of innocent creditors. As such, this penalty is appropriate and proportionate given the conduct would significantly undermine the integrity of the insolvency regime and have far-reaching consequences for insolvency practitioners, debtors, creditors and financial institutions.
8.17 To the extent that these offences under the Bill restrict the right to a fair trial and the presumption of innocence under Article 14, the limitations are justified as they balance the need for regulation of the personal and corporate insolvency industries with the rights of those accused of an offence by preserving the rights of defence and ensuring penalties imposed are appropriate and proportionate.
The right to work and rights in work
8.18 The right to work and rights in work is contained in articles 6(1), 7 and 8(1)(a) of the International Covenant on Economic, Social and Cultural Rights. The right to work and rights in work may be engaged if the Bill deals with aspects of employment or workplace relations.
8.19 This Bill provides provisions in relation to the registration, discipline and remuneration of insolvency practitioners. The right to work is only affected, to the extent that a practitioner is suspected of wrongdoing or of not meeting a requirement under the Bill, such as having adequate insurance. However, on balance, the right to work and rights in work are not engaged.
The right to privacy and reputation
8.20 Article 17 ICCPR provides that no one shall be subjected to arbitrary or unlawful interference with their privacy. The right to privacy may be engaged if the Bill involves the collection, security, use, disclosure or publication of personal information.
8.21 The Bill contains provisions to require applicants to provide information to the relevant regulator and such information will be available publicly.
8.22 Practitioners will also be required to lodge a notice with the regulator when certain events occur such as when the liquidator becomes insolvent or if they are convicted of an offence involving fraud. These notices will not be made public, but rather inform the regulator
Conclusion
8.23 This Bill is compatible with human rights. To the extent that the Bill limits any human rights, those limitations are reasonable, necessary and proportionate.