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Australian Industrial Relations Commission Transcripts |
AUSCRIPT PTY LTD
ABN 76 082 664 220
Level 4, 179 Queen St MELBOURNE Vic 3000
(GPO Box 1114J MELBOURNE Vic 3001)
DX 305 Melbourne Tel:(03) 9672-5608 Fax:(03) 9670-8883
TRANSCRIPT OF PROCEEDINGS
O/N 10401
AUSTRALIAN INDUSTRIAL
RELATIONS COMMISSION
JUSTICE GIUDICE
VICE PRESIDENT ROSS
SENIOR DEPUTY PRESIDENT POLITES
COMMISSIONER SMITH
COMMISSIONER DEEGAN
C2002/4087, 4088, 4091, 4097,
4099, 4178, 4505, 4506, 4507,
4508, 4607, 4608, 4609, 4610,
4611, 4659, 4660, 4740 and 4772
C2002/4089, 4090, 4092, 4098,
4100 and 4179
STORAGE SERVICES - GENERAL -
AWARD 1999
RUBBER, PLASTIC AND CABLE MAKING
INDUSTRY - GENERAL - AWARD 1998
RETAIL AND WHOLESALE INDUSTRY -
SHOP EMPLOYEES - ACT- AWARD 2000
METAL, ENGINEERING AND ASSOCIATED
INDUSTRIES AWARD 1998 - PART 1
GRAPHIC ARTS - GENERAL - AWARD 2000
CLERICAL AND ADMINISTRATIVE
EMPLOYEES (VICTORIA) AWARD 1999
RUBBER, PLASTIC AND CABLE MAKING
INDUSTRY - GENERAL - AWARD 1998
GRAPHIC ARTS - GENERAL - AWARD 2000
INFORMATION TECHNOLOGY INDUSTRY
(PROFESSIONAL EMPLOYEES) AWARD 2001
METAL, ENGINEERING AND ASSOCIATED
INDUSTRIES AWARD 1998 - PART 1
BUSINESS EQUIPMENT INDUSTRY - TECHNICAL
SERVICE AWARD 1999
RUBBER, PLASTIC AND CABLE MAKING
INDUSTRY - GENERAL - AWARD 1998
STORAGE SERVICES - GENERAL - AWARD 1999
STORAGE SERVICES - GENERAL - AWARD 1999
LIQUOR AND ACCOMMODATION INDUSTRY -
RESTAURANTS - VICTORIA - AWARD 1998
RETAIL AND WHOLESALE INDUSTRY - SHOP
EMPLOYEES - ACT - AWARD 2000
GRAPHIC ARTS - GENERAL - AWARD 2000
METAL, ENGINEERING AND ASSOCIATED
INDUSTRIES AWARD 1998 - PART 1
LIQUOR AND ACCOMMODATION INDUSTRY -
RESTAURANTS - VICTORIA - AWARD 1998
Applications under section 113 of the Act by
the National Union of Workers and Others to
vary awards re redundancy
APPLICATIONS FOR EMPLOYMENT TERMINATION
ORDERS
Applications under section 170FB of the Act by
the National Union of Workers and Others for
orders giving effect to Article 13 of the
Termination of Employment Convention
MELBOURNE
10.31 AM, THURSDAY, 29 MAY 2003
Continued from 28.5.03
PN1862
PN1863
MR WATSON: Your full name is Lionel Bruce Campbell?---Correct.
PN1864
And you reside at 141 Broughton Street, Campbelltown in New South Wales?---That is correct.
PN1865
And you are employed and have been for some time as an organiser with the Australian Manufacturing Workers' Union in that State?---Correct.
PN1866
Now in the course of preparation for these proceedings, you have prepared two witness statements. Do you have both of those with you in the witness box with you?---I do.
PN1867
Can I take you to the first of those. That is dated 9 April 2003. And in your second witness statement you qualify some matters at paragraphs 6 and 8 of that statement, that first statement.
PN1868
JUSTICE GIUDICE: Where is this, Mr - - -
PN1869
MR WATSON: I am sorry, it is ACTU7 at page 63.
PN1870
JUSTICE GIUDICE: Yes, thank you.
PN1871
MR WATSON: Yes. Subject to the qualifications that you do make in your second witness statement, are the matters that you refer to in your first statement, true and correct?---Correct.
PN1872
Now can I take you to your second statement, which is undated but which is ACTU15, if the Commission pleases. It is the document I handed up. Can I take you first to paragraph 3 of that statement. And the second dot point there, where it says:
**** LIONEL BRUCE CAMPBELL XN MR WATSON
PN1873
I received a copy of this report on 13 November 2001.
PN1874
Is that in fact precisely accurate?---I didn't receive it personally, Mr Watson. That would have been received in the office, because on that particular day I would have been at the IMF Congress in Sydney.
PN1875
Right. Subject to that qualification, are the contents of your supplementary witness statement true and correct?---Correct.
PN1876
I have no further questions in examination in chief.
PN1877
JUSTICE GIUDICE: Mr Campbell, a couple of the other advocates are gong to ask you some questions about your evidence. Yes, Mr Moir.
PN1878
PN1879
MR MOIR: Good morning, Mr Campbell. I represent the Australian Industry Group. In your supplementary statement, ACTU15, you qualify some of the original statements you made in ACTU7. In paragraph 8 of your original statement, you said that the proposal to reduce severance pay entitlements was not raised until the creditors' meeting in November 2001. Do you see that in paragraph 8 of your original statement?---Of my original statement?
PN1880
Yes?---Yes.
PN1881
Yes. However, as you acknowledge in paragraph 3 of your supplementary statement, that was not quite true, was it?---No, it has been corrected. I - it had been raised. It had been raised in the - during the EBA negotiations.
**** LIONEL BRUCE CAMPBELL XXN MR MOIR
PN1882
Yes, but nevertheless the proposal to reduce severance pay entitlements was contained in the proposed deed of company arrangement, and the Union received a copy of the Administrator's report, which contained details of the proposed deed on 13 November. That is correct, isn't it?---Correct.
PN1883
Well, that was exactly one week prior to the creditors' meeting held on 20 November?---That would be right.
PN1884
Yes. So it is not accurate to say that the proposal to restructure the company, including the proposal to reduce severance pay entitlements, was not raised until the time of the creditors' meeting. Would you agree with me that the Administrator's report - you have seen a copy of that report? It is set out as an attachment to the statement by Mr McGloin. Have you seen Mr McGloin's statement, or do you have that?---I saw Mr McGloin's statement earlier.
PN1885
Yes. And you saw the Administrator's report, which was attached to Mr McGloin's statement?---The Administrator's report, I would have received would have been the one earlier, back in - prior to 20 November.
PN1886
Yes?---For the creditors' meeting.
PN1887
Yes, Mr McGloin refers to the Administrator's report at several points in his witness statement, and attached to his witness statement is a copy of that report. Did you see the copy of that report attached to his statement?---No, I saw the deed of arrangements.
PN1888
Yes?---That was prior to 20 November.
PN1889
All right. So you saw the Administrator's report to creditors dated 12 November 2001, just so we are certain about what document you saw?---that would - that is the document which - was referring to regarding the creditors' meeting of the 20th, which would have the deed of arrangements which was proposed for that creditors' meeting on the 20th, which would have went to the state secretary in the office.
**** LIONEL BRUCE CAMPBELL XXN MR MOIR
PN1890
Right. Now would you agree with me that the Administrator's report dated 12 November 2001, which you received one week prior to the creditors' meeting, it set out information about the financial affairs of the company?---The financial affairs for the company, I think - for detail, I do not - I don't know. But I do know for a fact that the company were having difficulties.
PN1891
Yes. So do you recall that the report set out information about the financial affairs of the company? Or you not able to answer that?---I can't answer without going over the document, checking it.
PN1892
Your Honour, I wonder if the witness maybe provided a copy of Mr McGloin's statement. It is found in volume 1 of the materials filed by AI Group. It is found at - Mr McGloin's statement is found at tab 2. You see that that - Mr Campbell, do you have a copy of Mr McGloin's original statement dated the - the date which appears on it is the 17 December 2002?---I do.
PN1893
And if I can ask you to turn to tab 8, you will see there are dividers behind the statement on your right hand side of the folder? Tab H or divider H?---Tab 8, yes, okay. Yes.
PN1894
And you see that is a copy of the Administrator's report to creditors dated 12 November 2001? Do you see that?---Yes.
PN1895
And is that the report which the Union received on 13 November 2001?---I believe it would be the - - -
PN1896
And if I could ask you to turn to page 4 of the Administrator's report, you will see there it sets out relevant background information on pages 4 and 5, and then on page - commencing on page 5 it sets out details about the company's present difficulties. Do you see that?---On page 5?
**** LIONEL BRUCE CAMPBELL XXN MR MOIR
PN1897
Yes, under the heading, 5, Reasons for Company's Difficulties. Do you see that?---Yes.
PN1898
Yes. So you would agree with me that the report sets out information about the financial affairs of the Company at that time?---It does, yes.
PN1899
Yes. And if I could ask you to - - -
PN1900
VICE PRESIDENT ROSS: Isn't that clear on the face of the document, Mr Moir?
PN1901
MR MOIR: Yes, I am just familiarising the witness with relevant arms of the document.
PN1902
And if I could ask you to - just excuse me for a moment, Mr Campbell. If I could ask you to turn to page 10 of the document? You will see there that the report also sets out details about the level of employee entitlements, as at the date of the report. Do you see that?---Yes, I do.
PN1903
And that includes the level of redundancy pay entitlements. Do you see that?---I do.
PN1904
Yes. And at the back of the report, there is a list set out of all the creditors, some 82 of them, including employee creditors. Do you see that?---What page are we referring to, sorry?
PN1905
It is annexure C to the report, which is about four pages from the back?---Yes, I can see it.
**** LIONEL BRUCE CAMPBELL XXN MR MOIR
PN1906
Yes, you see that list of creditors?---Mm.
PN1907
Three page list?---Yes. Well, one of those would be Phillip Pearce, Mr Pearce, of Bryden, which was the previous owners.
PN1908
Yes, the previous owners. And it also - that list also includes the names of the employee creditors, which is on the third page of the list? Do you see that?---I do.
PN1909
Yes, thank you. Now, you have no reason to doubt the accuracy of the information which is set out in the Administrator's report?---Well, I have no grounds to challenge that.
PN1910
No reason to doubt the veracity of it?---I think it was explained that the company were having difficulties, yes.
PN1911
Yes, but you have got no reason to doubt the accuracy of the information set out in the - - -?---No.
PN1912
Thank you. Now, the report also sets out details of the proposed deed of company arrangement. If I could take you back to the report on page 16. Do you see those details?---I have just lost the page, can you - - -
PN1913
Sorry, if you remain in tab H, which is the Administrator's report?---Yes, well, I have lost it, just a minute. Yes. Dated the 12th?
PN1914
Page 16, it is?---Yes.
PN1915
Yes, and you see there details are set out about the proposed deed of company arrangement, particularly from page 17, with the heading to that effect? Do you see that?---Yes, I have got those.
**** LIONEL BRUCE CAMPBELL XXN MR MOIR
PN1916
Yes, and then at the conclusion of the report, commencing on page 20, the Administrator puts forward a recommendation to the creditors that they vote in favour of the proposed deed of company arrangement? Do you see that, commencing on page 20?---Yes, page 20, yes.
PN1917
And you will see also that the Administrator sets out his reasons as to why he believes that creditors should vote in favour of the proposed deed? Now, are you familiar with those reasons?---I haven't read this detail for some time, but I would have browsed it when it came through obviously.
PN1918
Yes, all right?---You know - - -
PN1919
One of the reasons included that all creditors would receive a better return under the proposed deed than under any winding up of the company. You agree with that? You agree that that was one of the reasons put forward?---That was his reason, yes.
PN1920
And another reason that the administrator recommended the deed, was that it would have involved continued employment for many of the employees? You are familiar with that reason?---For the remaining. There was already - been seven terminated prior to that, yes.
PN1921
Yes?---That was the objective, yes.
PN1922
Yes, yes. And the Administrator also expressed the view that the winding up of the Company was not in the interests of creditors or the community at large. Are you familiar with that reason being put forward by the Administrator as well?---That would sound familiar, yes.
PN1923
Yes, thank you. Now, the Union obviously had time to consider the proposed deed, and the contents of the Administrator's report prior to the creditors' meeting on 20 November; you would agree with that?---I do.
**** LIONEL BRUCE CAMPBELL XXN MR MOIR
PN1924
Yes. And in fact in the third paragraph of your supplementary statement you acknowledge that discussions were held between yourself and company representatives about the proposed deed in the week leading up to the creditors' meeting. Do you see that? It is the final dot point in paragraph 3?---Yes.
PN1925
Yes. So you had those discussions in the week leading up to the creditors' meeting with the company?---Yes, and that is where the original confusion came from on my initial statement. Yes, after we received the deed of arrangements, which was proposed, yes.
PN1926
That was with Mr McGloin, that you had those discussions?---Well, it most certainly would have been with Mr Scott, the production manager.
PN1927
I see?---And Mr McGloin, if he was there.
PN1928
Yes. Now, you go on to say, however, in paragraph 4 of your supplementary statement, that before receiving the Administrator's report on 13 November, the issue of a possible amendment to severance pay entitlements had not been raised with you by Mr McGloin. Do you see that in paragraph 4?---Of my statement?
PN1929
Yes, your supplementary statement?---Supplementary statement, which one is that?
PN1930
You are saying that prior to receiving this Administrator's report, there were no discussions with Mr McGloin about possible amendment to the severance pay entitlements. Is that your evidence?---I am saying that that is correct, there had been none until we received the Administrator's deed of company arrangements.
PN1931
And that included during the negotiations over a new enterprise agreement in the preceding months? You are maintaining that the issue was not discussed then?---There was discussions most certainly, in regard to wages and redundancy.
**** LIONEL BRUCE CAMPBELL XXN MR MOIR
PN1932
Right?---Yes.
PN1933
Now, those negotiations over the new enterprise agreement, they commenced in May 2001?---It would have been, yes, Ma/June, yes.
PN1934
And they concluded by about early August?---It would have been around August. Yes, because the agreement wasn't certified until September.
PN1935
Yes. And you said earlier that you were aware of the company's trading difficulties. Were you aware of the trading difficulties during the period of the negotiations, that is from May until early August?---No, my difficulties really arose on the 19th.
PN1936
You weren't aware of them before then?---Well, I was aware that the company weren't making millions, yes.
PN1937
Okay. Were you aware that the Company had lost a major contract in June?---Well, that contract in June, I believe that was the contract that we discussed in the creditors - not the creditors' meeting - the first meeting of the 19th with the Administrator.
PN1938
Yes?---I believe that was the same contract. Now, I don't believe - I wasn't aware that they had lost it until the 19th.
PN1939
I see, all right. Now, in paragraph 6 of your original statement you said that redundancy provisions were not raised as an issue during the negotiations over the new EBA. However, you do now acknowledge in your supplementary statement that redundancy provisions were raised and discussed during the negotiations. That is right, isn't it?---They would have been in the claim. I haven't looked at the claim, but, yes, they were raised and they weren't pursued because for the reasons set out with the first wages offered from the company.
**** LIONEL BRUCE CAMPBELL XXN MR MOIR
PN1940
So you originally said in your first witness statement that redundancy was not raised.
PN1941
SENIOR DEPUTY PRESIDENT POLITES: He didn't say that at all. He said it was not raised as an issue.
PN1942
MR MOIR: Yes, well, not raised as an issue.
PN1943
SENIOR DEPUTY PRESIDENT POLITES: Well, there is a difference, isn't there?
PN1944
MR MOIR: All right. Well, you are saying that redundancy provisions were not raised as an issue during the negotiations. Can I put it to you that it is possible - I am sorry, I withdraw that. During the negotiations, you do agree that the AMWU was putting forward a proposal to increase the level of redundancy pay entitlements? That is in your evidence now, isn't it, paragraph 2 of your supplementary statement?---Yes, there was the redundancy and it would have been requested by the employees.
PN1945
Yes, there was a claim for increased redundancy provisions?---Yes, that would have come from the shop floor, yes.
PN1946
Now, is it possible that in response to the union's claim for increased redundancy provisions, Mr McGloin said words to the effect the severance pay scale should be cut back, not increased? Is it possible that Mr McGloin said something along those lines to you during the negotiations?---No, and there was four parties at that - there was the production manager and he doesn't recall either and doesn't believe it was stated. The only reason that the redundancy wasn't pursued because any sane man wouldn't have pursued it when the company offered one per cent and a further two per cent on their wages offer and that was the reason explained to the blokes, that we won't pursue redundancy.
**** LIONEL BRUCE CAMPBELL XXN MR MOIR
PN1947
Well, you now acknowledge that redundancy pay was actually discussed during the negotiations. Can I put it to you that in response to the union's claim for increased severance pay, Mr McGloin responded by stating that the existing severance pay scale was too high and needed to be reduced?---I believe he said it was a really good redundancy package we had which was 3.75 weeks per year of service, not arguing that point.
PN1948
Well, that is not the point I am putting to you?---Sorry.
PN1949
I will say it again. You now acknowledge that severance pay was raised during the negotiations. Can I put it to you that in response to the claim for increased severance pay entitlements, Mr McGloin said that the existing scale was too high and needed to be reduced? What do you say to that?---I don't believe that is the case. I believe he said it was adequate.
PN1950
All right. Now, the agreement which was - it was concluded, the enterprise agreement was concluded by early August 2001 and would you agree it contains quite generous redundancy pay provisions?---The redundancy provisions are a flow-on from the 2000 enterprise agreement. It remains the same.
PN1951
JUSTICE GIUDICE: What was the wage increase?---The total package was for five per cent over a 21-month period, your Honour.
PN1952
Thank you.
PN1953
MR MOIR: Would you agree that those redundancy pay provisions set out in the agreement are relatively generous in nature?---It's a reasonable redundancy outcome.
PN1954
Yes, it is certainly well above the award scale, isn't it?---Considerably.
**** LIONEL BRUCE CAMPBELL XXN MR MOIR
PN1955
And in paragraph 6 of your original statement, if I could take you to that, you refer to clause 15 of the 2001 agreement which states and I quote:
PN1956
The company will take all necessary steps to avoid redundancies for the life of this agreement. It is agreed no redundancies are envisaged with the current work load and the current number of employees.
PN1957
So no redundancies were envisaged, that is right?---That is what it says, I agree.
PN1958
Yes. Now, the events which occurred over subsequent months leading up to the ultimate demise of the business, were they foreseen by you during the negotiations?---The 19th came as a shock to me when I received a call early in the morning to be - the production manager, he wanted to see me urgently, immediately.
PN1959
Yes, so it was a total shock that this situation had arisen and you certainly could not have foreseen during the period of the negotiations that this situation might have transpired. Is that right?---I didn't believe the company was going to fold, no.
PN1960
So you couldn't have foreseen this situation occurring?---Not the way it turned out.
PN1961
So during the negotiations, it could never have occurred to you that one day quite soon the redundancy pay provisions under the enterprise agreement might apply to the whole of the workforce as a consequence of the employees being made redundant due to the insolvency? It could never have occurred to you that one day quite soon, those redundancy pay provisions would become applicable to each and every employee who is made redundant as a consequence of the insolvency? You couldn't have foreseen that?---Well, I wasn't looking at the insolvency of the company.
**** LIONEL BRUCE CAMPBELL XXN MR MOIR
PN1962
So it wasn't envisaged during the time that the severance pay provisions were negotiated and agreed upon, it was never envisaged that they would one day apply to each and every employee in an insolvency situation?---The agreement as it currently exists was negotiated under the umbrella of Mr Philip Pearce of McBride and Company. It was Plastine Products Pty Limited, Plastine Products, yes.
PN1963
So it would never have occurred to you during the negotiations that a couple of months after the agreement was settled the redundancy pay provisions would apply to the whole of the workforce as a consequence of the company going under?---No, at that stage there was no consideration of the company going under.
PN1964
So it couldn't have occurred to you?---Well, this agreement was signed off around August, you know, it was signed by the owner of the company, when you refer to clause 15 of the current agreement, and that would have been the spirit in which the - the employees didn't want redundancy, they wanted continuing jobs, they were long term people.
PN1965
Yes, all right. Now, you attended this meeting with management on 19 September when you got the phone call?---Yes, I did.
PN1966
And during this meeting you were advised of the appointment of the administrator?---Yes, Mr Petrina - David Petrina from De Vries and - - -
PN1967
De Vries Tate?---De Vries and Company, yes.
PN1968
And you were advised that his appointment was to commence the next day, on 20 September?---Well, my understanding was that he - that the appointment was starting that day which subsequently followed that it was the 20th.
**** LIONEL BRUCE CAMPBELL XXN MR MOIR
PN1969
I see, all right. And do you recall if the administrator, in this case Mr Petrina, addressed a meeting of the employees?---Mr Petrina and I addressed the workers and I suggested we better go down and speak to the workers.
PN1970
Yes?---Because the two delegates were in attendance at that meeting.
PN1971
And do you recall if Mr Petrina advised the employees that, due to the financial difficulties facing the company, the control of the company would now be conducted by the administrator?---Yes, and I believe I explained that to the workers first.
PN1972
Yes?---That Mr Petrina will now be the boss.
PN1973
And do you recall also Mr Petrina advised that it was not the intention of the administrator to close the doors, that the business would be kept running?---Yes.
PN1974
And that nevertheless a restructure was necessary because it wasn't possible to maintain all positions on the current workload. Do you recall that?---He did make reference to some of the jobs would not be required because of the amount of work that they had.
PN1975
Yes?---But no-one envisaged that to happen the following day.
PN1976
Do you recall that he stated that he would be speaking with employees individually about their future with the company?---I don't recall everything Mr Petrina - it was a pretty devastating day because it came out of the blue to me.
PN1977
Yes?---What was reason that I had to be there immediately.
**** LIONEL BRUCE CAMPBELL XXN MR MOIR
PN1978
Right. And you aware that Mr Petrina did subsequently speak with individual employees?---He may have done that after I left but we addressed the workers, myself and Mr Petrina and I believe Mr McGloin states that he was there, I don't know if he said much but - - -
PN1979
Yes.
PN1980
JUSTICE GIUDICE: Mr Moir, could I just ask about the position of this evidence in the case overall and I am not confining the question to the matters you are cross-examining on but to the evidence as a whole. What part of the case is it relevant to?
PN1981
MR MOIR: Well, your Honour, will note that the materials relating to this evidence were filed back in December and they specifically filed in relation to our application to deal with insolvency or the treatment of redundancy pay in insolvency circumstances.
PN1982
JUSTICE GIUDICE: Yes.
PN1983
MR MOIR: So that what is goes to and you will see in our line of contentions filed in December the various propositions or contentions we are advancing which in turn make reference to the evidence of Mr McGloin which obviously is now being amplified through reply evidence and the like. But in due course, of course, your Honour, we will address that point more directly in light of what transpires during the hearings.
PN1984
JUSTICE GIUDICE: Yes.
**** LIONEL BRUCE CAMPBELL XXN MR MOIR
PN1985
MR MOIR: If I could take you to paragraph 7 of your original statement, Mr Campbell. You will see in the final sentence there that you state you also spoke to the workers on the AMWU's understanding of the effects of the appointment of the administrator. What was your understanding of the effects of the administrator's appointment and what did you relay to the workers?---Well, what I relayed to the workers was the bombshell had just hit which was the loss of the contract. I believe it was the Addco contract in subsequently checking with the person. On the 19th which was the - I think the company refers to about a million dollars over the five years. That was the issue. That is the reason that the company has gone into administration and advised the workers that all your entitlements are frozen. The administrator - everybody will be terminated and re-employed with the administrator and your accruals apply from that period of time, you can't touch any of your redundancy or anything else but I think they made the qualification that - no, that was prior to that, sorry. Just a general view of what happens with - when a company is under a receiver; administrator.
PN1986
Was it also your understanding that the role of the administrator was to investigate possible restructuring of the business in an attempt to keep the viable?---That would be role of the administrator I believe, yes.
PN1987
Yes?---Yes.
PN1988
And did you relay your understanding of that to the employees on this particular occasion?---That particular day?
PN1989
Yes?---On that particular day, no.
PN1990
Right?---It was - inform the workers of what had just taken place and I believe Mr Petrina had raised the issue of the staffing levels at that meeting on the 19th and as we subsequently know now it was seven long term employees.
**** LIONEL BRUCE CAMPBELL XXN MR MOIR
PN1991
And you said that you understood and you passed this onto the employees that their entitlements were frozen. Did you also understand that the period of administration represented a moratorium on all debts owed by the company, that is a moratorium period in which creditors could not claim debts against the company?---That would be generally accepted and understood.
PN1992
Yes?---That - - -
PN1993
And in paragraph 8 of your original statement you then go on to say that while you met with Mr McGloin on that day, 19 September, he did not put any proposition to you about restructuring the company or reducing severance pay entitlements and you go on to say that this was not raised until the creditors' meeting some two months later. Do you see that?---I do.
PN1994
And you acknowledged I think that the restructuring proposal was in fact raised with you to the creditors' meeting. Can I put it to you that during your meeting on 19 September, Mr McGloin did raise with you the need to restructure the business in light of the current trading difficulties and he also raised the issue of seeking the employees' agreement to reduce severance pay entitlements?---That is not correct and it is not supported by his offsider in the office either.
PN1995
And you are also saying that - I withdraw that. Are you saying that there was not even the barest mention of possible restructuring on 19 September?---Well, there may have been reference to because of the loss of the contract which subsequently came out when it was reported to the workers that there would staffing - staffing would be looked at so, I mean, in the form of a restructure, yes, I suppose that is correct.
PN1996
Yes?---But that was put by Mr Petrina at the meeting, yes.
PN1997
Yes. So you acknowledge then there was discussion about restructuring in the sense that the workforce was to be streamlined at that particular time but was there any other mention of possible restructuring of the business going forward into the future on that particular occasion?---It may have been in the general discussion, I can't recall.
**** LIONEL BRUCE CAMPBELL XXN MR MOIR
PN1998
So there may have been discussion about possible restructuring. Can I suggest to you that part of that discussion was in fact the possible being advanced by Mr McGloin to look at reducing existing severance pay entitlements?---The existing severance pay was never mentioned. It was never mentioned. I wouldn't have been able to walk out of the office by the delegates if it was.
PN1999
Now, you attended the first creditors' meeting later in September. Is that right, did you attend that first creditors' meeting?---I did, yes.
PN2000
That was on or about 25 September. The meeting was also attended by employees?---The employees would have been there, yes.
PN2001
Was that all of the employees or the majority of them or - - -?---I don't believe it was all the employees. There was quite a number of employees. There would have been the seven that were terminated on the 20th.
PN2002
Yes?---And others also.
PN2003
And there were other creditors present at the meeting?---Yes, yes.
PN2004
And it was well attended, I mean, were there a large number of people present at the meeting?---I don't believe it was all that large, it may have looked large because the room was so small.
PN2005
I see. All right. At the meeting, did the administrator, Mr Petrina, what did he say? He chaired the meeting, is that right?---I believe it was Mr Petrina, yes.
PN2006
And what did he tell everyone?---I haven't got all that detail with me, I don't know, generally what their situation is and how they, I suppose, how they would continue to trade.
**** LIONEL BRUCE CAMPBELL XXN MR MOIR
PN2007
Yes?---That would be the general - - -
PN2008
Did he explain to everyone that he was undertaking an investigation into the affairs of the company and that he would provide a written report to all the creditors?---Well, as the administrator he would do that, I would say, yes.
PN2009
And then got the administrator's report on 13 November or the union did. Now, I took you earlier on to the proposed - or the details about the proposed deed of company arrangement which is set out in the report. You understood exactly what was being proposed under the deed?---Yes, I believe that would have been raised in the office, in our office prior to the creditors' meeting.
PN2010
So you discussed it - the union discussed it, analysed the report and so forth prior to the creditors' meeting. You had an opportunity to do all of that?---I believe the secretary would have been involved in those discussions as well.
PN2011
And you then attended the second creditors' meeting on - later in November. Once again this was attended by the employees?---The employees were at every creditors' meeting.
PN2012
And - what, that was the majority of the workforce present?---I don't believe it was the majority of the workforce, I mean, we had 18 members and seven - the seven there were terminated on the 20th.
PN2013
Yes?---They were pretty - they were regular.
PN2014
Yes?---Yes.
PN2015
They were there and some of the others as well?---There were some of the others, yes.
**** LIONEL BRUCE CAMPBELL XXN MR MOIR
PN2016
Yes?---Yes.
PN2017
And once again it was also attended by the other creditors?---Yes, there was - - -
PN2018
Yes?---Yes, particular creditor and the ex - the name escapes me by the ex-manager of the plant who now works for another company.
PN2019
Right, I see. And do you recall if the administrator who chaired - I am sorry, the administrator chaired this meeting once again?---There was two from De Vries and Company, David's boss, I am not sure what - Anthony - I don't know - he may have chaired it.
PN2020
Yes?---Because he was most certainly there on the - which you will probably lead onto after but - sorry, I am - - -
PN2021
All right. And do you recall that they, that is the administrators, they went through the contents of the report that you received on 13 November. Do you recall that, they went through the report?---They would have, yes, probably.
PN2022
Yes?---Yes.
PN2023
And then at the end of the meeting or towards the end they recommended that the proposed deed be approved by the creditors. Do you recall that?---I most certainly do.
PN2024
And do you recall that a vote was then taken at the meeting and by a majority, both in terms of number and value, the creditors approved the proposed deed?---They did.
**** LIONEL BRUCE CAMPBELL XXN MR MOIR
PN2025
And do you recall that after the vote, immediately after the vote, the administrators explained that the deed had to be executed within the next 21 days or otherwise the company would then lapse automatically into liquidation. Do you recall that?---I recollect 21 days somewhere, yes, I think so.
PN2026
And do you recall also that the administrator stated that, in order for the deed to proceed within that 21 day period, the approval of a majority of affected employees was needed to vary the enterprise agreement?---Can I just answer that question. The answer the question is, yes, but that was only after Mr Morrison from our research who accompanied me at the creditors' meeting advised the meeting that the Corporation's law does not over-ride the Workplace Relations Act and as a consequence that then, I think, had to go back for approval of the employees.
PN2027
Yes?---Yes.
PN2028
So the - in the order for the deed to proceed it had to be approved by a majority of employees otherwise the deed would fall over and the company would automatically go into liquidation after 21 days. You are aware of that?---Yes, I am.
PN2029
And the approval which was required from the majority of employees was approval to amend the enterprise agreement in line with the restructuring proposal. Is that right?---Yes, it was to reduce the redundancy, yes.
PN2030
Yes, to the redundancy pay entitlements?---Yes.
PN2031
And you understood then that the purpose of this proposed restructure was to secure the ongoing viability of the business?---Yes.
PN2032
I mean that was one of the reasons advanced by the administrator in support of the proposed deed?---That was the intention, yes.
**** LIONEL BRUCE CAMPBELL XXN MR MOIR
PN2033
So you understood that and you also understood then that if the approval of the majority of employees was not given within the 21 days the whole thing would just fall over and the company would proceed into liquidation?---Correct.
PN2034
Are you also aware that under the proposed deed it was envisaged that some employees would have to be made redundant but the rest of the workforce would continue on with the company?---To be honest with you, I am not too familiar with how many after but there was - it didn't leave many because seven had already gone, as we understood it. You are saying further terminations from the balance of the workforce?
PN2035
Yes. You understood then that if the - under the deed it was proposed that most of the jobs within the - or about half of the jobs within the factory would remain and the other half would be made redundant. Did you understand that?---There was uncertainty of the future, of the ongoing viability of the company, yes.
PN2036
And did you also understand that those employees who would have been made redundant were to receive - would have received all of their entitlements in full with the exception of severance pay for which they were to receive approximately 54 cents in the dollar?---Yes.
PN2037
Now, if I could take you to the meeting which was held subsequently on 29 November. This was a meeting on site at the company's premises between the union and the employees. Do you recall that?---Yes, there was - well, there was more than one meeting, yes, correct, I understand.
PN2038
So following the second creditors' meeting there was more than one meeting with the employees and the union?---I believe the employees were addressed by Mr Paul Bastian, the State Secretary and myself and that a - and also Mr Morrison from our State Research and myself.
PN2039
And if I could take you to this meeting that was specifically held on 29 November. This was the meeting at which the employees were to vote upon the deed proposal. Do you recall that?---I do.
**** LIONEL BRUCE CAMPBELL XXN MR MOIR
PN2040
And who attended that particular meeting?---I am not too sure of the dates but I - - -
PN2041
Those people - - -?---There was a meeting - it was put - Brother Bastion was at one meeting and it was over the deed.
PN2042
And were you aware that - well, you agreed with me earlier the purpose of this meeting was for the workforce to vote upon the deed proposal and in particular it was to vote upon whether the enterprise agreement was to be amended in line with the restructuring proposal?---That is correct.
PN2043
Is that correct?---That is correct.
PN2044
Yes?---Yes.
PN2045
And did you make the employees aware that if they voted yes, to amend the redundancy agreement in line with the deed, then the business would continue to operate?---Yes, we did.
PN2046
Yes, yes, that is right?---It was a democratic decision - - -
PN2047
Yes?---That was explained.
PN2048
And did you also explain that if they voted no, then the company would then go automatically into liquidation, that is after the 21 day period, that was how it works?---Everyone was made aware of that.
PN2049
Aware of that, yes. So then effectively the employees and the union were aware at this meeting that the future of the company was now in their hands. Do you agree with that?---Your assessment, yes, assumption.
**** LIONEL BRUCE CAMPBELL XXN MR MOIR
PN2050
And of course the employees voted no, that is right, isn't it?---They voted no, yes.
PN2051
And was there any recommendation put forward by the union to the employees?---It was explained to them what the effect of the deed of arrangements would have been, restructuring the agreement back to the award, in regard to the redundancy component of that agreement. People felt that they weren't in a position and the uncertainty that still existed, was voted down.
PN2052
Well, what did the union recommend, a yes vote or a no vote or something - - -?---Well, the union agonised over the issue, I mean, the first issue was - and that is - I wondered when I - why I had written certain things but - and I know. It was discussed in the office and the first issue was jobs. You know, the issue was, well, it is jobs but at the expense all their entitlements. Basically that is what was hashed over. And the seven employees I can assure you had no qualms in voting it down, that were terminated, the way they were treated.
PN2053
So did the union recommend a vote against varying the enterprise agreement?---I think we explained the two arguments. I can only speak for myself personally. I can't speak for anybody else. I believed it was big ask on the workers having to subsidy the company which they had, particularly when there was no certainty of the continuing employment and particularly the company had only purchased the business for five months.
PN2054
Can I ask you again, did the union recommend a vote against varying the enterprise agreement?---I would have to say yes.
PN2055
Now, you set out reasons why you believed the employees rejected the proposal. One of those reasons which you state, this is in paragraph 15 of your original statement. One of the reasons you state that you believe the employees rejected the proposal is that under it those made redundant would only receive the award redundancy pay standard. Do you see that in paragraph 15 of your original statement?---Yes.
**** LIONEL BRUCE CAMPBELL XXN MR MOIR
PN2056
That is not quite true though is it. Under the restructuring proposal employees made redundant - well, some of the employees made redundant would not just have received the award redundancy pay standard. An additional four weeks severance pay would have been provided for those employees with four or more years service?---Yes, but - - -
PN2057
Are you aware of that?---Correct, and that was explained - sorry, I missed your name again, Moir, Mr Moir.
PN2058
Mr Moir?---Yes. That was explained to the workers. I omitted to put four weeks in - but there was a lot of confusion on answering some of the questions initially also.
PN2059
I see. So that was put forward to the workers?---The workers were aware of what the situation was.
PN2060
All right. And you say that it wasn't acceptable to them that if they were made redundant in the future they would only get the award scale, in paragraph 15, so - - -?---Yes.
PN2061
- - - there was a concern amongst employees about receiving less for severance pay under the restructuring proposal and that was clearly one of the factors or a key factor as to why they rejected the proposal. Do you agree with that?---The main area would have been the reduction in their entitlements, yes.
PN2062
That was the main reason for their concern?---It wouldn't have been the only concern.
PN2063
Yes, but it is the main area of concern?---Financially, yes, because they had a lot of service.
**** LIONEL BRUCE CAMPBELL XXN MR MOIR
PN2064
Yes?---But that wasn't the only concern. There was uncertainty whether continuing employment with the company was going to remain viable and other issues that people obviously didn't feel comfortable with.
PN2065
But they were concerned that, if the restructuring proposal went ahead, then the level of severance pay entitlements that they might receive would be significantly reduced and that was a key factor why they put in a no vote?---That would have been given prime consideration, yes, it would have been a major, major issue. No disagreement with that.
PN2066
And is it also fair to say that the workforce believed that they would be paid out under the enterprise agreement scale, unamended, if the company went into liquidation, in other words, if the company went into liquidation, the scale under the agreement would then apply to them, 3.7 weeks per year of service would then be paid out to them?---That would be the understanding, that they would receive their entitlement, under normal circumstances, if and when it arose, but I don't think it was looked at on the basis of having it there to be used anyway. It was, an in the event of.
PN2067
And is it your recollection that the - at the point of this meeting, the employees expected that this would occur if they voted no, that is the company would go into liquidation as a result of a no vote and then the company would - or the liquidator would pay out the entitlements including the full severance pay entitlements under the EBA, that was the understanding?---I can't give a 100 per cent answer on that because it is quite clear that the money wasn't there.
PN2068
Yes, but they were clearly concerned about protecting their entitlement to the full severance pay benefits under the enterprise agreement?---They believed that that was an entitlement that had been won over a period of time and should have been honoured and maintained, yes.
PN2069
JUSTICE GIUDICE: Mr Moir, we are going to adjourn for 10 minutes.
**** LIONEL BRUCE CAMPBELL XXN MR MOIR
PN2070
MR MOIR: Yes.
SHORT ADJOURNMENT [11.31am]
RESUMED [11.43am]
PN2071
MR MOIR: Thank you, your Honour.
PN2072
I just have a few final questions, Mr Campbell. I showed you - you were taken earlier to the list of employee creditors which was set out in the back of the administrator's report. Would you agree with me that a significant proportion of the employees were aged over 45?---I would - yes, I believe so.
PN2073
JUSTICE GIUDICE: Do you know how many there were? Can you put it to him what the numbers were?
PN2074
MR MOIR: I can't, your Honour, I can't put the specific number.
PN2075
And you said before that the employees had built up an expectation about their hard-won severance pay entitlements; what did you mean by that?---Well, what I meant by that was on the sale of the business from Bryden to the current - well, the previous employer, Plastine, the offer of continuing job and entitlements, security of entitlements. So obviously the employees would have assumed that everything had been - the money was there previously and has been transferred to the new owner. So their entitlements - there was an expectation if it was ever necessary to retrench any persons that it would be available for them.
PN2076
I see, all right?---Not that they were - they were looking for it.
**** LIONEL BRUCE CAMPBELL XXN MR MOIR
PN2077
They weren't looking for it?---They weren't looking for it initially, no way.
PN2078
I see. Are you aware that prior to the business going into administration, employees would come forward to management and seek to be made redundant in order to receive a redundancy payment?---Prior to?
PN2079
Yes?---The company - - -
PN2080
Yes. During your - you were the organiser - - -?---Yes, yes.
PN2081
- - - responsible for the site, and that was what, over a number of years?---Considerable, yes.
PN2082
Yes. Were you aware of any employees ever approaching management and seeking to be made redundant in order to receive the severance pay entitlements under the enterprise agreement?---Not personally. I know the company had terminated some people though.
PN2083
Had terminated for redundancy?---Had terminated other people.
PN2084
But it was too expensive for them to terminate people for redundancy, wasn't it? When were they made redundant, these people you are talking about?---I am not talking about people, I am talking about one person that I know of that the company made - terminated his services; this is going back some time.
PN2085
Going back some time?---Yes, this is going back prior to the new owner.
**** LIONEL BRUCE CAMPBELL XXN MR MOIR
PN2086
I see. So that is prior to the relevant certified agreements with the union, isn't it? You will see all of those certified agreements which are attached to Mr McGloin's witness statement, original statement. I think the first agreement between the company and the union commenced on or about October 1993, and it included, as I understand, the aware severance pay scale. Redundancy arrangements were then increased beyond that from about 1995. Are you aware of that?---I am not aware of every little detail. I am aware that they probably started from virtually nothing until the - yes, there has been a - a - - -
PN2087
Gradual increase?--- - - - gradual increase over a period. Yes, I acknowledge that.
PN2088
Yes. And during that period of the gradual increase, there were no redundancies that you are aware of implemented by the company?---Well, when I say redundancy, there was one person terminated. I don't believe there was sufficient work for him. He may have had an injury as well. This is - - -
PN2089
Right. So are you aware then of - just to come back to my original question, are you aware of employees ever approaching management to seek a redundancy payout?---I can't recall.
PN2090
I see?---I can't recall, but the shop has been serviced by four different organisers over a period.
PN2091
I am particularly talking about the period from 1995 onwards?---Well, part of that period I wouldn't have been looking after it either, because I picked it back up.
PN2092
Yes. The period that you were looking after it?---I don't believe so.
PN2093
You don't believe so?---I don't believe so.
**** LIONEL BRUCE CAMPBELL XXN MR MOIR
PN2094
But you are not - you don't rule that out?---Well, I don't know of anyone that is - that volunteered for redundancy and been accepted and paid out. I don't - I am not aware of that.
PN2095
No, I am just talking about someone who volunteered and that is all. Someone who came forward, wanted to be made redundant?---Well, I don't know if there was - - -
PN2096
Are you aware of any instances like that?--- - - - if there was any need for redundancies up until the date of the 19th.
PN2097
Yes, but are you aware of any instances of employees doing that?---Not that I am aware of, no.
PN2098
No, all right. Thanks, Mr Campbell.
PN2099
JUSTICE GIUDICE: Any other cross-examination? Any re-examination, Mr Watson?
PN2100
MR WATSON: No, your Honour.
PN2101
PN2102
MR WATSON: The next witness that we will be calling is Lorraine Beryl Johnson. Ms Bissett has just gone to get her now.
PN2103
JUSTICE GIUDICE: Yes.
PN2104
MR BARKLAMB: Actually just while we wait for Ms Johnson, there is a matter which has been rather remiss of me not to have raised earlier in the week. Due to personal reasons, Ms Harris hasn't been able to join us this week, and she requests we represent the NFF during this week's hearing, and I do apologise for not announcing that on Monday morning, your Honour.
PN2105
JUSTICE GIUDICE: Yes. We received a letter from Ms Harris to that effect.
PN2106
MR BARKLAMB: Yes, thank you.
PN2107
PN2108
MR WATSON: Your full name is Lorraine Beryl Johnson?---Yes, that is right.
PN2109
And you reside at 4 Scarborough Street, Monterey, in the State of New South Wales?---Yes.
PN2110
And you are currently employed by 3D Travel American Express as a travel consultant?---As a manager, travel manager, yes.
PN2111
And in the course of preparation for these proceedings, you have prepared a witness statement which for the information of members of the bench is in ACTU6 at page 89. Do you have a copy of that witness statement?---Yes, I do.
PN2112
That statement was signed on 19 December 2002?---Yes.
PN2113
Yes. Can I just clarify a couple of matters with you. In paragraph 1 of that statement you say:
PN2114
I am employed full time by 3D Travel American Express in the travel industry. I have been employed here since 1 May 2002. I am employed to work four days a week, 80 per cent of full time hours.
PN2115
Can I just ask you to clarify what appears to be the discrepancy between the first sentence there and the second sentence - the third sentence, rather?---Yes. Basically it would be clarified as a permanent part-time position, I would say. When I was employed by 3D Travel they asked me to do whatever days I could work and we agreed on four days a week in the manager's role.
PN2116
Now, since you made your statement on 19 December 2002, was anything changed about those hours?---Effective last week due to the downturn in the travel industry, my hours have been cut by one day, so all our staff has been cut by one day, so basically I am doing approximately 20 hours a week or on call.
**** LORRAINE BERYL JOHNSON XN MR WATSON
PN2117
In paragraph 9 of your statement you say:
PN2118
I received eight weeks redundancy payment and four weeks payment in lieu of notice.
PN2119
Is that right?---No. It should be five weeks payment in lieu of notice.
PN2120
Subject to those qualifications, is the statement which you made on 19 December 2002 true and correct?---It is true and correct.
PN2121
At paragraph 12 of your statement you indicate that it took you a period of five months to fine a new job after your redundancy from Traveland. Can I ask you, during that period were you in receipt of Social Security assistance?---No, not at all.
PN2122
I have no further questions in-chief, if the Commission pleases.
PN2123
PN2124
MR MOIR: Thank you, your Honour.
PN2125
Good morning Ms Johnson. I just have a couple of questions for your about your previous employment with Traveland. I understand from your statement that just prior to you being made redundant with Traveland, Traveland was placed into voluntary administration?---Yes.
PN2126
And that was sometime during November 2001 that Traveland was placed into administration?---It was, yes, at the end of November 2001, correct.
**** LORRAINE BERYL JOHNSON XXN MR MOIR
PN2127
Yes. And was that the second time that Traveland had been placed into administration during 2001?---I am a little unclear on that because it was a very confusing time. Ansett went under and then Traveland - their future was unsure. There was a period where I wasn't sure whether we were under administration or not when a company called Internova bought us. So I am just a little bit unclear on the exact facts that happen in those months as far as the administrators.
PN2128
I see. Traveland was bought by Internova. It was bought from Ansett? Ansett were the previous owners of Traveland?---Ansett were the previous owners of Traveland, correct, yes.
PN2129
And when Ansett collapsed in September 2001, Traveland was then purchased subsequently by Internova?---Yes.
PN2130
Yes. And you are not sure whether Traveland was in administration following the collapse of Ansett?---I am unsure of that.
PN2131
Now, the new owners, Internova, do you recall when they took over? Was that shortly after September or during September?---23 September approximately.
PN2132
23 September?---Yes.
PN2133
And did they implement measures to restructure the business?---I believe they were going to, but we didn't really see any restructuring.
PN2134
Yes, because the Traveland business went back into administration - it was in administration, it was announced to be in administration during November. That was your understanding?---Yes.
PN2135
And is it your understanding that Internova, the owners, they also collapsed and went into administration?---Yes.
**** LORRAINE BERYL JOHNSON XXN MR MOIR
PN2136
And that was at the same time that Traveland went into administration?---Well, I thought that would have been then. It was Internova after they purchased Traveland, but then they went into administration. There were two - - -
PN2137
Yes, and Traveland followed?---Two were the same, yes.
PN2138
And are you aware that Traveland was then formally wound up by early January 2002 when the creditors voted to put the Traveland organisation into liquidation?---We were given the advice to close our doors on December 4, 2001. That is the only date I remember as far as that is concerned.
PN2139
I see. And do you know what happened to Traveland after that?---After that, Traveland the company no longer existed and I know they sold off some of the franchises to Travelworld and various other companies.
PN2140
Now, if I could just take you to your statement, Ms Johnson?---Yes.
PN2141
Paragraph 10 of your statement you say there that at the time of the redundancy clients weren't receiving documents and employees like yourself had to handle complaints from Traveland clients; do you see that in paragraph 10?---Yes.
PN2142
So that was during the period that Traveland was under administration, was it, that you were handling - or employees were handling complaints from clients?---Yes, that began - because we were associated with Ansett, it also began on 12 September when Ansett went under. Because of our association with Ansett, people were coming in already with their complaints and their problems.
PN2143
Yes, okay. So is it fair to say you were at this point dealing with some pretty angry customers?---Yes.
**** LORRAINE BERYL JOHNSON XXN MR MOIR
PN2144
And I assume those customers are persons who spent money on Traveland products and services?---Yes.
PN2145
And what were those products and services? What were the customers actually purchasing from Traveland?---Okay. There was a situation where the customers had purchased packages, say, airline tickets, hotels and tours, that type of thing, where the money they paid to us hadn't gone to the wholesaler, who is the person we are purchasing the package from. Therefore, we weren't getting the documents from the wholesaler to give to the client, that type of thing. Or people who had purchased Ansett tickets and couldn't fly with Ansett.
PN2146
I see. So the documents the clients were receiving, what, they were relating to hotel or accommodation bookings?---Yes, and tour bookings.
PN2147
And tour bookings?---Yes.
PN2148
And there were also problems associated with ticket purchases, airline travel and the like?---Yes. In particular the Ansett tickets, yes.
PN2149
I see. And what sort of customers were you dealing with? What, were they business clients or were they private people, you know, families going on holidays or that sort of - - -?---I did both. I had corporate clients and leisure, so I had both affected by that.
PN2150
Yes. So, what, the leisure clients would include people - - -
PN2151
MR WATSON: I am loath to cut my learned friend off because, generally speaking, when you object on the grounds of relevance in cross-examination you get told that it will develop, but I really am struggling to see how any of this is relevant to any of the issues in the case.
**** LORRAINE BERYL JOHNSON XXN MR MOIR
PN2152
JUSTICE GIUDICE: Yes. What do you say about that, Mr Moir?
PN2153
MR MOIR: Your Honour, it goes to the issue of insolvency and the losses and detriment suffered by persons in an insolvency or parties in an insolvency position. There are various stakeholders in an insolvency scenario, that is one of the key contentions we are advancing, and that it is not just employees but other stakeholders who suffer hardship and inconvenience.
PN2154
JUSTICE GIUDICE: Yes. But is there a witness statement in relation to Ms Johnson's evidence?
PN2155
MR MOIR: There is a witness statement; I am taking her to paragraph 10 of that statement.
PN2156
JUSTICE GIUDICE: I am aware of that, Mr Moir. Have you filed a witness statement? Have you filed a witness statement in relation to Ms Johnson's evidence?
PN2157
MR MOIR: No, no, your Honour, I haven't - - -
PN2158
JUSTICE GIUDICE: Do you have instructions about these particular matters that you can put to her?
PN2159
MR MOIR: Well, we have undertaken some research.
PN2160
JUSTICE GIUDICE: Look, we will permit you to continue.
PN2161
MR MOIR: Yes, thank you, your Honour.
**** LORRAINE BERYL JOHNSON XXN MR MOIR
PN2162
Ms Johnson, you just mentioned the clients you deal with were business and private leisure clients. Those leisure clients, would they include employees who are taking their annual holidays and the like?---By "employees", what do you mean employees of?
PN2163
Well, your clients, would they include people who had arranged to take annual holidays, take time off work and were going on family trips and the like?---Yes.
PN2164
And what sort of complaints then were you receiving from these customers?---Basically not being able to receive their documents to travel, not being able to fly on the scheduled flights that they were meant to fly on if it was an Ansett related matter, and more the delay in getting documents and that sort of thing.
PN2165
Okay.
PN2166
VICE PRESIDENT ROSS: Mr Moir, is the ACTU contesting that in an insolvency there are a range of interests that may be adversely affected, such as subcontractors who may be owed money, customers, etcetera?
PN2167
MR MOIR: Well, I -
PN2168
MR WATSON: No, we are not.
PN2169
MR MOIR: I guess you - - -
PN2170
JUSTICE GIUDICE: It would be a pretty hard thing to contest, wouldn't it?
PN2171
MR WATSON: We are simply not.
**** LORRAINE BERYL JOHNSON XXN MR MOIR
PN2172
VICE PRESIDENT ROSS: Well, if it is not contested, what - - -
PN2173
MR MOIR: Yes, look, I am not going to go for much longer, your Honour, it is just to give a specific example of what might actually occur, and it just seemed to us that Ms Johnson was in a good position to do that.
PN2174
So I will just be brief, Ms Johnson. Would the complaints also received deal with expenditure or moneys having been lost by the customers?---Yes.
PN2175
And you also mention there that suppliers were not paid in paragraph 10. Who are those suppliers, do you recall?---Some suppliers which are the wholesalers that as a travel agent we would deal with.
PN2176
I see. Wholesalers, what, are they small businesses or - - -?---A wholesaler would be someone who provides the accommodation in the tour. An example, Qantas holidays, Trafalgar Tours, somebody like that provides the package.
PN2177
I see, right.
PN2178
JUSTICE GIUDICE: They package the airfares and the accommodation and it could be of any size presumably?---Exactly, yes.
PN2179
MR MOIR: And so what was the nature of the complaints you were receiving from them?---They weren't receiving their money from Traveland.
PN2180
Right. Do you have any idea about what amounts of money they stated they weren't receiving?---No.
PN2181
Thanks very much, ms Johnson.
**** LORRAINE BERYL JOHNSON XXN MR MOIR
PN2182
PN2183
MR BARKLAMB: Yes, thank you, your Honour.
PN2184
My name is Scott Barklamb. I represent the Australian Chamber of Commerce and Industry in this matter. I would like to start by taking you to the period following the Ansett closure. Within your workplace and to the extent that you dealt with other Traveland staff and other Traveland places, was it a period of some uncertainty and discussion between staff as to your ongoing employment?---Yes.
PN2185
Yes. Were there any briefings or information provided either by the Traveland management or the administrators as to where the company was going and the likely financial prospects for the company?---We did have some briefings but they were very sketchy, basically kept promising that things were going to be right,but with no facts.
PN2186
Would there have been a perception amongst either yourself or some of your colleagues, from your discussions, that despite those assurances things perhaps weren't going to be right? Was that a matter of conjecture?---I think we all hoped and it was very hard to believe that a company like Traveland, which had been around for so long, would disappear. So I think we were very optimistic that someone would buy us and it would all be okay.
PN2187
Yes, so that perhaps - if I put it to you - well, let me put this question to you first. Did any of your colleagues or a number of your colleagues begin to seek alternative employment?---Not any of my immediate colleagues that I worked with, that were in my office, no.
PN2188
No, and would the perception that a company like Traveland couldn't go under, do you think that would have played a factor in perhaps not choosing to look for another job?---Yes.
**** LORRAINE BERYL JOHNSON XXN MR BARKLAMB
PN2189
I would like to take you now to paragraph 9 of your statement. You state that you received eight weeks severance pay and, with your amendment, five weeks pay in lieu of notice. So that is 13 weeks pay in total at the time you left. You state that you were only given a day's notice, in paragraph 8. What were the reasons for that or how did that come about?---Basically, we were all unsure of what was going to happen but the actual, final closure we were advised on 3 December that we would be closing our doors on the 4th and we were advised on the evening of the 3rd. So up until then, I mean, we were all nervous and worried but we didn't know for sure.
PN2190
So it would be fair to perhaps say it was sort of an 11th our event?---Yes.
PN2191
Is it your understanding that the very - or, in fact, let us be frank about it - the no notice that you received, effectively, of your pending redundancy might have been due to the efforts of the administrators and the people managing the company to keep it going?---Yes, I believe they were trying to keep it going.
PN2192
Yes. Thank you for that. When the redundancy occurred, did you receive any pro rata annual leave? Were you owed annual leave at that stage?---Yes, I did. Yes.
PN2193
Are you aware of how much, perhaps in weeks?---Yes. I had unpaid leave of 9.24 weeks.
PN2194
9.24 weeks, okay. So when you actually departed the employment there would have been - there was 21 weeks pay with the 13 - over 21 weeks pay with the 13 weeks you received?---Yes, but we didn't receive that on departure from employment. I didn't receive that for a couple of months.
PN2195
A couple of months. So perhaps into the - was it into the January or - - -?---It was - I can't remember the exact date but it was late January or early February.
**** LORRAINE BERYL JOHNSON XXN MR BARKLAMB
PN2196
Right. And that particularly was a function of the financial end of the company, that the winding up required that that was later, as you understand it?---Yes. It came from the administrators, Hall Chadwick, the final payment, and then there was some discrepancy with long service leave, which I didn't receive at that time but I received later.
PN2197
Yes, I wanted to ask you about that. Your service, I think you state, with Traveland was for 23 years. Did you take long service leave during that time?---No.
PN2198
No, not at all?---No.
PN2199
So are you able to tell the Commission in weeks what your long service leave payment was, again in weeks?---24.08 weeks.
PN2200
So all up - my colleague has done the maths - would it be fair to say that you received 43 weeks?---I haven't done my maths, so I am looking. That sounds correct.
PN2201
So 13 plus 9.24 plus the long service leave?---Yes.
PN2202
Yes. So that is approximately 10 months pay, 4.3 weeks being in a month in a very mathematical way?---Yes. But you are taking long service leave into account.
PN2203
Into account, yes. No, I am just talking total pay now. Yes, okay. Thank you. Now if we can just turn to the period after you were made redundant and the five months or so prior to your re-employment, which I think you mention at paragraph 12. In broad terms, you were unemployed some three or so months after the Ansett closure and as an offshoot or a function of that closure led to the closure of Traveland. Would you agree that this was a very difficult time to try and seek employment in the travel industry?---It was a very difficult time, yes.
**** LORRAINE BERYL JOHNSON XXN MR BARKLAMB
PN2204
There would have been a number of other people - - -?---Yes, all the Ansett staff as well as Traveland.
PN2205
Yes, at perhaps a fairly unusual time to look for a job?---Yes.
PN2206
How many jobs did you apply for during the five months?---Basically, applying for jobs, I didn't really apply for many jobs because they didn't fit the criteria that I wanted. I have a specific criteria where I only want to work four days a week, basically.
PN2207
Right, yes?---I was offered a few jobs immediately Traveland collapsed, which were full-time of five or six days a week. I have two young children and I couldn't do that. So they didn't fit the criteria. I was also offered two other positions which were very - no, excuse me, one position, which was casual, which did not suit me because it was basically the bottom of the rung again, like the casual girl who comes in and does all the dirty work and I had been a manager, I had been senior international consultant. So that didn't suit me.
PN2208
So you were able to wait to take up the job that best fitted your experience and your aspirations for the rest of your career?---It wasn't easy to wait financially but I had to. I couldn't just take on a full-time position because my partner also works overseas. So I am the main carer of the children. So, financially it wasn't easy to do that but I had to wait till the right - - -
PN2209
Yes. I was trying to search for a better way of putting it but there was a delay?---Yes, but I had to wait for the right position.
PN2210
Yes. Thank you. You finally found work at 3D Travel, your present employer?---Yes.
PN2211
I have done some figuring on your salary and I wasn't aware of the amendment which you have just made, I think downwards, in your hours?---Yes.
**** LORRAINE BERYL JOHNSON XXN MR BARKLAMB
PN2212
I think that was a correction to your statement this morning, so - - -?---That only happened on Monday last week.
PN2213
Right. I will take you back to that point in a second but I will do the figures on what you put in your statement at the moment and I will ask you a question just to clarify. You state that your salary at 3D Travel in the statement prior to its amendment was 36,000?---Yes.
PN2214
For 80 per cent of full-time hours?---Yes.
PN2215
Now, I factored that up on the basis of a 38-hour week, so I basically added the extra day back?---Yes.
PN2216
I have that as somewhere round 45 - at $45,000 a year?---That is correct.
PN2217
On a proportionate basis. Looking at your former employment with Traveland in paragraph 5 where you talk about 24,000 for 24 hours a week, I equate that - you mention equating it to 40. I actually equated that based on 38-hour week to $38,000. So would it be fair to say there has been ultimately some increase in your pay rate - - -?---Yes.
PN2218
- - - from your change of employment?---Yes. I am now in a manager's position, whereas that was the senior consultant position.
PN2219
So, in fact, ultimately the change of position has secured a promotion or a step up the career rung for you to the manager's position?---I have managed before and - yes.
PN2220
But you have returned to that level, ultimately, in your re-employment?---Yes.
**** LORRAINE BERYL JOHNSON XXN MR BARKLAMB
PN2221
If I could you back to paragraph 4 of your statement where you state that you were employed with Traveland for approximately 23 years. Over that period you would say you gained considerable experience in how the industry operates?---Yes.
PN2222
Yes, and I think you have indicated that you had a managerial position prior and you worked in a number of positions, etcetera, in the industry?---Yes.
PN2223
How important do you think your skills and experience you gained at Traveland were in ultimately being successful in gaining the job at 3D Travel?---A hundred per cent.
PN2224
A hundred per cent?---Yes. That was the reason I obtained the position, for my experience.
PN2225
No further questions. Thank you, Ms Johnson.
PN2226
JUSTICE GIUDICE: Thanks, Mr Barklamb. Any re-examination, Mr Watson?
PN2227
MR WATSON: No. No re-examination.
PN2228
PN2229
PN2230
MR WATSON: Your full name is Bruce Bedford?---Yes.
PN2231
And you reside at 70 West Burleigh Road, Burleigh Heads in Queensland?---Yes.
PN2232
You are currently self-employed?---Yes.
PN2233
You made a statement in the course of these proceedings - or the course of preparation for these proceedings which is dated December 2002. Do you have a copy of that statement with you?---Yes.
PN2234
For the purposes of members of the Bench, it is ACTU6, page 11.
PN2235
Are the contents of that witness statement true and correct?---Yes.
PN2236
When did you commence your period of self-employment?---About the end of February.
PN2237
And what are you currently doing?---Handyman, because that is all I could get.
PN2238
Between your loss of job in December and the period which you commenced your handyman work did you have any employment?---No.
PN2239
Were you looking for employment?---Yes.
PN2240
During that period were you in receipt of any Social Security assistance?---No. I applied but they wouldn't give it to me.
**** BRUCE BEDFORD XN MR WATSON
PN2241
I have nothing further in examination-in-chief.
PN2242
JUSTICE GIUDICE: Any cross-examination?
PN2243
PN2244
MR BARKLAMB: Mr Bedford, my name is Scott Barklamb. I represent the Australian Chamber of Commerce and Industry in this matter and in doing so, a number of employers in a number of industries, including the printing industry. I have read your statement and I have a number of questions on it. You state that you are employed by Webb and Sons since 1987?---That is right.
PN2245
I was just wondering if you might be able to in very short terms given the Commission some indication of your experience in the printing industry?---I started my apprenticeship when I was 13 years of age. I did my time. I was the last of the secure apprentices in Queensland. I worked in a number of places around. I worked in Sydney for a little while, mainly in Brisbane. I went over to New Zealand. I got married over there and I worked in the printing industry over there for a while. I came back home nearly 20 years ago and I worked in Brisbane, a couple of places, then I went to A. Webb and Sons.
PN2246
Thank you for that. If you would cast your mind back to the machinery you trained on and the sorts of machinery you have used throughout your career and any equipment you might be familiar with from other workplaces?---I started my apprenticeship as a letterpress machinist which is now defunct. You see very little of it. I retrained into offset printing, not graphic offset. I've worked the really big machines and then as I got a bit older, I went on the smaller stuff which was straight jobbing printing. Jobbing printing is letterheads, business cards, invoices, etcetera, all that type of stuff, not the real big book work, so it was general jobbing work.
**** BRUCE BEDFORD XXN MR BARKLAMB
PN2247
Yes, thank you. That is actually most useful. It has led me through a couple of my questions. In fact, I can cut straight to this question. What you have described as jobbing printing, letterhead, business cards, etcetera, that is the type of work that Webb and Sons did?---They did everything from book work which I did do, colour work, four colour work, multi-colour letterheads, naturally, envelopes, yes, that is what they did. They did everything. They did magazines, magazine work, everything.
PN2248
Right, so they were pitching for work at all parts broadly, most parts of the available market in Brisbane?---Well, yes. They didn't really have to pitch for it. They already had it. The last I suppose six years or so they never had a salesman. They had so much of their own - they had a very big, strong client base and the work we put out from there was excellent and so they didn't have to have a salesman. The work just kept coming back all the time.
PN2249
Okay. I do want to come back to their client base, but I will come back to that in a second. Was there a change in the work which Webb and Sons undertook in the 15 or so years you were there?---No.
PN2250
I will put this to you another way. The advent of desktop technologies didn't change the nature of the work?---No, not really. It did in some ways. Maybe a few of the invoice books disappeared, but that went into continuous stationery which we didn't do, but we kept the work there by farming the work out, by giving it to another printer, in other words.
PN2251
Yes?---But that was the only thing. It was only really in the invoice line that they lost work, not the actual other type of printing.
PN2252
Yes, thank you. I will take you through this perhaps in chronological order, rather than logical order through your statement. I would like to refer you to paragraph 6 and 7 where you talk about your rate of pay and your award coverage. You state at paragraph 7 that most recently you were paid $746 per 37-1/2 hour week?---True.
**** BRUCE BEDFORD XXN MR BARKLAMB
PN2253
That is some, on my calculation and you can take my word for this, that is some $220-odd above the current award rate?---True.
PN2254
Had you always been paid that amount above the award rate?---All over Australia you are paid above the award rate.
PN2255
How did that come about, that rate of pay or that quotient above the award?---It depends how good you are. I was good.
PN2256
Yes, yes, and was that at the point where you entered your employment? You agreed to be some 40 per cent above the award or was it a stable $200-odd?---That is pretty stable throughout the industry.
PN2257
Yes, and you understand that to be fairly consistent with the rates in Brisbane generally?---In general, yes. Maybe we could have been a bit above, but not much.
PN2258
In discussions about your pay with Webb and Sons and in particular discussing this over award arrangement, did you or perhaps anyone representing you ever approach Webb and Sons to establish a severance or redundancy pay entitlement?---Yes. When we were told we were being made redundant, that is when we approached them.
PN2259
Right, but in earlier discussions?---Never.
PN2260
Never?---But we were always under the understanding that they weren't going to close down until we all retired at the same time, them included, the two brothers.
PN2261
We have had the opportunity to read the statement of Mr Albury, your former colleague, William Albury, and I think he is of a similar age to you and I think there is a discussion - - -?---A bit younger.
**** BRUCE BEDFORD XXN MR BARKLAMB
PN2262
And there is a discussion about obviously the age of the elder of the two Webb brothers, so is it fair to say you are all pretty much contemporaries and, as you say, there was an understanding that the plant would close together?---True, yes.
PN2263
Would that be a fairly unusual situation in your view? Is that typical of other - - -?---Well, the firm had been going for 50 years, over 50 years and had been started by their father, two brothers that never got on with each other and I think they will be glad to get rid of each other, so that is what basically happened there.
PN2264
Right, just to take that up with you, so there would be a personal dimension to the relationship of the Webbs which would lead them to wish to disentangle their business affairs, in your view?---Well, they were willing to stick it out. Well, originally they were willing to stick it out and then - and I think they were disagreeing with each other and they wanted to call it quits towards the end and when Barry came to us and said I am thinking about retiring at 65 - - -
PN2265
He is the elder one, Barry?---He is the older and he said that we were going to sell the factory to another printer and keep you blokes employed until you retire.
PN2266
That was said to you?---That was basically said to us, yes.
PN2267
When was that said to you?---That was said in the last year or so or a couple of years.
PN2268
So that was your understanding of how - - -?---Yes, we were under the understanding that we would have had a job up until the age of 65.
PN2269
Okay?---And Bill was quite willing to go along with it, too. He is a bit younger.
PN2270
Sorry? I do apologise?---Bill was quite happy to go along with that, but Lenny and I would have finished at 65 and Bill would have been a bit younger and he was quite happy to retire when we gave it away.
**** BRUCE BEDFORD XXN MR BARKLAMB
PN2271
Right, he was happy - well, you are commenting for another chap who isn't here, but your understanding is he was happy also to retire at the point where you gentlemen were 65 and I do actually have a question at the end about Mr Searle. I will perhaps come back to that, but he is of a comparable age?---He is the same age as me.
PN2272
Thank you very much for that. To your knowledge and this follows the question that led to that passage of things we were just discussing, did you or perhaps any union representing you ever seek a certified agreement with the company?---No, we never had any certified agreements.
PN2273
You say in your statement at paragraph 7 that you worked a 37-1/2 hour week?---That is right.
PN2274
I have looked in the award covering your employment. It is a 38 hour week. Do you have any recollection as to how the 37-1/2 hour week came about?---Before I started there.
PN2275
So it has been there for quite a while?---A long time, yes.
PN2276
Thank you for that. Your statement comes into this matter through the ACTU. Am I correct in thinking that you were able to seek advice at some stage from the union in this industry on being told you are redundant?---Yes, we approached the union. I am a union member and we approached the union about redundancy and they said no because of - they agreed with the employer, there was no redundancy, but in the end we bluffed them into six weeks.
PN2277
Sorry?---We bluffed them into six weeks. We got six weeks pay in the end.
PN2278
You did ultimately get six weeks' pay?---In the end, yes.
**** BRUCE BEDFORD XXN MR BARKLAMB
PN2279
When did that come about? When was that paid?---About a couple of days before we finished up, because they were scared of going to the Commission.
PN2280
Because they were scared of going to the Commission?---Yes.
PN2281
So that was in fact my next question to you, whether - - -
PN2282
JUSTICE GIUDICE: So are a lot of people.
PN2283
MR BARKLAMB: An all too frequent experience for us all.
PN2284
So the union did discuss with you their capacity perhaps to seek to take Webb and Sons to the Commission, to use your phrase, even though you had less than 15 staff?---Yes. There is a grey area in the award, I believe, very grey.
PN2285
So just to be clear, there was a six-week payment to each of you?---Six week, yes.
PN2286
Did you also receive any outstanding annual leave or long service leave?---We got all payments that were due to us.
PN2287
All payments that were due to you? Are you able to tell the Commission in a number of weeks for yourself how much that was?---The dollar figure?
PN2288
No, in number of weeks. Well, the dollar figure if you wish, but it's often easier to - - -?---Well, I worked there for 15 years, so whatever that equates out to.
PN2289
You hadn't had long service leave?---No, I've never taken long service leave, no.
**** BRUCE BEDFORD XXN MR BARKLAMB
PN2290
Do you have any idea whether you had a fair bit of annual leave?---I had what was entitled to me which was about four weeks.
PN2291
About four weeks or so?---Yes.
PN2292
Thank you for that. I would like to take you to paragraph 8 where you state that Webb and Sons employed seven people. I am correct - and this may seem like a fairly dense question - but I am correct in saying that the business is now closed and employs no-one, the factory is shut?---The factory is shut, but the business is not closed.
PN2293
Yes, that is a point I do want to come back to with you because that is something in your statement which you are quite clear about. What did the owner's wife do in the business?---Well, she started off as a table hand, work in the factory and then that is when he was married to his first wife. I could go into a lot of details here, but - - -
PN2294
I am sorry I asked?---Anyhow, she started off as a table hand and then she somehow ended up in the office, but still did table hand work when it was needed.
PN2295
Right, that was my question essentially, to find out whether she was doing what we would term graphic arts work or whether she was a clerical person. She was both?---She started off as a table hand.
PN2296
You include the two owners, the Webb brothers, in your list of the seven employees there in your paragraph 8. Do you know whether they paid themselves a wage of employees of the business?---Yes, they did pay themselves a wage.
PN2297
A wage? So they weren't in some form of partnership or distribution for their income?---Yes, I know they paid themselves a wage. I don't know what - naturally the must have got something out of it.
**** BRUCE BEDFORD XXN MR BARKLAMB
PN2298
So you don't actually know whether they had the status of employees in the business perhaps. You know that they took income. You don't know what form that income - - -?---They took a wage every week, I know they took a wage ever week, because they used to get a pay slip like we did every week.
PN2299
Thank you for that. Are you aware of whether the Webb brothers had a superannuation entitlement at the closure of the business?---Yes, I know they did have superannuation, yes.
PN2300
They did have super?---Self - what do they call it? They did it themselves, whatever it was.
PN2301
They had organised their own superannuation fund arrangements?---Yes.
PN2302
You were given slightly over one month's notice of your pending redundancy last year, weren't you?---A month, yes.
PN2303
So considering what you told me earlier about your understanding about the timing of what you might call the simultaneous redundancy of your colleagues and your employers, would it be fair to say that the redundancy announcement in November came as a shock?---The way they did it, yes.
PN2304
But not the fact that the business would close?---The fact that the business would close, we would lose our jobs. We were under the understanding that we would still have jobs, you know, they were selling the business to another printer.
PN2305
Yes, okay?---So we ended up with nothing.
PN2306
So is it fair to say that given that you had that month's notice, that when the final working day arrived, which I think might have been from your statement something like 22 December?---Yes.
**** BRUCE BEDFORD XXN MR BARKLAMB
PN2307
When that actual working day arrived and you were to leave the workplace permanently, that that was not as much of a shock as it could have been, because you had a month's notice?---If you are given a month's notice, you are not going to have a shock on that day. You have already had the shock.
PN2308
Yes, thank you for that. Do you have any understanding, you have indicated that you have had discussions with the Webb brothers about their plans for retirement, especially the elder of the two?---Yes, that is right, he was going to retire at 65.
PN2309
Do you have any idea of what he is intending to do with his retirement?---Keep working for himself.
PN2310
The elder of the two?---In an indirect way.
PN2311
Can you elaborate on that at all?---Well, what they did was a bit dirty, I think.
PN2312
JUSTICE GIUDICE: Is this relevant to something, Mr Barklamb?
PN2313
MR BARKLAMB: Well, no, perhaps we will move on, perhaps we will move on. We will move on from that one.
PN2314
I would like to take you to paragraph 16 of your statement and to a number of your contentions regarding the necessity of closing the business which is something we have talked about already. Are you aware of whether the Webb brothers owed debts on their machinery or any of their other assets?---They didn't owe anything at all. Everything was owned.
PN2315
Everything was owned?---They owned the factory, they owned the land, they owned the machinery, they owned everything.
**** BRUCE BEDFORD XXN MR BARKLAMB
PN2316
So you are confident in that knowledge?---Oh, yes.
PN2317
Okay. I would like to take you now to 19. I understand it is your belief that Webb and Sons was a profitable enterprise upon its closure?---Yes, it was very profitable.
PN2318
Yes, okay. If the business was profitable and viable and I think you may have already partly answered this, but I will give you the chance to think about it again, couldn't the junior of the Webb brothers have sought to buy it out from his brother and sought finance from a bank or financier?---He was the factory manager and I think when it came to paperwork, he was not very capable.
PN2319
The Webb brothers were obviously competing with other printing enterprises in the Brisbane area?---True.
PN2320
If the company was profitable and viable, would it be realistic to think that one of those other printing industry bodies might actually have been interested in taking it over?---I couldn't answer that. I wouldn't know. Probably. I couldn't really answer it, no. Yes, I suppose it depends what they ask for, I guess.
PN2321
Yes, all right. I want to turn now to 20, your final statement that there was no evidence suggesting the business was going broke. Were you responsible for job costings at Webb and Sons?---No, I wasn't, no.
PN2322
So you didn't calculate the prices for jobs or do quotations on work?---No, I didn't.
PN2323
Did you prepare the accounts of the company?---Sorry?
PN2324
Did you prepare the accounts of the company?---No.
**** BRUCE BEDFORD XXN MR BARKLAMB
PN2325
Were you aware of levels of incomings and outgoings for supplies and consumables and accounts?---No.
PN2326
Are you aware of any level of debt owing by the business to operational creditors such as the suppliers of ink, paper, consumables, machinery repairs?---If they owed money, we wouldn't have been supplied, so they couldn't have owed money because we always had credit with every company we dealt with.
PN2327
You always had a level of credit?---Everyone we dealt with.
PN2328
Are you aware of the credit terms upon which Webb and Sons operated?---No.
PN2329
Right, so you wouldn't be aware of how they would compare to the credit terms that Webb and Sons itself was operating to its clients?---No.
PN2330
Well, I think I will leave that there. Are you aware that competition in the printing industry can be quite aggressive in terms of margins?---Yes.
PN2331
Turning your mind back to some of the competitors of Webb and Sons around Brisbane, were they much larger companies?---Well, yes, a lot of big printers, some smaller, yes.
PN2332
Are you aware that larger companies may be able to purchase supplies of ink and paper, etcetera, at a lower price due to the bulk that they can purchase it at?---Yes. I know Webbs had pretty good deals with other companies they dealt with, paper merchants and ink merchants, so I can tell you that I used to do a lot of the ordering myself.
PN2333
Right, and it was your view that they had a fairly competitive set of arrangements?---They had some good deals, yes.
**** BRUCE BEDFORD XXN MR BARKLAMB
PN2334
I would like to just briefly take you back to the machinery you talked about working on and I think you mentioned at some stage that it was older machinery?---It was getting old, yes.
PN2335
Just broadly, was it 10s of years old, 20s of years old?---One - of the printing machinery they had the newest I would say would be about 10 years old, maybe 12.
[12.43pm]
PN2336
German machinery?---German machinery.
PN2337
Are you aware of the entrance of competing machinery from Asia that is priced - that is more cheaply priced, in recent times?---It might be cheaper but it doesn't mean it is any good.
PN2338
Yes, but there are - and you are aware of the commercial resale value of used printing machinery and changes in that?---I have a fair idea, yes.
PN2339
Would it be fair to say that that can be a fairly low level of realisation on assets that people have bought at different times?---Well, we had German machinery which always kept the level up a bit higher, like, Asian machinery was never - not much good, we never had it, yes, we never used it.
PN2340
One - two final matters to take up with you. You talk about working overtime in the period leading up to the closure of the business. Can you conceive of a situation where a business that was genuinely going broke and was to make redundancies would still need to work overtime leading up to that closure?---I can't see them going broke because they are still trading as Webb and Sons so - - -
**** BRUCE BEDFORD XXN MR BARKLAMB
PN2341
Well, perhaps I might assist you. Is it possible that a client seeking to stock up on letterhead or supplies of printed matter, aware that their supplier is going out of business, might place final orders?---No, they never went out of business.
PN2342
Well, no, no - - -?---No, they didn't, it has still got the same - one brother out of it was taken - was bought - it was sold. It was sold to a print broker and the other brother sold his share to his wife and then they become completely print brokers. They didn't go broke. And to be print broker they have got to be making money.
PN2343
Okay. I do want to come back to that with you. I just want you to put your mind for a second to a situation and I am not asking you to, sort of, go into make believe land or anything but I want you to just think about whether there could be a circumstance in which a business that was genuinely going broke and was going to make redundancies may actually have overtime in the period leading up to that?---Well, Webbs weren't going broke but I suppose a business in hypothetically terms could ask them to do overtime because they weren't going broke.
PN2344
Do you understand that the clients of Webb and Sons owned the plates and artwork for their jobs?---Yes, they did own them.
PN2345
The clients owned them in all cases?---It is a common practice for clients to own them but very few clients actually claim them.
PN2346
So a client, for example, and I use this purely as an example, Kings Parking, the Metal Corp and the Cane Growers?---Yes.
PN2347
Aware that Webb and Sons were about to go out of business?---No, they didn't go - well, they weren't going out of - they advertised they were not going out of business. That was what they said. That was their - - -
**** BRUCE BEDFORD XXN MR BARKLAMB
PN2348
Okay?---They actually did not go out of business.
PN2349
Having been told perhaps by one of the Webb brothers that Webb and Sons itself would not be continuing to serve them directly?---No.
PN2350
No?---No, you have still got it wrong. They went as print brokers. They did not go out of business. They became a broker.
PN2351
Yes, I do want to get to that?---They became a broker not - so they kept the clientele. They didn't go out of - they just went to other printers to do the printing for them.
PN2352
Yes.
PN2353
JUSTICE GIUDICE: They basically subcontracted the business?---They - yes, they got rid of all the printers, they got rid of all the machinery, the factory, everything but they kept - or one of them, I should say one, I am not - - -
PN2354
Yes?---One kept the business, his wife, I believe, she became the other owner.
PN2355
Yes?---And another print broker bought the other brother's share of the business.
PN2356
So far as you are aware they retained the clients?---They retained the business, yes.
PN2357
But the work was done by other printers?---Other printers. They didn't go broke.
PN2358
Yes, I think you mentioned that a few times.
**** BRUCE BEDFORD XXN MR BARKLAMB
PN2359
MR MOIR: Yes?---Yes.
PN2360
All right. Do you have any understanding as to what happened to the plates and artwork formerly held by Webb and Sons?---Yes, it went with Barry Webb to his new business.
PN2361
Yes, now I do want to ask you: What exactly, in your view or in your understanding, does a print broker do?---A print broker keeps the same - or has clients, he goes around to different printers and gets the best price he can and then he gives that job to the best price he gets and he is the middle man, he gets his cut and then they charge the client whatever it might be.
PN2362
So a print broker can, in fact, be as simple as, to use the old fashioned term, a one man show?---Well, actually - - -
PN2363
It can be one man in an office?---Yes, two man, yes, one man show basically, yes. It could be a one man show.
PN2364
And the print broking company itself does not print anything?---It does not print anything, no.
PN2365
No, okay. What would the difference be in terms of the former clientele of Webb and Sons between that going to a print broking arrangement and the younger of the two Webb brothers having been employed by a larger competitor?---Hang on, say that again, sorry, I didn't - - -
PN2366
In terms of pitching to the same clients - - - ?---Yes.
PN2367
- - - that Webb and Sons had, what is the difference in the - no, strike that question, I will leave that one. I will leave that one. I would like to just take you back to one final thing. Paragraph 16, you state there regarding not having received any compensation that that statement is made on that basis?---At the time the statement was made we had received no compensation.
**** BRUCE BEDFORD XXN MR BARKLAMB
PN2368
But subsequently you received six weeks?---And subsequently we received six weeks.
PN2369
Yes?---Yes, but that because of a lot of pressure and a lot of - a bit of bluffing I am afraid.
PN2370
No further questions, your Honour.
PN2371
JUSTICE GIUDICE: Just one question I have, Mr Bedford, about paragraph 17, you say you travelled to Brisbane to work, there was limited work on the Gold Coast, that is referring to the time since your retrenchment, is it?---No, I have done that for the last 20 years.
PN2372
I follow, yes?---I have travelled to Brisbane because the work - the Gold Coast just doesn't have work.
PN2373
No, I follow?---And - so I used to jump on the - well, I drove. I started off driving and then I did busing and then I have - then what - we have got a train now so I go by train.
PN2374
Yes, I follow so that is the situation before and after?---Yes.
PN2375
Yes. Thank you?---Is that all?
PN2376
Well, we will just find out.
PN2377
MR WATSON: No re-examination, no.
**** BRUCE BEDFORD XXN MR BARKLAMB
PN2378
PN2379
JUSTICE GIUDICE: Do you have another witness before lunch, Mr Watson?
PN2380
MR WATSON: We have got Judy Lay. I don't know how long it is intended to cross-examine her but certainly we can get some things done.
PN2381
JUSTICE GIUDICE: Yes.
PN2382
PN2383
MR WATSON: Your full name is Judy Lay?---That is right, Judith Lay.
PN2384
Judith Lay, right. You reside at 7 Noreena Avenue, Golden Bay, Western Australia?---I do.
PN2385
And you are employed as a casual worker at PMP?---That is right.
PN2386
And you have been in that employment since 1988?---I have.
PN2387
In the course of preparation for these proceedings you prepared a witness statement. Are the contents of that witness statement true and correct?---True.
PN2388
I have nothing further in-chief.
PN2389
JUSTICE GIUDICE: Yes. Any cross-examination, Mr Moir?
PN2390
PN2391
MR MOIR: Good afternoon, Ms Lay?---Hello.
PN2392
You state in your witness statement you have been employed at PMP as a casual for 14 years commencing in 1988?---That is right.
PN2393
Was your service broken during 1999/2000?---For seven months, yes.
**** JUDITH LAY XXN MR MOIR
PN2394
For seven months. And what was the reason for that?---Family problems, that was all, they were just family problems.
PN2395
Okay. And you - - -?---I wasn't taken off the roster.
PN2396
Right?---I wasn't - yes.
PN2397
Okay. And you decided to go back and work for PMP after that period away?---I did.
PN2398
And you weren't interested in looking for work elsewhere, were you, or you had a clear preference to go back and work with PMP?---Yes, I did.
PN2399
Now, the company itself that you work for, it is in the printing game. You are at the Bibra Lake facility, what kind of product does that facility make?---They do all the catalogues and TV papers that get collated into the newspapers, the Saturday and Sunday newspapers.
PN2400
Yes?---And all catalogues like Harvey Norman, all the glossy catalogues for - I suppose you call it junk mail.
PN2401
The junk mail, yes, I see?---Love to hate it.
PN2402
The bane of us all?---That is it.
PN2403
And would you tend to experience peak periods of production during the year, for example, in the lead up to Christmas and the lead up to Easter when more catalogues are being sent out?---Yes, we do.
**** JUDITH LAY XXN MR MOIR
PN2404
So the workloads would tend to fluctuate within the business?---That is right, yes.
PN2405
And there would also be - yes, I withdraw that. Now, you state that you work in the finishing area?---That is right.
PN2406
That is also known, I think, as the bindery section?---Bindery, yes.
PN2407
The other section of the facility is the printing section?---That is right.
PN2408
And that printing section operates on pretty much a continuous basis, the machines are running continuously 24 hours a day?---24 hours, yes.
PN2409
And the persons employed in the printing section they are mostly engaged on a full time basis?---That is right, yes.
PN2410
Including some tradespersons?---Yes.
PN2411
And there is a couple of casuals, I think, in the printing section as well. Is that right?---There is but have been made permanent now.
PN2412
Yes. And would you agree with me that the work in the printing section is physically demanding work?---To some.
PN2413
To some?---Yes, to some.
PN2414
Would you agree with me that it is less physically demanding, generally speaking, in the bindery section than the printing section?---It all depends what - if you are only - if you are on the press and you are just stacking it is about equal.
**** JUDITH LAY XXN MR MOIR
PN2415
Generally speaking?---Generally speaking, yes, it is - yes.
PN2416
All right. And in the bindery section you work I think there are approximately 10 permanent employees?---That is right.
PN2417
And there is a pool of up to 38 casuals?---That is right.
PN2418
Of which you are one?---Yes.
PN2419
And is it also true that during quiet periods the company will tend only to run core activities such as press work and so forth, will scale back in the bindery section?---Yes, they will scale back, yes.
PN2420
And would you also agree with me that the casuals which are engaged in the printing section they work pretty much on a continuous basis, like that whole operation, the machines are running continuously so the casuals that are in the printing section they also tend to work - - -?---Yes.
PN2421
- - - pretty much continuously?---Yes.
PN2422
And because that work is basically continuous, would you agree with me that those casuals working in the printing section usually get access to permanent employment after about three months - - - ?---Not necessarily.
PN2423
- - - of work?---No, not necessarily, no.
PN2424
But if they are engaged on a continuous basis they are entitled to access to permanent employment after a period of three months?---Yes, they would be.
**** JUDITH LAY XXN MR MOIR
PN2425
And that is in line with your enterprise - - - ?---Bargain.
PN2426
- - - or the company's enterprise agreement provisions?---Yes.
PN2427
And would you agree with me that a number of casuals, over the years, the number of casuals working in the printing section have tended to be transferred from casual to permanent status?---Yes.
PN2428
Now, I think in your witness statement, Ms Lay, you point out that your rostering arrangements tend to fluctuate. If I could direct your attention to paragraph 7 of your statement?---Yes.
PN2429
You say there that some weeks you work up to five or six shifts, other weeks you only work for two shifts. Those variations would tend to occur because the level of demand in the bindery section fluctuates?---That is right, yes.
PN2430
And are you aware then that your employment, as a casual working within the bindery section, it depends upon the availability of work at any given time during the year?---That is right, yes.
PN2431
Are you aware of that?---That is right, yes.
PN2432
So there is no guarantee given to you about the exact number of shifts you will be provided each week?---No, no.
PN2433
And do you also request time off from work, for example, are there occasions when you indicate that you are not available to work a particular shift for whatever reason, for personal reasons?---Only for holidays.
**** JUDITH LAY XXN MR MOIR
PN2434
For holidays?---Yes, yes.
PN2435
And when would you take those normally, around Christmas time or other times during the year?---Mostly when we are not busy.
PN2436
When you are not busy?---Quieter times.
PN2437
Yes. And it is a fairly informal process, as I understand it, if a casual is not available for personal reasons then you just simply approach the manager and indicate that and there will be a - - -?---Before the roster goes up, yes.
PN2438
And the rosters are put up, what, one week in advance?---Yes.
PN2439
JUSTICE GIUDICE: Mr Moir, we intend to adjourn now. We are going to adjourn until 2.15, Ms Lay?---Okay.
LUNCHEON ADJOURNMENT [1.00pm]
RESUMED [2.19pm]
PN2440
JUSTICE GIUDICE: Mr Moir.
PN2441
MR MOIR: Thank you, your Honour. Just prior to the luncheon adjournment, Ms Lay, I think you agreed with me that your rostering arrangements depended upon the workload within the business and the availability of individual employees?---That is right.
**** JUDITH LAY XXN MR MOIR
PN2442
And if it were to become a quiet period during the course of the year, is it correct to say that the hours would then be spread around amongst the available casual employees so that they can all receive some hours?---Not necessarily, no.
PN2443
But as a general proposition, that is what would occur?---Generally, yes.
PN2444
And is it also correct that all casuals within the binding section are expected to participate in rotating shifts?---Yes.
PN2445
And that is made clear upon commencement?---That is right.
PN2446
Now, I don't think it is quite clear from your witness statement so just to clarify, you don't receive entitlements for annual leave or sick leave and the like?---No.
PN2447
Or payments for public holidays?---Payments for public - only if we work, no.
PN2448
Only if you work, yes, yes. And you receive a casual loading as part of your remuneration?---Yes.
PN2449
And is that - what is that level of casual loading, what percentage is it, do you know?---It is 20 per cent.
PN2450
20 per cent?---For days, 30 for nights.
PN2451
Yes, that you are talking about - - -?---Yes, I am not sure what the loading is, no.
PN2452
Right, okay. Your ordinary rate, as it were, would include a casual loading of 25 per cent and then on top of that you would receive loadings for working the different shifts, is that right?---The shifts.
**** JUDITH LAY XXN MR MOIR
PN2453
SENIOR DEPUTY PRESIDENT POLITES: No, that is not right, Mr Moir?---No.
PN2454
Looking at the agreement, it is not right. The agreement says that you get a casual loading of 20 per cent for day shift and 30 per cent for night shift so the witness's first answer was correct.
PN2455
MR MOIR: Yes, I see what you mean, your Honour. Just that on my instructions the hourly rate upon which those loadings are based, which is set out in paragraph 5 of clause 20 includes a 25 per cent casual loading but if the witness if not aware of that, I won't take it any further.
PN2456
SENIOR DEPUTY PRESIDENT POLITES: Well, what you have said is not evidence.
PN2457
MR MOIR: Yes, well - - -
PN2458
SENIOR DEPUTY PRESIDENT POLITES: Yes.
PN2459
MR MOIR: If the witness doesn't know that, your Honour, I can't take it any further and I don't seek - now, in paragraph 9 of your statement, Ms Lay, you refer there to the recent bargaining negotiations?---That is right.
PN2460
Those negotiations were conducted by both management and a working committee?---Yes.
PN2461
And that committee is made up of union and employee representatives?---That is right.
**** JUDITH LAY XXN MR MOIR
PN2462
And during those negotiations you referred to a proposal by management to transfer casuals to a labour hire agency?---That is right.
PN2463
And that proposal was subject to the approval of the working party committee, is that right?---Yes.
PN2464
And did you have input into the working party committee as an employee of PMP?---Not at first, no.
PN2465
Not at first?---No.
PN2466
Okay. Later on you had input into the committee?---Yes, later on.
PN2467
And the proposal to transfer casuals to the labour hire firm, that was - that proposal was rejected by the working party committee?---Yes.
PN2468
And would you agree with me that subsequently a further proposal was put forward by management?---Yes.
PN2469
Once again regarding the use of employment agencies?---That is right.
PN2470
And if I could just show you a document. Ms Lay, this is a document dated the 5th of this month, 2003, and it confirms discussions held earlier this month and an agreement which has been reached regarding the use of an employment agency to manage and source casuals. Do you see that?---That is right.
PN2471
And - so therefore the proposal which was advanced - the additional proposal which was advanced by management, is that in line with what is set out here in this document?---I am not sure what you mean.
**** JUDITH LAY XXN MR MOIR
PN2472
I am sorry, perhaps I have phrased the question wrongly. This document sets out the agreement which has now been reached between the union and the company about the use of labour hire casuals?---Yes, that is right.
PN2473
And that is your signature down the bottom right hand corner?---Yes, that is right.
PN2474
And to your mind then the issue has now been satisfactorily resolved?---Yes.
PN2475
Thank you, Ms Lay, no further questions.
PN2476
MR WATSON: Nothing by way of re-examination, your Honour.
PN2477
PN2478
MR WATSON: Mr Humphris is here next.
PN2479
JUSTICE GIUDICE: Yes. Can you remind me about Ms Tutty.
PN2480
MR WATSON: If we were in a position to get her done before lunch today we were going to try to.
PN2481
JUSTICE GIUDICE: Yes.
PN2482
MR WATSON: But she will now go to tomorrow.
PN2483
PN2484
MR WATSON: Mr Humphris, could you please re-state your full name and address please?---Michael James Humphris of 82 Powlett Street, East Melbourne, my residential address, or 461 Bourke Street, Melbourne, my office address.
PN2485
And you have been a partner with Howarth since the start of this year?---I have.
PN2486
And prior to that you were a partner with Sims Lockwood from 1997?---Correct.
PN2487
In the course of preparation for these proceedings you have prepared two witness statements, one dated 9 April which for the purposes of the Bench is to be found in ACTU7 at page 21. Mr Humphris, are the statements - is the - rather, are the contents of the first statement dated 9 April 2003 true and correct?---They are.
PN2488
You have prepared a second witness statement on 13 May 2003 which again for the benefit of the Bench is at ACTU8, paragraph 81 - page 81 rather. Are the contents of that witness statement true and correct?---They are.
PN2489
And you have copies of both witness statements with you in the witness box?---I do.
PN2490
Yes. I have nothing further.
PN2491
JUSTICE GIUDICE: Yes, Mr Moir.
PN2492
PN2493
MR MOIR: Good afternoon, Mr Humphris?---Good afternoon.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2494
I represent the Australian Industry Group and I have some questions focussing upon your first witness statement dated 9 April 2003. Now, attached to your witness statement is a full copy of your CV?---Yes.
PN2495
And that shows that you have been involved in quite a wide range of consultancy administrations?---It does.
PN2496
And that would include involvement in both voluntary administrations and liquidations?---That is correct.
PN2497
And what kinds of industries have you been involved in then during those types of administrations?---The majority of industry is probably broadly described as manufacturing, specific division of manufacturing industry would certainly be TCF and significant rationalisation of that industry in Victoria as you would aware. Generally construction and property development enterprises involving various forms of construction whether they be residential or commercial construction.
PN2498
And what sizes of firms have you been involved with?---The majority of the assignments would be small to medium sized firms. There have been some reasonable large enterprises as well but I would say that 75 per cent of the business activity from my firm's perspective would be involved in small business with employees probably in the range of, you know, 20 to 40.
PN2499
And you have also been involved with firms of say less than 20 employees?---Yes, I have.
PN2500
And have some of - your involvement with those firms, the smaller firms, if I could focus upon them for a moment, you have been involved in voluntary administrations of small enterprises?---Certainly in more recent years since the Administration law came into being there has been a greater number of VA activities that I have been involved in rather than liquidation.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2501
Yes?---The inevitable outcome however has generally been that most of those enterprises do finish up in liquidation.
PN2502
You say the inevitable outcome generally is that. It is not always that?---Not always.
PN2503
So you have been involved in voluntary administrations of small enterprises which have successfully turned the business around and provided a platform for the future operations?---I have.
PN2504
And the same would apply for medium sized enterprises?---Yes.
PN2505
Now, you are a member of the Insolvency Practitioners Association?---I am.
PN2506
You are not a member though of the National Committee of the IPAA?---No.
PN2507
And have you been present - I am sorry, I withdraw that. You obviously couldn't have been present then at any of the meetings of the national committee which have discussed the matters outlined in the statement of Mr Michael Dwyer?---I could not have been in attendance, you are right.
PN2508
And in particular you certainly weren't present at the meeting of IPAA in November last year where the matters raised in Mr Dwyer's witness evidence were specifically discussed?---The IPA committee meeting, you mean?
PN2509
Yes?---No, I was not.
PN2510
Now, in your statement dated 9 April, you say that, in your view, poor management is the greatest cause of business failure?---I do.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2511
And that, in your view, poor management embraces all aspects of running a business. You say this in paragraph 10?---Yes.
PN2512
And that includes the effective management of HR policies?---Yes, that is correct.
PN2513
And the example that you give there is limiting leave accruals?---Yes, that is right.
PN2514
So would you agree that managing the level of employee entitlements is am important part of running any business?---Yes, I would.
PN2515
And would you also agree that the level of employee entitlements can affect the performance of any business?---They could.
PN2516
Now, would you agree that there are other common causes of company failure, that is apart from poor management?---Yes, certainly.
PN2517
And one of those would be lack of working capital?---Yes, it could be although again I would attribute that to a management issue.
PN2518
But working capital is often used to meet liabilities for employee entitlements, would you agree with that?---I would.
PN2519
And another common cause of company failure would include an inability to restructure in a cost effective manner?---No, I wouldn't agree with that.
PN2520
You wouldn't agree with that?---No.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2521
All right. Well, can I take you to the attachment B to your statement which I understand is a paper that you delivered recently?---Yes.
PN2522
It is entitled, "Business Turnaround Strategies", do you see that?---Yes.
PN2523
Yes. Could you just perhaps contextualise this paper for us. What is it all about?---It is a paper that I prepared and presented to a CPA conference. I think from memory, August of last year or thereabouts, and I have specialised in turnaround activities. I am responsible for that division within our practice, and it basically envisages trying to manage companies out of crisis without the necessity for them to take on a formal administration.
PN2524
And if I could direct your attention to towards the middle of that paper. Sorry, I am not sure if your document is numbered; mine is, but - - -?---No, mine isn't.
PN2525
It is the section which is headed: Strategies for reducing business risk, and then under that the words "Strategic management strategies", and it is about four pages from the back.
PN2526
JUSTICE GIUDICE: For those of us who do have page numbers, perhaps you could tell us what page it is.
PN2527
MR MOIR: Certainly, your Honour. It is page 55 of ACTU - - -
PN2528
JUSTICE GIUDICE: Yes, Mr Watson.
PN2529
MR WATSON: Your Honour, we might be able to give Mr Humphris a numbered copy as well, which might make it all a lot easier, I suspect. ACTU7 is the exhibit number.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2530
JUSTICE GIUDICE: Yes, thank you?---57?
PN2531
MR MOIR: Page 55, Mr Humphris?---Yes.
PN2532
Yes. And you outline there some strategies to - well, what do you outline there? Could you just explain what this section of your paper is dealing with?---Well, it is a process that I would attempt to put in place influencing management decisions, and one of these strategies that you would see to turn around a company is connected with the growth of a company, and that is the strategy that is referred to there as survival then growth, and survival described for is the current position of basically consolidating a company's affairs ..... position which is manageable and I outline a number of points there which are areas that can be addressed to achieve that.
PN2533
Yes. And you say there:
PN2534
The basic objective of this strategy is to contract the business back to a profitable core of activities.
PN2535
Do you see that?---Yes, I do.
PN2536
Yes. Do you agree that that might involve a process of restructuring?---Well, it could do.
PN2537
Including the restructuring of the work force?---Quite possibly, yes.
PN2538
And you say in the second point, rather than exiting, maybe a better way to change - better to change the way in which the business is conducted. That is - yes, that is the objective you are referring to?---Yes, that is right.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2539
And then over the page to page 59 you continue this theme of strategies for reducing business risk, and you look at operations management strategies and a series of dot points. One of those is the final dot point:
PN2540
Control of the size of an organisation's work force -
PN2541
?---Yes.
PN2542
..is also critical for any effective turnaround.
PN2543
So, you would agree with me then that an ability to restructure, that is control the size of an organisation's work force in a cost-effective manner is or can be critical for any effective turnaround?---Turnaround, yes.
PN2544
Yes?---I think you put a term in before, it was in relation to the survival or preventing a company from actually entering into insolvency.
PN2545
Yes?---And this paper does not address that. It deals with companies that are facing a crisis in terms of the prospect that in the future they may become insolvent, but dealing with these strategies envisages the company still has potential to go forward, and it is in crisis mode, management mode, but not necessarily facing insolvency.
PN2546
Yes. But if a company is unable to implement one of these strategies, one of which you have nominated is control of the size of an organisation's work force, then that may lead to the business not being able to turn itself around and go into insolvency?---In a single illustration I don't believe that would be correct. All of these strategies need to be combined and they are to do with the - you pointed out earlier, the stabilisation of the business is critical. Putting the business into a position where it actually does have the ability to generate cash, and if need be, address issues in terms of any reduction of expenditure. One of those expenditure levels may in fact be - may be employment.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2547
Yes. These strategies are you say to be employed so that a business may turn itself around and therefore stave off going into insolvency. Is that right?---No, not at all. Just staving off insolvency is not an issue in a turnaround strategy. What these factors are addressing is the improvement of performance of the business. If a company is just merely staving off insolvency, my view is that the turnaround strategies I am referring to won't be anywhere near sufficient. These envisage being implemented in companies that do have a future. If it is facing insolvency I would say the majority of these actions and tactics will not turn the business around or will not keep it out of insolvency. The company actually does have to be addressed at a much earlier stage than when it is actually facing insolvency.
PN2548
Right. Would you agree that these strategies are important in at least so far as they might turn around a business from heading down the pathway towards insolvency?---Yes, definitely.
PN2549
And to the extent that a business is not able to do that, they then make it down that path?---They may.
PN2550
And would you also agree that in order to implement these strategies, and I am particularly focusing on that final one you have mentioned there, control of the size of the work force, do you agree that that - the ability of a company to implement that type of strategy will be affected by the level of employee entitlements?---It certainly is a requirement for the company to be able to fund any redundancy out of their cash flow. I am not - could not disagree with you in respect of that point. But if we are talking small businesses, generally speaking, from my experience small business does not normally restructure with the termination or the redundancy of employees. It is normally a more - it is generally speaking a small business that employees sort of 15 to 20 people or 10 to 20 people, however many it is, generally running a business that is running very lean on personnel. Management are very hands-on with the environment, they know exactly what their work force is doing, and generally there is more impact in a cost-saving exercise for a small business particularly to perhaps look at the releasing of the factory or you know, possibly disposing of some unnecessary equipment which is perhaps subject to some financing costs. They would be far more significant to a small business than actually attempting to cut one salary out which generally is all a small business can afford to do without losing its total production.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2551
If a small business faced a liability of say $5000 to make one individual redundant, would you agree that that may have an impact upon the ability of such a firm to do that, that is, to implement a redundancy?---I don't believe so. I think that sort of cost is manageable by basically all small business that I have been involved with; if that was the issue confronting a business I am sure they would be able to handle that type of expenditure, even if they are a small sort of five to 10-man employee or person employee firm. You know, $5000 isn't going to be a make or break issue for most entities. A five to 10 employee firm has probably got a turnover of - depending on the business, but let us say it is $1 million; 5000 isn't going to be a make or break issue, I would have thought.
PN2552
Well, perhaps the example I gave wasn't a very good one, but if I had to downsize and retrench four or five people, the total bill then of - we are talking tens of thousands rather than thousands?---Well, you may be talking 10 or 20 or $25,000 in those circumstances, but from my experience a retrenchment of say five people out of a work force where you may actually have only 15 or 20 people, it is very unusual from my experience to see a small business be able to in fact reduce its work force by 25 per cent and still be in a position to actually carry on business. So, as I said before, they are running mean and lean in terms of their staff, you know, right from day one.
PN2553
Yes. So, if they are sailing pretty close to the wind already?---Well, I don't think they are sailing close to the wind. I think it is just a matter of a case of them being very careful in terms of how many people they can employ. When you have got, you know, a small factory and the number of staff are continually under the eye of management and/or owner it is very unlikely that he has got any people there who aren't pulling their weight.
PN2554
Yes. And retrenchment costs are something which the operators of these businesses will take into account when it comes to hiring, won't it?---Sorry, can you repeat that?
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2555
The possibility of having to provide retrenchment payments is something that these operators, small business operators, will be mindful of when it comes to hiring employees?---Well, the provision of payment for retrenchment is not a matter that actually equates or comes into the calculations of any profit and loss account or balance sheet. So, I am not sure that, you know, I can see your point on that.
PN2556
But in your experience is it something that small business operators are mindful of?---I don't believe so.
PN2557
But you did accept earlier on that - coming back to this point - that the level of employee entitlements will affect the ability of a firm to implement this type of strategy, that is, to control the size of the work force?---I think the key word there is "entitlements", and what I am referring to as an entitlement is the amount that actually may be due and payable in respect of holiday pay, long service leave or unpaid wages. I wouldn't equate or calculate into entitlement as being a redundancy pay that is not yet entitled to be paid.
PN2558
But if the company is to implement this sort of strategy, that is, to down-size, as it were, then the contingent liabilities associated with severance pay will be triggered, won't they?---They will, but if I can put your questions into perspective, you asked me about entitlements.
PN2559
Yes?---And the entitlements that I am referring to are entitlements that are due and payable - - -
PN2560
The actual entitlements?---And they don't include redundancy. Now, if you are telling me that those entitlements now relate to a redundancy package which may in a small business equate to three, four or five people which could be, you know, 25 or 30 per cent of their work force, my view is that, you know, a business can actually afford to pay those sums of money, because you are talking 25, $30,000; I don't see it as being a massive sum for a business to undertake, and generally speaking in discussions with small business and their bankers, my experience is if a banker can actually see the impact of - on the cash flow and the better profitability, a banker is likely to fund those sorts of payments because they are not massive.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2561
You see that actual liabilities such as holiday pay and long service leave, they may affect the ability of a firm to restructure, to down-size, but you draw a distinction between that and contingent liabilities?---Well, I don't draw a distinction. There is a clear distinction, and it is drawn purely from the accounting standards.
PN2562
Yes. But in a down-sizing situation both sets of liabilities apply, don't they? The actual liabilities are there as they always are. The contingent liabilities are triggered also, so surely both sets of liabilities will affect the ability of any firm to restructure and down-size its work force?---The contingent liability will only be a matter of consideration when it actually is triggered and becomes an entitlement.
PN2563
Yes?---If it is an entitlement to be paid in a restructure, then yes, it will have an impact, and clearly as the requirement of cash flow then becomes a matter of whether or not cash flow can fund it.
PN2564
Now, if I could take you back in your presentation, to page 38, which is a flow chart for a business model?---Yes.
PN2565
I take it from that, sir, you are suggesting that business performance may be affected by a variety of factors, and you have attempted to identify or you have identified some of those factors here, external and internal factors, is that correct?---That is what I have attempted to do, yes.
PN2566
And on the right-hand side of the flow chart you identify signs of business performance?---Yes.
PN2567
And you have got a column there dealing with cash flow?---Yes.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2568
And then under that there is reference to operating profit and then movement in working capital, movement in non-current assets liabilities. I take it from that you would include contingent liabilities for employee entitlements within there as well in the sense that cash flow may be affected by movements in non-current liabilities?---No. Cash flow is only a measure of current liabilities and current assets.
PN2569
Right. I see. So, cash flow is not affected by movements in contingent liabilities which are triggered?---No. If they are triggered, yes.
PN2570
Yes?---If they are triggered they become a current liability, but if they are standing - I think you asked the question of contingent liabilities, contingent liability will not come into it because it is not a liability that has to be met.
PN2571
And if they are triggered, that is, contingent liabilities for severance pay and like, that will - that could have an effect obviously upon cash flow which I then take it you are suggesting could have an effect upon business performance?---Yes, well, certainly any expenditure that is due and payable by a business, if that is a redundancy payment that was previously a contingency which was not needing to be accrued as a liability in the company's balance sheet, once it becomes a liability and has to be accrued and/or met, then certainly will affect both profit and loss and cash flow.
PN2572
Yes. So, business performance can be affected by the level of contingent liabilities associated with severance pay, when they are triggered?---When they are triggered.
PN2573
And then obviously, would you agree with me that if a business operator is considering to implement redundancies they will then bear these factors in mind, that is, the impact upon cash flow and business performance?---Certainly. You would have to model any payments into your forecasts and take into account the impact on whether or not you have sufficient working capital in place or there are sufficient banking facilities to accommodate those discharge of liabilities.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2574
Now, you also, if I can take you back to the left-hand side of the flow chart, you identify factors relating to the causes of business success and failure. In macro-economic factors you have got a list of dot points there, one of which you itemise as industrial relations. What do you mean by that?---Well, I think the issue with industrial relations is actually having a good relationship with your work force, to ensure that the work force is being productive, not being disruptive to any process, and basically ensuring that they are putting in I guess a solid effort for their pay.
PN2575
Could it also include rules and regulations associated with employment?---Yes, it would.
PN2576
So the obligations, the lawful obligations upon employers and the entitlements of employees?---Correct.
PN2577
And, you would accept that the higher level of redundancy payments would lead to - if there were to be an increase in the minimum obligations of employers regarding severance pay, that would then lead to a greater amount payable in the context of any down-sizing as compared to what previously existed?---Yes, if there is a decision to make any number of employees redundant, then any increase in the current number of weeks available to that employee would have a financial impact in increasing the cash to pay out that redundancy.
PN2578
Yes. And would you agree that that could act as an increased disincentive towards any such restructuring?---No, I don't believe so.
PN2579
You don't believe that?---No.
PN2580
So you don't believe that the increased liability for an employer to implement redundancies would increase the disincentive to engage in such restructuring?---I don't believe so. Restructuring - - -
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2581
JUSTICE GIUDICE: I think you have given the reasons for that already, haven't you?---Yes, I have, your Honour.
PN2582
MR MOIR: If I could ask you to now look at page 42?---I am regretting having prepared this paper.
PN2583
I am sorry?---I am regretting having prepared this paper.
PN2584
It is headed up: Business performance, and you identified there visible signs of potential business failure?---Yes.
PN2585
And some of those include falling profits, declining cash flow, credit facilities becoming stretched and so-forth. If those signs are visible, and perhaps let us just concentrate on decreasing cash flow, if that particular sign is visible, would you agree with me that within a particular firm if that sign is visible then that may limit the ability of such a firm to implement redundancies and provide redundancy packages?---It may.
[2.57pm]
PN2586
And if you had any of those visible signs of potential business failure, a particular firm, then it may limit the ability of such a firm to fund redundancies?---Yes, that is a possibility.
PN2587
Would you also agree that by the time a company becomes insolvent, its holding of substantial cash provisions has usually evaporated? Would that accord with your experience?---Well, certainly in small business, my experience is that they hold very small amounts of cash at any time. The normal working capital assets are either in inventory or receivables. Not in cash, you know, cash at the bank. In larger firms they are normally required to carry a, you know, a requirement from their bankers to meet banking covenants of certain levels of cash. So it does vary as to whether you are talking small business or larger enterprises.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2588
Yes, you are talking about at any time; is that right?---Yes.
PN2589
Yes. I am talking about at the actual point where you become involved, if you like, where you step in as an administrator or a liquidator. Was it your experience that where you do step in, on that occasion, a company's holding of substantial cash provisions is usually evaporated?---That would be my experience.
PN2590
And so therefore, such a firm clearly has a reduced ability to fund redundancy payments?---Well, it depends. I mean the issue with cash may well be that the cash has actually been applied to build inventory or fund other assets of any nature, whether they be working capital assets or fixed assets. So if the company has just in fact expended a substantial amount on capital expenditure, it may well be the asset is there represented by something other than cash. It may well be a new plant or it may be in other forms assets. So the movement in cash doesn't necessarily mean that the assets have disappeared by virtue of trading losses, which is - generally speaks to the case when I am appointed as an insolvency administrator. But you do have to look at the circumstances of each business, rather than I think, you know, take a view that cash - the non-existence of cash, you know, doesn't necessarily mean that there aren't other assets to support their liabilities.
PN2591
When you step in as an insolvency administrator, you are then required to investigate the affairs of the Company?---Correct.
PN2592
And that would include the affairs of the Company leading up to the actual point of insolvency?---Yes.
PN2593
Yes. So you would have - you would be able to establish what has been going on in the lead-up to insolvency, the actual role.?---You are required to report on the causes of failure.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2594
Yes. And would it be your experience that where you have analysed that situation, in the lead up to insolvency, where, as it were, the company is going into a state of collapse, such a company's holding of substantial cash provisions declines?---I am not sure that you actually necessarily identify the issue of cash. You are generally talking in terms of realisable assets as a group. That may well mean all fixed assets, current assets and cash. And I think it is important not to just isolate case in that description, because it is always the directors' discretion as to how they utilise cash within the business. And if cash is being absorbed to build other assets, or indeed to in fact pay creditors, that may not be an issue that deserves any criticism whatsoever.
PN2595
I am talking about cash that may be used to fund redundancy packages. Would it be your experience that the cash that might be available in the lad up to insolvency, tends to decline such that by the point at which you are appointed, it is usually evaporated?---My experience is there is not normally much cash in the bin when you get in there.
PN2596
Yes?---That is certainly the case.
PN2597
And your experience would be that the cash provisions have steadily or rapidly declined. They have declined in the lead-up to insolvency?---I don't think I could give you a definitive answer on that. My experience would say that, you know, the - each and every company situation is different. It may well be that - and it can vary according to the time of the month that you are actually dealing with the company in terms of whether their receivables are in, or whether it is time for them to actually start to make their creditor payments.
PN2598
Yes?---So cash can vary from one week to the next in any small business.
PN2599
Yes. Just talking about a struggling firm, which may be headed down the pathway towards insolvency, sailing pretty close to the wind, is it your experience where you eventually become appointed as administrator or whatever, is it your experience that in the lead up to insolvency the provision of retrenchment packages has not been possible, because of the significant drain upon cash flow and the like, for that struggling firm?---Are you referring to, sorry, the lead up period, you are talking about?
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2600
Yes?---Well, the lead up period of a company generally doesn't - you know - certainly small companies don't have any consideration of the need to make retrenchment payments because the retrenchment payments are not due. They don't become due until the company actually cease operations and the staff are terminated. It is very rarely in the focus of a small business that they actually have to give consideration at all to the payment of retrenchment monies.
PN2601
Yes?---Because it is not a debt due and payable.
PN2602
Yes. Is it your experience that firms in the lead up to insolvency will place an embargo on implementing redundancies?---I wouldn't say it would place an embargo on it. It may well be that you actually have staff who become aware of, you know, perhaps the predicament that the company is in. You may have one or two suggest that they should resign, and they do resign and seek to take their entitlements immediately.
PN2603
Is it your experience that prior to insolvency directors of companies have been inhibited from implementing redundancies due to the associated cost?---I haven't seen that. I haven't seen that as being an inhibition of management to implement redundancy. All I can say from my experience is that it is not a matter that most businesses consider. That is in small business, they don't consider the redundancy as an issue because they are generally running at such a - with small staff to see one or two of their staff disappear through a redundancy would probably mean they can't complete their production facility or production orders that are in front of them.
PN2604
Yes, but you agree that if cash flow is decreasing or there are any other of these visible signs of potential failing which you have set out in your report, then the ability of firms to implement such restructuring is more limited; you have agreed with that?---Well, I would say it is a possibility. I am not sure I am agreeing with you but it is a possibility.
PN2605
And that would include in circumstances leading up to insolvency?---Yes.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2606
And you state in your evidence that, in your view, difficulties in restructuring a company which is under administration are not often due to the level of employee entitlements; do you see that at, for example, paragraph 6 of your statement?---Yes.
PN2607
So you are saying there that it is wrong to assert the difficulties in restructuring a company in administration are often due to the level of employee entitlements. Are they sometimes due in your experience?---No, I don't believe so. I have never experienced that as a problem.
PN2608
That has never been your experience?---Never been my experience.
PN2609
I see, and yet you acknowledge that the level of employee entitlements will affect the ability of a firm to restructure?---Are we talking employee entitlements or the contingent liability?
PN2610
The contingent liabilities associated with severance pay which would be triggered by any such restructuring which involves a down-sizing of the workforce?---In a restructuring situation of a small enterprise, when I say I have never experienced this, my experience is that most of the employees - and I say most - are absolutely critical to the ongoing success of a business. So if you attempt to restructure, as I said before, the restructuring normally takes the carving out of other overheads rather than your labour force because your labour force is so critical to what you are actually attempting to produce in terms of revenue. So I haven't experience that as being an element that would cause any concern in a restructuring process. Employees will go on. There may be one or two. You may find that there could be a relocation of the business. That may influence a redundancy because somebody may not want to work from the east to the western suburbs. That could be an issue. But I have never experienced it as being a fundamental drawback in terms of a restructuring.
PN2611
Yes. Well, I am not talking about fundamental drawbacks. I am just talking about: have you ever seen it as causing a difficulty?---Personally, no.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2612
Not even in some cases?---Well, in larger businesses, yes. I have seen it in the larger context, but not in small business.
PN2613
And what have you observed in the larger business context?---The larger business context, and perhaps as an example Hazelton Airlines would be one of 300 employees. The concern certainly there was that if the business was not successful within a reasonable time frame after the sale of the business, then the purchaser wanted the ability to claw back some of the costs of redundancy if he actually had to make staff redundant over a period of time. And that can be a component of the consideration that you need to build into the contract of sale. And working out a reasonable percentage as to what, you know, could be a claw back, you know, certainly can cause some difficulties in the negotiations. But not as was the case in Hazelton Airlines, not to the extent where it actually took the transaction off the table. We were able to negotiate an outcome and build in a provision that would enable the redundancy to be met if, in fact, further restructuring of the business was required within six months of the actual sale of the business. So it can be done in a flexible arrangement.
PN2614
Right, but you have seen cases involving larger firms where the level of contingent liabilities associated with severance pay has caused difficulty in restructuring?---Well, I haven't seen it as causing a difficulty. All I say is it causes one to actually be a little bit more creative in the construction of the contract of sale in terms of how you would deal with that contingent liability.
PN2615
Now, in your statement you also state that the restructuring of - and I think you have just repeated it here, the restructuring of small and medium businesses is usually not an option. You identify the reason for this as due to a lack of fixed assets. This is, for example, in the third dot point of paragraph 6; do you see that?---Yes, I do.
PN2616
But I think earlier on you stated that you have been involved as an administrator of a firm under voluntary administration and that those administrations have involved smaller businesses?---Yes.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2617
Yes, and in some of those cases you have been involved with the voluntary administration has been successful in turning around those small businesses?---Yes, I have.
PN2618
Yes, and you are aware that the voluntary administration procedure has been increasingly used since it was implemented in the early 1990s?---I am.
PN2619
Yes, and many of the - I am sorry, many small and medium sized enterprises do use the voluntary administration procedure?---They do.
PN2620
Yes, and as you have been involved in yourself, many of these voluntary administrations of smaller and medium sized firms are successful in re-organising their affairs and continuing in business?---Well, I disagree with the usage of the term many.
PN2621
All right. Well, then some?---Some.
PN2622
Yes. Now, I think you mentioned a few moments ago that - and you also state this in your evidence, that the purchase price of an insolvent business can be affected by the level of contingent liabilities?---Well, not so much affected, it will normally fit into consideration in the calculation of how the price is actually paid.
PN2623
So would you agree with me that where a potential purchaser is looking at taking over an insolvent business from the administrator that those potential purchasers are cognisant and are influenced by both the actual and contingent liabilities within the firm?---Yes, they are. They will be well aware of the transition obligations from one employer to another.
PN2624
Do you think that a higher level of contingent liabilities, that is, higher than what may presently exist, would affect the attitude of potential purchasers?---I don't believe so.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2625
Perhaps make them - you don't believe so?---No.
PN2626
So if a potential purchaser was faced with an increased liability for severance pay, don't you think that might make them more cautious in taking on the risk associated with the purchase of a struggling business?---Any potential purchaser looking at buying a business will put a price on that business and if he demands or requires a certain return on investment, he will do his calculations in what he believes that new business may add to his existing business. So if he requires to get a return on investment of 25 per cent, he will work out his purchase price accordingly. The purchase price then will fall into the category of does he pay cash for that and allow the - and simply not take over liabilities but allow the administrator to actually discharge liabilities, particularly statutory liabilities, or will he actually take a transition of the employees and take part of the consideration as being the liabilities that he actually has taken on a future commitment to meet. So if his price is a million dollars, he may take on $500,000 worth of liabilities and pay $500,000 cash. So I don't believe it will affect the purchaser in any shape or form once he has done his calculations as to how much he is prepared to pay because he will split the price in terms of liabilities taken on and cash to be paid out.
PN2627
Have you been involved in administrations where potential purchasers have come forward and then walked away?---There are a lot of tyre kickers out there.
PN2628
And they have walked away because they assess the level of risk is too high?---Yes.
PN2629
And don't you think that the level of contingent liabilities may affect an assessment of the risk associated with purchasing a business?---I don't believe so.
PN2630
You don't believe so?---No.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2631
So if I am a potential purchaser contemplating taking over a struggling firm, which may then in future involve me having to implement redundancy and being liable for those contingent payments, don't you think I would be affected then - my attitude towards the potential purchase would be affected by the level of those entitlements?---I thought I just answered that in terms of you will factor that into the consideration you pay. The risk that you take on board is more akin to the risk associated with whether you can actually achieve the sales or the profit margins. The expenditure level associated with the potential of a contingent liability is something you can actually calculate and therefore you can factor it into your calculation of risk. But whether or not you can achieve the sales, if the market is damaged as a result of the insolvency of the business, they are the risk factors you will take into finally calculating your price. My view is that the purchaser can always measure to within reasonable dollar levels the value of the contingent liability as it may be if he, in fact, has to close the business down and he will take that into account when he does the calculation of how he pays the price.
PN2632
Yes. I think you agreed with me that the level of risk, which obviously affects the attitude of the potential purchaser, a factor involved in assessing the level of risk is the level of liabilities currently within the firm?---No, I don't think I agreed with that.
PN2633
So you don't think that a potential purchaser is influenced by what liabilities he or she may have when he takes over that firm?---Well, he is influenced in how it affects the price he will pay.
PN2634
Yes, but if the price is too high, then they can walk away, as you have seen on many occasions?---And they do.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2635
Yes. So if the level of risk increases because the level of liabilities goes up, that could involve potential purchasers walking away?---I think we are still at cross purposes here because the price is the price as far as I am concerned as to what any astute purchaser will pay, and the liabilities that he may wish to take on will only ever form part of that price. He will not pay more than what he believes is a reasonable investment to make. The liability factor will not equate. If I can come back to the Hazelton example, your Honour, it was an interesting case where Hazelton had very little in the way of fixed assets to sell but it had a very substantial liability to employees if those employees were to be terminated. And of the assets that I held as administrator of that company, most of them were in the form of cash and receivables, which would have been, very clearly, available to employees and would have taken virtually all of those assets to discharge the liabilities of redundancy had those employees been terminated. In the case of the sale of Hazelton a price was agreed and that price actually saw me as administrator actually paying money to the purchaser because it was cheaper for me to contribute to his ongoing costs than it was for me to actually incur the full redundancy level. So in making that analysis I think what I am demonstrating is that a purchaser will actually only ever pay what he believes he is a reasonable investment to pay for an asset and if the liabilities are part of the consideration it may be an adjustment either way. In my case it was better to make a small payment to give him some supplementary revenue to meet those liabilities in the future if they did occur.
PN2636
JUSTICE GIUDICE: Is that like Melbourne Football Club paying part of Woewodin's salary when he goes to Collingwood?---Very much like it.
PN2637
MR MOIR: Just taking up what you said there, Mr Humphris, in the case where there are substantial liabilities associated with the termination of employees, in particular the retrenchment of employees, you have never encountered instances where a potential purchaser has walked away because of concerns about the level of liabilities associated with possible termination of employees?---No, I haven't.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2638
Have you been involved in instances, though, where the potential purchaser has driven a harder bargain with the vendor because of the substantial liabilities associated with possible retrenchment of employees?---It can become a part of the heavy negotiating position because obviously as the administrator you are attempting to get as much cash into the administration as you possibly can to meet, obviously, priority creditors. So the balance between leaving an amount as - the liability as being part of the consideration, as opposed to the cash component, will sometimes create a difficult negotiation situation but, from my point of view, it is just part of the process of trying to establish the price.
PN2639
Yes, but to come back to my question, you have been involved in instances where a potential purchaser has driven a harder bargain with you the vendor because of the substantial liabilities associated with possible retrenchment of employees?---I can't really say that I have. I mean, all negotiations of this nature are hard bargains, I mean, in every instance with people who are looking to pick up a bargain. They are not going to pay what the assets generally are worth. So the negotiations are always harsh.
PN2640
So you have never had an instance where a potential purchaser whom you have been involved in negotiations with has pointed to the substantial liabilities associated with possible retrenchment of employees and has used that as a bargaining tool?---Used as a bargaining tool, yes, but only in terms of the split between cash and full price.
PN2641
Yes. So that has been a factor that has been taken into account in the negotiations?---It is part of the negotiation but as I came back earlier to demonstrate the price at the end of the day, how you get to it by way of the taking over of liabilities and the net position of paying cash is just part of the negotiation process.
PN2642
And have you also been involved in instances where there have been negotiations, a potential purchaser has pointed to the substantial liabilities associated with retrenchment and has then chosen to walk away, or the negotiations have ultimately collapsed?---I don't believe so.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2643
But you mentioned before that not every negotiation is successful?---Oh, yes, but I wouldn't - there are always numerous issues that come up in the discussions, there is not just one issue of employee entitlements that may - - -
PN2644
Yes, I am not suggesting there is just one issue but in those cases where a negotiation has been unsuccessful, has that ever been raised as an issue?---It may have been raised as one part of a dozen issues.
PN2645
Yes. Thank you for that. And would you agree that if a potential purchaser was to drive a - or seek to drive a harder bargain with the vendor, one of the factors relevant to that may be the substantial cost associated with the retrenchment. Would you agree in that situation where a harder bargain is driven that reduces the level of returns, generally speaking, to creditors?---Well, certainly, if there is a harder bargain driven it means there is going to be less in the contract at the end of the day.
PN2646
Yes, and less for creditors?---Yes, that would be right. But as I said before, it will only be one of the numerous issues where they drive hard bargains.
PN2647
Yes. And that may include employee creditors?---It may.
PN2648
And would you agree also that if you were to have an increased level of liabilities associated with - I am sorry, withdraw that. If you were to have an increased level of liabilities, any liabilities, that will then inevitably reduce the options available to an administrator to trade and sell the business because of the effect it has upon the attitudes of potential purchasers?---Not really. I think every business, again, has to be looked at in the very individual sense. The amount of liabilities that a business has at any stage may be caused by a variety of issues that may not necessarily reflect on the actual operating performance of that business. And we see, certainly, as administrators/liquidators a lot of companies that have actually been perhaps skimmed or, you know, sort of over-traded by their directors and directors' salaries have been exorbitant, things of that nature. If you remove those from the calculation of that business operating normally, then one
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
would be able to reduce the liabilities and say, well, those liabilities in an ongoing sense would never be as high as that. So I think you have to be cognisant of the fact that every business is totally different. So saying that you actually have a higher level of liabilities, it means that the company - anybody doing due diligence on the possible acquisition of that business will actually have to understand how those liabilities have arisen. You can't actually always attribute them just simply to trading losses.
PN2649
Would you agree with me that the lower, as a general proposition, would you agree with me that the lower the level of liabilities within an insolvent business the more options for an administrator to trade and sell the business?---No, I can't agree with that either.
PN2650
You don't agree with that?---It works the other way as well because the company may have less liabilities if, in fact, the proprietors had tipped in more capital to start with. So they may have been able to actually discharge their liabilities progressively and absorb trading losses.
PN2651
Yes. Well, won't it be harder to sell an insolvent business that has higher levels of liabilities than one that has low levels?---No, not at all. I mean, the business only sells based on its financial performance. The liabilities of the business are not normally the concern of any purchasing party.
PN2652
Yes. Well, perhaps I should rephrase it. All other things being equal, a business with a low level of liabilities will be easier to trade and sell from the administrator's point of view than a business with a high level of liabilities?---No, I am sorry. Every company is totally different and you can't make that assumption in respect of your ability to trade on. As I said before, if it has got low liabilities, historically, and you go into a business that is turning over a hundred million dollars but only has two million dollars worth of liabilities it may well be as a consequence of $98 million worth of capital being tipped into that business and the losses may well be 98 million. You don't know what the performance is.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2653
But your evidence is that you have encountered difficulties where the high level of liabilities associated with possible retrenchment have created difficulties in the negotiation process?---No, I didn't say it created difficulties, I said they form part of a negotiation process in terms of the split of the consideration that will be payable for that business whether it be in cash or whether it be an absorption of liabilities.
PN2654
Yes, but some of those negotiations have broken down and that has been one of the factors?---One of a dozen factors I think I mentioned before it may equate to.
PN2655
Yes. And in other cases where they haven't broken down, there has been a successful outcome, the vendor has driven a harder bargain and pointed to this factor - sorry, the potential - the purchaser, I should say, has pointed to this factor and driven a harder bargain?---And I think I said before, I couldn't recall whether that - having had that experience.
[3.28pm]
PN2656
Now, in paragraph 18 of your statement, if I could take you to that, Mr Humphris, you state there that the existence of employee entitlement's liability provides an incentive to banks or other financial institutions to keep a business as a going concern. You quality that by saying in some circumstances. In those circumstances, are you then saying that if there is no liability for employee entitlements, then there is no incentive for lending institutions to keep the business afloat?---I am not saying there is no incentive but I am saying the incentive is reduced because they have immediate access in priority to the floating charge assets.
PN2657
Yes. So the incentive is only reduced if the employee entitlements are also reduced or disappear?---I am not sure how that works. Can you expand on that for me?
PN2658
Well, you are saying that where you have employee entitlements and a liability for that, that provides an incentive for the lending institutions to keep the business afloat?---Yes, I am saying it may.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2659
Yes?---Yes, in some circumstances I think are my words.
PN2660
Yes. Now, that incentive to keep the business afloat for the lending institutions, that incentive is not going to be diminished if the level of employee entitlements remains the same?---That is probably right.
PN2661
Yes. So the incentive for lending institutions to keep the business as a going concern would, in your view, remain unaffected if the existing level of employee entitlements is maintained?---Would remain unaffected; that is probably right.
PN2662
Yes. Now, if I could - - -?---It certainly depends on the nature of the company, once again. I mean, the - - -
PN2663
Yes, as a general proposition - - -?---If there are - - -
PN2664
- - - it would remain unaffected?---That is right, yes. And you have to determine whether the bank has other access to other fixed assets, and they may be there by a collateral security which in small business is generally the case, where they have a private residence or something which is secured by mortgage covered by collateral debenture.
PN2665
Yes. If I could just now turn briefly to the Ansett example which you make reference to in paragraph 20. Are you aware that in recent Federal Court proceedings the Ansett administrator argued against higher redundancy entitlements for certain Ansett employees on the ground that making such payments would be detrimental to other creditors, including employee creditors; are you aware of that?---I am.
PN2666
Yes, and the basis of that evidence from the administrator was because of his concern that the funding for these higher redundancy pay entitlements would come out of the pool for all creditors?---Well, there is no pool for creditors other than employees in Ansett, so only out of employee entitlements, yes.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2667
Yes, yes?---They were also talking an average redundancy of something in the vicinity of 30 weeks.
PN2668
If I could take you now back to paragraph 6, and the fourth dot point. You make the point there that employee entitlements are ranked below fixed charges and ahead of floating charges in priority. And in your view this means that in most instances the practical effect of payment of employee entitlements is to reduce the pool of funds available to the holders of floating charges?---Yes, that is right.
PN2669
That wouldn't apply in every instance, would it; in fact, you say it is in most instances but not all instances?---Most.
PN2670
And that certainly wasn't the position being advanced by the administrator in the Ansett case which I have just referred to, is it?---No, because there were no secured creditors in the Ansett case. He was only referring to the pool available to those employees.
PN2671
Yes. Would you also agree with this proposition that a successful restructure of an insolvent firm will generally enhance the levels of return for all creditors as opposed to any winding up of the business; is that your experience?---Yes.
PN2672
And these enhanced levels of returns which generally apply in your experience where the business is turned around and goes back out of insolvency, those enhanced levels of return would provide an incentive for creditors to support any restructuring proposal?---Normally. That would normally be the case.
PN2673
Yes?---Although in some instances creditors will support a return to them through a restructuring which may see a deed of company arrangement implemented which will give them 10 cents in the dollar, whereas under a liquidation they may get 25 cents in the dollar. But because of the future opportunity, the trading with that entity and taking profit into the future, they still may vote for that.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2674
Yes, and I take it that you are a supporter of the voluntary administration procedure?---I am.
PN2675
Yes, and what are your reasons for that?---I think the flexibility of the deed of company arrangement really provides a very clear opportunity for creating a better return for creditors.
PN2676
And also a better outcome for the community at large?---Well, your objective very clearly is determined by the Corporations Law and basically the primary objective is to find a result for creditors better than they would expect on a liquidation. That is what drives you. You are not driven by the community at large, I am afraid.
PN2677
I see. In your experience, have you observed that the benefits to the community at large are greater where a business can be turned around through voluntary administration than proceeding to liquidation?---I would expect that to be the case.
PN2678
Yes, and so it is your view that voluntary administration leads to superior outcomes?---Well, not necessarily. As I indicated to you before, voluntary administration may, in fact, see creditors take a lesser sum of money rather than what they would actually achieve on a liquidation. Creditors will then, particularly in that situation the vote may be dictated and governed by employees, not by unsecured creditors. Because the employees will strive to see the business survive so that they can actually have ongoing employment.
PN2679
Yes, and would it be your experience then that voluntary administration as opposed to liquidation leads to better outcomes for employee creditors?---Potentially, yes.
PN2680
Potentially?---My experience still in voluntary administrations with small companies is the majority actually do finish up in liquidation.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2681
Yes?---And it tends to be a sale of business with a transition of employees, rather than a reconstruction of that entity.
PN2682
Yes. That is not for all cases though, is it?---It is not for all cases and I don't think there actually are any statistics on that but I would think that the - well, certainly my experience and others that I talk to, they do experience the same issue.
PN2683
All right. If I could turn to the final part of your witness statement, Mr Humphris, at paragraphs 21 to 23 dealing with the distinction between insolvency and other circumstances. Do you acknowledge that the Corporations Law now makes it an offence for companies and company directors to enter into arrangements with the intention of significantly reducing the amount of entitlements of employees that can be recovered?---I am aware of that.
PN2684
Yes, and that provision which is set out in section 596AB of the Corporations Law, that provision applies even if that is not the only reason for the arrangement; are you aware of that?---I am.
PN2685
Now, those provisions, or attached to those provisions are significant penalties: for example, jail terms of up to ten years and/or fines of up to $1100, you are aware of that?---I am.
PN2686
And in your view do those provisions provide a deterrent against these types of behaviour?---They should.
PN2687
Yes, and can I put it to you that a company or company director which sought to engineer or otherwise manipulate circumstances of insolvency in order to reduce the level of redundancy pay entitlements for employees would be committing an offence under the Corporations Law?---I accept that.
PN2688
Yes, and in your view do these provisions provide a significant deterrent against business operators manipulating or engineering circumstances of insolvency in order to reduce the amount of redundancy pay entitlements?---I don't believe so.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2689
You don't believe they provide a deterrent?---No. Desperate men do desperate things when their family and livelihoods are on the line. You see it, and I have seen it over 25 years of being an insolvency practitioner, the number of opportunities that people will - actions they will take to actually protect their investments and protect their homes are quite extraordinary.
PN2690
You agreed with me a moment ago that the provisions provide a deterrent against behaviours which involve arrangements with the intention of significantly reducing the entitlements. Are you now changing your evidence?---I said - - -
PN2691
JUSTICE GIUDICE: I don't think he did say that, Mr Moir?---I said they should.
PN2692
He said they should, as the witness has just indicated.
PN2693
MR MOIR: Yes. Thank you.
PN2694
JUSTICE GIUDICE: You said, "do they" and he said, "they should."
PN2695
MR MOIR: Yes. You also state in your evidence that - and this is in paragraph 22, Mr Humphris?---Yes.
PN2696
That a distinction between redundancy payable in solvent and insolvent circumstances provides holders of floating charges with a financial incentive to have a company placed in insolvency?---Yes.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2697
Yet earlier on in paragraph 18, which I took you to before, you said that in some circumstances the existence of employee entitlements liabilities actually provides an incentive for lending institutions to keep the business afloat. How do you reconcile the two paragraphs in your statement?---Well, it depends on the availability of assets under a fixed charge as well. And if the only assets available to a banker are, in fact, under a floating charge, they may seek to diminish the employee entitlements and increase the margin that they have under that floating charge by making an immediate appointment. If there are fixed assets available to them, they may not be concerned about it.
PN2698
How would the holders of floating charges, how could they diminish the level of employee entitlements if they are established under law?---Well, if there is a lesser sum under an insolvent company to be paid out than there is under a restructured company if it goes forward without an insolvency appointment, then the potential for payout and liability of the company that is not formally in insolvency administration will be higher and have a grater burden on the cashflow and potentially more money that the bank actually has to fund to discharge those liabilities.
PN2699
But if the amount of redundancy payable in insolvent circumstances remains unchanged, it is not reduced, then there is no incentive there for holders of floating charges to do any such thing, is there?---Well, I believe so. My experience with the holders of floating charges is they will actually look at the circumstances relating to each entity and, if it suits them, they will make a decision.
PN2700
Yes. The holders of floating charges, they don't decide the future of the company alone, do they?---If they have appointed a receiver, they do.
PN2701
in a voluntary administration setting, the future is determined by a vote of all creditors, isn't it?---The floating charge holder has the ability still to appoint a receiver over the top and make his own decisions.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2702
Yes, but if the level of redundancy pay entitlements in insolvent circumstances is not reduced, the level remains the same as it currently is, then any incentive for this type of behaviour - there is no basis then for this type of incentive to work?---Well, I have seen it work that way, in my experience. That is all I can now relay to you.
PN2703
But I am talking about the circumstance where the level of employee entitlements remains the same; there is no reduction. You are assuming here, are you not, that there is a reduction in the amount of redundancy payable in insolvent circumstances?---I was assuming that there was a lesser sum, rather than an insolvent - in the solvent circumstances.
PN2704
Yes. Well, if the amount payable in insolvent circumstances was zero, you are saying there would be an incentive there if the amount payable in solvent circumstances was greater than zero?---Yes, I am.
PN2705
But where there is an amount payable above zero in insolvent circumstances, the degree of incentive, if there is any, would be less?---I am getting lost on who is insolvent and who isn't at this stage but my previous comment was in connection to a - sorry, in the earlier paragraph is in relation to the incentive for a bank to keep a company afloat where it actually only has risk attached to a floating charge. In those circumstances, if they see their exposure relevant to the assets available under a floating charge being diminished significantly by employee redundancy payments, they may give consideration to saying, let us work this business out because it actually can build the stock and build the debtors if we actually work with this company and, therefore, increase our asset security under those floating charges. Now, in the circumstances here, if there is a lesser figure than I was working towards under paragraph 22, if there was a lesser figure under an insolvent entity than rather there is under a solvent entity, then my view is that they may consider taking their formal position, appointing and realising those assets so as not to expose themselves any further, or to keep their exposure at a certain level.
PN2706
May consider: that is the key phrase, isn't it?---Yes.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2707
Now, you also contend in your statement that a distinction may lead to disputes and cause distraction for administrators. Are you familiar with the provisions dealing with insolvency which have been agreed between the major parties in these proceedings?---No, I am not. I was informed of them by reading Mr Dwyer's more recent affidavit but I haven't seen them myself.
PN2708
All right. Now, in your experience as an insolvency practitioner, have you been involved in circumstances where lending institutions have engaged with insolvent companies in a workout situation; that is they have offered money by way of loans and so forth to assist insolvent businesses?---Well, certainly to businesses under formal administration, yes. But in the normal circumstances where the business is under a formal administration, the company tends to have the benefit of frozen creditors which tend to place the administrator into a position of solvency rather than insolvency, unless he continues to trade on a loss situation.
PN2709
Yes. So is it fair to say that you have gained a bit of an insight over the years into the behaviour of secured creditors, that is lending institutions?---That is fair to say, yes.
PN2710
Yes, and you have gained an insight into their lending practices?---Yes.
PN2711
Would you agree with me that increasing the level of contingent liabilities will change the risk profile of businesses?---Possibly.
PN2712
Would you agree that it might introduce an additional uncertainty factor to secured loans with floating charges?---Yes.
PN2713
And the reason for that is that employee entitlements rank ahead of floating charges?---Correct.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2714
Would you agree that that may affect access to finance by businesses which are seeking to borrow?---Difficult to say. I mean, the normal process - and, again, splitting business between small and large - banks don't finance businesses, they finance individuals in a small business sense and, therefore, take collateral security over a home or other private assets. They will obviously weight those assets in consideration of the liabilities that may come or flow from the business activity. In a larger enterprise, yes, certainly they will look at the assets and the capital of the business before they will actually lend money and put in certain covenants that will dictate the performance of that enterprise to ensure the ongoing provision of facilities.
PN2715
Yes. You have agreed that increasing the level of contingent liabilities will change the risk profile of businesses. Is that not a factor which secured creditors, particularly those with floating charges, may take into account in providing finance to such firms?---They may.
PN2716
Yes, and how would you expect that they would take this into account; by increasing the risk premium?---Well, when a bank does do an appraisal of a potential credit facility, they will make an assessment of the company's security position based on its assets and liabilities, and they will do that on the appraisal of the worst case scenario which tends to be in a liquidation sense. So they will value the assets at very low prices based on probably liquidation realisation values, and they will also then put value on the liabilities that would rank ahead of them which would clearly include employee entitlements and any contingencies in the circumstances of a redundancy payment. They will measure that. But banks will not lend based on security position. They will only lend on the ability of the business to actually repay its debt. So unless the business stacks up from an operating perspective and can clearly demonstrate its financial performance capabilities, they will not lend. They won't lend based on security alone.
PN2717
Yes, they will also look at cashflow?---Profit. Sustainable profit is the issue and that obviously encompasses cashflow.
PN2718
Yes. Are you aware that banks typically use two tests to determine the amount of money they are willing to lend a business, one being cashflow and the other being the value of security that a company puts up as collateral for a loan; are you aware of that?---I think that is what I just said.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2719
Yes, and the cashflow being one of the tests that banks will use to determine how much money they are prepared to lend to businesses. That cashflow will determine the capacity of the company to meet regular interest and capital repayments?---Yes, that is right.
PN2720
Yes, and if there is a limited amount of security, lenders will need to rely upon a company's balance sheet to determine the amount of credit they are willing to provide?---Well, the balance sheet itself does provide an element of security, but with small business they look outside that for collateral security.
PN2721
Yes, but if there is a limited amount of collateral security, then lenders will look towards the balance sheet, won't they?---It is a package.
PN2722
Yes. So if the balance sheet is affected by increased contingent liabilities for employee entitlements, then banks may reduce the amount of money they are willing to lend?---They may.
PN2723
And this may result in some companies being unable to gain sufficient finance to manage their business?---Well, if the facilities are not in place to run the business, the business shouldn't be in business.
PN2724
Yes, but it may result in some companies being unable to gain necessary finance to sustain their operations?---Well, if you are talking sustaining operations, that is a different issue. Certainly banks that have currently facilities in place, I don't believe you will change their LVRs to measure the performance of a business. I think the financing in place will stay. If you are looking at a totally new credit, then, yes, they may be a little tougher in terms of their assessment of whether the business can actually meet the risk profile that the bank requires.
PN2725
Yes. Have you been involved in instances where firms have been unable to gain sufficient finance and that has then resulted in closure or insolvency?---I have.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2726
And that all, of course, impacts on employment levels, doesn't it?---Yes.
PN2727
And what have been those circumstances?---Well, basically a company is trading on losses and essentially requires additional facilities to meet and sustain working capital requirements to meet their creditors.
PN2728
Yes. So you are saying that if the balance sheet is affected by increased contingent liabilities for employee entitlements, one response that banks may take is to actually reduce the amount of money they are willing to lend; that is correct?---Possible.
PN2729
Is another response that lending institutions might take could be to maintain a company's credit limit but to compensate for the increased risk by raising the price of the loan?---That is a possibility.
PN2730
And that might involve increasing the interest rate with an additional risk premium?---That could be right.
PN2731
And this is because an increase in the level of contingent liabilities pushes a company's loan profile into a higher risk category from the point of view of lending institutions?---Well, it could but you would have to come back again to the issue of what represents a contingent liability. There is no obligation on a company to include retrenchment pay as a contingent liability so the bank will not be assessing it as a contingent liability. The bank will build in to clearly its liquidation scenario the prospect of having to pay retrenchment entitlements to employees, but not in the form of a contingent liability on a balance sheet.
PN2732
Yes, but this overall affects the way in which banks and other financial institutions extend loans and finance to businesses?---Certainly a bank will make an assessment of risk profile. There is no doubt about that. But banks lend based on the financial performance of a company as preference to, and that is certainly in their risk weighting profile. It is more directed to performance rather than security.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2733
SENIOR DEPUTY PRESIDENT POLITES: Mr Humphris, can I just ask you about this. I am going back to 1984 which was a long time ago, but I recall in the first case that this issue of whether contingent liabilities were, you know, on account of redundancy pay where shown balance sheets was an issue, and I recall somebody subpoenaing a large number of balance sheets. And in quite a large number of them there was a contingency for retrenchment. Are you saying that that is not mandatory, that people just choose to do it, or does a prudent accountant do it, or what?---There is only a requirement to provide for a contingency for employee entitlements if there is a calculated sum that may be come due and payable. If it is, in fact, accepted as a liability that is required to be paid, then it obviously should be as a liability on the balance sheet. But in the normal circumstances of an ongoing entity, there is no obligation on that company to consider that it actually has a contingent liability. It will only arise, and I would think the position would be where you would include it as a contingency is if, in fact, there may be a plan developed to actually say we are going to restructure and enter a process of making payments under a redundancy scheme.
PN2734
So perhaps somebody who had an ongoing program of continual restructuring would make a provision to account for that program?---That is correct, your Honour.
PN2735
Thank you, Mr Moir.
PN2736
MR MOIR: So just coming back to where I was up to, Mr Humphris. I think you agreed with me that an increase in the contingent liabilities associated with employee entitlements pushes a company's loan profile into a higher risk category and that banks may seek to respond to that in a variety of ways. One is to reduce the amount of credit they are willing to lend and another way is by maintaining the company's credit limit but compensating for the increase risk through raising the price of the loan?---They may.
PN2737
Yes. Would you also agree that the lender - in circumstances where there is an increase in the contingent liabilities, the lender may need to take extra steps to identify those businesses - business clients which are subject to the increase in contingent liabilities?---They could do that as well, yes.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2738
And they could also need to take extra steps to estimate the value of contingent liabilities within those clients?---They could do so.
PN2739
And also may need to take steps to monitor the value of outstanding contingent liabilities?---They may do so.
PN2740
And they may also need to take steps to establish a mechanism to adjust credit limits to take account of potential changes in the company's level of contingent liabilities. Would you agree with that?---They could do so, although I must say that the definition of contingent liability does still not fit into the balance sheet. If there is an ongoing enterprise, there is no contingent liability for redundancy payments.
PN2741
Yes, I take your point about whether it goes into the sheets but in terms of something that is taken into account by the lenders, it certainly figures in their calculations, doesn't it?---But not as a contingent liability.
PN2742
Yes. Would you also agree that if there was an increase in the level of contingent liabilities such that they have to implement monitoring and assessment mechanisms this may involve banks having to collect additional information from companies on employee numbers and lengths of service?---They do that now if they feel it is necessary. I don't see there would be any need to increase that level. They would have the rules and the calculations in front of them. Whatever they need, they get now.
PN2743
If severance pay was introduced for the first time within a business then banks would then have to implement these types of measures, wouldn't they?---I can't speak on behalf of banks, I am afraid.
PN2744
But they may is your - - -?---They may.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2745
Yes, they may, which includes measures to collect additional information on employee numbers and lengths of service?---I believe they do that already because they need to understand what the entitlements are, being holiday pay and long service leave particularly. So they need - in a normal review of facilities at year end, they will normally be provided with that information.
PN2746
Yes, but if you had a new entitlement being introduced within a business which is contingent upon lengths of service, for example, then banks would have to implement measures to collect that type of data, wouldn't they, for the first time?---They may.
PN2747
And then they might have to implement procedures to monitor these numbers on an ongoing basis?---They may.
PN2748
And that may involve a continual process of notification and assessment by the bank?---Well, I think there is already an ongoing assessment and continual notification between lender and company.
PN2749
Yes, and that process would be enhanced where you have a new liability being established within an enterprise for the first time?---Possibly.
PN2750
This would obviously then involve additional cost if such mechanisms were to be implemented. You would agree with that?---No, I don't.
PN2751
What about in those cases where the entitlement is introduced into an enterprise for the first time such that these mechanisms don't already exist in relation to that particular entitlement?---Well, if you are talking entitlements, then they are an item that is required to be calculated in the balance sheet. If it is not an entitlement, not due and payable, it is not. So the company wouldn't be required to expend any greater information or greater cost in calculating those sums because they don't include them in their accounts. If the bank required the information, then I am sure the bank could access that information from employee records they already have in calculating what holiday pay and long service leave entitlements may be.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2752
Yes. Look, I am sorry, I mightn't have been clear, Mr Humphris. I meant costs to the banks in having to implement these mechanisms. Now, I take your point that in those businesses where the mechanisms are already in place the costs may not increase but what about in those - take a small business which is currently exempt from any liability to provide severance pay entitlements. If such a business became no longer exempt, it had to provide severance pay entitlements, then that is a factor which banks obviously would clearly be interested in when it comes to assessing loan arrangements and the like. You would agere with that?---I would.
PN2753
And one of the ways in which interest would become translated into action is to establish mechanisms to monitor the level of that contingent liability. Do you agree with that?---Yes.
PN2754
And those measures could include continual processes of notification; would you agree with that; that is, by the business to the bank about employee numbers and lengths of service and so on?---I am not sure what you mean by continuous on that. I mean, banks conduct annual reviews. So if it is done on annual basis and if you are talking small business, you may be talking the provision of information relating to a dozen employees.
PN2755
Yes, and then somebody back in the bank would have to sit down and absorb that information, crunch it through a software program or whatever and that would obviously involve increased costs, you would expect?---No, I wouldn't.
PN2756
You wouldn't expect that?---No.
PN2757
Where a bank has to implement mechanisms for the first time in relation to business clients who previously didn't have a liability but now do?---You are putting a field in a computer system that simply has a multiplication of X number of employees by X number of weeks' entitlement. I don't see that as being a cost factor.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2758
I see. Do you concede that it is possible that increased costs might be incurred and that - - -
PN2759
JUSTICE GIUDICE: Anything is possible, Mr Moir.
PN2760
MR MOIR: Yes.
PN2761
JUSTICE GIUDICE: There can only be one answer to that, can't there?
PN2762
MR MOIR: That is true, your Honour.
PN2763
You agreed with me earlier - - -
PN2764
JUSTICE GIUDICE: Sorry, Mr Moir. Just before you go on, can I just ask in relation to these questions about the possibility of firms being subject to contingent liabilities, if that is the loaded term we want to use in relation to termination payments, how does that currently operate in relation to companies who already have a liability or contingent liability or semi-contingent liability? Are there reporting arrangements of the kind that have been referred to and are these things taken into account?---Generally what - I am not an auditor, your Honour, so I don't prepared statutory accounts but my - - -
PN2765
But looking - no, I am really look at the issue of the requirements of a lender?---From a lender's perspective, they will always have the information available to them to actually ascertain at any time what the worst case scenario will be in any potential failure of an entity, which would put the employee entitlement ahead of the bank's security position. So there is always, certainly for larger enterprises - and the payroll systems do pretty clearly allow for that calculation of holiday pay, annual leave and even retrenchment or redundancy payments at the flick of a switch. So that information can be provided instantly and is normally requested by banks on sort of annual reviews. But the provision
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
of that retrenchment or redundancy pay is not in terms of my reading of the accounting standards - and certainly I have checked this with my audit partner - it is not an obligation to include any contingent liability relating to those redundancy payments unless there is some future commitment to meet those redundancy payments. So if there is - - -
PN2766
Yes, of the kind you described a few moments ago?---That is right.
PN2767
So, generally, it would not be a balance sheet item?---That is correct.
PN2768
MR MOIR: Mr Humphris, you agreed with me earlier that there is an increase in the level of contingent liabilities. Banks may respond by either reducing the amount of credit they are prepared to lend or, alternatively, by increasing the price of the loan. Would you agree with me that such impacts would be most likely to occur within small to medium sized businesses that have substantial and/or long serving employees or numbers of employees?---I think it will come back down again to the individual business. I don't think I would be prepared to sort of make a statement in a generic state to actually support your view. I would certainly say that a bank providing facilities will not do anything to actually jeopardise its relationship with the customer. If there is a strong profit coming out of that company and it is meeting its requirements under an existing facility, I would be very surprised if the bank would attempt to re-price or reduce facilities, which may, in fact, put the business' future in jeopardy. So it would be unusual, from my point of view, to see them do that. In future pricing, yes, they may well take it into account.
PN2769
Yes, and that is because they take into account a worse case scenario?---They always do, yes.
PN2770
Would you expect that if there were to be any impact upon future pricing of loans or availability of credit, that would be greater upon companies which employ long serving, full-time employees?---I would expect so, yes.
PN2771
For example, companies within the manufacturing industry where you have had experience?---They tend to have larger numbers of long serving employees, yes.
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
PN2772
Might it also be possible that as a result of any increase in the level of contingent liabilities, which then introduces a higher risk factor for lending institutions, that those lending institutions will be less willing or may be less willing to engage with financially vulnerable companies in a workout situation?---Well, it is really always going to come down to what is the best approach to ensure the bank maximises its return. So again without the ability to sort of - I don't think there is an ability to be generic, again, in responding to your question. Each case is totally different and there may be a strategy in place that, given the nature of business, that does support a workout.
PN2773
Yes, but it is possible, is it, that because of the increase in the level of contingent liabilities, creditors may be less willing to engage with companies under insolvency and provide credit to them in a workout situation?---Well, I have to come back to my earlier statement that if the bank is restricted to floating charge assets and the increase in liabilities reduces the margins they have in floating charge assets, they may well be more incentivised to actually work with that company in a turnaround.
PN2774
But, equally, if there is a limited amount of security put up as collateral for a loan, the lender may be less willing to engage with such a company in a workout situation because of the increased level of contingent liabilities. Would you agree with that?---No, I don't think I can agree with it. I can say that they will take all of those issues into consideration when they assess the turnaround strategy. If the turnaround strategy indicates that the profits can be generated over a period of the next two to three years, that we will see the bank's position enhanced, then regardless of their security position, if they accept the forecasts, they will go with the turnaround.
PN2775
You have agreed that in some circumstances as a result of the change in the risk profile of the business or businesses, banks may reduce the amount of credit they are prepared to lend. Do you think that may have the consequence of some companies which need sufficient capital to continue trading being pushed into insolvency if they cannot secure the necessary finance?---I guess, look, there is a possibility of that but, obviously, if the company is a successful enterprise, as it is now, there are other avenues for finance or equity injection that may support the
**** MICHAEL JAMES HUMPHRIS XXN MR MOIR
company if the bank facilities are reduced. I mean, bank facilities are continually required to be reduced. No one borrows a facility for a five-year period without an expectation of capital reduction. So if the business is growing, it does, obviously, necessitate additional facilities. So if one facility is in place, it requires to be reduced but if the business is growing, it requires further support to ensure that growth.
PN2776
And if it is not growing?---If it is not growing, then it has the opportunity for me to come in and turn it around.
PN2777
I see. Yes. Well, on that positive note I think I will leave it. Thanks, Mr Humphris?---Thank you.
PN2778
PN2779
MR BATES: Thank you, your Honour. I am sure the members of the Commission, the witness and certainly the ACCI are indebted to Mr Moir because he has significantly reduced my questions.
PN2780
Mr Humphris, my name is John Bates and I am representing the Australian Chamber of Commerce and Industry and I just have a few questions for you. Firstly, I would like to take you to your original statement, to question 6 and, in particular, dot point 1. In that statement you say:
PN2781
In my experience, poor management is the greatest cause of business failure.
**** MICHAEL JAMES HUMPHRIS XXN MR BATES
PN2782
Could you explain to the Commission what you mean by poor management?---Well, I am certainly referring in this instance to small business, where the proprietor of the company is generally the full-time managing director, CEO or general manager. He is also probably the marketing director, production director and generally screws the caps on the bottles at the same time. So for all purposes, in a small business sense, he is totally responsible for every decision that happens in that enterprise and if something goes wrong, then it is no - you can't look any further than that person. So if - for example, if he is responsible for finance and administration as well, which more often than not they are, because small business generally does not afford an in-house accountant, they generally rely on external accountants to provide annual and statutory accounting, he has to manage cash flow and manage the payables and the receivables and if he gets it wrong, once again it all comes back to a management issue. I would even go as far as to say if the factory burns down and he has no loss of profits insurance and can't re-establish the business, regardless of whether it was an act of God or not, he is responsible because he hasn't put adequate insurance in place.
PN2783
But wouldn't the chief executive of a large corporation have the same responsibility?---He has a greater ability to delegate is really the issue.
PN2784
But ultimately he is the person who is responsible, is he not?---Well, they certainly put a team around them that - I would think a management team tends to work with a CEO in a larger corporation and they generally come and go as a block more than anything else. So if the CEO gets it wrong you will generally find there is a wipe-out of probably about 20 people from head office.
PN2785
Do you believe businesses can operate without taking risks?---No. Risk and reward go hand in hand.
**** MICHAEL JAMES HUMPHRIS XXN MR BATES
PN2786
So would you say that a risk taken that doesn't work out is bad or poor management?---No, not necessarily. I mean, the difficulty is in assessing whether the risk is based on a reasonable business case and management have to make that decision. If they make it on a whim and take a risk on a whim without assessing the down side and measuring the risk and reward, then that is bad management. But if they take a risk based on factual issues or best assessed issues at that time, then I believe that can be a good business decision. It may prove to be wrong and still may cause the collapse of a company, and then if I am reporting in an insolvency sense the causes of failure, I certainly have given cause in the past to say that a bad business decision has caused the collapse of this company but, at the time, it was based on information available and on sound reasoning.
PN2787
And that could happen to a large company as well, couldn't it?---It could.
PN2788
Now, I would like to take you to paragraph 20 of your statement where you are talking about Ansett and the collapse of Ansett. In that you say:
PN2789
I do not believe that Ansett administration is a sound topic for analysis, given the unique nature of the company and the circumstances prevailing in the lead-up to the appointment of the first administrators.
PN2790
When you say that, are you saying that Ansett is atypical of a company collapse?---I am.
PN2791
And that you can't use that to give a general guide in such circumstances?---Well, there are several issues associated with Ansett which I would hope we probably don't see again. Obviously, the damage attributed to Ansett by 9.11, which was a very significant damage to the industry generally across the world, and then also the circumstances of administrators going into the company on day one and actually closing it down and damaging its goodwill.
**** MICHAEL JAMES HUMPHRIS XXN MR BATES
PN2792
How does small business generally raise capital for their operations?---Well, the normal process is by bank finance. There is very little equity goes into small business, other than to say that the collateral security that is afforded to a bank by way of private residence or private investment could be described as quasi-capital, because without that support collateral security they would not normally get the finance based on the business asset.
PN2793
So the family home and mortgages are generally put up as part of that collateral, are they?---That is normal.
PN2794
And how much would a small business usually have in capital behind it?---$2.
PN2795
Well, that is the notional figure, but in reality?---Well, that depends entirely, if you are saying capital, which is share capital, or as opposed to the collateral security which yes, I would say is equity, I mean, take the average price of an average home, I suppose may give you a general feeling, and if you take it as being a risk of something in the vicinity of 250 to $500,000 on an average property, that is probably the capital exposure of the proprietor.
PN2796
Right, thank you. I now take you to your supplementary statement, and take you to paragraph 9, and that is the paragraph that refers to the evidence of one of the ACCI witnesses, Mr Taylor. Looking at paragraph 9 of your supplementary statement, would you agree that employers have regard to labour costs and their exposure to financial risk in their decisions in hiring additional staff?---Yes, they would.
PN2797
And would you accept that the ACTU claim would substantially increase the redundancy costs of small business if they were forced to reduce jobs?---Sorry, can you put that to me again?
PN2798
And would you accept that the ACTU claim would substantially increase the redundancy costs of small business?---No, I am sorry, I am really not coming to grips with that.
**** MICHAEL JAMES HUMPHRIS XXN MR BATES
PN2799
Well, particularly if they were forced to reduce jobs in their work force?---Yes, and their costs would be - sorry, I am not with you in terms of the question that you are putting to me.
PN2800
Well, if they were required to reduce jobs?---Yes.
PN2801
And they were subject to redundancy payments?---Yes.
PN2802
What I am putting to you, wouldn't that substantially increase the costs for small business?---Well, cost - in a reconstruction sense there will be a one-off cost of meeting redundancy payments, but it is not an ongoing cost of operations, so normally a redundancy would be considered almost as an abnormal item in an ongoing business because it is associated with the reconstruction phase, so if you are measuring ongoing costs it is something that wouldn't be there in your future budgets.
PN2803
But would cost more than it would now, because small business is exempted from that cost?---Yes, and it would have an impact on cash flow, that is correct.
PN2804
Would you agree that most small businesses would undertake a restructuring because of financial difficulties they face?---No. I think my view is that most small businesses don't actually undergo a restructuring. Companies that employ upwards of, you know, sort of 10 to 20 to 30 people, as I have described before, are not generally familiar with opportunities, or don't have the intellectual capacity to actually involve themselves in a turnaround. Turnarounds or reconstructions generally are only associated with larger enterprises. For a small businessman to actually undergo a reconstruction it would normally only be at the point where he actually has made a decision to place the company into voluntary administration. That means he has already reached the decision that the company is insolvent or likely to become insolvent.
**** MICHAEL JAMES HUMPHRIS XXN MR BATES
PN2805
Well, what if a company were in a position of financial difficulty? Wouldn't they consider making reductions?---Well, they make reductions in all manner of areas, as I think I have described before. Employment in a small business is one of the least likely areas that the company can actually address because they need that employment group to actually generate their production, so they will normally look at the opportunity, and in a lot of circumstances it is the proprietor who will actually take the salary cuts, and from my experience I have actually worked for nothing, or they will bring family members in to actually work for nothing, and that is peculiar to small business.
PN2806
I have no further questions, your Honour. Thank you.
PN2807
PN2808
MR STEWART: Mr Humphris, I will be asking you a number of questions on behalf of the Commonwealth. First of all I would refer you to paragraph 13 of your original statement, and in paragraph 13 you refer to restructuring, and you state that it is often the case:
PN2809
..that a business cannot be restructured due to the lack of fixed assets acceptable to lenders for the purpose of advancing the necessary funds to restructure the enterprise.
PN2810
Could you just explain a bit more about that? In particular are you talking about just in the administration phase or in a business operating normally before it enters into administration?---I am talking pre-administration in that situation. The circumstance generally as we certainly have covered a fair bit of ground on this is that most small businesses don't have sufficient balance sheet assets to actually justify the credit risk that is bank is looking for, so accordingly the bank will look to collateral security in the form of a residence or some other investment. When they look to a restructuring position, restructuring normally requires additional
**** MICHAEL JAMES HUMPHRIS XXN MR STEWART
capital, and restructuring can come across, as you would read from my paper, it may be restructuring associated with a growth phase or it may be coming back to core business which may mean the disposal of a division or some subset of the activities of the company that aren't making profits and therefore detrimentally affecting the overall total business. Getting rid of that debt arm, if you like, or getting rid of, you know, sort of - or accommodating a growth phase to facilitate a reconstruction will require capital. And in that sense, the bank will look at the balance sheet in a normal sense and say, well, the balance sheet isn't going to support any additional capital that we would consider worthy security, and we have already got your house for the current facility, so they are locked into a situation of saying we can't help you.
PN2811
And you go on to say in paragraph 13 that that is particularly the case for small business, and secondly, that it can - a situation arising like that, where there is a need for restructuring, can cause fixed asset financiers and charge holders to essentially seek the - putting the business into administration?---That is correct.
PN2812
Now if we, sort o,f concentrate on the issue of the liability that is created by severance pay, and you have been saying, as I understand it, that businesses in the normal course of events are not required to include in their balance sheet a liability for severance pay?---That is correct.
PN2813
Now, one of the circumstances in which they would be, wouldn't it, would be if they had to pay something into a Manusafe type fund, if you are aware of the Manusafe type funds, to cover severance pay entitlements, then it would have to appear on - the full entitlement that is paid into the fund would have to appear on the balance sheet or the payments would?---Yes, certainly. If there is a legal liability to pay money, and that is the issue that we have been discussing, the liability can only arise if there is a legal liability relating to that. So if the liability is there to require a company to pay money into an account, then clearly it would have to be a balance sheet item. You would have two balance sheet items; firstly, you would have the amount paid into the bank account, and then you would have the liability on the other side. So the impact would be zero effect in terms of the net asset position of the company, but it certainly would have to reflect the overall position.
**** MICHAEL JAMES HUMPHRIS XXN MR STEWART
PN2814
And otherwise it is only generally where a requirement to retrench actually crystallises that it makes it onto the balance sheet?---That is correct.
PN2815
Now I want you to consider a situation where a business is progressing well for a number of years, there are no retrenchments during those years so severance pay liabilities do not make it onto the balance sheet. And now I want you to consider a situation where there is a substantial drop in demand for that business's services for products, and it might be due, for example, to the effect of 9/11 in the tourism industry, it might be due to the drought or it might be due to the economic cycle, the widespread deterioration in the economic cycle. Now, in those circumstances, if a business has to, because of the drop in demand, reduce its workforce by, say, a third, well, then the severance pay entitlement obviously appears on the balance sheet in that case?---That is correct.
PN2816
It could be a substantial one off payment that has to be made that hasn't had to be provided for before in the balance sheet of the company and it might be extremely difficult for the business to make that payment?---It may well be and we see a number of illustrations of that. I guess Qantas is probably the classic example where they restructure ever six months and another few thousand people go, but it is a fact, as soon as that happens, there is the liability that is crystallised, so it must be provided for. In small business, however, it is not a normal situation that has to accommodate I guess the movement of a global industry. It will be something that they focus on very locally, but it certainly can still happen, but a successful business can only survive if in fact they do take radical steps to reduce their overhead and that overhead may certainly be attacked through employment costs. In those circumstances, it would form a liability onto the P and L account and impact on the profit and loss.
[4.28pm]
PN2817
And now looking specifically at the case of a small business that has to reduce its workforce by a third, if there are substantial severance pay costs, it might have to approach lenders and it would run into that problem that you refer to in paragraph 13, wouldn't it?---It would.
**** MICHAEL JAMES HUMPHRIS XXN MR STEWART
PN2818
So, in fact, it could result in a situation where the small business, when it approaches its financiers, then they might take action to secure or to realise what they have already lent to the small business?---They may. The normal process with a company that is restructuring in that situation is, however, if the company is able to demonstrate its ongoing profitability and that they are pro-active in actually reducing its overhead to ensure the same level of profitability, even if they've lost the revenue, banks will normally support them and provide those facilities.
PN2819
But that would be less likely where it is a downturn in the economic cycle and there is widespread reduction in demand, the drought, where it is uncertain about how long it might go on and so on?---That would be taken into account and if it means that the company is actually going to proceed eventually into some insolvent state, then I am sure the bank would not necessarily support it.
PN2820
And it is correct to say, isn't it, that small business is quite different to large business in this respect, that when a shock occurs that does produce a significant drop in demand that would require a significant pay-out in severance pay, then they do have less facility than larger business to raise additional capital to restructure as you say in paragraph 13 to adapt to that situation?---Well, I don't think you can answer again in a generic sense. If it is a well managed business, whether it be large or small, the proprietors will have built - certainly if it has been successful over years, the proprietors will have built a reserve of assets that may not be on the balance sheet, that you would expect normally they could actually realise to provide additional capital to the company and that certainly does happen.
PN2821
But in the event that they do have to go for additional finance, as you point out in paragraph 13, small businesses are in a particularly difficult position compared with large businesses?---They can be, yes.
**** MICHAEL JAMES HUMPHRIS XXN MR STEWART
PN2822
Now, about those reserves that you just mentioned that would be built up, you would agree then that a prudent business, if it is in an area where demand might fluctuate considerably, where the economic cycle might affect the demand for its products and services, that it would built some reserves in order to be able to cover these liabilities when they arise?---Well, it tends to depend on the lifestyle I guess of the individuals behind the business, but that would be normal, that they would develop an asset base behind them and generally be in a position to support their business through those privately owned assets.
PN2823
And the larger the potential liability from severance pay, the larger the reserves they need basically, don't they?---Well, again it depends whether the company is ongoing or not. If the company is ongoing - - -
PN2824
Yes, I am talking about an ongoing company that is organising itself to continue on in operation, it needs to have reserves as you have pointed out to cover these contingencies, even though they might not be on the balance sheet and the larger the liabilities, the greater the reserves it would need?---Well, it has to have access to capital. Every small business needs that and whether it is through bank finance or from equity injection by the proprietors, then you do have to provide for contingencies, not just in respect to employment.
PN2825
And equally, the floating charge holders and others that are lower on the hierarchy of creditors, they would try and ensure by their behaviour that businesses did keep those reserves and did have sufficient reserves to deal with adjustments needs if they were needed, wouldn't they?---I couldn't say what the attitude of the banks might be in respect to that. The bank would normally make its own decisions in respect to what is adequate for its own security position. Certainly they would in the normal sense and again I guess speaking in a generic sense in terms of how they view their customers, they would obviously expect their customers to invest wisely and basically be able to support personal guarantees or whatever else may exist to support the collateral position, but whether they actually police their private asset worth to ensure that it is growing at a reasonable level, I don't think that is actually likely.
**** MICHAEL JAMES HUMPHRIS XXN MR STEWART
PN2826
But they have got to make sure that the businesses they deal with can meet the needs for severance pay that might arise for adjustment reasons and so on?---Well, they like to think that the business does actually have a business plan and is reasonably managed to accommodate any possible variations to the plan.
PN2827
Thanks very much, Mr Humphris. Thank you.
PN2828
JUSTICE GIUDICE: Any re-examination?
PN2829
PN2830
MR WATSON: You were asked a number of questions regarding availability of bank finance and cost of that finance and the impact of severance payments on that issue. Are you aware of any difference in bank practices in this regard between New South Wales and the rest of Australia?---No, I am not. They seem to act reasonably consistently given that you have got a head office in Melbourne or in Sydney which dictates the rest of practice around Australia.
PN2831
Nothing further.
PN2832
PN2833
JUSTICE GIUDICE: Who have we got tomorrow, Mr Watson?
PN2834
MR WATSON: Your Honour, we have Michael Sainsbury, Christine Tutty, Patricia Rose, Erwin Leyden, Robert Belzer and Lucy Beaton. They are all one hopes of relatively shorter compass in much the same way as the witnesses this morning were and there is some prospect, although I notice Mr Barklamb has gone, there is some prospect we may be able to resolve Mr Belzer, but we haven't yet got to that point.
PN2835
JUSTICE GIUDICE: Yes, all right, thanks for that indication. Yes, Mr Bates.
PN2836
MR BATES: Your Honour, I think I can indicate that we will be wanting to cross-examine Mr Belzer.
PN2837
JUSTICE GIUDICE: Yes, well, unless we are told otherwise, we will expect him. We will adjourn now until 10 in the morning.
ADJOURNED UNTIL FRIDAY, 30 MAY 2003 [4.38pm]
INDEX
LIST OF WITNESSES, EXHIBITS AND MFIs |
LIONEL BRUCE CAMPBELL, AFFIRMED PN1863
EXAMINATION-IN-CHIEF BY MR WATSON PN1863
CROSS-EXAMINATION BY MR MOIR PN1879
WITNESS WITHDREW PN2102
LORRAINE BERYL JOHNSON, AFFIRMED PN2108
EXAMINATION-IN-CHIEF BY MR WATSON PN2108
CROSS-EXAMINATION BY MR MOIR PN2124
CROSS-EXAMINATION BY MR BARKLAMB PN2183
WITNESS WITHDREW PN2229
BRUCE BEDFORD, AFFIRMED PN2230
EXAMINATION-IN-CHIEF BY MR WATSON PN2230
CROSS-EXAMINATION BY MR BARKLAMB PN2244
WITNESS WITHDREW PN2379
JUDITH LAY, SWORN PN2383
EXAMINATION-IN-CHIEF BY MR WATSON PN2383
CROSS-EXAMINATION BY MR MOIR PN2391
WITNESS WITHDREW PN2478
MICHAEL JAMES HUMPHRIS, SWORN PN2484
EXAMINATION-IN-CHIEF BY MR WATSON PN2484
CROSS-EXAMINATION BY MR MOIR PN2493
CROSS-EXAMINATION BY MR BATES PN2779
CROSS-EXAMINATION BY MR STEWART PN2808
RE-EXAMINATION BY MR WATSON PN2830
WITNESS WITHDREW PN2833
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