Parker David: Companies Amendment Bill Insolvency Amendment Bill — Third Readings 
Parker David: Companies Amendment Bill Insolvency Amendment Bill — Third Readings 
[Volume:616;Page:11949] 
DAVID PARKER (Labour—Otago) 
: 
 The first point I will make is that these bills do not create an entitlement to redundancy. Whether a person has a right to redundancy under his or her employment agreement depends upon the terms of that agreement as negotiated between the employer and the employee. We do not have compulsory redundancy in New Zealand and this law does not create it. Neither does it affect the owner of a business directly as Mr Adams referred to. If the business has an obligation to pay redundancy because by contract the owner of the business has agreed to pay redundancy then it is that agreement that creates the liability for redundancy and this bill does not affect it. 
What this bill does is give priority to redundancy payments which together with wages and holiday pay due can total $15000. That amount is given preference over secured creditors. Secured creditors are normally banks which secure their indebtedness by way of a debenture or mortgage over a company’s assets. We heard Mr Prebble say that the $15000 was equivalent to 6 months’ earnings. It may have been— 
Hon Richard Prebble 
: I said $6000. 
DAVID PARKER 
: The member said the $6000 was equivalent to 6 months’ earnings? 
Hon Richard Prebble 
: Three months. 
DAVID PARKER 
: Three months’ earnings. So 6 months’ earnings on the member’s figures would be $12000. I think Mr Prebble just corrected— 
Hon Richard Prebble 
: Four sixes are 24. 
DAVID PARKER 
: That would be a year. Four sixes are 24 but two sixes are 12. On Mr Prebble’s figures he says that the average wage is equivalent to $24000 per annum. It may have been when he was last in Government but because of the economic prosperity of the nation under the wise stewardship of this Government it is a lot more than that now. It is $39600 per annum. So one can discount the figures that Mr Prebble has given to us in this debate—as often happens. It does not directly affect the owner of the business. It does not create a liability for redundancy payment but it does give preference to it ahead of secured creditors. 
We have heard claims that this legislation is unfair to other creditors—other than secured creditors—who wait in line. Members opposite shed crocodile tears because during their period of stewardship they changed the laws relating to securities and wiped completely the ability of small businesses to protect their own interests against secured creditors by wiping the effectiveness of retention of title clauses—also called Romalpa clauses. Those members who shed crocodile tears now try to say that this is unfair to other unsecured—not secured—creditors. 
In respect of those other unsecured creditors—with whom we all have sympathy if they lose in the event of an insolvency—it is interesting to compare the position of normal business creditors and the waged or salaried worker. The normal trade supplier or deliverer of goods or services to the business has a number of customers. Their risk is spread. If one of their buying customers goes broke before it pays the supplier the supplier loses money. However it is unusual for someone to lose a large percentage of the total business because it would be unusual for the majority of debtors to be any one particular debtor. Those suppliers spread their risk. 
It is different for an employee. An employee generally has a duty to work full-time for the employer and not to moonlight for others. Employees do not have other sources of income or redundancy payments or wages due from other employers. They have only the one employer to rely upon. That is why redundancy payments and wages are a bit different from the debts that are owed to suppliers of goods and services. They can spread their risk. 
I would like to make one other point. The $15000 increase from $6000 in large part relates to inflation since the figure was introduced in the 1980s. There has been inflation since that period that would require considerable upward adjustment of the $6000 figure probably close to $10000. So $4000 the difference from $6000 to $10000 is due just by virtue of inflation anyway. We are now in this harsh world that we live in acutely aware that when people are made redundant there is a considerable dislocation to their lives. The individuals who we all want to stay with their shoulder to the wheel as long as possible to make their great efforts in order to avoid the insolvency of a business should be encouraged. If I were an employee of a business that was looking a bit shaky and I was aware that my redundancy provisions were not going to be worth the paper they were written on I would dive out of that business sooner than I would if I knew that my redundancy entitlements which were giving me some insurance against the consequences of that business going broke would be paid in priority to secured creditors. That is not in the interests of the bank it is not in the interests of the business owner and it is not in the interests of the economy. We do want to encourage employees to feel secure that their contractual entitlements will be met. 
In respect of the suggestion that the day before a business goes broke someone might write himself or herself a very generous redundancy contract I am told by my colleague Mr Peck that he responded to that issue during the Committee stage and sought advice from officials who said it was unlikely that would be sustainable. I did not hear the reason but I suspect it would be that it would be a voidable preference negotiated at the eleventh hour which could be set aside by the receiver acting for the bank. 
Hon Richard Prebble 
: So it’s OK. Just do it 3 months before? 
DAVID PARKER 
: I hear the 3-month figure again but I tell Mr Prebble we have already been through that and we worked out that his maths was wrong on that occasion too. Without further ado I recommend this bill to the House.