Franks Stephen: Third Readings 
Franks Stephen: Third Readings 
[Volume:616;Page:12426] 
STEPHEN FRANKS (ACT) 
: 
 I rise for the ACT party in the third reading and final debate on the bills that have come out of the Business Law Reform Bill. First I want to say that ACT supports the idea of Business Law Reform bills—that is bills with a whole lot of miscellaneous amendments that are regarded as largely technical and that are the kind of amendments that ordinarily might languish for a long time before the Government decides to use up some of its House sitting time to get them through. They are often matters that business people or others have been asking for for some time. As has been said they are tidy-up matters but are not exactly the same as those dealt with in Statutes Amendment bills which traditionally have only things that are entirely non-contentious. There can be some dissent on matters in Business Law Reform bills but there has to be substantial consensus before they go through. 
The ACT party has supported and will support all the bills that have come out of the Business Law Reform Bill even though we consider that some of the matters dealt with are dealt with poorly. We have decided that the changes are better than the status quo but in some respects only just. It is a great shame that the fact that those issues have now been dealt with will mean that the Government will not return to them for some time. This Government is unlikely ever to return to those issues because it will not be here. Even so in bidding for priority for change an incoming Government may find it is hard to go back and look at matters such as the Securities Act and the changes that should have been made—but have not been made—in this bill. Instead the changes are half-hearted. 
 I will deal first with the void and voidable allotment question. That is really the “Australian bank rescue” provision. It is the provision that will allow WestpacTrust Bankers Trust and a few other Australian fund managers to apply to the New Zealand courts to get transactions validated that otherwise would entitle New Zealanders to refunds of some very large sums of money. They were even larger a few months ago before markets rose which would have made it slightly less expensive if New Zealanders had decided to exercise their rights. 
What concerns me about this retrospective law change is that the Commerce Committee reported on the bill without ever really identifying to the people who might be losing their right to pull their original investment out of the investments run by WestpacTrust and Bankers Trust just how much they might be giving away and without alerting anyone including the business press. Think of the irony of that in a Business Law Reform Bill. There are rules that force businesses to disclose—in the colloquial term to spill their guts—the most untidy and unwelcome facts in a prospectus. But here we have essentially the Labour Government colluding with the Australians who had this unfortunate lapse that they now want to have remedied to avoid actually indicating to the New Zealand investors who could take advantage of it just what they might be giving up. 
That is not to say that it is not a proper change. It is the retrospectivity that really raises eyebrows. If the Government had really adopted a principled approach to the issue—if it had said: “We will apply the same standards of disclosure and warning that we force business to apply”—it would have been upfront and explained to the investors in the Bankers Trust WestpacTrust and the other affected funds just what it is that they may forgo when those retrospective changes come in. If the Government had done that it might have been able to justify the retrospectivity with more than the begrudging approval that it got. 
The other concern about these provisions is that there is no indication the Government has secured from the Australians any kind of understanding for reciprocity. I have very little doubt that the hard-nosed ruthlessness that the Australian Government applies in matters concerning its own businesses—the sort of attitude it displayed in 1996 when it unilaterally abrogated its open skies agreement and the sort of attitude it showed to Ansett when there were two mysterious groundings and then Ansett collapsed which the Australians laid at the door of the New Zealand management—would not have resulted in the kind of consideration that the New Zealand Government has given to the Australian banks over the retrospective change to rescue the allotments. 
Indeed it almost looks as if it has gone the other way: that this is a change forced out of the New Zealand Government because of its supplicant role. I suspect that behind this change is the Hon Dr Michael Cullen’s arm right up his back. I suspect that it is part of a pattern whereby we want to throw Air New Zealand to Qantas whereby we want to adopt the same insolvency law as the Aussies and whereby the Government says that it is going to have the same insider trading law which is already in force in New Zealand—continuous disclosure rules that even Australia does not live by. The New Zealand Government is rolling over and asking not to be growled at in almost every transaction it has with the Australian Government. 
It is true that we should be humble. We reneged on immigration arrangements. We created an open flapping back door to the Australians at a time when they were very worried and rightly about the risks of open-slather immigration. We reneged on the Skyhawk deal for training and exercises with the Australians and we have not pulled our weight in defence arrangements. So maybe the Government has to sacrifice the interests of a whole lot of New Zealand investors to placate the Australians and maybe that is what accounts for the retrospective change to the voidability provisions in the Securities Act. 
I want to move now to some of the things that have been done sensibly and commend the removal of the foolish extension of prospectus requirements to company or employer superannuation. It was predicted when they came in that that would kill a lot of superannuation. Belatedly the regulators have recognised that and this bill sees a very sensible rollback of a stupid extension of regulation 10 or 12 years ago. 
I have already mentioned during the Committee stage debate that the timidity of the change to the pre-prospectus publicity rules is patently ridiculous. Pre-prospectus publicity rules have been fatuous in every regime. They are simply to make sure that the uselessness of the primary offering requirements in law are not shown up by people flooding in to offers without the benefit of all the expensive documentation that the law prescribes. 
Similarly the sophisticated investor exception which the bill now extends could have been extended in a way that respected the genuine risk that people want to take. The notion that an independent financial service provider will have to certify that the person who is exempt can assess the merits the value the risks in the offer the person’s own information needs and the adequacy of the information is patently ludicrous. I wrote hundreds of offering documents over my career. I did not rely on them to assess the offer. I would never have thought of relying on the offering documents to know the value of the security or the adequacy of the information. I would write a document and then ring a broker and ask what it meant. I once surveyed the lawyers in my firm—more than a hundred—and asked whether any of them ever relied on the offering documents that the law requires to be produced. The answer was “None”. This is an area of law that could have been swept away to everyone’s advantage.