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Speech: Illegal Phoenixing Bill

Speeches in Parliament
Mehreen Faruqi 5 Feb 2020

As already indicated by my colleague Senator Whish-Wilson, the Greens do support this bill, but we also realise that what this bill does not do is specifically crack down, and crack down hard enough, on building companies who are phoenixing to avoid paying their debts and avoid taking responsibility. Builders who declare bankruptcy to avoid sanctions for their shoddy works are constantly resurfacing as new businesses in the building industry. We know that phoenixing is rife in the building industry, and a huge part of that could actually be linked to the cladding crisis.

Everyone in this chamber is well aware of the fire in the Lacrosse building in Melbourne, which was directly linked to the external building's flammable cladding. The Melbourne Metropolitan Fire Brigade concluded in their investigation of the Lacrosse fire that the rapid vertical spread of the fire was directly associated with the external cladding. This is a terrible issue on its own, and it's actually made much worse and is further exacerbated by the issue of phoenixing in some of the cases.

One of the most egregious examples of phoenixing being a huge issue in the building industry is happening in Victoria with the Hickory Group. Twenty-five properties built by this group have been identified by the state-wide cladding audit as having non-compliant cladding. At least 17 of the company's non-compliant buildings, some of which have hundreds of apartments, have been rated at high risk or extreme risk of fire. As of September 2019, Mr Michael Argyrou has been a director and/or secretary of 40 companies which are now deregistered. Two more companies of which he was director are in administration and three are in the process of being struck off after the company sought voluntary deregistration. Mr George Argyrou, the company's joint managing director, is a former director and/or secretary of 27 deregistered companies.

These amendments effectively do two things. Firstly, they create a duty for directors and officers of corporations that design, manufacture, import, supply or install external cladding products to take every single reasonable step that they can to keep up to date with cladding products, to understand what the safety risks are, and to take appropriate actions and steps to minimise and remove these risks. This will help stop the dodgy directors of these dodgy companies. Secondly, and this is the most powerful part of these amendments, these amendments give the courts the power to disqualify a person from managing corporations for up to 20 years if (1) they were a director; (2) they engage or engaged in phoenix activity, and that uses the current framework of the act as it exists; and (3) the company at any time designed, imported, supplied or installed wall cladding products that were nonconforming according to the National Construction Code. Lastly, these amendments require that the court is satisfied that the disqualification is justified with regard to the person's conduct and any other matters the court considers appropriate.

I'll say in conclusion that it is really important that companies who have installed flammable, non-compliant cladding must be brought to justice. These dodgy companies cannot be allowed to get away, and the courts as well as ASIC should pursue them relentlessly. Of course, this issue of cladding, which has hurt so many people, needs to be addressed by a whole-of-government response to this crisis. I knew that New South Wales and Queensland have already called on the federal government to take more responsibility and to act on this issue. But I think today we have an opportunity to make a real change on this issue. This is exactly what these amendments do. I urge my colleagues to support these amendments.


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