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Retail Tenancy Legislation

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Speakers - Nori Ms Sandra; O'Doherty Mr Stephen; Collier Mr Barry
Business - Matter of Public Importance


    RETAIL TENANCY LEGISLATION

Page: 18446
    Matter of Public Importance

    Ms NORI (Port Jackson—Minister for Small Business, and Minister for Tourism) [4.23 p.m.]: On 12 October the New South Wales Governor proclaimed the Government's critical new provisions of the Retail Leases Act dealing with unconscionable conduct. I ask the shadow Minister to note that date.

    Mr O'Doherty: I have just written it down, just for you.

    Ms NORI: I am sure you do not understand why. I will drive it home to you.

    Mr Fraser: You tell us.

    Ms NORI: I will. These provisions will save New South Wales small businesses thousands of dollars in unnecessary legal costs and lengthy court battles. The unconscionable conduct provisions were part of the New South Wales Retail Leases (Amendment) Act that the State Government introduced in 1998. Honourable members will realise that it is a long time between late 1998 and late 2001. Most honourable members, but not the honourable member for Coffs Harbour, will recall the unconscionable conduct provisions could not take effect until the Commonwealth Government amended the Trade Practices Act. That is because it was necessary to remove any possibility of an inconsistency between the Retail Leases Act and the Trade Practices Act.

    Unfortunately, the Commonwealth Government's commitment to small business was seriously lacking. That meant that hundreds of thousands of small businesses in New South Wales who, from time to time, found themselves embroiled in significant, expensive and sometimes business-threatening disputes with their landlords in respect of retail tenancies, were forced to wait for at least two years longer than they should have had to wait for the Commonwealth Government to finally amend the Trade Practices Act so the State Government could draw down that section of the Trade Practices Act and make it available to small businesses in New South Wales.

    Retail tenancy problems can sometimes lead to the end of small businesses. Some people have had their business lives completely ruined because of the unconscionable conduct of the landlord. In the past couple of years, before these provisions were proclaimed, small businesses that found themselves in such a predicament had to go to the Federal Court to find legal remedy, but proceedings in the Federal Court are lengthy and the costs can be prohibitive. One thing a small business does not need is additional costs beyond those it is required to pay. The delay has been frustrating for the New South Wales Government and for me as the responsible Minister, because despite repeated calls by me and my colleagues to the Commonwealth to act quickly to provide certainty for small business, the Commonwealth Government did not seem to be interested.

    Honourable members will recall that once or twice a year I would report to the House during question time, and point out how long we had been waiting and how many letters we had received from the Federal Government saying it would look into the matter. It took the Federal Government three years but it finally looked into it. Honourable members will recall also that the New South Wales Retail Leases Act was amended by the Government in 1998. The amendments included several new provisions to provide a simple mechanism for the early and fair resolution of tenancy disputes. The legislation is recognised as a benchmark for retail tenancy agreements throughout Australia. One of the principal objectives of the law is to move away from the expensive litigation model to mediation.

    Complex, difficult or contested retail tenancy legal matters can easily cost up to $100,000 to resolve. That is time, money and effort that small businesses simply do not have. It is also money and time that small businesses may have had to risk because the Commonwealth Government took two years to act, at our request, to amend the Trade Practices Act. The State Government's provisions will enable retail tenants or landlords to have their claims heard by the retail tenancy division of the Administrative Appeals Tribunal. That is a significant breakthrough. It will make it faster and cheaper to resolve these kinds of disputes, and it means affordable access to justice by small businesses that have problems with their landlords in relation to retail leases.

    Obviously, this is a huge and long overdue win for small businesses in this State. In my position as Minister for Small Business I have found much to be proud of, and one thing I am very proud of is the New South Wales retail tenancy unit. Over the past six years the Government's retail tenancy unit has received about 20,000 inquiries. Over this six-year period the unit has successfully resolved 82 per cent of the cases that have gone to mediation. In the month of September 2001 alone the unit mediated 46 separate cases. In an extremely pleasing result, 40 of those cases—that is a remarkable 87 per cent—resulted in the disputants reaching agreements to settle the disputes.

    I take this opportunity to congratulate Mr Ken Carlson, the registrar of the retail tenancy unit. I congratulate also his staff on the excellent job they are performing for small business in this State. I am particularly pleased that the industry is seeking to resolve and mediate disputes, rather than going down the route of a court case and litigation, which only wastes time and money in many cases and does not necessarily result in an outcome that helps the small business that we are intending to support. It is pleasing to know that the unit is working well. It is pleasing to know also that the industry, the landlords, have understood what we were seeking to do with the legislation that was passed back in 1998. They understand the new parameters; they understand where the line is drawn in the sand. It is pleasing for me to get the feedback that landlords and those who advise landlords—for example, legal firms that specialise in this area—have started to ensure that new leases entered into since that time reflect the spirit of what we intended to be law in this State as far back as 1998.

    Unfortunately, that only became law in this State recently, as I said, because of the absolute slackness of the Federal Government and of several successive Ministers for small business who were interested in other matters rather than taking care of their small business portfolio. The retail tenancy unit is a major success story, and the Government's amendment to the Act can only enhance this achievement. The Retail Tenancy Amendment Act creates the conditions for all involved in retail leasing to operate with confidence and certainty—in terms of both retailers and landlords, a fair degree of certainty—that whatever the outcome will be, it will be based on commercial realities and on what is just. The proclamation of the unconscionable conduct provisions ends a long campaign by the Government and by me to win affordable access to justice in the New South Wales judicial system for small business.

    Mr O'DOHERTY (Hornsby) [4.33 p.m.]: I think all honourable members will agree that legislation to regulate agreements between retail tenants and landlords is difficult.

    Ms Nori: Where have you been? It's very simple.

    Mr O'DOHERTY: Where have I been? I have been sitting here listening to you.

    Ms Nori: It's very simple.

    Mr O'DOHERTY: All right, it is very simple. I shall address exactly what the Minister raised in a moment. While I did not interrupt the very rude Minister for Small Business—

    Mr Merton: She's not normally rude.

    Mr O'DOHERTY: The honourable member for Baulkham Hills says that the Minister is not normally rude, and that is true. I suspect that something happened on the weekend to slightly upset the Minister. That would have been the complete rout of the Labor Party, particularly in New South Wales. The Cabinet in which she sits is primarily responsible for the devastating loss by Labor across New South Wales—a greater loss than in any other State—but I shall say more about that later. It is difficult to strike a balance between the interests of the parties to a retail tenancy agreement. No-one knows that better than the New South Wales Coalition because it was the New South Wales Coalition that first grappled with this issue as long ago as the time Nick Greiner was the Premier.

    The Minister for Small Business may not remember that it was Nick Greiner's Government that instituted discussions between building owners and tenants about retail tenancies. When Gerry Peacocke was Minister there was a voluntary code. That eventually made its way to landmark legislation that went through this place in 1994—I believe the Minister was here at the time; she must not have been paying attention—when Ray Chappell was the Minister under the premiership of John Fahey. That landmark legislation contained many of the provisions which the Minister for Small Business now hails as achievements of the Carr Government. In fact, the legislation goes back to that time.

    Only today someone from the retail industry told us how well used and how well appreciated those provisions are, including the provision for a disputes resolution mechanism, which was introduced by the Coalition Government back in 1994. Michael Lonie told us that those provisions are working well. Retailers are happy with them, and so they should be. It was a good piece of legislation. There are ongoing problems, which the Minister alluded to, particularly in the area of unconscionable conduct and undue pressure that can be brought to bear. As small business owners in my electorate have raised this matter with me from time to time, I know that there are occasions when small business proprietors in larger shopping centres feel that the balance is unequally weighted against them when it comes to renewing their leases.

    Mr Collier: It is.

    Mr O'DOHERTY: The honourable member for Miranda says that it is, and that is right. Therefore, it is good that action has been taken by the Commonwealth and State Governments to address that aspect of the relationship between landlords and tenants. However, the Minister for Small Business, who pretends that this was all her doing, needs to be reminded of what has been going on as far back as 1997. There was the Reid fair trading report and then what the Australian Financial Review in March 1999 described as "a stern lead from the Federal Government" for the States and Territories to "slowly—one might say reluctantly" harmonise their legislation.

    As the Australian Financial Review reported in March 1999, the Commonwealth was taking the lead in this matter, asking the States to review their own legislation in relation to this issue. In a Federal system it is appropriate that there is discussion between Commonwealth and State Ministers and that the Commonwealth Government provokes the States into taking action. Which was the first State to take action? Try this quick quiz! Was it New South Wales? To listen to the Minister for Small Business one would think it was New South Wales. However, it was South Australia. The Liberal Government in South Australia took action first. According to the Australian Financial Review:
        South Australia struck out on its own with its legislation, and gave preferential lease renewal for the sitting tenant—as recommended by the Reid report—where the sitting tenant has a strong claim on the new lease.
    South Australia was out there after the Federal Government provoked the States to take action, and New South Wales did not come into the picture on this issue for at least 12 months after that. The Minister for Small Business is right: She has entertained the House on a number of occasions with her concerns about the Trade Practices Act. I acknowledge that it was New South Wales which said that the State legislation should invoke the Federal Trade Practices Act, and that has not been an unhelpful contribution. We do not quibble with that. Indeed, the Commonwealth Government also agreed, and legislated to allow that to happen. That is the point.

    Whatever the Minister for Small Business may say about the Commonwealth Government while she continues to relive the events of last weekend's Federal election, the fact is that the Commonwealth Government has taken the necessary steps to amend the Trade Practices Act so that the unconscionable renewal provisions can be dealt with at a State level, as agreed by the Commonwealth and State Ministers who all met as a council. The Minister for Small Business was present at the meeting and she knows that the Commonwealth Government agreed to those measures. On 10 May 2000, the Minister for Financial Services and Regulation, Joe Hockey, issued a statement specifically pointing out the Commonwealth Government's actions. The press release states:
        The [Commonwealth] Government intends to change the Trade Practices Act so that small business can use State laws to achieve easy redress where unconscionable conduct has taken place in retail shop leasing arrangements …

        The Trade Practices Act needs to be amended so that the State legislation can operate alongside the Commonwealth legislation without being constitutionally inconsistent.

        This Government is committed to making sure small business has every opportunity to establish profitable and thriving enterprises.

        We also want to see consumers adequately protected from unfair market practices.

        The [Commonwealth] Government will amend the Trade Practices Act to make it easier for small business and consumers to access the remedies under the Act. The amendments, for example, will increase the time in which legal proceedings can be started and the courts will be better able to provide appropriate remedies.

    The Minister for Small Business said that there has been an issue about the timing of the necessary changes and the House has been reminded of this previously. The most recent occasion on which the Minister raised this matter was May 2000. It is the action of the Australian Labor Party and the Australian Democrats in the Senate that was responsible for holding up the legislative program which was designed to embody the will of the Commonwealth Government in changing the Trade Practices Act. The action of the Australian Labor Party and the Australian Democrats was lengthy, spurious, tiresome and time wasting debate in the Senate about the new tax system and its implications for the Trade Practices Act, among other matters. That ensured that there were delays in passing the amending legislation, which had been clearly and very swiftly endorsed by the Federal Cabinet and the lower House of the Federal Parliament, the House of Representatives.

    Despite the swift and decisive action of the Howard Government in formulating a policy decision and legislating in the House of Representatives, the Australian Labor Party stuffed around with the amending bill in the Senate. If there has been any delay, the Australian Labor Party is to blame—the very same Labor Party that was trounced at last Saturday's Federal election by electors who know a bunch of charlatans when they see one—and the very same Labor Party that says hospitals and schools in New South Wales are in a decrepit state. As every elector who spoke to me at a polling booth last Saturday knows, the Carr Government is responsible for hospitals and schools in New South Wales. The voters see through the Australian Labor Party's apparently clever attempts at deception.

    Security of tenure and other issues have been raised with the Opposition by industry, and I wish to take the next couple of minutes to address those issues. The Retail Traders Association is concerned that there needs to be equitable renewal at the end of a lease. The association is concerned that under tenancy agreements, tenants are required to give monthly disclosures of their sales to landlords. When a lease comes up for renewal, a landlord can see whether a tenant is doing well in terms of sales and may increase the rent in the new agreement, whereas the landlord does not have that knowledge when dealing with a potential tenant. Retailers are happy to provide information to a third party to enable some assessment to be made but would like the Government to address this matter as a policy issue. Perhaps the Minister will respond to this matter in her reply.

    The Retail Traders Association has also referred to concerns about casual mall leasing. In this matter, South Australia has taken the lead over New South Wales in circumstances in which a tenant who has not occupied a prime location in a centre, and therefore has not been paying prime location rates, could come into a prime location for a short period and compete with other retailers who pay a prime rate 100 per cent of the time. That is another issue I would like the Minister to address in her reply. Retail tenancy laws represent another failed attempt on the part of the Carr Labor Government to blame somebody else for its own problems.

    Mr COLLIER (Miranda) [4.43 p.m.]: There is no doubt that the Federal Government dragged its feet in amending section 51AC of the Trade Practices Act as it applies to retail leases. All honourable members know that if there is any inconsistency between a State law and a Commonwealth law, the Commonwealth Constitution Act provides a mechanism for sorting out that matter. In this case it is quite clear that the retail tenancy provisions that were introduced by the Carr Government allow for concerns related to unconscionable conduct to be reviewed by the Administrative Decisions Tribunal, which provides a means of resolving problems, characterised by lower costs, quicker procedures, cheaper methods and a more equitable approach.

    For the small business community, the procedure is less expensive than resolution of the dispute in a court, and small business owners may be able to afford to obtain resolution of a dispute quickly, without incurring an enormous cost and having to take time off from their businesses. However, the provisions subsequently proved to be somewhat inconsistent with the Federal Trade Practices Act which require that any issue of unconscionable conduct is to be determined by the Federal Court. Such a procedure is time consuming and extremely expensive for small business people, so they eventually either gave up or got out of the business, because they could not afford the cost and the time.

    To remove any possibility of inconsistency, the date of operation of the New South Wales Retail Leases Act was postponed until section 51AC of the Commonwealth Trade Practices Act was amended, and there was a waiting period of two years for what all small business proprietors agreed was the right and sensible thing to do. I wish to place on the record the events that occurred during that two-year waiting period. When the New South Wales retail leases legislation was introduced in late 1998, it received bipartisan support. The then honourable member for Wagga Wagga and honourable members representing the electorates of Baulkham Hills, Albury, Dubbo, Northern Tablelands and Gordon all spoke in support of the legislation.

    The Treasurer, and Minister for State Development, the Hon. Michael Egan, wrote to the Federal Treasurer, Peter Costello, in December 1998 and received a reply in February 1999. The Federal Treasurer's reply acknowledged the existence of a problem with the State enactment and the need for amendments to the Trade Practices Act. The Federal Treasurer's response stated that the matter would be taken to Federal Cabinet for consideration. Eight months later, in October 1999, after no action had been taken, the New South Wales Minister for Small Business wrote to the Federal Minister for Financial Services and Regulation, Joe Hockey, requesting him to expedite the proposed amendments to the Trade Practices Act.

    Again no action was taken—that's our Joe—yet the Federal Government prides itself on being responsive to the needs of small business. Nothing was done, so in May 2000 a motion was moved in this House which included a proposal to urge the Commonwealth Government to immediately end the uncertainty faced by small retailers. The Minister for Small Business sent a further letter to the Hon. Joe Hockey consequent upon the motion being passed by the New South Wales Legislative Assembly. In June this year, the Commonwealth Government finally made the necessary amendments to the Trade Practices Act, which came into effect on 26 July this year—only nearly three years after Treasurer Costello was asked by Treasurer Egan to fix the problem.

    The New South Wales Governor proclaimed the unconscionable conduct provisions in early October, bringing to an end the uncertainty that had existed owing to the Federal Government's prevarication and delays. New South Wales small businesses that are involved in retail tenancy disputes now stand to save tens of thousands of dollars and to avoid what may otherwise have been lengthy court battles. It is a pity that the Federal Government did not grasp the nettle and take action three years previously to save small businesses some money.

    I have a large small business community in my electorate of Miranda which could have benefited from a much earlier implementation of the amending provisions. State provisions under the Retail Leases Act can resolve disputes over unconscionable conduct, that is, unreasonable conditions or demands being placed on lessees by lessors, particularly in large shopping centres. The provisions will permit businesses to take their claims to the retail tenancy division of the Administrative Decisions Tribunal, which will make it faster and cheaper for claims to be heard than was previously the case. That is a long overdue win for small businesses in this State. The Federal Government should hang its head in shame over the delay.

    Ms NORI (Port Jackson—Minister for Small Business, and Minister for Tourism) [4.48 p.m.]: I am amazed that the shadow Minister for small business was not present during question time, as the Premier so rightly pointed out, and is not present in this Chamber to even hear the conclusion of this debate. I am disappointed because I wanted to challenge him over some matters that really show that the shadow Minister was not involved in any of the negotiations or preparation of the bill that was passed in this House in 1998. The shadow Minister clearly does not understand the issue and certainly does understand the chronology. Some of the things he said were just sheer nonsense and rubbish. I will not accuse the shadow Minister of lying because I know that he does not know enough about this matter to lie.

    The honourable member for Miranda said that Federal Cabinet made a decision based on a letter from Joe Hockey dated 10 May 2000. That may well be true, but it was not until July 2001, about three months ago, that New South Wales was given the legal right to draw down that legislation. However, even if it were 10 May 2000, this House passed the legislation unanimously in November-December 1998. From the end of 1998 to 10 May 2000 is a long time. The Federal Government took far too long. It was not until probably some time in the middle of this year that the Federal Government finally worked out that perhaps it ought to separate the legislation so that it could be dealt with on its merits.

    The Federal shadow Minister, Joel Fitzgibbon, had also moved amendments to get the legislation through because it was non-controversial. The shadow Minister was right: it was non-controversial. But the reason it was non-controversial is that it was leading legislation. The legislation that was introduced by the Greiner Government in 1994 provided a good base. But we have gone well beyond that, as indeed we have gone well beyond the South Australian legislation. I well remember the ministerial council meetings at which we were all asked to go away and look at our States' legislation. The problem was that New South Wales already surpassed the minimum standards; it was already miles in front of South Australia.

    I will never forget that at one ministerial council meeting Peter Reith looked at me as if I were mad for suggesting that I would get through the Parliament of New South Wales the legislation that we eventually got through. I can remember most of the other Ministers—most of them were Liberals—saying, "Sandy, you will never get that through." Well, we did. We are a leading example across Australia. For a long time we had argued that the New South Wales model provided by far the most extensive reforms. Those reforms reflected co-operation on both sides.

    Mr Oakeshott: This is not a history lesson.

    Ms NORI: It is a history lesson. It is obviously a lesson that the honourable member for Port Macquarie has not learned, and I will therefore repeat it. When he and his supposed shadow Minister for Small Business talk such rubbish and nonsense, it is clear that they are in desperate need of a history lesson. The House should be under no misapprehension that what the shadow Minister said is in any respect true. Clearly, he does not understand the facts. He does not even understand the history behind the legislation. He does not understand its evolution in the Commonwealth, and he does not understand its evolution in this State.

    The legislation that Labor introduced prior to the 1999 election was leading legislation in Australia that strongly reflected the views of both sections of the industry. Both sections of the industry took 12 to 18 months to negotiate every aspect of that legislation, and that is why it has worked. That is why landlords signing new leases have embodied in spirit the contents of our legislation, even though they were not legally obliged to do so. In effect, we could not enact our legislation, enshrine it and make it available to small business while we waited for a Federal Government that had its eye completely off the ball when it came to small business. The Federal Government had plenty of time to impose all sorts of burdens on small business through the GST, but it could not take five minutes to think about the effect of its actions on small business in New South Wales.

    Discussion concluded.


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