Bill Shorten's Address to the Pan Pharmaceuticals Creditors' Meeting

The AWU represented 128 employees of Pan Pharmaceuticals at a 9 hour meeting of creditors which evenutally voted to liquidate Pan. The AWU campaigned against liquidation of the company and below is a transcript of Bill Shorten's initial contribution at the meeting.

I come from Melbourne and I backed Melbourne Storm on the weekend so you can now start booing me. The reason why I asked the question about Mayne, Faulding and Sigma, and I can't believe they're not going to exercise their votes, so if you take offence at what I say do so on the basis I tried to find out what you were going to do before I speak.

Just a little bit of history about Pan Pharmaceuticals as far as I've been able to glean from the employees here. I understand the company was set up by Angelina and Joe Aquinto. They were doing the work. I understand James Selim was a lab technician, did the quality assurance, he was involved in getting their licence. And I've asked the employees why is it called Pan and they've said well it's called Pan because it symbolised the colour or white coating on the tablets, and they prepare these tablets in big round pans and that's symbolised by the "P" in Pan. Which was a bit of a bummer to learn that answer, because I also wondered if it was named after the well known Greek god half human of the questionable sexual habits of a goat.

People know about the Greek god Pan and in fact people know so much because the Greeks were a civilised race, that several interpretations exist of what he did. But indeed that may well - if he was here in this room he may well understand this administration. Now he had many attributes, I won't go for all of them but another sort of piece of relevant data while we wait for Computershare to work out the latest cunning stunt, Pan was the god of music, he was also the god of goat, sheep and bee-keeping but he was the god of music, and it was said that his music would inspire panic in anyone who heard his music hence the origin of the word panic. But he was also the god of nature and human nature.

Pan, unlike the other Greek gods, didn't do anything too heroic. He tended to have comical adventures and in fact one time he beat Apollo maybe Mayne Faulding or Sigma, cause after all to be a legitimate company you should have a Greek or Roman name in the modern in the modern business. What happened is that King Midas picked Pan's music over Apollo's and therefore Apollo punished the King by giving the ears of an ass.

That could well be the outcome of today if indeed some of the big end of town people get their way and liquidate the business. Now a lot of the gods and their adventures live on. They were adapted by the Romans, and the Romans were very good at copying lots of things but there's only one story about the death of the Greek god. Greek gods are immortal. The only Greek god who ever had a story about his death was in fact Pan. So just bear those thoughts in mind about Pan when we deal with the death of this company or we give it the ears of an ass upon the organisation or do we in fact see if Pan is also the god of rebirth in nature. And so there's a number of options for Pan of what we can do - rebirth or kill it.

The employees of Pan, members of the Australian Workers Union have asked me to speak in favour of the deed of company arrangement, the resolution, and as much as I didn't want to interrupt the flow of technical legal questions, I did want to put some pegs in the ground on this debate, as no one else indeed Mayne, Faulding and Sigma were reluctant to take up that invitation. Maybe they will after I speak.

For me the debate about the DoCA is about risk versus certainty. In other words, in voting, for those of you here who are listening to the debate as opposed to coming here with your minds made up, in voting for or against the DoCA, I do believe there are risks for creditors both ways. I do not believe the DoCA is without challenges and I acknowledge that KPMG, and I'm not going to ask them how many hours they've put on to it at this stage cause I do believe they have had to deal with a difficult issue and I've been quite impressed especially in the last week with the way things have developed, but I am asking - I'm not even going to try and convince everyone here because I think some people have got their own interests worked out and that's fair enough in a market capitalist economy but I would like you to at least perhaps bear with me as I take you through some of the issues and listen to me on behalf of the workers of Pan Pharmaceuticals who I think everyone agrees have done nothing to deserve this deliberation and debate.

The proposition that I've put in favour of supporting this DoCA is in 3 parts to do with the rationale for voting for the DoCA, what I believe to be the intent and the obligations under the Corporations Law with regard to this DoCA, and also the consequences of voting against the DoCA. And let me entitle the people who want to vote against the DoCA and please don't take offence but I've now decided to call you the coalition of the unwilling. Unwilling to save the company.

Can I just go through then my first proposition why do I think some people are supporting this. For the trade creditors some of the small business the best way to mitigate loss in a bad financial experience is to have ongoing business. The number of trade creditors is significant. The number of people they employ is even more significant. I hope that some of the people voting to liquidate have bothered to at least find out how many people work for the trade creditors who will lose jobs as a result of the business not going forward. We estimate 2,500. But the people I'm most interested in are the employees. Now sometimes I've noticed in the business press the views of the employees are almost dismissed. The argument goes a bit like this.

There's a shrug of the shoulders, well of course they want their jobs, but that argument isn't the key argument. The argument is how much money will everyone get and anyway who cares if they don't get their jobs, they're going to get 100 cents in the dollar and after all the money their entitlements is all that matters. That is the superior, that is the first class argument.

But let me put a different proposition about the jobs. That workers have had to bear the slings and arrows of the sort of outrageous fortune which has seen them brought to this pass along with the trade creditors. To equate that their loss of a job is equal to the loss of Mayne Faulding or Sigma or indeed and I'll stop naming them. They may well abstain or vote in favour so I don't want to discourage them from that. I'll just have to guess what their intentions are. But those who wish to liquidate I just need to put the proposition that you will lose something, there's no question. You will lose something in liquidation. These people proportionately will take a hit. This is - people may not be aware but there's - of the 128 people, there's over 10 couples working at the business. Their average hourly rate is about $12 and I'll come back to that. Many of them have mortgages. To lose their job is a giant hit. That's more than the haircut which some of the people supporting liquidators are resisting. Proportionately the impact on their total income is catastrophic.

I won't insult the intelligence of people by asking people to identify how much the dole is when you've got 2 dependants because I don't suspect many people liquidating would know the answer. And no doubt this is part of the risks of commercial life, we understand that, companies collapse. But as people are reading the Financial Review or whatever paper of choice, and I didn't mean to offend anyone else, you know as they go over their Special K in the morning having been buffed to the gym before they head down to Palm Beach for their summer holidays, I would just make the point that the workers who lose their jobs, the average length of unemployment is far greater than the costs proportionately on income as it will be to some of the people voting for liquidation. I mean after all if the votes lost will the TGA compensate the workers? I'm not saying the TGA's acted wrong, I want to be brand new best friend to the TGA until they give the licence back. But, they won't compensate. Jim Selim's not going to compensate the workers for what's happened. The contingent creditors with their amazing range of claims won't compensate. The Barts won't compensate. Everyone will move forward. With respect to the administrators. KPMG aren't going to compensate them and find them another job.

The dilemma is that the consequences of shooting the business is you cause a giant upheaval in a lot of families, and if anyone seriously believes that getting a redundancy pay is better than having an ongoing job, just ask someone who's got their redundancy pay and hasn't found a job and the current Department of Social Security laws require basically no liquid savings before you can trigger some of the entitlements of the dole.
It's explained to me time and time again about this liquidation, and this proposal that it's just part of the market system within which we live. It's explained to me time and time again that if the workers get their money, well that's a good outcome. Let me explain that what our members want, and by all means have a look at them, they're people some of you will never see again but they're people who - I actually think many of you personally are quite interested in what happens to them. But what our members want more than our money is we want our jobs. Now if you think that the money's worth more than the jobs for the people sitting upstairs and sitting around the back, have a chat to them during the break while we work out the Computershare voting.

It's explained to me time and time again that if the AWU and if Pan workers back this rescue package we're taking a risk. It's explained to me time and time again that if Jim Selim doesn't pay enough penalty that could be commercially gained after years of litigation and it's explained to me time and time again that the new purchaser's are no better than anyone else. Bart's just trying to make a quick buck, a windfall gain. But these question marks, that there's a risk in going forward. It's explained to me time and time again, that some of the big companies who might vote to liquidate this business are doing so as much as they're interested in the workers and stakeholders and the trade creditors, that really they've got to act in their shareholders' best interests and get the best possible value, and of course eliminate competition in the marketplace you're going to have a better chance to sell your product. But please let me explain that a risk of a job going forward is better than a certain job loss.

A risk of going forward with people who we don't necessarily know is better than the certainty of the DSS office especially when our entitlements are secure. The risk of going forward at least guarantees some greater competition in the contract pharmaceutical marketing sector than the certainty of losing their job.
Let me look at another person in the coalition of the willing - the administrator. Almost quite willing, somewhat on the balance. They've recommended the DoCA. This hasn't been an easy process I believe for KPMG or the administrators, Gary(sic) Honey or Tony McGrath. There's been plenty of debate and rancour and disputation. No doubt we'll see more of that today. We'll see some people whose hourly rate of pay is higher than my members' weekly rate of pay scoring very neat legal points against each other in a fascination. I do believe the administrators have improved the deal. I do believe they've worked hard and the DoCA now is an improved DoCA on the one which was put up last time. I do believe they've actually tried to find the best deal possible and present it to the creditors.

If the administrator hadn't supported the deal however, people would say that the employees and the union we were silly, we are economically illiterate and nothing better than Luddites, why are we just worrying about jobs. However, the administrator has come down on our side. I think that is significant. The administrator's had a chance to look at everyone's interests. As was said before in a question the administrator could probably receive more by winding up than by administering the DoCA, but the point is they've tried to assess everyone's interests. Not easy I would say. I mean I haven't enjoyed watching it but I come from the trade union movement and the Labor Party, where factionalism and backstabbing is regarded as high art.

What I realise we don't do compared to insolvency lawyers and accountants is get high wages for doing it. So we think that the administrator, we think the employees, we think the trade creditors, we think they've got a right to be listened to. We think there are arguments. If the company is liquidated today and I'll come briefly to this second bid which was referred to, the Walker bid, for want of a better word, we haven't been spoken to so I don't assume our views count a lot to those people. But if we lose today, I think this would be a complete travesty. It would be an injustice. There will be a signal that the Corporations Law doesn't work properly because on one hand you've got the administrator who has to do a job. On the one hand you've got the employees. On the one hand you've got the trade creditors. You've also got some entrepreneurs who are looking to make a buck. On the other hand you've got creditors with yet to be adjudicated final claims.

The law does prioritise trying to restructure businesses and send them forward. That's why the administrator on balance has gone for that option and recommended. The objectives of the Act are clear. Yet what would concern me is if we get overwhelmed by a vote and of the coalition of people who don't want the company to go forward and I want to have a look at their claims. I mean I would rate that behaviour as mean and selfish but the reason why we would say it was mean and selfish is as follows.

Let's go through the Pharmacy Guild of Australia. What a clever clever legal argument that is. I take my hat off. I might want to brief their lawyers next time. That is clever, that is masterful. How 357 pharmacists can claim $223,000, and for those of you who weren't pencillers and bookmakers, that's about 600 bucks a claim on average, $600. Those votes can be used to overwhelm the trade creditors. To overwhelm all of the workers is a complete farce.

Whether or not it's legal I'll leave it to better minds than mine to work out but I don't need to be an insolvency expert to be told that is a complete and utter joke. The idea that $600 claims can over - to me it reminds me of what I saw in the dying days of the Ansett administration where the frequent flyer points brigade emerged, who had tens of thousands of points and said well we want to have a say. I think most of the pharmacies that if they actually realised individually that for $600 they were voting to see 130 people with family members going over 3 and a half dependants per family, I think some of them would be privately appalled. I am impressed that the Pharmacy Guild, with claims on average of $600 can secure legal representation at a forum like this. I'm very impressed by that because when you're only getting on average $600 you're obviously very good at dealing with your lawyers or there's some other agenda afoot. And I'd also be curious to have a look at these pharmacies.

I want to see their balance sheets from the 30th of June. Because after all they've lost $600. How many of these pharmacies have put down as a doubtful debt this $600. Or is it just a clever piece of legal chicanery. You can all judge that and maybe if some of you support liquidation, you pat yourself on the back. I'm not overwhelmed that the Bart consortium fielded 500 new claims today. But mind you I don't have to be where they are trying to assess the clever, cunning stunt of 357 members of the Pharmacy Guild claiming on average $600 whose votes can kill off average incomes of $450 a week and put them on the dole at $415 a week. Do you know that's another nice thing about the employees? I mean I say something about Selim, Mr Selim, James Selim, Jim Selim. The point is this, he may be a good businessman but what my members tell me is that he wasn't the highest payer in town and I'm sorry if the family take offence at that but we unionised this business 6 months before it went into administration because people weren't happy with their wages. So we shed no tears about the changing of the guard. We are not excited. We do not come with stars in our eyes about the new people who are rescuing the business. Good on them, they're trying to save jobs. We're a union, we want to try and save jobs. We're under no illusions that it's a commercial relationship but at least someone is trying to have a go. But when I compare the issues in terms of our membership 80% of whom, born overseas so welcome to Australia, welcome to Australian corporate life.

When I can tell them that at least they'll get to - when I can at least tell them that they will get $416 on the dole. Having educated you a little bit about the origin of the word panic, let me also tell you a little bit about the dole. The dole is $385 if you're single, gets up to $458 if you and your partner are unemployed and you've got 2 dependants. But let's not pretend that that is in any way compensation for an ongoing job. So we are sceptical about the credentials of the people attacking - liquidating the business. Absolutely sceptical. We actually, and I'd love to hear Mayne/Faulding and Sigma. I guess they will speak at some point, or maybe they'll just liquidate in the dark and never be heard. But I'd also like to hear them say that if the business is liquidated, will they buy parts of the business at fire sale prices? Will they buy any of the technology? Will they buy any of the plant and equipment? Mmm. Don't blame them if they do. Good deal, good deal. Keep going for shareholders. Mayne's had a rough time. Good to see them do something on the money. But let us not pretend that in liquidating it is about all creditors. Let us just recognise that what it's about doing is taking the - is bottom feeding, acting like a vulture, going from what - getting at fire sale prices what's really perceived as the value in the company and putting the company down.

As for the other bid, I'm interested to see - I got a document as late as this morning. I guess you've had plenty of meetings with our members. I guess you've chosen to respect the workers cause you're interested to get their ongoing support or maybe you haven't bothered talking to the workers even though they've been there at Moorebank day after day. Maybe you haven't spoken to all the trade creditors because actually you know that they will work out that the deal is basically liquidation in drag. So and I mean the other thing which I'm very keen for the administrator to find out is do any of these pharmacies, this army, this battalion of cheated chemists have business interruption insurance? In fact what insurance does Mayne and the others cover. Also, when we hear this on balance of probability the deal is better than no deal, I do think that is of great weight. So at the outset I said to us this is an issue of risk but for us the issue is also certain loss versus risk. We do believe to liquidate this company would be mean and selfish.

The percentage impact of liquidating this company will be far greater on the members of the Australian Workers Union than it will be on the people liquidating the company. I think the Corporations Law if this liquidation occurs is completely useless where unadjudicated claims, and tiny claims of a vexatious nature, can overwhelm workers and trade creditors, and we will be encouraging the administrator to, if it comes down to a vote on the balance, that the administrator falls our way because I think on balance there's worthy claims and less worthy claims.

I am reminded, and it's been interesting for our members and delegates, they'll never forget this process and our delegate, Paula, made some observations about some of the talks in the last 3 creditors' meetings she's been to. She said big people aren't any better behaved. Maybe they're wearing Armani but there's no difference underneath, it's not the big end of town, it's the dirty end of town. I thought that that was important that I read that out because that's what she said and you can't beat common sense any day. We think that to liquidate this company will be rewarding opportunism and bottom feeding of the worst and most crass nature. But for the TGA and perhaps the mistakes of the previous company management, I'm not going to say the TGA's wrong, that's a matter for other people to have an argument about, it is actually a viable business. It's not like other insolvencies, there is cashflow, there is a good workforce of skill, there is perhaps underpaid, certainly underpaid, better plant and machinery, and very modern, sorry, plant and machinery. The only certainty is job losses and loss of business. How can the small businesses mitigate their loss if there's no business there at all. As I indicated Pan was the god of rebirth.

Our members too want a chance. They want to be able to take a risk as opposed to the certainty of defeat. If any of you today think the workers have been good people and done well in difficult circumstances do not be hypocrites and clap them if you're intending to liquidate. Do not clap the workers here if you are intending to liquidate. Because it is a complete and utter act of hypocrisy. I look forward to watching the next few hours I guess because I think there is a chance this business can be saved and I think that everyone stands to gain whereas certainly if its liquidated some people certainly stand to lose. Thanks.