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Bob Day’s resignation from the senate this week amid the collapse of his building companies raises questions about Family First’s funding arrangements and its future without him. By Mike Seccombe.

Bob Day’s resignation and Family First’s future

For decades before his sudden resignation from federal parliament this week, Bob Day held himself up as a paragon of the free enterprise system.

He was inordinately proud to be part of one of Australia’s most unregulated industries, home building. He advocated it as a model for the broader economy.

According to Day’s fervent belief, employers and workers didn’t need government or unions coming between them, with their rules and regulations and minimum standards. All they needed, as he wrote in a piece for the H. R. Nicholls Society in 2000, was “mutual trust and, dare I say, mateship”.

Most Australians would not have heard of Bob Day back then, but he was already a hero to the small-government, anti-union brigade, a “stalwart defender of ... freedom”, as economist Professor Judith Sloan said in her foreword to that piece.

Among the industry associations and right-wing organisations such as H. R. Nicholls, the Samuel Griffith Society, the Institute of Public Affairs and the Centre for Independent Studies, Day’s dust-dry economic views, arch-conservative social views and thrusting ambition were well known.

Most Australians remained unaware of him as he schemed his way into public life, first cultivating the right wing of the Liberal Party in South Australia – he is close to Cory Bernardi – and then buying dominance of Family First, the political party that began as outgrowth of a conservative Adelaide evangelical church.

Day entered the senate on a 3.8 per cent primary vote in 2013, via a complex web of preference deals. He lucked in again at July’s double-dissolution election on an even smaller vote – just 2.9 per cent. He rose almost without trace to become the most reliable crossbench supporter of the Coalition government, an important ally in a finely balanced and unpredictable senate.

Business collapse

Ironically, the most public attention Day ever got came on the occasion of his demise. The bombshell statement was dropped on Monday, the start of the sitting week. Day announced his property development group had gone bust, with “liabilities [that] greatly exceed our assets”. He had signed personal guarantees with creditors and expected to lose his home. Liquidators had been called in. He was quitting the senate to focus on his collapsed empire and his looming bankruptcy.

He said he would work to pay back those who had lost out. The liquidators will convene a two-day meeting of creditors on November 4 or earlier, as they sift through the complexities of Day’s web of companies.

Other questions wait to be answered, too: about the future of Family First; the future of the Turnbull government’s legislative agenda, particularly its industrial relations agenda; and the extent to which Day and his party complied with electoral funding laws.

We’ll get to them, but first let’s deal with the man and story to this point.

Day’s Monday statement said he left the parliament “devastated”, but he went as a hero to many on the political right. Tony Abbott, for one, paid lavish tribute to a “principled and courageous senator”.

Others were not so kind. Contractors had been stiffed for many millions of dollars. A couple of hundred home buyers were left with defective or unfinished homes. Numbers of them lined up to complain about their dealings with Day’s group of companies.

According to a preliminary estimate by the liquidators, McGrathNicol, Day’s companies owed unsecured creditors – that is, unpaid subcontractors and tradies, not banks – some $12.5 million. That number is expected to rise. So much for mutual trust and mateship.

McGrathNicol’s statement said all work had stopped on homes under construction by five wholly owned subsidiary companies of Day’s Home Australia Pty Ltd across five states: Ashford Homes in Victoria, where there were 57 houses; Huxley Homes in New South Wales, 56; Homestead Homes, South Australia, 48; Collier Homes, Western Australia, 29; and Newstart Homes, Queensland, 17.

In total, 207 families were left in the lurch. That number is expected to grow.

So much for the slogan of Day’s political party: “Family business, family farms, every family, a job and a house.” So much, too, for its policy promise about “keeping the Great Australian Dream alive”.

In announcing his resignation from the senate, Day said the group’s problems stemmed from losses associated with Huxley Homes and the high price he paid for the company in 2003. He owned that he had made two big mistakes: buying Huxley, and going into politics without putting in place a proper management structure.

Abbott praised Day for not having “sought to avoid responsibility or blame anyone else”. Which was commendable, but also underscored the question of why a man whose business was in trouble would take on the burden of political life.

IR warrior

Day himself said the financial difficulties went back more than a decade. Parsing of his financial affairs showed that in 2012, the year before he entered parliament, an independent auditor’s report on Home Australia provided to the Australian Securities and Investments Commission warned its liabilities of more than $32 million presented a “material uncertainty which may cast significant doubt about the consolidated entity’s ability to continue as a going concern”.

Why did Day not devote his full attention to sorting out the financial mess?

The answer is both simple and complex: because he is an ideologue. Long before he entered parliament, he devoted vast time and energy to advocating his views of a radically deregulated labour market.

Let’s go back to that H. R. Nicholls presentation in 2000. It was prompted by a report to government suggesting that any trade contractor who received 80 per cent or more of his or her income from one source should be considered an employee for tax purposes.

Day hated that idea. He foresaw unions getting involved, and the prospect of having to pay award wages.

“The Industrial Relations Commission and the Federal Court would put in their oars in various bureaucratic ways,” he fumed, “interfering in the contractors’ relationships, to insist on them being covered by the relevant award provisions, sick leave, maternity leave, holiday pay and goodness knows what else.”

Day’s pursuit of IR reform has been tireless, in roles including that of national president of the Housing Industry Association, director of the Centre for Independent Studies, chairman of the Institute of Public Affairs’ Great Australian Dream project, chairman of the Bert Kelly Research Centre, member of the Mont Pelerin Society, and as secretary of H. R. Nicholls and Samuel Griffith Societies. He also was a founder and inaugural president of the Independent Contractors of Australia, supported by H. R. Nicholls, the IPA and labour-hire companies intent on stripping award protections.

Politics was the obvious next step. Day joined the Liberal Party in 1987 and filled various organisational roles – as well as being a significant donor – before winning preselection for the South Australian seat of Makin in 2007. He lost the election but the next year he contested the preselection of Mayo, the seat vacated by Alexander Downer. The party chose another right-winger, Jamie Briggs, over him.

This wounded Day. He acrimoniously quit the Liberals and set out to find another vehicle to take him into parliament. It was a lot like Clive Palmer’s flameout, except that where Palmer started his own party from scratch, Day took over an existing one.

Family First takeover

The Family First Party was established in 2002, and that year got former Assemblies of God pastor Andrew Evans into the South Australian upper house. It claimed to be a secular party, but stood for the same socially and economically conservative values as its evangelical founders.

The church from which it sprang, then called Paradise Community Church, was rebranded in 2012 as Influencers Church (Global) and now has several other “campuses”, including two in Atlanta, Georgia, which gives you some idea of the entrepreneurial spirit of these prosperity gospellers.

Within a few months of joining in 2008, Day became the party’s chairman. The new Family First HQ was in a Day-owned building that also housed a number of other right-wing groups, including Cory Bernardi’s Conservative Leadership Foundation.

In relatively short order, Day got himself elected. He was not the first Family First senator though. That was Steve Fielding, a committed Christian who fluked it on 1.9 per cent of the vote for the last Victorian seat in 2004, before the Day takeover. Fielding took consistently conservative positions on moral issues but was less reliably right-wing on economic issues, and so a disappointment to the new regime. Day publicly berated him in the media for being insufficiently supportive of the Abbott opposition’s attempts to block the carbon tax.

When Fielding’s senate term expired at the end of June 2011, he was drummed out of Family First. The new owners of the party still paid lip service to conservative social issues, but their focus was radical economic liberalisation.

They were prepared to spend big to advance that agenda and the party. The money trail is very interesting, and murky.

A couple of years ago I totted up Day’s donations to Family First, as detailed in Australian Electoral Commission returns. Between 2009-10, the year after his takeover of the party and 2011-12, he kicked in more than $2.6 million, including a loan of $1.089 million, which appears never to have been repaid.

Since then, the money has continued to flow. In 2012-13 there was another $381,775, and the next year $484,000. In the most recent year for which figures are available, 2014-15, it was $73,200.

It should be noted that this money all came from his private company, B&B Day Pty Ltd, but one might reasonably wonder at one of his companies handing over millions – most of it applied to the purpose of getting him elected – while his other companies were struggling with massive debts.

It’s all very perplexing. In 2012-13, for example, ASIC records show Home Australia recorded a loss of more than $420,000, yet paid a fully franked dividend of $2.67 million to its owners, including B&B Day. Which then gave $380,000 to Family First.

“Doing a Palmer”

Meanwhile, in Victoria, Ashley Fenn, a Day lieutenant and another wealthy businessman with major interests in the housing sector, was also generous to the party. Fenn had his own parliamentary aspirations, but narrowly lost to Ricky Muir for the final senate seat in 2013.

AEC records show Family First received $70,000 from Fenn in 2012-13, and $360,665 the following year. Oddly, the amounts were recorded not as donations, but as “other receipts”. Fenn, who The Australian called the “financial, strategic and intellectual driving force” behind Family First, quit a year ago. According to the report, Fenn clashed with Day over his “ultra-dry economic libertarian” policies.

Fenn did not return calls from The Saturday Paper. Nor did Day, whose various contact numbers appear permanently on voicemail. In fact, none of the several Family First officials contacted were interested in talking. The party’s website still promises to be “open and transparent” in response to any “matter [arising] that may affect the Party or another team member or be detrimental to the good name of Family First”, but the Senator Bob Day site now says “Account suspended”.

There were other oddities in the AEC returns. Not surprisingly, political opponents began asking questions. Back in June, the Greens democracy spokeswoman, Senator Lee Rhiannon, noted “significant irregularities in the disclosure of donations and loans made by Bob Day and his private company”, and called on the AEC to do a special audit of the party.

On Monday, when Day announced his business collapse, Rhiannon put out a media release accusing him of having done “a Palmer”.

“While Bob Day’s building empire Home Australia was leaving many, many people in financial stress, Bob Day was pumping hundreds of thousands of dollars into his own party’s coffers,” she said.

“It is reminiscent of the Clive Palmer nickel scandal, when Queensland Nickel donated millions to the Palmer United Party before sacking over 200 workers at Yabulu.”

In a senate estimates committee hearing on Tuesday evening, Rhiannon asked Electoral Commissioner Tom Rogers about it. He told her the AEC had indeed examined the Family First returns and had sought further disclosures. He did not say more, on the basis that it remained an “active” case.

The AEC is notoriously gentle in dealing with breaches of reporting requirements by political parties. More interesting might be actions of the liquidators who, once they have worked out how much creditors are owed, will turn their attention to the solvency or otherwise of Day’s business while these donations were made.

We are not suggesting any illegality here, but clearly Day and the party officers will have some explaining to do.

Meanwhile subcontractors and hopeful home owners will not be the only ones hurt by Bob Day’s fall. The radical right of politics will also miss his energy and, above all, his money. The hit to Family First will be enormous, both financially, because Day and his acolytes provided almost all their funding, and reputationally. Their future federal electoral prospects seem dim.

For now, though, they will maintain a presence in the senate. Three people so far have publicly declared themselves contenders to fill the vacancy created by Day’s resignation.

Replacements candidates

The first is Day’s former chief of staff, Rikki Lambert, widely considered the frontrunner and the most akin in his views to Day. He has nonetheless surveyed the party’s declining vote and suggested some of the party’s policies need “adjusting”.

The second is one of the party’s two members in the South Australian upper house, Rob Brokenshire. He is a former Liberal and conservative Christian but is not seen as being as radically economically right wing as Day. He has insisted he would not be a rubber stamp for Turnbull government legislation.

The third candidate is the most interesting, and probably the least likely to succeed. Lucy Gichuhi, a Kenyan-born lawyer, was No. 2 on the party’s senate ticket at the last election.

In an interview with the Adelaide Advertiser this week she said Australia’s political culture was “very different to when Family First started … and no one is immune to the changes”.

She nominated as her passions “empowering women, empowering their children … helping families”.

The party’s state executive is expected to decide in a couple of weeks.

Ironically, the piece of legislation about which Day was probably most passionate, the government’s union-busting bill targeting the building industry through the re-establishment of the Australian Building and Construction Commission, was introduced the same week as he resigned.

He will never get the satisfaction of voting for the ABCC. But it is expected to get through with the support of the Nick Xenophon Team.

It is doubly ironic that Xenophon is seeking to use his leverage to change the laws relating to the relationship between the likes of Bob Day and their subcontractors.

He wants to strengthen so-called “security of payments” provisions to give subcontractors greater certainty about getting paid for their work. The proposed changes, he says, “would mean developers would have to put money aside in trust to assure payment. As a job was being completed, as banks were providing money, it would have to be set aside for that job. It couldn’t be diverted to another project that is not going very well.”

Had such a regime been in place before Day’s companies went bust, says Xenophon, “it may not have prevented the company going under, but it would have protected the people who have done their work and provided the materials”.

The Day case has become exhibit A in Xenophon’s negotiations with the government.

It may well be the case that the greatest political contribution by the radical deregulationist Bob Day is in providing proof of the need for greater regulation. What a delicious irony.

This article was first published in the print edition of The Saturday Paper on Oct 22, 2016 as "Day’s lost savings". Subscribe here.

Mike Seccombe
is The Saturday Paper's national correspondent.