A bankruptcy disciplinary committee has issued its reasons for deciding to cancel the registration of a trustee in bankruptcy, based on his misconduct in a matter in which he was a liquidator: decision under s 40-45 in the matter of David Leigh, 31 January 2019.
It appears that the trustee, Mr Leigh, had admitted to acting fraudulently and with dishonesty in misappropriating $800,000 in a corporate liquidation.
The committee’s decision
In its report, the committee decided that Mr Leigh’s registration as a trustee should be cancelled, the maximum penalty: see IPS(B) s 40-55.
The committee further decided that a condition should be imposed on all other registered trustees that they must not allow Mr Leigh to carry out any of the functions or duties, or exercise any of the powers of a trustee on their behalf, (whether as an employee, agent, consultant or otherwise), for a period of 10 years. This is the exact wording of s 40-55(1)(g) and is the maximum period allowed.
The reasons for decision refer to but do not disclose the terms of the show cause notice (SCN) under s 40-40, whereby AFSA’s belief is said to be based on ASIC’s belief as to Mr Leigh having breached certain civil and criminal provisions of the Corporations Act. Nevertheless, the committee does go on to find that those provisions were breached. However, according to ASIC, the offences for which Mr Leigh is being prosecuted are for three counts of fraud under section 408C(1)(D) of (Schedule 1) of the Criminal Code 1899 (Qld).
No doubt the committee was able to obtain information from ASIC to confirm these details.
The committee had regard to Mr Leigh’s personal and professional circumstances which were said to have led to the offences being committed. It records his regret and embarrassment over the matter. However, Mr Leigh did not appear and the decision records that he was ‘happy to submit’ to the outcome. His remorse and contrition, which might in other circumstances go to penalty, were not explained.
The committee does not refer to other material, under its authority to do so, in particular contained in Insolvency News Online. Nothing is raised here about any health issues, and it is not suggested that any existed.
Prohibition on employment
The other decision of the committee does not allow for any rehabilitation, imposing a restriction on all trustees not to employ Mr Leigh for the maximum period of 10 years.
The committee said it considered the matter according to the Briginshaw standard, necessary in particular given the consequences for Mr Leigh’s livelihood and rehabilitation. He had been a trustee for nearly 20 years.
While the committee refers to Mr Leigh having ‘breached’ ex parte James, that is in effect a defence to any unfair action that might be brought by a trustee, and the committee’s intention is understood.
The end result
The end result is that Mr Leigh is no longer a trustee, that no-one may employ him in a bankruptcy role. How that serious restriction has been disseminated is problematic, given that it is to be found under the heading of about us on AFSA’s website. Murrays Legal is a more accessible source.
ASIC itself has also taken a decision, not to cancel Mr Leigh’s registration, but to ‘suspend’ it, at Mr Leigh’s request (s s 40-25), although ‘indefinitely’. Why that was taken is not clear and may be questionable, the law generally saying that the word suspension implies an end time based upon some specified further event or order. In any event, s 40-30(1)(c) is now available.
Whatever, that further event may in fact be the next court date in the prosecution matter, listed before the Brisbane District Court for a mention hearing on 26 February 2019.
The law in relation to disciplinary hearings has a long lineage, with some new elements introduced in March 2017 by the Insolvency Law Reform Act 2016. Coverage and criticisms of the new law are contained in a series of articles by David Castle in the 2016 Insolvency Law Bulletin – ‘corporate disciplinary committees and natural justice’, ‘resignation versus cancellation’, and ‘the 10 year ban’ – against which this decision in Leigh might be assessed.