A liquidator whose registration was suspended for 3 years by the court in 2021 has succeeded in 2025 in overturning a decision by ASIC that as he had not maintained his required insurance cover (which was not available during his period of suspension), he had to apply all over again to become a registered liquidator. This would have been an outcome the opposite of that intended by the nature of a suspension, to avoid the requirement to re-apply to ASIC for registration. The matter involved what might be described as a Kafkaesque series of proceedings for the liquidator, though resulting in an interpretation of the law that should provide a smoother outcome for others in such circumstances.
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On 19 February 2021, the Supreme Court of South Australia (Justice S Doyle) made orders suspending the registration as a liquidator of Mr Peter Macks for a period of three years.[1] Macks had been a liquidator for over 30 years, since 1990. Before the expiry of that period of suspension, Macks had applied to ASIC for renewal of his registration. ASIC refused that application on grounds including that Macks had failed to maintain adequate and appropriate professional indemnity and fidelity insurance as required by s 25-1 of the Insolvency Practice Schedule (Corporations) (IPSC) and accordingly his registration had lapsed on 28 March 2023.
Macks’ failure to hold such insurance related to the fact that, as his registration was suspended, he was unable to obtain relevant cover until such time as his suspension had expired.
Then, following the expiry of the suspension period in February 2024, Macks again applied to ASIC to be reinstated as a registered liquidator. ASIC refused to do so on the basis that the refusal of Macks’ prior application meant he was no longer registered and consequently was required to lodge a fresh application for registration, in effect, as a new liquidator.
Macks applied to the Supreme Court for orders for an extension of time within which to lodge a further application for renewal of registration as a liquidator pursuant to s 20-70 of the IPSC.
The Court, Justice Stein, allowed his application.[2] ASIC’s prior decision to refuse the renewal of his registration did not preclude ASIC from considering a fresh application and consequently did not preclude the Court from granting an extension of time within which to make such an application.
Insurance requirements of suspended liquidators, and trustees
The Court held that the obligation to maintain adequate and appropriate insurance in s 25-1 of the IPSC is a present obligation relating to working as a registered liquidator and consequently does not apply to a suspended liquidator not working as a registered liquidator. The insurance obligation on a suspended liquidator is an obligation to hold run off cover which is imposed only as a condition of the liquidator’s registration by r 20-5(4) of the Insolvency Practice Rules (Corporations) 2016, and RG 258.205; this is the only insurance requirement applying during a period of suspension.
The Court’s decision in 2021 was to suspend Macks for a period of time rather than disqualify him. It is implicit in a penalty of suspension that the suspension will lift and also implicit in the decision not to disqualify Macks that he was not obliged to apply for registration afresh.
His application to ASIC to lift his suspension in February 2024 was in fact
“unnecessary because once the period of court ordered suspension expired, the register would have been updated without need for any action by Mr Macks”: [18].
ASIC’s interpretation would have resulted in an outcome
“being precisely the opposite of that intended by S Doyle J, that is, to avoid the requirement for Mr Macks to have to re-apply to ASIC for registration”: [61].
ASIC to consider his application afresh
The Court granted an extension of time, thereby enabling Macks to apply to ASIC to renew his registration,
“to be addressed afresh by ASIC on the basis of the application and supporting material. If any issues arise thereafter, they can be addressed separately”.
ASIC must consider any application on the basis of circumstances in existence as at the date the application is made.
As trustee in bankruptcy
Macks had also been a registered trustee in bankruptcy since 1993. On 22 February 2021, as a result of his suspension of registration as a liquidator, the Inspector-General in Bankruptcy suspended Macks’ registration as a trustee for three years through to 22 February 2024.
On 7 July 2023, during the period of his suspension, Macks’ registration as a trustee fell due for renewal. He applied for the renewal of his registration which was granted on 10 July 2023. In February 2024, in anticipation of his suspension of registration concluding, Macks corresponded with AFSA seeking confirmation that the suspension would be lifted. On 26 February 2024, after correspondence in relation to clarity around insurance cover, AFSA confirmed the expiry of the suspension of Macks’ registration as trustee and sought further information concerning the satisfaction of professional indemnity and fidelity insurance requirements under the Bankruptcy Act.
Further correspondence between AFSA and Macks included information confirming the renewal of Macks’ professional indemnity and fidelity insurance policy from 30 March 2024 to 28 February 2025 on terms including an endorsement indicating cover for any appointments as trustee commencing after 20 February 2024. Mr Macks was informed that his suspension as trustee had been lifted.
Komment
This rather Kafkaesque scenario should just not occur. It is a product of Australia having two separate regulators for personal and corporate insolvency, each going about their regulatory tasks in parallel and with little apparent reference to the other, and in this case about the one practitioner.
A 2010 recommendation to have the one regulator was not accepted.
The Insolvency Law Reform Act 2016 attempted to harmonise the registration and regulation of trustees and liquidators. The law did so but the regulators – ASIC and AFSA – have then gone their own separate ways in implementing that law.
Apart from the respective laws being harmonised, section 10-5 of the IPSC is headed “working cooperatively with the Inspector – General in Bankruptcy”. It provides that in performing its functions and exercising its powers under the Act in relation to those “who are, have been or may become” both registered liquidators and registered trustees, ASIC must work cooperatively with the Inspector-General in Bankruptcy, and vice versa: s 10-5 IPSB.
Here. on the same uniform practitioner registration and regulatory provisions, AFSA reinstated Mack’s trustee registration and ASIC refused his liquidator registration. There is no indication in the judgment of any “cooperation” between ASIC and AFSA. At least the Court knew of AFSA’s position, but only because Macks’ so informed the Court.
Justice Stein had to wend her way through the provisions and come to a sensible reading of them. Although that might suggest they need to be amended and clarified for cases of suspension of registration, which are not uncommon situations, the decision does confirm that s 25-1 requirements do not apply during a period of a practitioner’s suspension.
Beyond that, a better course might be for parties and the courts to anticipate outcomes and legal requirements, whether a practitioner’s registration be suspended or terminated, and frame sound court orders accordingly.
ASIC’s response to Macks’ anticipated application for reinstatement will be reported in due course.
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[1] AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v MACKS (No 5) [2021] SASC 12 (12 February 2021)
[2] ASIC v Macks [2025] SASC 4
One Response
As a trustee in bankruptcy – that was what was relied upon by IGB in relation to P Leroy.
The principle applies equally to legal practitioners for one reason or another are not entitled to practice. The policy is in relation to conduct in practice.