ASIC’s initial claim of illegal phoenix activity by a liquidator now the subject of a 160 page statement of claim

This post is further updated on 26 February 2021 to reflect that ASIC filed its statement of claim against Mr Bettles on 19 February.  Orders were then made by the Federal Court on 23 February that included that ASIC must, by 9 March, supply Mr Bettles  with a version of the statement of claim which includes the document ID for each document referred to in it; and respond to his request for further and better particulars.  Mr Bettles is then to file his defence by 28 May with the matter next before the Court on 31 May 2021.  

As matters of general interest, Part 45 of the Insolvency Practice Schedule is relied upon; ‘breaches’ of the ‘ARITA Code’ are pleaded; and “(t)he relevant principles of the common law concerning the duties of liquidators” are summarised, at least, it seems, as claimed by ASIC in the context of this claim. Consistently with the Court’s earlier judgment, the term “phoenix” does not appear.

The statement of claim is 160 pages.  The matter looks exceedingly complex and no doubt ASIC has in mind the proportionality of its claim in terms of costs and time and outcome for all parties involved, including itself.




This post is updated on 22 December 2020 to this effect, that ASIC was to have prepared and filed  a statement of claim setting out its detailed claims against Mr Bettles by 16 December 2020, but it did not do so.  Orders were made by the Court on 21 December that ASIC serve its claim by 19 February 2021 with the matter next in court on 23 February 2021. The proceedings were commenced by ASIC in 2019 in relation to alleged misconduct in 2016.



A liquidator has successfully applied to have claims by ASIC that he was involved in unlawful phoenix activity in external administrations matters in 2016 struck out.  He was “entitled to have a coherent pleading” and ASIC was directed to replead its claims. 

Claims by ASIC against liquidators in other matters in the past have suffered similar fates over their pleading.

ASIC brought Federal Court proceedings in 2019 against a liquidator Mr Jason Bettles with claims that he was involved in “illegal phoenix activity”. The matters of concern occurred in 2016 by way of Bettles’ alleged s 79 involvement in breaches by directors of their duties to various companies under s 180, 181, 182 of the Corporations Act 2001.  ASIC’s application was made by way of a Concise Statement and a Supplementary Concise Statement under section 45-1 of the Insolvency Practice Schedule (Corporations), being Schedule 2 to the Corporations Act.

Bettles has been successful in his application to have ASIC’s Statements struck out on the basis that the facts set out were inadequately connected with the claimed contraventions. Greenwood ACJ of the Federal Court said that Bettles was “entitled to have a coherent pleading” and ASIC was directed to proceed by way of a statement of claim.

Unfortunately, as the Court explained, it was necessary to set out in some considerable detail precisely how the case was framed – involving over 50 companies, in various forms of external administration, back in 2015 and 2016. That detail is not covered here because in the end the Statements were struck out and ASIC was directed to start again, within 28 days.

In that respect, the Court emphasised the “very serious” case against Bettles that could if proved lead to his registration as a liquidator being cancelled. It followed that it was essential for ASIC to set out all the relevant facts in its statement and what sections of the Corporations Act were contravened, and how Bettles was said to have aided and abetted that misconduct.  ASIC had not adequately done that, referring for example to Bettles involvement in “unlawful phoenix activity”.

As Greenwood ACJ said at [87]:

“The question of whether the conduct described by the shorthand phrase “phoenix conduct” is, as a “matter of law”, “unlawful phoenix conduct” or “unlawful phoenix activity”, is entirely determined by whether proof of the facts of the conduct makes good a contravention of a provision of the Act. There is no such thing, per se, as “illegal phoenix activity”….”.

It was not sufficient for ASIC to set out a collection of facts over a period of time and describe conduct falling within that large matrix of fact as “illegal phoenix activity” on the basis that this involved contraventions of ss 180, 181 and 182, and that Bettles was involved in those contraventions.

The Court referred to the well-known academic work of the Universities of Melbourne and Monash on phoenix activity and to Treasury papers by way of emphasising

“the difficulty over a reasonably long period in Australia in coming to grips with the relationship between a range of conduct related to steps taken in the reorganisation of companies within a group and features of that conduct which engage duties, obligations and prohibitions under the Act, other legislation or the general law which, if not performed and honoured, render the conduct contravening conduct and giving content and definition to that which is a contravention”.

ASIC’s statements did

“not properly address a coherent claim in the sense of identifying a sequence of facts which, if made good, demonstrate a contravention by particular persons of one or more of ss 180, 181 or 182 of the Act leading to a pleading that (Bettles) was involved in a relevant contravention in the sense of aiding and abetting that conduct”.

ASIC then unsuccessfully sought to reclassify the nature of the proceedings as being an application for an inquiry into conduct under s 90-10, the difficulty with which was that, as the Judge said, ASIC had applied for order under s 45-1, including for Bettles deregistration.

See ASIC v Bettles [2020] FCA 1568.

Other ASIC matters

As to that “inquiry” process, ASIC failed in its application for such an inquiry into the conduct of two liquidators in 2019 – see Some views on ASIC v Wily & Hurst.

Going back further to 2016, the then CALDB dismissed all allegations of dishonesty made by ASIC against a liquidator, finding that they were inadequately pleaded, and were compounded by imprecise language and unclear differentiation between levels of dishonesty. See Concerns about liquidator misconduct hearings – no lawyer’s quibble

The CALDB in that case fact referred to earlier High Court admonishment of ASIC for a similar issue, in Forrest v ASIC [2012] HCA 39, where ASIC’s statement of claim had confused allegations of fraudulent and of negligent misrepresentations. The High Court pointed out that this was

“no pleader’s quibble. It is a point that reflects fundamental requirements for the fair trial of allegations of contravention of law. It is for the party making those allegations (in this case ASIC) to identify the case which it seeks to make and to do that clearly and distinctly. The statement of claim in these matters did not do that”.


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3 Responses

  1. This is a further example of ASIC not properly understanding its role as Regulator and party to proceedings. A pleading needs to plead facts not sections or concepts. The judge determines whether the pleaded facts fall within conduct that infringes a section or concept.

    The idea of Phoenix Activity has been around for many years – an early case being ASIC v Roheni before Einfeld J.

    It is not uncommon for Regulator to assert breach of s 79 of CA without asserting facts constituting that involvement.

    It is looking at early Reports on Phoenix Activity to understand. The words ”Rising From the Ashes” like a Phoenix comes to mind.

    The fact that a new business is established after failure of an earlier business is not necessarily activity justifying action.

    The involvement issues are illustrated by ASUC v Somerville

    Bettles is a senior IP who has always been diligent in my dealings with him.

    What he ASIC does is start proceedings in a fanfare then make regular Media Statements and struggle to make out their claim while destroying the Defendant in the process

    One must wonder about the proper compliance by it with the Model Litigant Guidelines of the AG which apply both to the Department as litigator and legal representatives Also there is the concept of Just, Quick and Cheap as the overriding purpose – much ignored in recent times.

  2. It is disgraceful that the regulator can get this so horribly wrong. If they can’t get their pleadings right, what hope is there for the rest of the case? As Jim commented, all they want is the cheap headline without any though of the damage to reputation done by them. What a waste of time money and stress. At what point will government start asking for ASIC to justify its wasteful ways?

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