Michael.1
Insolvency and related law and policy, and more

Michael Murray is an Australian author and commentator on corporate and personal insolvency law and related issues, in Australia and internationally. He has a strong law and policy background, is independent of any connections, and his views are his own. He gives no legal advice. 

Spent convictions of insolvency practitioners

According to a report from Stuff in New Zealand, a long-established liquidator has been denied permission to continue to practise based upon his convictions for fraud offences over 25 years ago.  Australia’s law of spent convictions might not allow that.

Mr Damien Grant is reported to have been denied permission to continue to practise because his application for membership was rejected by the Restructuring, Insolvency and Turnaround Association of NZ (RITANZ) based upon those past fraud convictions: ‘People have got to have a second chance’, judge says in the case of liquidator Damien Grant, John Anthony, 21 October 2020: www.stuff.com.nz

Grant brought an application to the High Court of New Zealand to challenge RITANZ’s decision and Stuff’s report is on the hearing, following which the Judge is said to have reserved his decision.

RITANZ’s decision is the more important now given NZ’s new liquidator licensing system under under the Insolvency Practitioners Regulation Act 2019 by which all insolvency practitioners must be licensed by an accredited body. As explained – Insolvency licensing bodies confirmed for New Zealand’s new regulatory regime – the New Zealand Institute of Chartered Accountants (NZICA) is now an accredited body with RITANZ now being a recognised body under the Act. NZICA has regulatory functions and only it can issue licences to its members.  RITANZ has no regulatory functions but its membership is one avenue by which a person can obtain a licence from NZICA.

Those who are not chartered accountants, such as Grant, had to apply to RITANZ to be allowed to continue practising.  It seems that RITANZ was not satisfied that Grant was a fit and proper person to be a liquidator based on his past convictions, for which he was sentenced to 30 months in prison and served 16.

Australian law – spent convictions

Under Australian law, conviction of an offence involving fraud or dishonesty can prevent a person applying for registration as a liquidator or trustee in bankruptcy and can lead to the cancellation of an existing registration.

These processes are subject to the law of spent convictions, under Part VIIC of the Crimes Act 2014.[3]  Under s 85ZM, a person’s conviction of an offence is “spent” if, inter alia, any sentence of imprisonment did not exceed 30 months and the “waiting period” for the offence has ended.

That waiting period is generally 10 years, or 5 years if the person was a minor at the time of the offence.

Part VIIC includes provisions that, in certain circumstances, relieve persons from the requirement to disclose spent convictions (s 85ZV) and require “anyone else who knows” of such convictions to not disclose them and to disregard them (s 85ZW). The Privacy Commissioner has the power to investigate complaints about breaches of Part VIIC.

Australia’s insolvency registration and regulatory regimes are different from those of New Zealand such that memberships of ARITA, or CAANZ, for example, are not relevantly required.

An example

As a comparable example under Australian law, a person convicted of fraud in 2009 and sentenced to 30 months in prison could apply to become an insolvency practitioner in 2020 and she or her would not be required to disclose the conviction, nor would ASIC, AFSA or anyone else involved in the process be permitted to disclose or have regard to that conviction.

Nor can a spent conviction be taken into account by the Administrative Appeals Tribunal in reviewing a decision of a committee: Frugtniet v ASIC [2019] HCA 16.

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