Determination of the Disciplinary Tribunal of Chartered Accountants Australia and New Zealand 27 October 2016 Case Number: D-1138 Member: Ian Richard Hall, CA Hearing Date: 27 October 2016 Tribunal: Legal Adviser: Counsel: Case description: Richard Rassi, FCA (Chair) Ross Haslam, FCA Ross Illingworth, non accountant member of the Tribunal Zoe Taylor For the Professional Conduct Committee (PCC): Michael Bradley For the Member: Jeremy Kirk, SC Jonathan Burnett, Barrister Louise Capon, KPMG General Counsel Spencer Hulme, KPMG Legal Counsel 1. Member failed to observe a proper standard of professional care, skill or competence in the course of carrying out his professional duties and obligations as an insolvency practitioner. 2. Member subject of adverse findings in relation to his professional or business conduct. 33 Erskine Street, Sydney NSW 2000 GPO Box 9985, Sydney NSW 2001, Australia T +61 2 9290 1344 charteredaccountantsanz.com Chartered Accountants Australia and New Zealand ABN 50 084 642 571 (CA ANZ). Formed in Australia. Members of CA ANZ are not liable for the debts and liabilities of CA ANZ.
1. NEW BY-LAWS These proceedings were conducted under the new By-Laws of Chartered Accountants ANZ which came into force on 28 July 2016. In accordance with By-Law 42(d) the Member cannot be held liable to sanction for conduct which would not have attracted sanction under the Former Professional Conduct By-Laws. Accordingly, the Tribunal determined the allegations in this case with reference to the terms of the Former Professional Conduct By-Laws. 2. DECISIONS 2.1 DECISION ABOUT THE PCC S ALLEGATIONS AS SET OUT IN FULL IN SCHEDULE 1 At a hearing of the Disciplinary Tribunal: the Member did not admit the allegations; the Tribunal found that allegations 1 and 2 were established. The PCC did not press allegation 3 and therefore the Tribunal did not consider this allegation. 2.2 DECISION ABOUT SANCTIONS The Tribunal considers that the appropriate sanction in these circumstances is that the Member receive a reprimand. 2.3 DECISION ABOUT COSTS SANCTION The Tribunal determines that the Member pay to Chartered Accountants ANZ the sum of $26,300 for the costs and expenses of the hearing (paragraph 10.12(l) of By-Law 40). No GST is payable. 2.4 DECISION ABOUT PUBLICATION This decision will not take effect while the Member remains entitled to appeal. The Tribunal will publish its decision, mentioning the Member s name and locality, on the Chartered Accountants ANZ website and journal (paragraphs 12.3 and 12.4 of By-Law 40). 2.5 NOTIFICATION TO OTHER BODIES The Member holds registrations and/or memberships with the following bodies, which will be notified of this decision: Australian Securities and Investments Commission; Turnaround Management Association; Australian Institute of Company Directors. 3. RIGHT OF APPEAL The Member may, within 21 days after the notification of the written decision with reasons to the Member of this Tribunal s decision, appeal in writing to the Appeals Tribunal of Chartered Accountants ANZ against the decision (paragraph 11.1 of By-Law 40). Page 2 of 6
While the Member remains entitled to appeal, or while any such appeal by the Member awaits determination by the Appeals Tribunal, the following decisions shall not take effect: Decision about the PCC s allegations; Decision about sanctions; Decision about costs sanction. The PCC may, within 21 days after notification of the written decision with reasons to the PCC of this Tribunal s decision, appeal in writing to the Appeals Tribunal of Chartered Accountants ANZ against the decision (paragraph 11.2 of By-Law 40). 4. REASONS FOR DECISION 4.1 ALLEGATION 1 The Member did not admit allegation 1. The Tribunal, having considered the submissions of both parties and the evidence before it, is satisfied the allegation is established. The Tribunal considered that the Member s conduct in accepting the appointments as administrator and then as liquidator (Appointments) fell short of the standard of care, skill and competence required under By-Law 40 paragraph 2.1(a). This is because: - prior to the Appointments, the Member s firm in 2013 provided a broad range of services to the Member s client including the preparation of tax returns, financial statements and certain other advice. The Tribunal considered that the nature and scope of those services were not immaterial and therefore in breach of APES 330, Insolvency Services (APES 330), paragraphs 4.10 and 4.11; - the Tribunal did not accept the Member s submissions that the services were high level, generic, administrative or compliance-based. In particular the Tribunal considered that the advice which was given on: the expansion of the business; the correction of accounting records relating to the classification of equity and liability balances; corporate structures; the utilisation of tax losses; 4.2 ALLEGATION 2 could be perceived to be independence impairing and therefore in breach of APES 330; - a number of these services constituted a potential self-review threat at the time of accepting the appointment; - the Tribunal was not convinced that the Member undertook an appropriate assessment of the risks to his independence. The Member did not admit allegation 2. The Member raised procedural fairness issues regarding the decision making of Australian Restructuring Insolvency & Turnaround Association (ARITA) and submitted that this Tribunal should not rely on the findings made by ARITA. Page 3 of 6
4.3 The PCC submitted that this Tribunal is not a court of law and not in a position to determine issues of procedural fairness of other professional bodies. The Tribunal accepts this submission. The Tribunal, having considered the submissions of both parties and the evidence before it, is satisfied the allegation is established. This is because the Member was the subject of an adverse finding made by ARITA, a professional body. ALLEGATION 3 The PCC did not press allegation 3 and therefore the Tribunal did not consider this allegation. 5. REASONS FOR SANCTIONS The PCC submitted that: the Member did not comply with the sanctions and was subsequently expelled as a result of his non-compliance; the Member's conduct fell short of the proper standards established by the ByLaws and expected of members of Chart~red Accountants ANZ; at a minimum, a reprimand, fine and payment of costs in the amount of $26,300 were appropriate. The PCC accepted that the ARITA deci"sion had been published and this had impacted on the Member and should be taken into account in making a decision on sanctions. The Member submitted that: he had a good character and unblemished record, and is trusted by his clients; the Member has been sufficiently punished;.~ there was no reason for punitive sanctions because he had acted in good faith; it is open to the Tribunal to not impose a sanction, in accordance with By-Law 40 paragraph 10.14. The Tribunal considered: that the matters were not at the more serious end of the scale; the significant impact on the Member's practice of ARITA's published findings and ensuing adverse publicity; the Member's present good standing and previously unblemished record; and determined that a reprimand and costs in the amount of $26,300 were appropriate. Chair Disciplinary Tribunal Page 4 of6
SCHEDULE 1 - THE PCC S ALLEGATIONS It is alleged that while a member of Chartered Accountants Australia and New Zealand the Member is liable to disciplinary action in accordance with: 1. By-Law 40(2.1)(a) in that the Member failed to observe a proper standard of professional care, skill, competence or diligence in the course of carrying out his professional duties and obligations by accepting appointment as: a) joint voluntary administrator of a company on 22 May 2014; and b) joint liquidator of the same company on 26 June 2014, (together, the Appointments) in circumstances where the Member s firm provided professional services to the company within the two years prior to the Appointments and in doing so did not comply with the requirements of APES 330, Insolvency Services, because these professional services were not immaterial and did not otherwise fall within the exceptions provided for in paragraph 4.5 of APES 330. 2. By-Law 40(2.1)(e) in that the Member has been the subject of an adverse or unfavourable finding in relation to his professional or business conduct by a professional body in that: a) on 18 August 2015 the Australian Restructuring Insolvency & Turnaround Association (ARITA) determined that its concern was substantiated regarding the Member s breach of clause 6.8 of the ARITA Code of Professional Practice (Code), pursuant to Regulation 6.2(c) of the ARITA Regulations; b) on 17 November 2015 ARITA determined that: i. in accordance with section 6.18.1C of the Code, the Member be required to immediately call a meeting of creditors or apply to the Court for a replacement practitioner to be appointed, and should only continue as the appointee if the Court so determines (or as the Court may otherwise order); ii. subject to any determination of the Court, the Member repay all remuneration drawn in this matter and not draw further remuneration; and iii. the Member undertake ARITA s independence workshop by 31 December 2015 (extended to 30 June 2016); c) on 29 February 2016 ARITA determined that the Member be expelled from membership of ARITA and his name be removed from the ARITA Register for his refusal to comply with the penalties applied as a result of the ARITA Disciplinary Proceedings, pursuant to clause 7.2(a) of the ARITA Constitution, in the circumstances set out in paragraph 1. 3. By-Law 40(2.1)(h) in that the Member has committed a breach of APES 330, Insolvency Services in the circumstances set out in paragraph 1 above. Page 5 of 6
SCHEDULE 2 - RELEVANT BY-LAWS 40. Except as provided by By-Law 41, the By-Laws in this Section 5, including the following paragraphs of this By-Law 40, do not apply to Members who are also members of NZICA in respect of disciplinary matters over which NZICA has jurisdiction and which relate to the practice of the profession of accountancy by NZICA s members in New Zealand. Nothing in this By-Law 40 excludes from the operation of this Section 5, conduct of a Member: (a) (b) who was, but is no longer, a member of NZICA; or who has subsequently also become a member of NZICA. Except as provided by By-Law 41, no Member shall be sanctioned under both this Section 5 and NZICA Rule 13 in respect of the same conduct. 2 Disciplinary action 2.1 A Member is liable to disciplinary sanctions under these By-Laws if (whether before or after the date of adoption of this By-Law) that Member: (a) has failed to observe a proper standard of professional care, skill, competence or diligence in the course of carrying out that Member's professional duties and obligations; (e) has been the subject of an adverse or unfavourable finding in relation to that Member's professional or business conduct, competence or integrity by any court of law, professional body, royal commission, statutory authority, regulatory authority, statutory body, commission or inquiry in any jurisdiction in Australia or elsewhere; (h) has committed any breach of the Supplemental Charter, these By-Laws or the Regulations, any pronouncements issued by the Accounting Professional and Ethical Standards Board, Australian Accounting Standards Board and Auditing and Assurance Standards Board (or their successor entities) including the Code of Ethics, or any applicable pronouncements, instruments, technical or professional standards or guidance issued by any similar body whether in Australia or in a foreign jurisdiction; Page 6 of 6