Shrinking insolvency division no threat to supervision: ASIC

Ex-ASIC insolvency team
member John Laird  

THE corporate regulator has rejected suggestions that its capacity to police the insolvency profession is diminishing, despite the departure of two senior insolvency team members in recent months and an almost 20 per cent reduction in insolvency division staff since 2011.

Neither John Laird or Marc Robinson would comment on their departures from the Australian Securities and Investments Commission's (ASIC) insolvency unit when contacted this week. Laird invoked confidentiality constraints. Robinson did not respond to a request for comment.

Sources told SiN that Laird, who according to his Linked In profile led the unit's investigations on major corporate collapses, is setting up his own consultancy.

Robinson, a senior insolvency specialist, is said to be headed to the Australian Tax Office (ATO) to work as a law interpretation specialist on its cross-agency task force combatting illegal phoenix activity.

If the most recent figures are accurate, the departures of Robinson and Laird leave ASIC with 21 insolvency team members monitoring almost 700 registered liquidators. That's about 33 liquidators per staffer and is representative of a trend of declining staff numbers within the division charged with the supervision of registered insolvency practitioners.

ASIC's 2010/11 annual report stated that there were 28 insolvency division staff regulating 670 registered liquidators. In 2011/12, staff numbers were reported as 24. Liquidator numbers meanwhile had risen to 680.

ATO wind-ups: elevated recoveries continuing

ATO wind-up activity persists
at record levels.
Chart courtesy Insolvency Notices

IS 400 wind-up applications per month the tax office's new normal? It's looking that way after the numbers for July, collated by Insolvency Notices, were published yesterday.

As the attached chart indicates, wind-up applications filed by the Australian Taxation Office (ATO) came in at around 400 in July, lower than the previous two months but still well above the long term monthly average of 92. Not that this should surprise anybody given the crackdown was flagged by the tax commissioner, Chris Jordan back in May, when a record 556 wind-up applications were lodged.

"While the majority of taxpayers voluntarily pay their taxes on time or soon after, collecting outstanding taxes is an ongoing challenge for us. Despite our increased efforts, the amount of debt we have to collect has continued to rise in recent years," Jordan said in a speech to the Tax Institute on May 19, 2015.

"We will be taking legal action earlier when warranted, initiating bankruptcy and wind-up action where there is evidence that a taxpayer is insolvent, and looking to use other statutory powers where businesses have failed to pay employee superannuation entitlements or pay amounts held in trust," he said.

Jordan's comments were backed up by deputy-commissioner Cheryl-Lea Field, who said that about half of the companies subjected to an ATO-initiated wind-up notice would proceed to liquidation. And each month since has confirmed that tax debt recovery activity is persisting at historically elevated levels.

After the surge in wind-ups lodged in May - which coincided with a supposedly pro-SME Federal budget - the June number dipped to around 450. But when added to July's numbers they reveal that the ATO has initiated around 1,400 proceedings against SMEs in three months. By comparison it lodged 1,333 winding up applications for the entire year in 2013/14. August meanwhile is on track to record another 400-plus figure.

Given SMEs account for around 60 per cent of the more than $20 billion in collectable tax debt, it might take the ATO some time to make a dent in the arrears, even at 400 per month. That said, a Federal election is due no later than January, 2017, so this more vigorous and comminatory ATO may well assume an altogether gentler demeanour over the next 17 months. 400 per month may in time appear an aberration. Only the opinion polls know.

Chart courtesy Insolvency Notices

Got a SiNful tale to tell?

Midland HWY- why ASIC objected to Hall Chadwick appointment

Hall Chadwick partner
David Ross

THE corporate regulator challenged the appointment of two Hall Chadwick partners as voluntary administrators (VAs) to a Victorian land banking scheme because of the closeness of their referral relationship with the lawyers behind the scheme.

On Tuesday, August 4, Richard Albarran and David Ross resigned as VAs of Midland HWY Pty Ltd, neutralising an application brought by the Australian Securities and Investments Commission (ASIC) in the Federal Court, which sought a ruling that their appointment was invalid.

Ross told Fairfax Media that he was disappointed that ASIC had not advised either he or Albarran that it was investigating Midland HWY "prior to them lodging an application to have us removed".

ASIC made the application after the first meeting of Midland's creditors on July 14. At the meeting a resolution to replace the company's initial VAs, Nick Martin and Craig Crosbie of PPB Advisory, with Albarran and Ross was approved. An ASIC officer attended the meeting.

Tim Mulally, ASIC's head of enforcement - financial services said the regulator became concerned after Ben Skinner, principal of Melbourne law firm Evans Ellis Lawyers, told the meeting that he referred 50 per cent of his insolvency work to Hall Chadwick.

Octaviar: Kerr considering fresh tilt at Barnett and Fletcher

RSM Bird Cameron's David Kerr

HAVING recently secured a $12.35 million settlement from Fortress Credit Corporation, Octaviar Limited's (OL) special purpose liquidator is, we are reliably informed, contemplating resurrecting a $515 million proof of debt claim against the liquidators of Octaviar Administration (OA).

The NSW Supreme Court made orders on May 26, 2015, discontinuing proceedings first brought by OL's receivers against Bentleys partners Kate Barnett and Bill Fletcher in 2014.

The orders made no directions as to costs and crucially, the defendants were prevented from raising any time bar defence, meaning Kerr is free to re-litigate the proof of debt adjudication issue at the heart of the dispute.

In their statement of claim, PPB as OL's receivers had argued that at the date of OA's winding up on October 3, 2008 it owed OL, OA's ultimate holding company, $514,685,948.12c.

Barnett and Fletcher's defence listed multiple grounds showing why OA's debt should be offset, along with counter claims they argued meant OA's parent owed it money.

When contacted by SiN yesterday, Kerr declined to confirm or deny he was reviving the claim, saying only that he was unable to assist "at this time".