KPMG Brisbane partner expelled from ARITA

THE CVs of KPMG Brisbane's two most      

KPMG partner Ian Hall has been
expelled from ARITA

senior insolvency professionals are sporting fresh bruises after the Australian Restructuring Insolvency and Turnaround Association (ARITA) announced this week that it had terminated their membership.

In a short statement ARITA said that Ian Hall and Chris Giddens have been expelled and their names expunged from the ARITA Register for their refusal to comply with penalties applied as a result of ARITA disciplinary proceedings.

KPMG said in a statement today that it believes ARITA's allegations and findings against Hall and Giddens "are erroneous". 

The firm has previously argued that: "Full disclosure of all prior relationships with the company were made to stakeholders and no party raised any concerns about conflict of interest – perceived or otherwise. 

"Mr Hall and Mr Giddens in fact tendered their resignations from ARITA on 18 December 2015. KPMG reiterates its support of Mr Hall and Mr Giddens,” the firm said.

Clause 7.1 (a) (i) of the ARITA constitution however indicates that acceptance or otherwise of a resignation tended by a member of ARITA subject to disciplinary proceedings is a matter for the discretion of the ARITA Board.

Under that provision, a resignation results in automatic termination or suspension: "if the member gives the CEO written notice of resignation, subject to the Board's power to decline to accept the resignation of a member while his or her professional conduct is the subject of an investigation, Company Disciplinary Proceedings, or Disciplinary or Legal Proceedings under clause 8, in which event, the resignation shall take effect from a later date as may be determined by the Board from time to time;".

The proceedings against the pair

KPMG's Chris Giddens:
also booted out

 were commenced after they were appointed administrators of the Mackay-based Engineered Surface Preparation Pty Ltd on May 26, 2014 and then liquidators a month later. 

By August 2015, an ARITA Professional Conduct Committee review had determined that the Brisbane-based pair had not demonstrated sufficient independence, a finding that Hall, Giddens and KPMG have repeatedly rejected.

In a statement issued late last year ARITA said: "the Committee and the ARITA National Board determined that:

KPMG pair clinging to fees despite ARITA ruling

KPMG partner Ian Hall

KPMG's Ian Hall and Chris Giddens have for months been resisting calls from the insolvency practitioners' representative body to resign as liquidators of Engineered Surface Preparation Pty Ltd and repay fees earned on the appointment.

The dispute between the Australian Restructuring Insolvency and Turnaround Association (ARITA) and two of its members came to light today when ARITA published details of a Professional Conduct Committee review that found that the Brisbane-based pair had not demonstrated sufficient independence.

KPMG director John Christian Giddens 

According to SiN's sources the professional conduct committee determination was made on August 18, 2015. While Hall and Giddens eventually complied with the requirement to resign they are resisting calls to repay $167,269.00 in fees.

A search of the ASIC companies database shows that the pair resigned as liquidators on November 26, 2015. 

When contacted Hall declined to comment, instead referring SiN to KPMG's media team. Giddens did not return calls or respond to email prior to publication.

KPMG later responded with the following statement: "KPMG Australia believes ARITA's allegations and 'findings' against Ian Hall and John Christian Giddens are erroneous. Full disclosure of all prior relationships with the company were made to stakeholders and no party raised any concerns about conflict of interest - perceived or otherwise. KPMG fully supports Mr Hall and Mr Giddens."

In a statement headed: "Liquidators required to resign and remuneration disallowed due to conflict issues", ARITA said today:

"ARITA has reviewed the appointment of ARITA Members Mr Ian Hall and Mr John Giddens to Engineered Surface Preparation Pty Ltd (In Liquidation).

Following careful consideration of this matter by ARITA’s Professional Conduct Committee and its National Board, it has been determined that:

1. Mr Hall and Mr Giddens should 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).

2. Subject to any determination of the Court, Mr Hall and Mr Giddens repay all remuneration drawn in this matter and not draw further remuneration.

3. Mr Hall and Mr Giddens undertake ARITA’s independence workshop by 30 June 2016."

The pair were appointed administrators of the Mackay-based business on May 26, 2014 and liquidators a month later. 

Hall is currently acting ceo of Racing Queensland, and a director of Greyhounds Australasia, Racing Australasia and Harness Racing Australasia. He and Giddens head up KPMG's restructuring team in Brisbane.

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Bankruptcy professionals convening for congress

Bankruptcy professionals in between sessions at a previous Congress
Image courtesy: Traill & Associates  

IT'S that time of year that bankruptcy trustees and those who work with them convene for Traill & Associates' annual National Practical Bankruptcy Congress, Workshops (and cocktail party).

Organised by Rosie Traill, whose sister Kate was recently appointed to the bench as a Judge of the District Court, the two day get together of body snatchers focuses on practical issues facing trustees and their staff and advisors, bringing together some of the best and most experienced operators for a series of practical workshops and interactive, informal talks.

Speakers include O'Neill Partners' consulting solicitor Sally Nash, Ferrier Hodgson's John Melluish, Norton Rose partner David Goldman, and barrister Sandrah Foda. The focus is on practical solutions to key issues.

For example, the challenges of complying with the various state and ARITA codes of independence will be examined through a review by Melluish and Goldman of the recent Federal Court decision of BC39 Pty Ltd v Rambaldi in the matter of Wharington (Bankrupt) [2014] FCA 1076 (7 October 2014), where an examination summons triggered an intensive examination of the trustees's independence and the DIRRI regime.

There'll also be a Family Law panel discussion and interactive discussions relating to fees and remuneration; after acquired property; voidable transactions; dealing with creditors, bankrupts and sheriffs. 

Barrister Brian Skinner will also host a discussion around the issues a trustee should consider in determining whether a possession-related matter is best pursued through the Supreme or Federal Court. For the full program see: 3rd Annual Bankruptcy Congress

The Congress kicks off on Wednesday, October 28 with a day-long program that concludes with a cocktail party at the ArtHouse Hotel, across the road from the congress venue at the Wesley Centre on Pitt Street. Enquiries should be directed to Congress organiser Rosie Traill at: rtraill@traillassociates.com.au

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Tidbits from the transcripts - Cameron slams liquidators at construction inquiry

Labor Senator Doug Cameron

IT is SiN's opinion that the term 'farcical' might just creep into the general discourse around a senate inquiry when much of a session is dominated by the inquiry's architect busting attendee's testicles.

The session in question took place when the Senate Economics References Committee's Inquiry into Insolvency in the Construction Industry rolled into Sydney recently.

Leftwing Senator and unionist Doug Cameron, who is driving the inquiry, did the busting; Senator Sam Dastyari acquitted himself as chairman except when walking around with his shirt hanging out discussing travel arrangements with staff; South Australian Senator Sean Edwards mostly listened and Senator John 'Wacka' Williams didn't show.

Those subjected to Cameron's McCarthyist fervour included a pair of execs from credit reference agency Veda Advantage, the chief executive of the Australian Restructuring Insolvency and Turnaround Association (ARITA) and various commissioners and deputies from the Australian Securities and Investments Commission (ASIC) and the Australian Tax Office (ATO).

The inquiry is focussed on addressing phoenix activity in the construction sector, which has been estimated to cost the economy as much as $3 billion annually and Cameron told ARITA chief executive John Winter that liquidators are a big part of the problem.

More assertive ATO good for insolvency professionals as wind-ups jump in August

ATO-initiated wind-up activity
from March to August, 2015
Chart courtesy Insolvency Notices

ANY thought that the Australian Tax Office (ATO) might begin reducing the number of wind-up applications it's been lodging since it set a new monthly record of 582 wind-ups last May has been dispelled by the August numbers, which show the tax man sought to appoint liquidators to 488 companies last month.

This is almost 100 more than the number lodged in July and also exceeds the June figure of 449 wind-ups lodged. The long term average for ATO-initiated wind-ups of companies with unpaid tax debts is 92 per month.

In a statement the tax office confirmed it had adopted a more active policy on debt recovery, an essential change one would've thought given there's approximately $20 billion of recoverable debt on the ATO's books. More than 60 per cent of the arrears is owed by small to medium-sized enterprises (SMEs).

"The ATO is focused on making it as easy as possible for businesses, and other taxpayers, to understand and meet their tax obligations," the ATO said.

"As the Commissioner said during his address to the National Small Business Summit on 16 July, our intention is to be more active to prevent debts, to provide appropriate help and support when people are in debt, to take the right action to prevent debts from escalating, and to take legal action earlier when it is warranted."

Michael McCann, president of the Australian Restructuring Insolvency & Turnaround Association (ARITA) said there is no doubt the ATO has taken a more assertive stance. The question is whether it is a temporary measure to deal with a back log or is to be sustained.

"If there is in fact a catch-up that's one thing but if there is actually a sustained program by the ATO of being more assertive that would suggest that it is going to be acting earlier," McCann said.

INSOL infiltrated by Australian achievers

PPB Advisory's Mark Robinson
is the new INSOL president.
Photo courtesy PPB Advisory

 AS the annual regional INSOL conference wraps up in San Francisco, Australians have emerged as prominent players in the organisation's leadership with PPB Advisory's Mark Robinson taking on the presidency after several years as vice president. 

A statement issued by PPB Advisory said Robinson's role would include "promoting a stronger, global turnaround culture" and expanding INSOL's reach into jurisdictions like South-East Asia.

"In the near term, Mark will be embarking on an active program to listen to the needs of market participants both here and abroad to shape his program to deliver the above priorities and broadening its membership base to include other turnaround market participants such as debt/hedge/private equity funds and financiers," the statement said.

Other Aussies ascending the INSOL ranks include the Queensland University of Technology's Ros Mason, who as Professor of Insolvency & Restructuring Law and a member of the Faculty of Law’s Commercial and Property Law Research Centre now heads up INSOL's academic group.

Henry Davis York chairman and insolvency specialist Scott Atkins, also takes a seat on the main INSOL board.

The appointments are an endorsement for the Australian Reconstruction, Insolvency & Turnaround Association (ARITA), which counts Robinson as a past president and Atkins as a current director.


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ARITA cuts Wily in the wake of AFSA deal

Andrew Wily.
Courtesy www.andrewwily.com.au

THE association of insolvency professionals has revoked Andrew Wily's membership after the armstrongWily principal cut a deal with the bankruptcy regulator that allowed him to resign as a trustee in bankruptcy, rather than having his registration terminated involuntarily.

"In accordance with clause 7.1(b)(ii) of the Constitution, Mr Wily's membership was automatically terminated effective from 24 March 2015," the Australian Restructuring, Insolvency & Turnaround Association (ARITA) said today.

"Mr Wily recently relinquished his status with the Australian Financial Security Authority as a Registered Trustee. Through its statutory role in supporting AFSA under section 155H of the Bankruptcy Act, ARITA became aware of actions being undertaken by AFSA that invoked consideration of Mr Wily's ongoing membership under clause 7.1(b)(ii) of the ARITA Constitution," ARITA said.

The relevant section of ARITA's constitution states: "If, as a consequence of Disciplinary Proceedings or legal proceedings taken against a Member, a Sanction is imposed on the Member which:

"has the effect of terminating the Member's entitlement to remain a member of a Foundation Organisation or to continue to practise as an Insolvency Practitioner or legal practitioner, then the Member's Membership is automatically terminated;".

Did Wily jump before AFSA pushed?

Andrew Wily hooked up and laughing.
Photo courtesy: Andrewwily.com.au

IN early February, Sydney-based insolvency practitioner Andrew Wily was required to front at a meeting with the Australian Financial Security Authority (AFSA).

The bankruptcy regulator had formed a three member committee under section 155(H) of the Bankruptcy Act to consider terminating Wily's registration as a trustee in bankruptcy.

Section 155(H) (1) allows for the involuntary termination of a bankruptcy trustee's registration. It empowers the Inspector-General to demand from the trustee a written explanation justifying why they should continue to be registered.

If the trustee's response either does not satisfy the Inspector-General, or is not forthcoming within a reasonable time frame, then under the Act, the Inspector-General must convene a committee "to consider whether the trustee should continue to be registered."

The reasons why the regulator might consider involuntary termination are numerous. If a trustee is incapacitated by illness or convicted of a crime then section 155(H) can be applied. If the regulator believes the trustee has failed to carry out their duties properly or exercise their powers in a suitable fashion then a demand under 155(H) can be issued. There is no suggestion that any of the above are the reason why AFSA was contemplating rescinding Wily's registration. On that point both Wily and AFSA are mute.

Whatever the reason, it was sufficiently serious for AFSA to form the committee comprising the Inspector-General, another public servant and a registered trustee with no conflict of interest. Under the Act the registered trustee must be chosen by the Australian Recovery Insolvency and Turnaround Association (ARITA).

SiN understands a trustee travelled from interstate to join the committee. It should not be inferred though that there isn't a trustee in NSW who doesn't have a conflict when it comes to the head of armstrongWily, who, as it turned out, arrived at the meeting accompanied by his lieutenant Paul Fury, another armstrongWily staffer and an alternate proposal.

Liquidation's outcome 'profoundly disturbing" says On Q Group judge

Matthew Gess
Photo: Worrells 

LIQUIDATORS' remuneration and deeds of company arrangement (DoCAs) are again in the spotlight following the publication of a judgement relating to the failed ASX-listed IT outfit, On Q Group Limited (In Liquidation)(Subject to Deed of Company Arrangement)

The judgement - handed down last Friday by NSW Supreme Court Justice Paul Brereton - ruled on the application of Danny Vrkic, a Wollongong-based insolvency practitioner seeking to terminate the winding up of On Q Group so as to facilitate the effectuation of a DoCA. 

Paul Burness
Photo: Worrells.

But while outlining his reasons for ultimately granting Vrkic's application, the judge expressed multiple reservations about how On Q Group's insolvency has played out.

One concern related to the remuneration of On Q Group's liquidators, Worrells' Matthew Jess and Paul Burness, who were appointed liquidators via a creditors voluntary winding up on December 23, 2008. Justice Brereton questioned the liquidation's purpose.

"Thus the practical effect of the liquidation has been to

recover in excess of $725,000 of assets and transfer it to the liquidators, their agents and advisers, with no benefit at all to those for whose benefit the liquidation is supposed to be conducted. I find this profoundly disturbing," he said.

Prior to the judgement Jess and Burness presented evidence to justify their remuneration, with Jess filing an affidavit on October 1 2014 which laid out the complexities of the liquidation and the work done. The judge however seemed unconvinced.

"But even assuming that every dollar of remuneration can be supported on the basis of time spent at their usual rates, it is difficult to see how it can be justified having regard to considerations of proportionality," he said, referring to his recent decision in the matter of AAA Financial Intelligence Ltd (in liquidation) ACN 093 616 445 (No 2) [2014] NSWSC 1270 (17 September 2014).

In a statement provided to SiN, Worrells shed more light on the background to On Q Group's complicated clean up.

"Prior to us accepting this appointment, we are aware that at least one other major insolvency firm had refused to consent to act due to the significant risk and uncertainty associated with the appointment," the firm said. 

"The Voluntary Administration and subsequent Liquidation of the Company was burdened with a number of complexities, including several separate legal proceedings, and significant costs that we were required to personally fund (at our expense and risk) as there were no recoveries until more than 12 months following our appointment.

"Worrells supports proper scrutiny of liquidators remuneration and we welcome open discussions on insolvency matters."

Justice Brereton's judgement, following hard on the heels of the AAA Financial decision, also drew a quick response from the Australian Restructuring, Insolvency & Turnaround Association (ARITA). 

Insolvency veteran slapped with suspension

Bill Hamilton
Photo: WJ Hamilton & Associates

BILL Hamilton, one of Australia's longest serving insolvency practitioners, has had his liquidator's registration suspended for six months following a hearing before the Companies Auditors & Liquidators Disciplinary Board (CALDB).

Details of the suspension and future compliance requirements were published in the Commonwealth Gazette yesterday, more than five months after the CALDB hearing, which took place on November 5, 2013. 

Hamilton, who began practising in 1960, last week advised the Australian Restructuring Insolvency & Turnaround Association (ARITA) that the decision was imminent. 

In a statement ARITA said: "In accordance with clause 7.1(b)(i) of the ARITA Constitution, Mr Hamilton's ARITA membership has been automatically suspended for six months effective from 2 June 2014 following a decision by the Companies Auditors and Liquidators Disciplinary Board (CALDB)".

CALDB found that Hamilton did not adequately and properly perform his duties as a joint liquidator by entering into a deed of settlement and release with the directors of ERB and a director-related company to accept an amount which had not been properly assessed.