Burroughs and Australian Prudential Regulation Authority
[2007] AATA 1960
•16 November 2007
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2007] AATA 1960
ADMINISTRATIVE APPEALS TRIBUNAL ) Nos N2005/183 &
) N2006/2532
GENERAL ADMINISTRATIVE DIVISION ) Re STEPHEN BURROUGHS Applicant
And
AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY
Respondent
DECISION
Tribunal The Hon C R Wright QC (Deputy President) Date16 November 2007
PlaceSydney
Decision (i) N2005/183 Decision under review affirmed (ii) N2006/2532 Decision under review affirmed
[Sgd C R Wright]
Deputy President
CATCHWORDS
INSURANCE - disqualification from holding senior management role in a general insurance company - applicant reinsurance manager of FAI involved in drafting document nullifying reinsurance status of transaction and failing to disclose this and other material to company auditors - purpose to facilitate misleading accountancy treatment of transaction - applicant disqualified by APRA as being "not a fit and proper" person to hold senior managerial status - application to AAT to review that determination - further application to AAT to revoke the determination - consideration of findings of HIH Royal Commission relating to the relevant transactions - consideration of applicant's awareness of and involvement in relevant transactions and his understanding and willingness to acknowledge the impropriety of his conduct
Insurance Act 1973, ss 24, 25, 25A, 26
General Insurance Reform Bill 2001
Financial Section Legislation Amendment Bill (No 1) (2002)
Prudential Standard GPS 520
Howes v Law Society of Tasmania [1998] Tas SC (19 September 1998)
A Solicitor v Law Society of NSW (2004) 204 ALR 8
Cohen v APRA (2006) AATA 512
VBS v Commissioner of Taxation (2005) AATA 1303
REASONS FOR DECISION
16 November 2007 The Hon C R Wright QC (Deputy President) The Applications for Review
1. The applicant in both matters before the Tribunal is Stephen Burroughs. He is aged 45 years. In November 1996 he commenced employment with FAI General Insurance Ltd (FAI) as the Group Reinsurance Manager. He held this position until he ceased working for FAI in April 1999. In May 1999 he secured employment with the Munich Reinsurance Company (Munich Re). He has continued with Munich Re ever since, holding a number of different positions. He is currently employed with Munich Re as a senior analyst.
2. The applicant was a witness at the Royal Commission into the failure of the HIH group of companies (HIH). He gave evidence in relation to his activities involving complex reinsurance transactions between FAI and General & Cologne Re Australasia Ltd (GCRA) in 1998. FAI had been taken over by HIH in early 1999. It was contended before the Royal Commission that HIH's failure was partly due to FAI's under-provisioning for its underwriting losses and the concealment of that under-provisioning situation by its accounting methods, (inter alia) in respect of the 1998 GCRA transactions.
3. In May 2003 the applicant was charged with offences under sections 232(2) and 1317FA of the Corporations Law. On 14 November 2005 at the conclusion of the Crown case he was acquitted of both charges at the direction of the trial judge.
4. On 18 November 2004 the applicant was disqualified by the Australian Prudential Regulation Authority (APRA) under the provisions of s.25A(1) of the Insurance Act 1973 (the Act), on the ground that he was not a fit and proper person to hold a senior position with a general insurer. At the applicant's request his disqualification was reviewed by APRA, but upon review it was confirmed. By application to review to this Tribunal dated 11 February 2005 (N2005/183) the applicant seeks review of APRA's determination.
5. In October 2006 the applicant applied to APRA for revocation of his disqualification. That application was refused on 23 October 2006 and the refusal was subsequently confirmed on 28 November 2006. By application to this Tribunal dated 13 December 2006 (N2006/2532) the applicant seeks review of APRA's determination. Both applications were heard together in Sydney on 15, 16 and 17 October 2007. Final written submissions were received from the applicant and APRA on 19 and 25 October respectively.
The HIH Royal Commiission
6. On 29 August 2001 the Governor-General established a Royal Commission to enquire into the reasons and circumstances regarding the failure of the HIH Insurance Company prior to 15 March 2001. In April 2003 the Royal Commissioner, Mr Justice Owen published his report in which he concluded (inter alia):
"The adverse financial and managerial consequences of HIH's takeover of FAI Insurances Ltd in 1999 were a substantial contributing cause and an important circumstance surrounding the collapse of HIH".
The learned Commissioner also observed that the primary harm caused to HIH by the FAI takeover:
"... arose from the unexpected losses it incurred as a result of under-provisioning in FAI".
7. In the course of his investigations the Commissioner explored steps taken by FAI between December 1997 and June 1998 to deal with significant under-provisioning problems by obtaining reinsurance through General & Cologne Re Australasia Ltd (GCRA) a member of an international group of companies providing reinsurance services. At all relevant times Daniel Wilkie was the manager of the General Insurance and the Commercial and Professional Insurance Divisions of FAI General Insurance. He was also Chief Operating Officer of FAI Insurances Ltd and a director of FAI General Insurance. As previously mentioned the applicant was employed as the Group Reinsurance Manager by FAI General between November 1996 and April 1999.
8. In his report the Commissioner succinctly explained the function and purpose of reinsurance as follows:
"Reinsurance is widely used by general insurers to manage underwriting and financial risk. One purpose of reinsurance is to transfer the risk of future adverse developments in relation to claims. Reinsurance is thus important when the level of outstanding claims provisions and other matters affecting the financial statements of an insurer are being considered".
Insurance industry standards recognise that for a transaction to be accounted for as reinsurance there must be a transfer of risk by the ceding insurer to the reinsurer and there is a general acceptance within the industry that the risk transfer must be "significant", "sufficient" or "material". Before 1 July 2002 it was necessary for an Australian insurance company's reinsurance arrangements to be approved by APRA or its predecessor the Insurance and Superannuation Commission (ISC).
The GCRA Transactions
9. The factual matrix within which the applicant's impugned conduct took place is not in serious dispute. The central issues for consideration in each of the present review proceedings are the applicant's state of mind and awareness of the overall purpose of the activities in which he was participating and his appreciation, both then and now, of the impropriety of those activities. These issues will go a long way in determining whether or not he was, or is, a fit and proper person to be employed in a senior management position. I find the relevant events in which the applicant was involved to be as follows.
10. In December 1997 Wilkie advised the applicant that FAI had "a problem" with its claims reserving position. He requested the applicant to "investigate whether there is a reinsurance solution to fix it". The applicant consulted with insurance brokers Willis Faber & Dumas Ltd ("Willis Faber") and through them with two reinsurance companies, Gerling Global Reinsurance Aus P/L ("Gerling") and Hannover Re but without success. The applicant's understanding of the problem was that FAI had a reserves shortfall of about (A)$67 million in respect of two professional indemnity insurance schemes referred to by the acronyms ALAS and MIPI. The applicant was insistent in his dealings with Willis Faber (through the agency of Stuart Stow) that the relevant transactions should be '"clean and transparent".
11. In his email to Wilkie on 15 January 1998 explaining problems with a potential reinsurance solution he said "I don't want to be part of deals unless they are squeaky clean and raise no problems with auditors, ATO and ISC". In his statement dated 17 January 2006 (referred to during the AAT hearing as "Burrough's First Statement") the applicant said (para 86):
"I understood my role was to obtain a reinsurance solution for the MIPI and ALAS accounts which involved a sufficient transfer of risk which would pass muster with the authorities".
It is appropriate to record that I accept the applicant's evidence as to this. I am quite satisfied that at this stage of his quest for a solution to FAI's woes he was anxious to act with professional integrity. However it is equally apparent that his insistence upon the transparency of the relevant processes reveals that he had some suspicion or foreboding that inappropriate or underhand methods were within Wilkie's contemplation.
12. Nothing concrete came of FAI's negotiations with Willis Faber, Gerling or Hannover Re and on 18 March 1998, Wilkie arranged a meeting between himself and Timothy Mainprize, the finance director of FAI and three representatives of GCRA. At the meeting the question of a reinsurance solution to FAI's under reserving problem was pursued. The applicant was not present at that meeting. The GCRA representatives were Lindsay Self, general manager of GCRA's Treaty Department, Tore Ellingsen and Milan Vukelic, members of GCRA's Alternative Solutions Division. Two days later Self sent an e-mail to Houldsworth, (the Chief Underwriter of Cologne Reinsurance Company (Dublin) Ltd), Vukelic, Ellingsen, Smith (the Treaty Manager at GCRA) and Barnum, (the Managing Director of GCRA) in which he stated:
(a) Wilkie and Mainprize had confirmed that the reserves "will be taken up by them over three years" and were likely to be $25 million in year 1, $20 million in year 2 and $20 million in year 3, a total of $65 million.
(b) Wilkie and Mainprize said that only five people at FAI would know of the transaction with GCRA, namely Adler the CEO and a Director of FAI, Mainprize, Wilkie, Peiris (the Group Financial Controller at FAI) and the applicant.
(c) Only the recipients of the e-mail would know of the transaction with GCRA.
13. On or about 25 March 1998 Ellingsen drafted a form of aggregate excess of loss ("AXOL") contract containing the following features:
(a) three sections of cover, one for year 2000 risk, one for professional indemnity and one for non-recoverable insurance.
(b) an overall aggregate limit of $65 million.
(c) a premium described as a "basic premium" of $55 million
(d) the premium to be held on deposit by the reinsured on behalf of GCRA until 1 July 2002
(e) GCRA not to be obliged to make cash payments before 1 July 2002; and
(f) an offset clause which provided "either party at its discretion may setoff against any amounts due from the other party hereunder or under any other agreements between the parties hereto any amounts which are due under this or those other agreements".
14. GCRA proposed that the difference of $10 million between the $65 million aggregate limit and the $55 million basic premium provided for in the AXOL contract was to be made up by other reinsurance business. This was referred to by the applicant in his first statement as "good business" meaning business pursuant to which GCRA was unlikely to have to pay any claims whatsoever between members of the FAI group and GCRA. This business was to be written at or about the same time.
15. Late in April, Smith, Self and Ellingsen, on behalf of GCRA, conducted a review at the offices of FAI of that company's underwriting and claims files, in order to determine whether FAI would be able to meet its obligations to GCRA under the proposed transactions. As a result of that review Ellingsen and his colleagues came to the conclusion that FAI was in fact under-reserved in the relevant portfolios by about $65 million and therefore, if GCRA entered into a AXOL contract of the kind proposed, without any other compensating arrangement, GCRA would be very likely to lose $10 million in the transaction. Accordingly, on or about 25 April 1998 the Alternative Solutions Division informed GCRA that it would not proceed with the transaction of the kind proposed by FAI, unless it included $12.5 million of additional "good business" premiums for GCRA in addition to the $55 million basic premium proposed under the original scheme.
16. In or about late April 1998 GCRA and FAI agreed an additional term of the transaction to the effect that GCRA would indeed receive $12.5 million premium through extra good business in addition to the $55 million basic premium.
17. On or about 27 April 1998 Wilkie told the applicant "I need you to negotiate some supporting business with GCRA for a premium of around $12.5 million. The business should have a good claims history, could you arrange this as quickly as possible?". As a result between 27 April and 30 April 1998 Smith, on behalf of GCRA, and the applicant, on behalf of FAI, agreed on terms of other reinsurance business which was to be written in connection with the proposed AXOL contract and which became known thereafter as the "six slips". On behalf of GCRA Smith prepared and signed six placement slips providing for the following types of cover:
(a) Builders warranty - excess of loss reinsurance
(b) North America property - retro session excess of loss
(c) Performance and Licensing Boards - runoff excess of loss
(d) Professional Indemnity, Directors and Officers Liability - aggregate excess of loss
(e) Professional Indemnity, Directors and Officers Liability - aggregate deductible buyout and
(f) Professional Indemnity, Directors and Officers Liability (New Zealand only) - stop loss.
The six slips totalled $12.5 million payable in two equal instalments of $6.25 million on 1 May 1998 and 1 July 1998 respectively. The six slips were provided by GCRA to FAI prior to the execution of the first AXOL contract on 6 May 1998. The applicant was aware that the premium of $12.5 million for the six slips represented the difference between the $55 million premium under the AXOL and GCRA's exposure of $65 million under the AXOL plus GCRA's $2.5 million fee for the overall transaction.
18. On the morning of 1 May 1998 Wilkie rang the applicant and informed him that Self, on behalf of GCRA, had told him that GCRA wanted it clear that no claims would be made under the six slips. Wilkie asked the applicant to do something about it. Wilkie told the applicant that GCRA wanted something in writing and that he had agreed with that request. Wilkie told the applicant (according to the applicant's version of events) that this had "something to do with GCRA's accounting". The applicant then drafted a document dated 1 May 1998 which was referred to during the Tribunal hearing as the "side letter". That letter was in the following terms. "Despite the contractual intention of the reinsurance contracts detailed below, unless mutually agreed by both parties, FAI will not seek reinsurance recoveries". Listed thereunder were the six slips previously referred to. In evidence at the Royal Commission both Self and Christopher Byatt, (the Chief Financial Officer and Company Secretary of GCRA) claimed that they had some role in preparing the draft of that letter. However the applicant has consistently stated that the letter was drafted by himself. In cross-examination during the proceedings of the Royal Commission the applicant was asked in cross-examination:
Question - "Is it the case that you drafted the terms of that letter?".
Answer - "I did draft the letter. I should say I drafted the words. I didn't actually physically type up the letter".
Question - "You did a handwritten draft?"
Answer - "I sent an email".
Question - "To who".
Answer - "Mr Wilkie".
Question - "With that wording?".
Answer - "It seems similar. I couldn't comment whether it was identical".
That evidence was given on 25 February 2002. The applicant has maintained that version of events in prepared statements which he has made for various purposes since that time. He has also repeated those claims in evidence in the present proceedings. On the basis of that evidence I make the finding that he was the author of the side letter. The applicant has also claimed consistently that he introduced the words "unless mutually agreed by both parties" in order to "deliberately blur what they" (GCRA) "were requesting". The implications of this claim will be considered later in these reasons.
19. On 6 May 1998 Self and Smith on behalf of GCRA and Wilkie and Robert Baulderstone (FAI's group secretary) signed an aggregate excess of loss reinsurance contract. This document was referred to throughout the Tribunal hearing as "the first AXOL contract". This document was backdated to 16 March 1998, apparently at the request of FAI. It has been suggested that this request was motivated by a desire to place a temporal distance between the six slips and the first AXOL contract thus reducing any possible inference that the same might have been inter-related. This issue will also be considered later. The first AXOL contract had the following features:
(a) There was to be a maximum recovery of $65 million
(b) Premiums were to amount to $55 million
(c) The contract was "cashless" ie FAI was to hold its premium payments "on deposit" for GCRA until 1 July 2003 and GCRA would not be obliged to make payments for recoveries until on or after that date.
(d) There was an offset clause allowing recoveries to be set off against premiums due under the contract and due under "any other agreements".
20. By a letter dated 6 May 1998, GCRA in a letter signed by Self, wrote to FAI in the following terms:
"We hereby agree that should the performance of the aggregate excess of loss reinsurance contract made between our companies be prohibited or rendered inoperable in consequence of any law or regulation which is in force in Australia then we will suspend the cover provided under those contracts set out in your letter dated 1 May 1998 and return in full any premiums already paid thereunder less any claims paid or due for payment".
21. I shall return to the significance of the side letter and the letter of 6 May later in these reasons when discussing the applicant's understanding of the nature of the transactions and the intentions of the contracting parties. As a consequence of the actions reviewed above, the following was the position as at 6 May 1998:
(1) There was no transfer of risk to FAI to GCRA under the "six slips"
(2) FAI had agreed to pay $12.5 million in cash to fund (a) the gap between the maximum recoveries of $65 million and premiums of $55 million payable under the first AXOL contract and (b) GCRA's fee of $2.5 million
(3) There was no risk that GCRA would make any greater profit than the difference between total premiums and total recoveries.
(4) There was no possibility of GCRA ever incurring any loss under the transactions subject only to the fanciful possibility of GCRA having to pay claims under the six slips.
(5) Any credit risk to GCRA was overcome by the payment of $12.5 million under the six slips combined with the offset clause referred to.
22. As a result, the structure and effect of the relevant transactions between FAI and GCRA, enabled FAI to account for some sums which would otherwise be accounted for as provisions against losses for under-reserved sums as fully reinsured in its accounts for the year ended 30 June 1998 by falsely or erroneously representing that the AXOL contract could properly be accounted for as reinsurance. The prospect of the transactions being successfully accounted for in this way would be materially heightened if the AXOL contract was viewed by auditors or other interested parties as having no apparent link with other parts of the transaction. The fact that the AXOL contract and each of the six slips and the side letter were prepared and created as separate documents would obviously facilitate the perpetration of such a deception. The fact that between 23 and 26 June 1998 the first AXOL contract was revised and replaced by a second AXOL contract does not materially affect these conclusions. The applicant was not involved in any way in the preparation of the second contract.
The Applicant's Dealings with Vanderkemp
23. In August 1998 FAI's auditors, Arthur Anderson, met with members of FAI's staff to discuss issues relative to the annual accounts. The applicant, early in the audit process, attended a meeting with Daniel Vanderkemp, Anderson's senior auditor. According to the applicant this meeting lasted between 15 and 30 minutes and took place in the applicant's office. The applicant was in possession of the relevant documents concerning the GCRA/FAI transactions discussed above and offered to take Vanderkemp through those documents and answer any questions that he had concerning them. The applicant acknowledges that he did not mention the six slips or the side letter to Mr Vanderkemp either by way of volunteered information or in response to questions asked of him.
Proceedings before the AAT
24. At the Tribunal hearing the applicant was represented by Mr Phillip Strickland SC with Ms Anne Horvath. APRA, the respondent, was represented by Mr James Stevenson SC with Mr Peter Braham. Evidence presented to the Tribunal included the T Documents in each matter. A "Tender Bundle" of documents prepared by the respondent (2 volumes) was received without objection. In addition the applicant gave viva voce evidence to supplement three written statements which he had prepared and submitted to APRA. I should note at this point that the T Documents provided in case no. N2005/183 were in such a state of disarray and confusion as to make the task of reading and comprehending those documents very difficult indeed. I have asked the Registry to reject any such hotch potch of material if it is tendered in purported compliance with s.37 of the AAT Act in future.
25. In paragraphs 10 to 23 above I have set forth a history of the relevant transactions involving the applicant. Very little, if any, of the chronology or detail of events recounted is in dispute in respect of the applicant's knowledge or understanding of the processes in which he was engaged. I have sought in the review of events which I have already undertaken to identify such matters as relate to the applicant's state of mind, and, where necessary to quarantine them for further consideration during the course of the following discussion.
26. In the applicant's Statement of Facts and Contentions counsel for the applicant correctly identified the substance of the respondent's allegations of misconduct against the applicant:
"11. In summary APRA alleges that the Applicant"
11.1 assisted senior management at FAI to procure a financial reinsurance contract which contained a side letter to the effect that no claims would be made under 6 related reinsurance contracts (the 6 slips) so as to enable FAI to raise its reserves, without impacting on FAI's balance sheet; and
11.2 failed to tell the FAI auditors about either the 6 slips, the side letter, or the relationship of the 6 slips in the GCRA Transaction".
27. The applicant contends that the evidence before the Tribunal is insufficient to persuade the Tribunal that the applicant is not a fit and proper person to be a director or senior manager of a general insurer. The applicant contends that the correct or preferable decision (a) is to set aside the first APRA decision in which case resolution of the second decision will become unnecessary or, (b) alternatively, in the event of the Tribunal upholding the first APRA decision it should exercise a discretion not to disqualify the applicant. A third beneficial alternative may be to uphold the first APRA decision disqualifying the applicant and then revoke the disqualification. Counsel however did not deal with this alternative.
28. The respondent contends that for the Tribunal to set aside the APRA disqualification of 18 November 2004, the Tribunal must be satisfied that it is "highly unlikely" that the applicant is a prudential risk to any general insurer. The competing submissions of the parties as to the Tribunal's task appear to arise out of their interpretations of sections 24, 25, 25A and 26 of the Insurance Act 1973. It will therefore be necessary for me to consider the meaning and scope of these provisions particularly as they presented some difficulty for APRA's delegate in considering the applicant's application to revoke his disqualification, and have also presented some problems for me in construing the Act. .
29. The respondent also contends that the applicant must have known that he was acting improperly and contrary to the interests of FAI (a) in unquestioningly accepting Wilkie's instructions to implement GCRA's requirement that there were to be no claims under the six slips and (b) drafting the side letter when he understood the role it was to play in relation to the GCRA's transactions. The respondent also contends that the applicant was acting improperly contrary to the interests of FAI, and dishonestly, by failing to mention the six slips and the side letter to Vanderkemp when he must have known the auditors would not otherwise learn of these documents and he must have also known that this would lead to the auditors being misled as to the improper accounting treatment accorded to the GCRA transactions as a consequence. The respondent contends that these issues demonstrate that the applicant is not a fit and proper person to hold the relevant positions provided for in the Insurance Act.
30. The respondent also contends that the applicant has failed to recognise or acknowledge the gravity of his impugned conduct and, even now, does not understand the significance of his transgressions. It is also contended that notwithstanding his explanations and expressions of contrition the applicant has sought to mislead the Tribunal about the state of his knowledge and understanding of the GCRA transactions both at, and after, the time of his involvement in those transactions. Accordingly it is contended he is still not a fit and proper person to hold the relevant positions.
31. Before turning to consider the evidence as these issues I should note that the HIH Royal Commission found (inter alia) that the only rationale for the GCRA transactions with FAI was to enable FAI to account for sums which would otherwise have been accounted for as provisions against losses for unreserved sums, as fully reinsured under the AXOL contract, for the year ended 30 June 1998 and that the relevant process whereby this outcome was to be achieved was not legitimate as there was no transfer of risk to GCRA, resulting in a artificial overstatement of FAI's profit for the year ended 30 June 1998. The Commissioner found as a fact that this overstatement was in the order of $35 million (para 14.4.12)
32. Whilst the Commissioner's findings are not binding upon me in these proceedings I consider them to be highly persuasive and, evaluated in light of the material before me, including the applicant's own evidence during the hearing, I am thoroughly persuaded that the learned Commissioner's conclusions as to the nature and purpose of the scheme and events leading up to the GCRA transactions, were correct.
33. The learned Commissioner also made findings as to the applicant's role in the GCRA transactions. At para 14.2.8 of his Report he observed:
"I consider that Burroughs knew the letter" (the "side letter" of 1 May 1998) "affected risk transfer and strongly suspected that it removed it altogether. Like Smith, he put it no higher than that if claims arose there would be a chance to sit down with GCR and negotiate further prospective reinsurances to balance the situation".
At para 14.2.9 the Commissioner said"
"14.2.9 Purpose in documenting the transaction
The next question is why the transaction was structured in the way it was. Each of Burroughs, Self, Smith, Barnum, Wilkie and Mainprize understood that FAI could only book recoveries in excess of premiums under the AXOL contract if it was accounted for as reinsurance. This required there to be risk transfer.[337] Each of them denied having any improper motive or purpose in documenting the transaction[338] in the way it was documented or in executing such documentation. Counsel assisting submitted that each of them and Ellingsen and Houldsworth understood that the transaction was documented to enable FAI to present an AXOL contract to its auditors (and to APRA if required), as one showing the appearance of a transfer of risk. This arose by virtue of the apparent gap between the amount of premiums and the maximum recoveries payable, with the other elements of the transaction which removed the transfer of risk hidden. By their actions each of them was submitted to have facilitated the documentation of a transaction with that object in mind.
I cannot overlook the fact that each of the persons I have named had knowledge or awareness of these things:
· all of the constituent elements of the transaction
· the accounting significance of the need for risk transfer
· the object of the exercise of finding ‘other business’ (which was then sought to be made ‘claims free’) was to make up the gap between recoveries and premiums apparent on the face of the AXOL slip.
This, it seems to me, provides a basis from which an inference of the type suggested by counsel assisting could be made. In arriving at that view I have paid careful attention to what the witnesses said in evidence and the submissions put on their behalf. But one thing resonates with me. No one advanced a plausible explanation as to why the cover provided for in the six 1 May contracts was not incorporated into either AXOL contract.[339].
...
The 1 May 1998 side letter became the means of ensuring that occurred. The ‘other business’ was conceived so that the proper extent of risk transfer was not apparent on the face of the first or second AXOL slip. The 1 May 1998 side letter was conceived so that the removal of risk transfer was not apparent on the face of either the AXOL slip or the six 1 May 1998 contracts. I consider that the documentation was structured for that purpose and that each of Wilkie, Mainprize, Burroughs (in the case of the first AXOL contract), Ellingsen, Houldsworth, Barnum, Byatt, Self and Smith understood that and by their actions sought to facilitate it".
34. The learned Commissioner discussed and evaluated the conduct of Wilkie, Mainprize, Peiris and the applicant in respect of their involvement in the negotiation of the GCRA transactions. At paragraph 14.8.5 he made the following comments in relation to the applicant's activities and possible breach of the Corporations Law:
"Burroughs
In relation to Burroughs I pose the same question as I have in relation to Wilkie concerning the negotiation of the GCRA AXOL contract—allowing for the fact that Burroughs was only involved in the negotiation of the first AXOL contract. By his actions in preparing and transmitting material for and to GCRA, and with the knowledge he possessed as to the purpose of the transaction, Burroughs facilitated FAI’s entry into the transaction. I am doubtful whether, as reinsurance manager, Burroughs fell within the definition of ‘executive officer’ at the relevant time and I make no finding that he might have contravened s. 232(2) of the Corporations Law as a principal offender. But his conduct might have constituted a knowing involvement in Wilkie’s breach of s. 232(2)".
35. Counsel for the applicant submitted that, in accordance with his evidence both written and oral at the hearing, the applicant at all relevant times had a genuine belief that as a result of the way in which he had drafted the side letter of 1 May 1998, there could still be a recovery under one or more of the six slips. In this connection he referred to the evidence of Roger Colomb, (the applicant's subordinate and second-in-charge at FAI in 1998) and others during the abortive prosecution proceedings in November 2005. Colomb told the court on that occasion that the applicant had never instructed him (Colomb) not to seek a recovery if he ever received a claim under one of the six slips. According to the witness, the way the FAI system worked, a recovery would be sought automatically if there was a claim. Counsel for the applicant also referred to the final proviso contained in the letter of 6 May 1998 as indicative of, and therefore supportive of, an intent by the parties, FAI & GCRA, that the six slips were to operate in the normal commercial fashion. This issue had been considered by the HIH Royal Commissioner in his report where he said (para 14.2.7):
"GCRA placed great store on the last proviso to the letter of 6 May 1998 (‘less any claims paid or due for payment’), and submitted that it was ‘telling evidence that the parties expected the six slips to operate according to their tenor, the side letter of 1 May 1998 notwithstanding’. At first glance the argument has attraction. But on closer analysis I think the proviso is consistent with the full operation (according to its tenor) of the 1 May 1998 side letter.
Self said he and Smith drafted the letter but Self did not refer to it as evidence that he contemplated that claims would be made. Smith and Byatt said they had no recollection of having seen the letter. Barnum said he did not see it until some time after the event.[316] In other words, no one from GCRA indicated that the purpose or one of the purposes, of the letter was to permit claims to be made or that it envisaged this to be the case. Nor did Wilkie (who requested that the letter be provided) say that this was its purpose.[317]
In any event it is compatible with the view that I have taken of the 1 May 1998 letter. If claims had been made under the six 1 May 1998 contracts and accepted by GCRA in the exercise of discretion, then GCRA would have done so in respect of a risk for which FAI had paid the premium of $12.5 million. If (due to the triggering of the 6 May 1998 letter) the whole transaction was to be unwound and GCRA was required to return the premium, then it would follow as a matter of commercial logic that FAI should not retain the benefits it had received or was to receive by way of claims paid in the exercise of discretion".
Comment and Findings
36. I have considered each of the applicant's written statements in evidence and I have listened carefully to his oral evidence. I have also reread it as recorded in the transcript. I have also considered the final submissions by counsel, both made viva voce at the hearing and in writing thereafter pursuant to leave granted by the Tribunal. This is plainly a matter in which a great deal turns up on my assessment of the credibility of the applicant in the explanations he has given for his conduct in 1998 and his acknowledgements of and his understanding of his misconduct in relation to the FAI/GCRA transactions. It has also been a matter of concern to me to consider whether or not the applicant has sought to mislead the Tribunal during his oral evidence in relation to these and other issues. As pointed out in Howes v Law Society of Tasmania [1998] Tas SC (19 September 1998) and several of the other authorities referred to by counsel, (eg A Solicitor v Law Society of NSW (2004) 204 ALR 8) attempts to mislead a disciplinary body in the course of a disciplinary hearing or process may of themselves justify severe penalties such as deregistration or disqualification even though the offences under investigation may not have been sufficiently serious to warrant such an outcome of themselves.
37. I find that the applicant joined FAI as reinsurance manager when he was still a comparatively young man. He had several years experience working in the insurance industry before that time. It is clear that in joining FAI, despite his role as "manager" he was not in fact, and was not regarded as a senior member of the FAI management team. It is also fair to say that he was joining an organisation with a somewhat secretive and questionable culture and that, Wilkie, the man to whom he was relevantly directly responsible, had a demanding and overbearing personality. The applicant was nonetheless aware of the principles relating to reinsurance and he was aware in particular that for a reinsurance contract to be properly accounted for as such it must carry a degree of risk transfer from the ceding company to the reinsurer. This is apparent not only from his evidence, but also from the documentary material produced under his own hand following the initiation of his search for a "reinsurance solution" for FAI's under reserving. When he started this exercise he was plainly most concerned that anything he prepared should properly be constituted with relevant risk transfer so as to pass muster with auditors and regulatory authorities. There is no direct evidence that the applicant knew the full extent of the reserve shortfall but I am satisfied that he was aware that it was substantial. The respondent's case against the applicant as set out in para 76 of the Respondent's Amended Statement of Facts and Contentions dated 15 May 2006 and maintained throughout the proceedings was as follows:
"First, in 1998, as the Reinsurance Manager of FAI he engaged in conduct which he must have known was improper and contrary to the interests of FAI in that he:
76.1 Unquestioningly accepted Wilkie's instructions to implement GCRA's requirement that there were to be no claims under the six slips;
76.2 Drafted the Side Letter in circumstances where he understood the role that the Side Letter played in relation to the GCRA transactions when viewed as a whole and the object that the Side Letter was designed to achieve;
76.3 Failed to mention the Side Letter or the six slips to the FAI auditors when:
76,3,1 he had an opportunity to do so;
76.3.2 he must have known that the auditors did not know of and would otherwise not learn of those documents (and in particular the Side Letter); and
76.3.3 he must have known the implications of permitting the auditor to be misled as to the true of the GCRA transaction, including the improper and misleading accounting treatment".
It was no part of APRA's case that the applicant had conspired with Wilkie or anyone else to produce a convoluted or disconnected series of documents to deceive auditors or regulators. There is thus no allegation of impropriety in respect of any conduct or input from Burroughs leading up to the preparation of the side letter.
38. Nonetheless it is clear to me, and I so find, that the applicant accepted Wilkie's instruction to prepare the side letter for the purpose of giving effect to GCRA's wishes to nullify the prospect of claims being made under the six slips. I also find that in preparing the draft side letter the applicant intended to give effect to Wilkie's directions and in doing so was aware that the process in which he was engaged would prevent the overall transaction from being properly accounted for as reinsurance. Although there was some evidence (already referred to above) which suggests that the applicant did not prepare the initial draft of the side letter and merely inserted the "unless mutually agreed" proviso that is not what the applicant himself has said. At all relevant times he has claimed authorship of the complete document. I have no reasons to disbelieve him as to this. It seems consistent with his conversation with Wilkie when instructions were given as to the content of the document to be prepared. However I entertain considerable doubts as to his claimed reasons for inserting the "unless mutually agreed" clause.
39. Counsel for the applicant submitted that I should accept that the applicant believed his drafting process "blurred" the matter so that a right to claim may have been preserved notwithstanding his apparent attempt to carry out Wilkie's instructions. I do not think that the letter of 6 May 1998, or the risk of currency fluctuation and other issues such as timing and credit risks referred to by the applicant in his evidence lead to that conclusion. I believe that the applicant accepted Wilkie's instruction without demur, argument or debate recognising both the purpose and effect of what he was doing. I accept that it "went against the grain" for him to do so and I accept, as he himself acknowledges, that he in effect succumbed to momentary cowardice in the face of the domineering demands of Wilkie. I also accept that Wilkie's instructions came at a time when the applicant was under considerable work pressure associated with the renewal of reinsurance treaties. In my opinion he realised that preparing such a document, particularly as it was separate from the other GCRA documents, presented a high risk or strong probability that it may be utilised or suppressed to mislead auditors or others as to the true nature of the transaction. The applicant in his evidence came close to acknowledging this fact but in his written statements and evidence in chief he seemed willing only to concede that the side letter may have removed reinsurance status from the transaction. He suggested that this, of itself, was improper. I think that in adopting this stance the applicant placed himself in an untenable position, as became manifest during the course of his cross-examination because, as was put to him by cross-examining counsel, there was nothing intrinsically improper in robbing the transaction of genuine reinsurance status, it was the purpose behind that process which constituted the impropriety if it was intended to lead to the preparation of company accounts which were false or misleading and/or to mislead the auditors or others with the responsibility for approving or accepting these accounts.
40. Turning now to the second aspect of the applicant's conduct which is impugned by the respondent viz his failure to mention the side letter and the six slips to the auditors representative Mr Vanderkemp. The applicant explains in his Statement of 17 January 2006 that he had a meeting with Mr Vanderkemp in 1998 but was unsure as to the matters which were to be discussed. He realised however that the GCRA transactions may be involved and he took some of the relevant documentation along to the meeting. He acknowledges that he discussed the second AXOL contract with Mr Vanderkemp in some detail. The applicant says that he did not raise the six slips or side letter with Mr Vanderkemp "... because I did not have those documents with me. I was not asked about them and, at the time, I saw no reason to raise them". One obvious reason why Vanderkemp asked no questions about the six slips or side letter may be that he was unaware of their existence. Be that as it may, I am satisfied that the applicant knew that if the auditors became aware of the side letter and /or the six slips they would be interested in assessing whether a genuine reinsurance transaction had been created and the significant impact which that problem may have created for FAI's bottom line. I am also satisfied that in failing to disclose the relevant documents to Vanderkemp the applicant was acting improperly and, in light of his role in the whole of the GCRA transaction, I am satisfied that he must have been aware that there was a high likelihood that these matters would be concealed from the auditors. There is of course no evidence that he conspired with Wilkie, Mainprize or other FAI accountancy staff to this end and no such conspiracy is claimed by APRA. Nonetheless such failure to disclose relevant documents should properly be regarded as deceitful and improper conduct.
41. The Prudential Standard GPS 520 (Exhibit R4) is largely concerned with policy issues to be implemented by insurers intending to appoint senior staff but it is plain enough from para 18 that to be fit and proper for such responsibility a person "must possess the competence, character, diligence, honesty, integrity and judgement to perform properly the duties of the responsible person position". The phrase "fit and proper" has been discussed in several decided cases but despite a common thread there is no definitive statement governing the interpretation of that phrase.
42. On the basis of the material considered and reviewed in the present case I am fully satisfied that as a consequence of his involvement in the GCRA transactions and the subsequent attempt to keep the true character of these transactions from disclosure to the auditors, the applicant, in 1998, was not a "fit and proper" person to hold senior managerial responsibility and, unless and until he had regained status as a fit and proper person he was liable to disqualification by APRA pursuant to the powers contained in section 25A from the date on which that section came into operation. Such a disqualification does not apply in respect of all avenues of employment in the insurance industry, of course, and the applicant's employment prospects in the industry, whilst curtailed, have not been eliminated. Plainly however he wishes to secure such advancement into senior managerial ranks as may be available to him either with his present employers, Munich Re, or some other company.
43. I have not previously discussed the implications of his prosecution for and acquittal of, serious crimes against the Corporations Law. As to this I essentially agree with Mr Stevenson's submission that this is an irrelevancy. Mr Strickland cavilled with APRA's suggestion that the acquittal was based on a "technicality" and he was justified in doing so. The simple fact was that the state of the evidence at the conclusion of the prosecution case resulted in a directed acquittal. There was no case to go to the jury. Whether that would have been the situation if the applicant himself had given evidence at the criminal trial, as submitted by Mr Stevenson, is beside the point. This does not mean that I have ignored those parts of the evidence given at the criminal trial to which my attention was directed by Mr Strickland but in substance that material has had no determinative effect upon my findings.
44. Mr Strickland placed a substantial degree of emphasis upon the large number of character references provided on the applicant's behalf by persons of apparent good standing and seniority in the insurance industry. These references were usefully summarised by Mr Strickland in paras 64 to 89 of his Final Submissions. I have read all references in their entirety within the T Documents. I was deeply impressed by the thoughtful and extensive details provided in most of the references. The overwhelming case made by them is that the applicant is highly regarded as competent, honest and of high integrity by a significant number of his colleagues, peers and senior management acquaintances within the insurance industry. It is also apparent from the extensive curriculum vitae incorporated in his written statements and oral evidence that since ceasing employment with FAI in 1999 he has become a valued employee in Munich Re, a company which has a much more inclusive and mutually supportive and mentoring culture than was ever to be found at FAI.
45. It must also be observed that the applicant at the time of his misconduct with FAI was still a comparatively young man. He was of quiet disposition and whilst in no sense intimidated by Wilkie, the applicant felt under pressure to do as instructed by his superior and, in this sense he was persuaded to take part in an improper chain of conduct designed to conceal FAI/s parlous financial condition regarding its reserves. There is no suggestion that he has been involved in or has contemplated being involved in other misconduct of a similar kind. It is also appropriate to observe that the applicant's relevant misconduct occurred over nine years ago and during that time he has been involved in proceedings before the Royal Commission, the criminal prosecution, the APRA disqualification/revocation processes and the current AAT review. There is no evidence before me as to the cost of this sequence of involvement with the law but it must have been substantial. No doubt the applicant has also attracted a degree of opprobrium from unsympathetic colleagues for bringing the insurance industry into disrepute.
46. Against these favourable considerations must be placed the fact that his misconduct was in part instrumental in the failure of HIH. I realise that there were many other factors of much greater significance in this disaster. Nonetheless he was part of it. It is clear from his evidence that although he now concedes error and impropriety in his conduct he has only reluctantly approached an acknowledgement that he was aware that his conduct would probably facilitate misrepresentation of FAI's financial position. The respondent's final written submissions deal with this problem in paragraphs 8 to 35 under the heading "Belated and Evolving Statements of Contrition". Those submissions comprehensively express my own misgivings as to the degree of insight and awareness by the applicant of the true level of his culpability. Notwithstanding his lack of clear self analysis in this respect I am fairly confident that in light of his experiences both within the industry and in legal proceedings since 1999, the applicant would be hesitant before involving himself in similar dubious conduct. Before proceeding to a final resolution of the two matters under review it is necessary I think to consider some of the key elements of the relevant legislation.
The Insurance Act 1973
47. An examination of the legislative history of the Insurance Act 1973 reveals that since the Act first came into operation there have been a number of significant amendments which have affected the substance and, in my opinion, the ambit and proper construction of Division 5. This division deals with directors, senior managers and other representatives of general insurers and authorised non operating holding companies (NOHC's). A "senior manager" of a general insurer means a person who has or exercises any of the "senior management responsibilities" (within the meaning of the prudential standards determined by APA under section 32) for the insurer (see section 3). The relevant prudential standard for present purposes is GPS 520 (Exhibit R4) to which I have already referred.
48. Sections 24, 25 and 26 of the Act were new sections inserted as a consequence of the passage of the General Insurance Reform Bill 2001. This Bill was introduced into Federal parliament on 28 July 2001. By this enactment the original Part II of the Act was repealed and new sections 9 to 31 inclusive were inserted. As a result the first part of Division 5 at that time contained the following sequence of sections (reproduced hereunder only insofar as relevant to the present discussion):
"24 Disqualified persons must not act for general insurers or authorised NOHCs
(1) A disqualified person must not be or act as:
(a) a director or senior manager of a general insurer (other than a foreign general insurer); or
(b) a senior manager, or agent in Australia for the purpose of section 118, of a foreign general insurer; or
(c) a director or senior manager of an authorised NOHC.
(2) A person commits an offence if the person contravenes subsection (1).
Maximum penalty: Imprisonment for 2 years.
(3) A person commits an offence if the person contravenes subsection (1). This is an offence of strict liability.
Maximum penalty: 60 penalty units".
"25 Who is a disqualified person?
(1) A person is a disqualified person if, at any time:
(a) the person has been convicted of an offence against or arising out of this Act or the Financial Sector (Collection of Data) Act 2001:
(b) the person has been convicted of an offence against or arising out of a law in force in Australia, or the law of a foreign country, if the offence concerns dishonest conduct or conduct relating to a financial sector company (within the meaning of the Financial Sector (Shareholdings) Act 1998); or
(c) the person has been or becomes bankrupt; or
(d) the person has applied to take the benefit of a law for the relief of bankrupt or insolvent debtors; or
(e) the person has compounded with his or her creditors;"
"26 APRA may determine that a person is not a disqualified person
(1) Despite section 25, APRA may determine (in writing) that a person is not a disqualified person. APRA may do so on its own initiative or on the application of the person.
(2) However, APRA may only make the determination if it is satisfied that the person is highly unlikely to be a prudential risk to any general insurer or authorised NOHC.
(3) If a person applies for a determination under this section, APRA must:
(a) either make, or refuse to make, the determination; and
(b) in the case of a refusal, give the person written notice of the refusal.
(4) APRA may do any of the following:
(a) when making a determination under subsection (1), specify in the determination conditions to which the determination is to be esubject;
(b) at any later time while a determination under subsection (1) is in force, make a further determination specifying conditions or additional conditions to which the determination under subsection (1) is to be subject;
(c) at any time make a determination varying or revoking
conditions that have been specified under paragraph (a) or (b).
(5) A determination takes effect on the day on which it is made".
Whilst section 25 subsections (6) - (9) inclusive are relevant generally they have been omitted for the purpose of the present analysis.
49. Of particular importance to the present discussion it should be noted that section 25(1)(f) formed no part of the material introduced into the Act on 28 July 2001. At that time there was no section 25(1)(f). Sections 25A together with section 25(1)(f) first came into existence as the result of amending legislation (Financial Sector Legislation Amendment Bill (No 1) 2002) introduced into Federal parliament nine months later on 21 March 2002. Section 25(1)(a) was also amended at this time. Thereafter section 25(1) provided as follows:
"25 Who is a disqualified person?
(1) A person is a disqualified person if, at any time:
(a) the person has been convicted of an offence against or arising out of:
(i) this Act; or
(ii) the Financial Sector (Collection of Data) Act 2001; or
(iii) the Corporations Act 2001, the Corporations Law that was previously in force, or any law of a foreign country that to that Act or to that Corporations Law; or
(b) the person has been convicted of an offence against or arising out of a law in force in Australia, or the law of a foreign country, if the offence concerns dishonest conduct or conduct relating to a financial sector company (within the meaning of the Financial Sector (Shareholdings) Act 1998); or
(c) the person has been or becomes bankrupt; or
(d) the person has applied to take the benefit of a law for the relief of bankrupt or insolvent debtors; or
(e) the person has compounded with his or her creditors; or
(f) APRA has disqualified the person under section 25A".
50.The new section 25A(1) to (3) provides as follows:
"25A APRA may disqualify person
(1) APRA may disqualify a person if it is satisfied that the person is not a fit and proper person to be or to act as someone referred to in paragraph 24(1)(a), (b) or (c).
(2) A disqualification takes effect on the day on which it is made.
(3) APRA may revoke a disqualification on application by the disqualified person or on its own initiative. A revocation takes effect on the day on which it is made.".
(Subsections 4 to 6 inclusive are not presently relevant and have not been included).
The result is that sections 24-26 inclusive as currently in operation and as operating at all times relevant to the present applications to review, represent an amalgam of two distinct legislative programmes. They appear to be designed to operate together as a single legislative regulatory scheme but it seems to me that the marriage may not have been a happy one as some significant difficulties have been created.
51. As section 25(1) stood in 2001, a "disqualified" person did not include a person disqualified by order of APRA, simply because s.25(1)(f) was not then a part of the legislative scheme. At that time the concept of a "disqualified person" only applied to someone who had been convicted of offences, a bankrupt, a person applying for bankruptcy or a person who had compounded with his creditors ie people who were disqualified by operation of law as a consequence of their status achieved by falling into one or more of these categories by reason of a conviction or a particular act of insolvency. That status did not depend upon any character evaluation by APRA or any other regulatory body. It was a matter of objective fact arising from that person's acquisition of a particular legal status. In this situation it is completely understandable that APRA should be invested with the power provided in section 26 to determine that such an individual did not fall into the category of a disqualified person either by action on APRA's own initiative, or upon the application of the person alleged to be a disqualified person. It appears, however, that it was also intended by s.26 that APRA's power was not just to determine that a person "is not disqualified" as a matter of fact and/or law but also to determine that a person is not disqualified if APRA is satisfied that (notwithstanding his actual disqualified status) that person is "highly unlikely to be a prudential risk" to a general insurer or authorised NOHC. A clumsy but nonetheless effective way of giving APRA a discretionary, but tightly controlled dispensing power to relieve a deserving person, notwithstanding his convicted or insolvent status, of the mandated consequence thereof.
52. It seems to me that what happened in March 2002 was that steps were taken to empower APRA to fulfil an entirely new and distinct role. Section 25A was enacted to achieve this. APRA's previously largely passive role was altered to give it a much more active controlling power to disqualify based upon the single but very broad criterion of whether or not a particular person was shown to be not "fit or proper" to act in one of the senior roles mentioned in s.24(1). Unsurprisingly APRA was also invested (for the first time) with power to revoke a disqualification (section 25A(3) bit it seems to me that this power could only be exercised in relation to a disqualification imposed by APRA under s.25A(1). It seems to me that it would be completely inappropriate and beyond the contemplation of s.25 (in its post 2001 form) or s.26 that a "disqualified person" could have his disqualification "revoked" by APRA under s.25A unless he was a disqualified person by reason of the operation of section 25(1)(f). It is therefore my conclusion that notwithstanding the addition of para (f) to section 25(1), s,.25A and s.26 were and still are intended to operate in quite distinct and separate circumstances.
53. It follows therefore that a person who has been disqualified by APRA under s.25(1)(f) may apply under s.25(3) for revocation of the disqualification and it is not necessary, as a matter of statutory construction, for such an applicant to establish under s.26(2) that he is "highly unlikely to be a prudential risk" etc. Of course, in practical terms, it would be extremely improbable that the risk potentially posed by such an applicant would not be at the forefront of an APRA delegate's mind. Any risk perceived would plainly be an issue to be given great weight in considering whether or not to revoke an APRA imposed disqualification. This however would be a factor arising out of consideration of the "fit and proper" test, not the application of an additional statutory standard mandated by s.26(2).
54. Although these issues were not debated at length during the hearing of the present applications to review I think that it may be useful to draw attention to the difficulties of interpretations caused by the present structure of the Act, particularly as the APRA delegate who dealt with the present application to revoke disqualification appears to have misconceived some of the legal issues arising in relation to the applicant's having applied both to set aside APRA's initial determination to disqualify and also having applied to have that determination revoked. It should be made plain that there is no inconsistency in an applicant making both applications either separately or together. Indeed it seems to me that in many cases it would be wise for him to make both applications at the same time, and in the alternative.
55. These views are, in the main, consistent with the views expressed by Deputy President Forgie in Cohen v APRA (2006) AATA 512 @ paras 12-14. However, if I am correct that a person who has been disqualified by APRA as "not fit and proper" under s.25A(1), must either successfully challenge that finding on appeal to the AAT or accept the disqualification and apply for its revocation under s.25A(3) at a later date, the dilemma discussed by Deputy President Forgie regarding the possibility of an APRA disqualified individual making an application under s.26(1) et seq would not arise. To make my position quite clear I regard a s,25A(3) application for revocation as being applicable only in respect of a person disqualified under s.25A(1). I regard an application for a determination that a person "is not a disqualified person" under s.26 as being applicable only in relation to persons who are "disqualified" persons by operation of 2.25(1), a, b, c, d or e. Section 26 is not applicable in respect of an individual who is a disqualified person under s.25(1)(f). In my opinion to interpret the legislation in any other way is strained and unnatural and, gives s.25(1)(f) a function it was not intended to have. In my opinion s.25(1) is unnecessary to give effect to the legislative scheme and is, in effect, surplusage giving rise to uncertainty and ambiguity.
Conclusion
56. In the final analysis I have reached the conclusion that APRA was right to impose the original disqualification upon the applicant. I am satisfied that at that time the applicant was not a fit and proper person to discharge the responsibilities of a senior manager. If the decision was right then, it remains the correct or preferable decision for this Tribunal unless relevant circumstances have changed. This proposition is no way undermines the principles discussed in VBS v Commissioner of Taxation (2005) AATA 1303 para 235 et seq but lest there should be any misunderstanding as to what I am saying, I am of the opinion that the applicant has been, at all relevant times, and remains a person who is not fit and proper in the relevant sense. Three years have now passed since his disqualification and if, (contrary to my belief) the applicant has finally come to a realization of the true level of his impropriety, this has only come about as a result of the probing cross-examination conducted by Mr Stevenson during the hearing phase of the proceedings. I am however, satisfied that the applicant has, until now, deliberately sought to minimize the nature of his culpability by refusing to own up to and acknowledge the real extent of his understanding of the deceptions being orchestrated by Wilkie and others. To that end he has prevaricated and sought to mislead the Tribunal.
57. For this reason I am left in the position that I am not persuaded that the time has arrived for the applicant's disqualification to be revoked. Obviously that point will be reached at some time in the not-too-distant future but at the present time it is still too early to do so. It is not for me to say when that time will arrive. I have no power to make a determination taking effect at some future date (see section 26(5) and section 25A(3) of the Act).
58. In each matter presently under review the determination under challenge will be affirmed. Consequently my formal orders are:
(a) N2005/183 - Decision under review affirmed.
(b) N2006/2532 - Decision under review affirmed.
I certify that the 58 preceding paragraphs are a true copy of the reasons for the decision herein of The Hon C R Wright QC (Deputy President)
Signed: R Hunt (Administrative Assistant)
Date/s of Hearing 15, 16 & 17 October 2007
Date of Decision 16 November 2007
Counsel for the Applicant Mr Phillip Strickland SC, Ms Anne Horvath
Solicitor for the Applicant DLA Phillips Fox
Counsel for the Respondent Mr James Stevenson SC, Mr Peter Braham
Solicitor for the Respondent Sparke Helmore
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