Byrnes and Australian Securities and Investment Commission - [2000] AATA 333

DECISION AND REASONS FOR DECISION [2000] AATA 333

ADMINISTRATIVE APPEALS TRIBUNAL )

) No N1998/1720

GENERAL ADMINISTRATIVE DIVISION       )
           Re      JAMES WARREN BYRNES
  Applicant
           And    AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION
  Respondent

DECISION

Tribunal The Hon Mr R N J Purvis, QC, Deputy President Ms J A Shead, Member

Date28 April 2000
PlaceSydney

Decision The Tribunal sets aside the decision under review and substitutes in lieu thereof its decision that the Applicant is prohibited from 3 November 1998 for a period of three years from being a director or promoter or from being in any way (whether directly or indirectly) concerned in or taking part in the management of a corporation without the leave of the court.

(Sgd)  R N J Purvis
  ..............................................
  Deputy President
CATCHWORDS
CORPORATIONS – Corporations Law – review of decision by Australian Securities Commission prohibiting applicant from directing, promoting or managing a corporation – insolvent trading – failure to remit group tax instalments – failure to give full disclosure in a report as to affairs – forgiving of a debt – failure to deliver all books of account and records – failure to produce profit and loss accounts and balance sheets – acting in the management of the company whilst an undischarged bankrupt

Corporations Law ss600, 533(1)

Commissioner for Corporate Affairs v Bracht [1989] VR 821
Cullen v Corporate Affairs Commission (NSW) (1988) 7 ACLC 121
Kardas v Australian Securities Commission (1998) 16 ACLC 1695
Blunt v Corporate Affairs Commission (NSW) (No 2) (1988) 6 ACLC 1077
Re Dawson Print Group Ltd [1987] 3 BCLC 601
Dwyer v National Companies and Securities Commission (No 2) (1989) 7 ACLC 743
Laycock v Forbes and Australian Securities Commission (1997) 15 ACLC 1814
Jorgensen v Australian Securities and Investments Commission (1999) 30 ACSR 481
Re Sheslow and Australian Securities Commission (1994) 20 AAR 16
Iliopoulos and Australian Securities Commission (1997) 15 ACLC 1512
R v Campbell (1984) BCLC 83
Commissioner for Corporate Affairs v Bracht (1988) 7 ACLC 40

REASONS FOR DECISION

28 April 2000 The Hon Mr R N J Purvis, QC, Deputy President Ms J A Shead, Member

THE APPLICATION

On 3 November 1998 a Notice of Prohibition pursuant to section 600 of The Corporations Law ("the Law") was issued and served against and upon James Warren Byrnes ("the Applicant"). The notice read:
"TAKE NOTICE THAT further to the Notices to Show Cause issued 11 November 1997 and 14 July 1998 and hearings conducted on 23 March 1998 and 14 July 1998 at 135 King Street, Sydney before Cyril Reynolds, Delegate of the Commission.
YOU ARE PROHIBITED from the date of service of this notice for a period of FIVE (5) YEARS from being a director or promoter of, or from being in any way (whether directly or indirectly) concerned in or taking part in the management of a corporation without the leave of the Court.
Your involvement in the following relevant companies resulted in this Prohibition Order: A.C.C. Australian Credit Corporation Limited (In Liquidation) and Barroleg Pty Limited (In Liquidation)
Your attention is specifically directed to sections 600(5) and 91A of the Corporations Law." (T1)

The Notices to Show Cause under date 11 November 1997 and 14 July 1998 stated that the circumstances giving rise to the Notice to Show Cause were summarised to the effect that the Applicant, for the purposes of section 600(1)(c) of the Law was a relevant person in relation to ACC Australian Credit Corporation Limited (in liquidation) ("ACC") and Barroleg Pty Limited (in liquidation) ("Barroleg") in that he was a director of those companies during specified periods of time. The notices continued by stating that such companies were for the purposes of section 600(1)(b) of the Law relevant companies in that, pursuant to section 533(1) of the Law (or section 418(1) of the Companies (New South Wales) Code as the case may be), a Liquidator of each of the companies had reported within a seven year period a matter relating to the ability of the companies to pay their unsecured creditors. In particular, that the companies may be unable to pay their unsecured creditors more than 50 cents in the dollar. Areas of concern were noted in attached schedules.
There was no issue raised in the present application that the Applicant was a relevant person within the meaning of the statute and that the companies were relevant companies also within the meaning of the statute.
The notices drew to the attention of the Applicant that unless within 21 days from the date of service of the notices, the Applicant sought an opportunity of being heard in relation to the matter or lodged a submission in writing that he wished the Commission to take into account in relation to the matter, the Commission would serve on him a notice in writing prohibiting him for a period not exceeding five years from being a director or promoter or from being in any way (whether directly or indirectly) concerned in or taking part in the management of a corporation without the leave of the court.
As referred to in the Notice of Prohibition, hearings were conducted on 23 March 1998 and 14 July 1998. Although there was a representative of the Applicant present at each of the hearings, the Applicant himself did not appear nor were any representations made by him or on his behalf, orally or in writing, as to why a Notice of Prohibition should not issue. In his evidence before the Tribunal, the Applicant said that he did not make submissions to the Commission on account of his being unable to afford fees sought by his then solicitor and:
"I did not feel able to make submissions as to legal matters myself and decided to let events take their course".

Events did take their course and the Notice of Prohibition was issued together with a 25 page statement of reasons under hand of the delegate.

The Applicant in these proceedings contends that the delegate of the Australian Securities Commission ("the Commission") erred in his determination of 3 November 1998.
The relevant issues and contentions for consideration by the Tribunal are, according to the Applicant:
"1.Whether the Applicant has, for the purposes of section 600 of the Law, displayed a lack of fitness to direct, promote or manage a corporation.
2.Whether it was appropriate for the Respondent to serve a notice on the Applicant prohibiting him from managing a corporation.
3.Whether the Respondent took into account irrelevant considerations and failed to take into account relevant considerations in its determination to prohibit the Applicant from managing a corporation for a period of five years."

THE HEARING

At the hearing of the application before the Tribunal the Applicant was represented by Mr Marcus Pesman of counsel, the Respondent Commission by Mr James Stevenson of counsel.
There was admitted into evidence the documents produced by the Commission, pursuant to section 37 of the Administrative Appeals Tribunal Act 1975, and marked T1 to T19. The following written material was tendered and marked accordingly:

Exhibit No A One Two Description Affidavit of Mr James Warren Byrnes dated 13 December 1999 Letter from Australian Securities & Investments Commission to Mr J W Byrnes dated 5 November 1998 Schedule summarising Australian Securities & Investments Commission records referable to Mr J W Byrnes

Oral evidence was given by the Applicant upon which he was cross-examined.
STATUTORY PROVISIONS
Section 600 of the Law provides:
"(1) For the purposes of this section:
(b)   a relevant body is a section 600 body at a particular time if, and only if, within the period of 7 years ending at that time, a liquidator of the body has, under:
(i)    subsection 533(1); or
(ii)   a previous law corresponding to subsection 533(1);
reported, or lodged a report with respect to, a matter relating to the ability of the body to pay its unsecured creditors; and
(c)   a person shall be taken to be a relevant person in relation to a relevant body that is or was a section 600 body if, and only if, the person was a director of the body at any time during the period of 12 months ending on the day of the beginning of the winding up of the body.
(2)The Commission may give to a person who is a relevant person in relation to 2 or more relevant bodies that are, at the time of service, section 600 bodies a notice in writing requiring the person to show cause why the Commission should not serve on the person a notice under subsection (3).
(3)   Where the Commission:
(a)   has served on a person a notice under subsection (2); and
(b)   has given the person an opportunity of being heard in relation to the matter;
the Commission shall, unless it is satisfied that it is not appropriate to do so, serve on the person a notice in writing prohibiting the person, for such period not exceeding 5 years as is specified in the notice, from managing a corporation.
…
(5)A person who is subject to a section 600 notice (whether served before or after the commencement of this section) must not, without the leave of the Court, manage a corporation.
(6)Section 91A defines what, for the purposes of this section, constitutes managing a corporation."

Section 533(1) of the Law provides, so far as here relevant:
"(1)If it appears to the liquidator of a company, in the course of a winding up of the company, that:
…
(c) the company may be unable to pay its unsecured creditors more than 50 cents in the dollar;
…"

The companies ACC and Barroleg are, consequent upon the section 533 reports lodged by the Liquidator of the companies, relevant bodies and the Applicant a relevant person within the meaning of section 600 of the Law.
FINDINGS UPON WHICH THE NOTICE OF PROHIBITION ISSUED
In the section 37 statement lodged with the Tribunal and tendered in evidence in these proceedings, the delegate of the Commission detailed findings on material questions of fact further to which conclusions were reached adverse to the Applicant. It is those conclusions that have now been the subject of oral and written evidence given by the Applicant and submissions made on his behalf and on behalf of the Commission. Additional material adduced before the Tribunal has enabled the Commission to raise further matters which are said, on its behalf, to warrant maintaining the prohibition.
The Applicant was a director of ACC from 17 May 1996 to 24 August 1999. Prior to his appointment as such he had been an employee of ACC. The Applicant was also a director of Barroleg, this from 31 May 1989 to 28 May 1992 and from 17 May 1996 to 24 August 1999.
According to the Applicant, ACC was a mortgage originator and lending facilitator, most of the income of the company being derived from commissions paid by lenders and borrowers. Advice was occasionally provided to companies in financial difficulty. The lending arrangements were of a "last resort" nature but the risk was said not to have been taken by ACC, it not itself lending the funds but rather assisting would be borrowers in their applications for finance. Barroleg was an investment vehicle for the purchase of property and equities, its principal business being to acquire undervalued land for the purpose of property development.
ACC was wound up under the Law on 25 February 1997, Mr H J Wily being appointed Liquidator. Barroleg was wound up on 24 September 1997, Mr Wily being also appointed Liquidator of this company.
The conclusions and findings reached and made by the delegate further to which the Notice of Prohibition issued were in summarised form as follows.
AS TO ACC
Insolvent trading
The Official Liquidator had reported in his section 533 report that there were a substantial number of final demands, overdue notices and Statements of Liquidated Claim in the company's records. The company had failed to remit group tax for approximately one year prior to liquidation.
The company owed $101,234.37 in group tax remittances in the period August 1994 to January 1997, and for the periods September 1994 to February 1996, and November 1996 to January 1997 group tax instalments were not paid and, further, late payments occurred for August 1994, March 1996 to May 1996, and July 1996 to October 1996.
Statements of liquidated claim, judgment debts, final demands, notices and letters in respect of outstanding debts totalled $10,256.48 for the years 1994 to 1997. It was the conclusion of the delegate that the company traded whilst insolvent and traded as such from at least August 1994, the date when group tax instalments were not remitted within the required time frame.
The delegate concluded the Applicant permitted ACC to trade whilst it was insolvent.
Failure to remit group tax instalments
As abovementioned, the company owed $101,234.37 in group tax remittances having deducted $100,819.00 tax instalments from employees' wages during the period June 1994 to January 1997. The delegate was of the opinion that the failure to remit the group tax demonstrated a serious lack of and a disregard for the standards of commercial morality by the Applicant and expected of a director. He further concluded that the amount of unpaid group tax suggested that the funds owing to the Australian Taxation Office were used for trading purposes.
Failure to give full disclosure in a report as to affairs ("RATA")
The RATA lodged by the Applicant on behalf of the company did not disclose any assets (including debtors) or creditors of the company. According to the delegate the Applicant knew, as at 19 February 1997 the date of lodgment of the RATA, that the company had creditors totalling $315,010.13. Further the Official Liquidator noted that on a trial balance dated 28 February 1997 for the financial year to that date, debtors appeared as follows:
           Sundry debtors  8,565.00
Loan Account Ranchcam Pty Ltd Trust account  13,678.47
Loan account Barroleg Pty Ltd  60,570.96
Loan account Byrnes Property Group  169,740.88

The Liquidator identified a cheque totalling $50,000 paid by or on behalf of a Mr M P Scarfone on 1 December 1997. The Applicant had informed the Liquidator that no money was obtained under the loan and subsequently advised that it was "a collapsing loan". The Liquidator was of the opinion that Mr Scarfone appeared to be a debtor of the company.
The delegate concluded that the failure by the Applicant to submit a RATA that fully disclosed the company's liabilities showed a reckless disregard of his obligations under the legislation and a reckless disregard for the interests of creditors.
With regard to the "collapsing loan", the Liquidator noted that in the books and records of the company there was a loan of $50,000 to Mr Scarfone made on 1 December 1995. Mr Scarfone was apparently a market gardener in the Liverpool area and, according to the Applicant, he had cash and wanted to buy a property:
"If he purchased the property with the cash, he would not be able to explain to the Australian Taxation Officer how he could purchase the property on his earnings. Therefore the 'collapsing loan' was set up with ACC."

It is noted that, in answer to a number of questions raised by the Liquidator and signed as "true and complete to the best of my knowledge and belief" by the Applicant on 29 October 1997 when asked "what are the company's present assets and liabilities?", the Applicant replied "see RATA". In answer to the same question put to him in a questionnaire under date 13 March 1997 and when asked "what are the company's presents and liabilities?", he replied "as per information supplied" and when specifically asked "approximately amount of debtors?", he replied "none".
Forgiving of a debt of approximately $220,000
In his report the Liquidator stated:
"… the biggest single factor leading to the demise of the company appears to be the forgiveness of a debt owed by Park Road Projects Pty Limited ... owed ACC approximately $220,000." (T1)

The Liquidator continued:

"A directors meeting was held on 16th October 1996. … At this meeting the directors of the company forgave a debt due from a related company of approximately $220,000. This resulted in Park Road Projects entering into a Deed of Company Arrangement whereby creditors personally guaranteed by Mr Byrnes were paid 100 cents in the dollar and other unsecured creditors were paid 10 cents in the dollar. ACC was paid nothing. From the minutes it does not appear that Mr Byrnes disclosed his interest in the transaction to the other directors." (T1)

The Applicant had been appointed a director and secretary of Park Road Projects Pty Limited on 17 May 1996. The delegate was of the opinion that by allowing ACC to forgive the debt owed by Park Road Projects, the Applicant gained an advantage for himself and for that company to the detriment of ACC and its creditors. He was also of the opinion that this action by the Applicant showed a total disregard for the interests of ACC's creditors and his duties as a director. He further concluded that the transaction represented a gaining of an advantage for the Applicant and causing a detriment to ACC and that this demonstrated the Applicant's lack of understanding of the duties of a director and disregard for the interests of creditors.
Failure to deliver all the company's books to the Official Liquidator
The Liquidator of the company. The delegate formed the view that the Applicant failed to comply reported that he had not been able to retrieve the client files or work in progress details with the Liquidator's requirement to deliver all the books of the company and the failure to deliver all the client's files hampered the Liquidator's administration of the company by not allowing him to gain "the full picture of the company's trading and its possible assets and liabilities". The delegate further concluded that, by failing to provide all the company's books, the Applicant had demonstrated a total lack of regard for his duties as a director to assist the Official Liquidator in his administration of the company. It further demonstrated his lack of understanding of the duties of a director and a disregard of the interests of creditors. His conduct indicated that it would be in the public interest for him not to take part in the management of a company.
Failure to produce Profit & Loss Accounts and Balance Sheets
The Liquidator, in his report, stated that the company's directors had not produced a Profit & Loss account for the years ended 30 June 1995 and 1996, and a Balance Sheet for the year ended 30 June 1996. It was a finding of the delegate that the failure by the Applicant to ensure that the requirements of the Law in respect to the preparation of Profit & Loss Accounts and Balance Sheets demonstrated a lack of regard for his statutory duties as a director. This demonstrated his lack of understanding of such duties and a disregard for the interests of creditors.
Acting in the management of the company whilst an undischarged bankrupt
In July and August 1994 the Applicant was an undischarged bankrupt and was indeed so from 17 June 1992 to 25 August 1995. ACC was engaged to represent a company Terry's Sound Lounge Pty Limited (Receivers and Managers Appointed) in a dispute with Retravision (Australia) Pty Limited. The delegate, by reason of statements made by the Applicant in letters on ACC letterhead referrable to the dispute, concluded that the Applicant was acting in the management of ACC whilst prohibited by reason of his being an undischarged bankrupt. Indicative of the nature of the statements made by the Applicant are those contained in a letter on ACC letterhead under date 28 July 1994, signed by the Applicant in which phrases appear such as "I have been instructed to act and/or negotiate", "I am happy to conduct negotiations", "I am now extending an olive branch", "we would be asking Coopers & Lybrand to confirm". Somewhat similar representations appeared in other correspondence.
AS TO BARROLEG
Insolvent trading

The Liquidator in his report pursuant to section 533 of the Law reported the fact of Barroleg for the three financial years ending prior to winding up having accumulated losses of:
30 June 1995  137,323.54
           30 June 1996  284,140.17
           30 June 1997  412,815.41.

The Liquidator was of the opinion that the company may have been insolvent since incorporation.

In a report to the Supreme Court of New South Wales of 14 April 1997, the Liquidator included a schedule showing that, in his opinion, there was a deficiency of $816,249.09 and the company was insolvent. In a RATA lodged with the Liquidator on 30 October 1997, there were no realisable assets disclosed and the liabilities, according to the report, were stated at $1,121,929.80. This position was stated by the Applicant under date 29 October 1997, in answer to questions put to him as being "true and complete to the best of my knowledge and belief".
The delegate concluded that the Applicant had allowed the company to trade whilst it was insolvent.
Failure to remit group tax instalments

The RATA showed the Australian Taxation Office as being an unsecured creditor claiming $140,000. The delegate referred to this indebtedness as being by way of "failure to remit group tax", and thereby demonstrating a serious lack of commercial morality on the part of the Applicant. In fact, the indebtedness was not by way of group tax but on account of assessed income tax in respect of the 1993 and 1994 financial years.
This finding of the delegate was not supported by the Commission at the hearing and reliance not placed upon it.
Generally
(1) The delegate further concluded that the Applicant had been a director of two other companies that had been wound up and whose liquidator had reported that the companies were unable to pay more than 50 cents in the dollar to unsecured creditors, namely J W Byrnes Wholesale Pty Limited winding up order made on 15 October 1990, and Barrofloor Pty Limited winding up order made on 7 April 1992. The Applicant had thus been involved in four companies that had been wound up in the period 15 October 1990 to 24 September 1997.
(2)The delegate concluded that the Applicant had displayed a lack of fitness to direct, promote or manage a company. His conduct, which if not dishonest, had been in breach of standards of commercial morality or indicative of gross incompetence. The Applicant had not been open and frank in carrying out duties and functions as a director, had acted in his own personal interests in dealing with the company, had not taken reasonable steps to ensure compliance with accounting and reporting provisions of the Law and had not ensured that the company incurred debts only when it was able to pay those debts as and when they fell due. The Applicant had taken part in the management of a company, had misapplied money, and had been guilty of breach of duty as a director.
(3)The delegate noted that the companies were unable to pay their unsecured creditors more than 50 cents in the dollar. The matters set out in section 533 being disjunctive, the Liquidator was able to simply report on the fact that the companies may be unable to pay their unsecured creditors more than 50 cents in the dollar without reporting on any particular matter in respect of a director. It was not a necessary prerequisite to a disqualification order being made that there should be established some conduct which was a breach of standards of commercial morality or involved gross incompetence. Section 600(2) entitled the Commission to give a notice to a person who was a relevant person in relation to two or more relevant bodies prohibiting the person from managing a corporation simply because that person had been a director of two or more companies which had been unable to pay their unsecured creditors more than 50 cents in the dollar. The power given to the Commission under section 600 may be exercised because of the fact of such an association independently of pointing to any particular default on the part of the person to whom the notice is addressed.
(4)The delegate was of the view that the Applicant's actions in respect to the nominated companies fell within the principles enunciated in (3) above and was also of the view that the fact of the Applicant having been involved in and with four insolvent companies over a seven year period placed him within such principles. The delegate was satisfied on the material before him that it was appropriate to serve a notice prohibiting the Applicant from managing a company and, whilst a five years prohibition should only be imposed in the worst cases, that having regard to all of the matters before him he directed the Applicant be prohibited for a five year period.

CONSIDERATION BY THE TRIBUNAL OF THE FINDINGS OF THE DELEGATE AND OF THE SITUATION GENERALLY IN THE LIGHT OF THE MATERIAL BEFORE IT

As has been earlier indicated in these reasons, the Applicant failed to present himself before the delegate at either of the two hearings conducted before him and did not make or cause to be made any oral or written submissions to the delegate. The Applicant, at the hearing before the Tribunal, was represented by counsel and gave evidence by way of affidavit and on oath. He was cross-examined. Consideration of the matter presently before it requires the Tribunal to take into account all of the facts and circumstances not only those as presented by the Liquidator and those considered by the delegate but also the additional evidence now available to it.
           AS TO ACC
  Insolvent Trading – Failure to remit group tax instalments:
The Applicant stated that he was aware when he became a director of ACC that the company was in financial difficulty. He says that he took immediate steps to reduce the company's costs by cutting staff levels and subletting part of the company's premises in an attempt to "allow the company to trade out of its difficulties". He was aware that a failure to remit group tax had occurred and says that he wanted the company to meet its obligations. He says that in the period in which he was a director of the company it met its liabilities other than those in relation to group tax.
He was aware that "the company" had discussed the group tax situation with officers of the Australian Taxation Office. He believed, on the basis of income projection provided to him at the time he became a director, that it would be possible for the company to make both group tax and arrears payments. However, by December 1996 it became clear to him that the projections "were grossly overstated".
He contended that the statements of the Liquidator as to claims, judgment debts, final demands and notices and letters with respect to outstanding debts totalling $10,256.48 did not evidence insolvency of the company. He commented upon each of such claims for payment and generally demonstrated that they had in due course been paid or did not relate to ACC. He said that the only creditor in the liquidation of ACC was the Australian Taxation Office and referred to a deed of settlement entered into between the company, the Liquidator, Byrnes Corporation Pty Limited and himself whereby he agreed to pay $100,000 to enable the indebtedness to the Australian Taxation Office to be settled. It is noted by the Tribunal that the deed dated 15 January 1998 recites that orders had been obtained from the Supreme Court for the examination of the Applicant, his mother and an officer of the company, and the Liquidator was investigating the conduct of these people. It is further noted that subject to payment by the Applicant of the monies and reimbursement taking place as to monies owed to the Australian Taxation Office, that the Liquidator and ACC covenanted not to sue the directors in respect of any claim under section 588G of the Law.
As earlier indicated, the Applicant stated that he was aware of the group tax indebtedness prior to his appointment as a director, indeed that the company had not paid group tax for almost two years before that time. An arrangement for paying off the group tax had been entered into just before he became a director. Nevertheless thereafter group tax in respect of a particular month was only once paid on time, other amounts falling due were either paid late or not at all. The arrears prior to May 1996, the time of the Applicant's appointment, were not paid at all. Indeed, the company was not at any relevant time able to pay the full amount of the group tax indebtedness as and when it fell due. For this indebtedness to have been paid, the company would need to have borrowed monies or have its shareholders subscribe further funds.
On behalf of the Applicant, it was submitted by Mr Pesman of counsel that, when considering the Applicant's conduct referable to ACC, the relevant date is the day on which he was appointed a director of the company. A great deal of the conduct complained of by the commission was said to occur well prior to the date of such appointment. As to the various statements of claim and final demands, it was contended that the evidence given by the Applicant should be accepted, the documents not being consistent with a finding that the company on that account alone traded whilst insolvent during the period the Applicant was a director. When he became a director, he was aware of the financial difficulties of the company and ceased incurring or lessened the incurring of liabilities. He attempted, it was said, to trade the company out of its difficulties.
Accepting that the principal evidence of insolvency was the failure to remit group tax, it is noted that at the time the Applicant became a director of the company payments to the Australian Taxation Office were outstanding from August 1994. Thereafter, payments were not maintained. It was said that there was no evidence before the Tribunal of any specific creditor or creditors other than the Taxation Office and inter-company loans.
On behalf of the Commission, counsel submitted that the Applicant was bound to accept his responsibilities as a director from the date of his appointment but this did not mean to say that events that had transpired before that date were irrelevant to the discharge of those responsibilities and the group tax indebtedness was an example of this. Documents available to the Liquidator disclosed that at the date of liquidation, the company had "a shortfall" of approximately $356,000. The evidence provided by the Notices of Demand, statements of claim and the like were indicative of a "tardiness in paying creditors" and pointed to a company that did not pay its debts "unless stern demand was made". This was indicative, at the least, of financial difficulty.
The evidence given on behalf of the Australian Taxation Office indicated that payment was made in respect of June and July 1994 and then the company defaulted no further payment being made until February 1996. The payment that was due in respect of August 1994 was paid 21 months thereafter. The Applicant who became a director in May 1996, knew of the group tax situation and should have appreciated the obligation of the company to pay group tax. The monies were in effect trust monies which did not belong to the company. The Applicant knew or should have known that the company was flagrantly in default of its obligations to pay group tax and that the company was not able to make payment of it. He knew or should have known that the company could not pay, it was insolvent and trading whilst so. Instead the company traded regardless of its insolvency.
It was submitted on behalf of the Commission that on this account alone the Applicant is not a fit and proper person to be a director of a company. The evidence that he made payment pursuant to a Deed of Settlement is not sufficient to negate the consequences of his conduct, he inter alia having obtained a "real benefit" out of the payment, namely avoiding the consequence of a threat of litigation. Payment was not "an act of altruism" on behalf of the Applicant, he having every reason to be apprehensive that proceedings might be brought against him pursuant to section 588G(4) of the Law for insolvent trading. He paid the money by way of a commercial settlement and to avoid litigation.
It was inconsistent with the discharge of corporate responsibility for a director to allow a company to continue trading, unable to pay its debts as they fell due. Companies are required to be able to discharge their obligations from their own resources. ACC was unable to remit the group tax money it had deducted from remuneration payable to its employees and the Applicant was the party responsible for the continuance of default.
Failure to give disclosure in RATA
The Applicant said that he prepared the RATA with the assistance of the company's secretary, a Mr Jurke. He says that at the time it was completed "the inter-company loan accounts" had not been finalised and he relied on Mr Jurke's advice as to the position and signed the RATA believing it was accurate. All the writing on the RATA was that of Mr Jurke, Mr Jurke prepared the document as "the company's accountant". The Applicant further stated that he was "advised to fill them out the best we could at this point in time and we could amend them later or provide further information as it came to hand". When his attention was drawn to a February 1997 Trial Balance, the Applicant stated that the latter was not an accurate reflection of the true financial situation of the company. He contended that the trial balance was inaccurate, "a working document which still requires all the adjustments". Adjustment by way of journal entries needed to be made, so he said, to the sundry debtors item.
In relation to "the collapsing loan" and the position of Mr Scarfone, the Applicant said that the words "mean it is an irrecoverable loan". Funds had been lent to Mr Scarfone and ACC "only merely acted as a conduit of the funds". Monies were provided to ACC which then on-lent them back to Mr Scarfone "their debt was forgiven to ACC on the basis that the loan to Mr Scarfone was on-lent".
On behalf of the Applicant, counsel submitted that the fact of the Applicant providing the RATA which may have been inaccurate should not be held against him. He relied on his accountant. The failure to provide a document which was correct had no ill effect, it was said, on the course of the liquidation. In the circumstances, a reasonable explanation had been given as to why the information was not provided. There was no "ill effect" as a result of that failure.
The Commission maintained that the attitude taken by the Applicant, he relying on the accountant as saying "it was accurate" that "being good enough for me" indicates want of a proper appreciation of directorial responsibility. It was clearly not an accurate reflection of the financial information contained in the company records. An obligation rested on the Applicant to ensure that the document was complete and accurate. It is noted by the Tribunal that it was not only the RATA that was signed by the Applicant but also a questionnaire confirming the RATA stated situation. The Trial Balance print-out was dated 28 February 1997, the RATA bore date 13 March 1997. There is no reference in the RATA to the Trial Balance figures. Indeed, the RATA bore no resemblance at all to the Trial Balance. It was not an accurate reflection of the true financial position of the company.
Forgiving of debt of approximately $220,000
It is said by the Applicant that the debt of Park Road Projects Pty Ltd appearing in the accounts of ACC in the amount of $220,000 related to "a contingent fee" to be paid to ACC by Park Road Projects. The latter was a small development company that had engaged ACC to provide professional management services. The company entered into commercial contracts with a builder who subsequently went into liquidation, causing a loss to Park Road Projects of approximately $350,000. The company thereafter had no need for further management services, and itself became insolvent. There was no possibility, it was said, that ACC would recover any funds. The Applicant maintained that even though the secured creditors of Park Road Projects entered into a scheme of arrangement whereby they received 100 cents in the dollar this in effect being funded by the Applicant or companies under his control, there was no benefit for him personally arising from the forgiveness of the debt.
Minutes of a meeting of ACC said to have taken place on 16 October 1996 stated the Applicant and his mother were in attendance. The Applicant said that attendance of his mother was by way of telephone connection. He acknowledged that there was no mention in the minutes of the meeting of the Park Road Projects indebtedness being contingent and no disclosure as to his personal interest in the proposed resolution. He further acknowledged that no endeavour was made on behalf of ACC to recover the money from Park Road Projects.
On behalf of the Applicant, it was submitted that there was no commercial advantage in pursuing the debt as there was no possibility of recovery and there was not any advantage to ACC in maintaining the debt in its financial records. Nor, it was submitted, was there any disadvantage to either ACC or the creditors of the company in forgiveness of the debt. It was never going to receive the funds. It was acknowledged however that by ACC forgoing its entitlement, the secured creditors of Park Road Projects were "certainly a lot better off". Indeed, the main reason it was submitted for the debt being abandoned was to ensure that a scheme of arrangement could be put in place. The secured creditors of Park Road Projects were paid 100 cents in the dollar and there was a lesser payment to the unsecured creditors. If the Applicant had not provided funds under the Scheme of Arrangement, no creditor would have received anything.
On the other hand, Mr Stevenson, on behalf of the Commission submitted that the "forgiveness" demonstrated a reckless disregard for the interests of creditors, this permeating the Applicant's attitude to corporate responsibility. The Park Roads Project's "forgiveness" displayed "an irresponsible and cavalier attitude' to corporate responsibility. The director's meeting held on 16 October 1996, a few months before the company went into liquidation, was held at a time when a substantial amount of money was owing by the company in respect of group tax. The directors purported to forgive the loan. The Applicant gained an advantage for himself allowing ACC to forgive the debt. The Applicant had guaranteed the secured creditors of Park Road Projects and they were paid so that he would not be called upon. Unsecured creditors were paid less. ACC did not participate in the scheme of arrangement, it was not paid anything. In the absence of this "forgiveness", ACC might have received some payment in respect of the debt with which some part of its obligations might have been satisfied. It was further submitted on behalf of the Commission that the attitude of the Applicant was one whereby he was going to effect the release of ACC from the debt, having no regard for any interest other than those referable to Park Road Projects he being a guarantor of obligations of that company. At the time of the forgiveness of the debt, the Applicant knew that ACC was in financial difficulties and knew that the Australian Taxation Office was pressing for payment, a significant creditor. The main reason the debt was forgiven was to ensure that the Park Road Projects scheme of arrangement proceeded and the Applicant derived the above benefit.
Failure to deliver all of the company's books:
The Applicant contends that all client files, other than those returned to those who wished to pursue applications with other mortgage originators or who had privacy concerns, were provided to the Liquidator. Further, an employee of the Liquidator had reviewed the clients, leaving them with the Applicant, he later forwarding them to the Liquidator under cover of a letter of 18 July 1997.

The latter factual situation it was said indicated the Applicant's preparedness to make files available, this further evidenced by the Liquidator allowing some files to remain with the Applicant. Indeed, there was not any evidence of the Applicant not providing such material as was in his possession or under his control. The Commission contends, on the other hand, that the statement of the Liquidator, that he had not been able to retrieve the client files or work in progress, should be accepted and that the fact of a summons being issued to the Applicant to produce documents is and should be indicative of his hesitancy in this regard.
Failure to produce Profit & Loss Accounts and Balance Sheets:
The Applicant maintains that he was not aware of any default in the provision of accounts prior to his appointment. The 1996 Profit and Loss Account and Balance Sheet were not due to be completed until after ACC was placed in liquidation. Indeed, on his behalf it was submitted that preparation of the June 1995 accounts was not a matter for which the Applicant could be held responsible as he was not appointed a director until some 10 months after the relevant balance date. The Applicant maintains that had the company not gone into liquidation, accounts would, in the fullness of time, have been prepared.
Even be it that the Applicant's appointment as a director post dated 30 June 1995, this does not provide an explanation or excuse as to why a relevant Profit & Loss Account was not prepared and available in respect of that financial year.
It is noted however that even though a copy of a Profit & Loss Account for the latter year was not produced to the Liquidator, nevertheless a Balance Sheet as at 30 June 1995 is and was available. The Balance Sheet discloses a profit being made for the relevant year in that a loss figure of $38,640.90 for the 1994 financial year was translated into an accumulated profit figure of $636.85 for the 1995 year. For this situation to have been so recorded, a Profit and Loss Statement must have been prepared.
Acting in management of the company whilst an undischarged bankrupt:
The Applicant denies that he acted in management whilst an undischarged bankrupt, particularly as the same relates to actions on behalf of Terry's Sound Lounge. ACC, he says, was requested to assist in the company's negotiations with Retravision and he assisted as an employee of ACC. Whilst acknowledging that he had carriage of the matter on behalf of ACC to deal with Retravision and that he had specific authority to bind the company, make arrangements on behalf of the company, negotiate a fee agreement and negotiate costs that the client would incur, he maintained that he was in a position to bind the company to such an extent only that would not breach his obligations as an undischarged bankrupt. Indeed he maintained that he engaged a solicitor from whom he obtained advice as to what he could and could not do. He acknowledged, however, having authority to be able to bind ACC to "certain arrangements" and being able to cause the company to provide a letter of offer, a mandate for finance.
It was submitted that for the Applicant to have been acting in a relevant management role, he would need to have been involved in the larger decisions made by a company (Cf Commissioner for Corporate Affairs v Bracht [1989] VR 821). What the Applicant had been doing in the present instance was to offer assistance through ACC to a client company. The company was acting as a consultant to Terry's Sound Lounge in its dispute with Retravision. The Applicant's role, it was said, was that of an employee of ACC.
The Commission directed the Tribunal's attention to sections 91A and 229 of the Law and the prerequisite for a person to be considered as being concerned in or taking part in the management of a company. The Applicant, it was submitted, "did not know where the line was to be drawn" and, in the circumstances disclosed in the present matter, was acting for or managing the affairs of ACC in the course of advising in relation to the client's dispute. The Applicant acted for ACC and on behalf of the client. His conduct in this regard cannot be fairly characterised as simply acting as a consultant. The Applicant had decision making power, had the carriage of the relevant matter and had power to bind the company in relation to any agreement that might have been reached (see observations in Cullen v Corporate Affairs Commission (NSW) (1988) 7 ACLC 121 at 126).
AS TO BARROLEG
Insolvent Trading:
It was the opinion of the Official Liquidator that with a deficiency in its trust funds of $816,249.09 Barroleg was insolvent. On the other hand Mr Jurke, the company's accountant, in an affidavit sworn on 28 February 1997 contended that the company was solvent, it then having trust funds of $346,506.73. The report of the Liquidator was made on 14 April 1997.
The Applicant maintains that, whilst being aware that Barroleg had limited financial resources, he believed it to be solvent. This, he says, being confirmed by Mr Jurke's statement above referred to. The Applicant submitted through his counsel that there was a rational basis for his belief in the company being solvent, it had received a tax assessment for an amount in excess of $120,000. The assessment was in due course amended to $41,680.03, an amount the Applicant contends that could have been satisfied without the need for the company to go into liquidation. The Commission noted the observations of the Liquidator to the effect that the company may have been insolvent since incorporation but acknowledges "there is no material in the paperwork which would – which revealed why the Liquidator made that comment". The Profit & Loss Accounts of the company evidence trading at a loss. It is maintained that Barroleg was insolvent and was therefore trading as insolvent whilst the Applicant was acting as a director.
Failure to remit group tax:
As has already been indicated, the belief of the delegate as to the amount owed to the Australian Taxation Office being group tax and not income tax, as it in fact was, has led to this contention not now being maintained.
RELEVANT CASE LAW AS TO PROHIBITION AND MANAGING A COMPANY
The statutory prerequisite to a prohibition order being made disqualifying a person from acting as a director has been discussed in a number of cases. In Kardas v Australian Securities Commission (1998) 16 aclc 1695, the Federal Court of Australia, after referring to Blunt v Corporate Affairs Commission (NSW) (No 2) (1988) 6 ACLC 1077 at 1079, Re Dawson Print Group Ltd ([1987] 3 BCLC 601 at 604 and Dwyer v National Companies and Securities Commission (No 2) (1989) 7 ACLC 743 at 746, referred to the decision in Laycock v Forbes & Australian Securities Commission (1997) 15 ACLC 1814 where at 1821 it was stated:
"… Section 533 requires a liquidator to lodge a report if it appears to him in the course of the winding up of a company that an officer may have been guilty of an offence, that a person who has taken part in the management or winding up of a company has misapplied money or been guilty of any negligence, default or breach of duty or that the company may be unable to pay its unsecured creditors more than fifty cents in the dollar. The matters set out in s 533 are disjunctive so that a liquidator may simply report on the fact that a company may be unable to pay its unsecured creditors more than fifty cents in the dollar without reporting on any particular matter in respect of a director. It seems to me therefore that it does not necessarily follow that a disqualification order can only be made after there is established some conduct which is in breach of standards of commercial morality or involves gross incompetence. As s 600(2) entitles the Commission to give a notice to a person who is a relevant person in relation to two or more relevant bodies it seems to me that the legislation contemplates that it would be open to the Commission to serve a notice on a person prohibiting him or her from managing a corporation simply because that person had been a director of two or more companies which had been unable to pay their unsecured creditors more than fifty cents in the dollar. Putting the matter another way, the power given to the Commission under s 600 may be exercised because of the fact of such an association independently of pointing to any particular default on the part of the person to whom the notice is addressed."

The court in Kardas (supra) agreed with what had been said in Laycock (supra). It added that it is important not to lose sight of the circumstances which must exist before section 600 of the Law can apply, namely that a liquidator has reported on the existence of one or more of the serious matters referred to in section 533 in relation to two or more companies of which the person concerned was a director. The fact of a section 533 report being made, in respect of two or more companies, has been seen by Parliament as sufficient to raise the question whether the director concerned should, for the protection of the public, be prevented for a substantial period from benefiting directly or indirectly from the privilege of limited liability. It was held however that it would be inconsistent with this legislative intent to read into the words of section 600 a further precondition or requirement as to the necessity of there being evidence of conduct such as "gross incompetence", nor need the Commission, in exercising the power of prohibition under section 600, be inhibited by any requirement for establishing "gross" negligence – a standard not relevant to the lawful discharge of a director's duties.
In Jorgensen v Australian Securities and Investments Commission (1999) 30 ACSR 481 at 483 the court stated:
"Solvency
Once there has been a s 533 report into two or more relevant bodies in respect of which an individual is a relevant person, the jurisdiction to make a prohibition order is established. It does not matter that by the time of the show cause notice the company's creditors have been fully paid, or paid to more than 50c in the dollar. The commission is at liberty to make a prohibition order in the light of all the circumstances."
The object of prohibiting a person from being a director of a company is not to punish that person but rather it is to protect the public (Re Sheslow and Australian Securities Commission (1994) 20 AAR 161; Iliopoulos and Australian Securities Commission (1997) 15 ACLC 1512). The facts however in each case will need to be considered to ascertain whether protection of the public is warranted.
The word "management" is deliberately widely cast and as used in the statue makes it impossible for a person to be part of a management team which directs in any way a company's affairs (R v Campbell (1984) BCLC 83). In Commissioner for Corporate Affairs v Bracht (1988) 7 ACLC 40 at 47, it was said that the words "being concerned in a company's management" must have a broad operation:
"Whilst it is easy to exclude from the concept of management those activities of a corporation which consist in the carrying out of day-to-day routine functions in accordance with pre-determined policies, whether they be clerical or involve the ordering or supplying of goods or services on its behalf, it is harder to fix on those elements which are critical to management. It cannot be confined to those matters performed by the board of directors or a managing director, for those are already the subject of the prohibition against acting as a director. The lower levels of administration comprehended by management must have some decision-making powers, but it cannot be thought that every branch or division manager has the relevant power of management."

Again, in Cullen (supra) at 126 it was said:

"From all this one can say that one looks to see somebody making decisions as to the direction of the corporation though one does not necessarily look for someone who is making decisions at the highest level, nor is it necessarily so that the manager's decisions will not be subject to obtaining the approval of some higher officer. However, even though a person may be described as a manager if that person is merely carrying out the policy of the corporation in charge of a branch or division of the business and not making decisions as to its direction then probably that person is not taking a management role in the corporation."

SUBMISSIONS AND DECISION

On behalf of the Applicant, it was submitted that the section 37 statement was inadequate in its approach to the evidence underlying its conclusions and inadequate in its reasoning as a method of justifying the decision. There being no onus on any party, the Tribunal is to be reasonably satisfied that the matters alleged against the Applicant are supported by the evidence before it can be comfortable that the notice was correctly served. However as earlier indicated in these reasons and see Jorgensen (supra) and Kardas (supra), the test is one of the Applicant satisfying the decision-maker that the operation of section 600 should not come to pass.
The purpose of section 600 of the Law is to protect the public, to protect creditors. The Applicant, it was said, had taken steps to ensure that creditors of the various companies in which he had been involved had their claims satisfied. This was evidenced by the deeds into which the Applicant had entered with the Liquidator of the companies. Payment had been made by him to meet the companies' obligations. The indebtedness to the Australian Taxation Office had, but in due course, been met. It was submitted that in respect of each of the findings made by the delegate, either the evidence relied on by the Commission does not support the finding, or the explanation offered by the Applicant for the conduct should be accepted. The delegate had misunderstood or misconceived the significance of the material that was before him.
It was further submitted that no basis had been disclosed on the evidence before the delegate justifying the decision that was made and there were a number of significant areas where the section 37 statement was entirely inconsistent with the evidence underlying it.
The hearing before the Tribunal is de novo. The Tribunal is to consider the matters and make as best it can the correct or preferable decision. The Applicant in this case has displayed an inability to appreciate the responsibilities of a director of a company and an inability to appreciate the need to comply with statutory obligations. The Applicant carried out his directorial responsibilities in an irresponsible manner. Accepting that section 600 of the Law comes into operation if there is a relevant body and a relevant person, section 600(3) imposes a statutory presumption in favour of prohibition and it is for the Applicant to rebut the statutory presumption and satisfy the Tribunal that an order should not be made. That is, in the present instance, that the decision under review should be interfered with. It is for the Applicant to develop a degree of satisfaction in the mind of the Tribunal that the decision ought to be set aside in all the circumstances of the case.
The Applicant, it was submitted on behalf of the Commission, was cavalier in the approach he took, in relation to the hearings conducted by the delegate and in his abstaining from making any oral or written submission to the delegate. It was submitted that he displayed a somewhat similar attitude in his approach to the various findings made by the delegate and his answer to them in these proceedings. The Applicant was one who treated companies with which he was associated as if they were his alter ego. If a company within a group had a financial need then according to the Applicant it may look to another company in the group to meet that need. This view was not consistent with proper corporate governance.
The Tribunal has considered the various findings made by the delegate and the evidence introduced at the present hearing by and on behalf of the Applicant. The Tribunal is satisfied that the Applicant did conduct the affairs of ACC whilst the company was insolvent, even be it that various of the company's debts were satisfied. The Tribunal does not accept that the company was in default in respect of the various demands made upon it but does find that delay took place in satisfying the demands and claims and that this evidences the financial difficulties then being experienced by it. The fact that the company failed to remit the group tax instalments as evidenced is proof enough of its insolvency and its inability to meet its obligations as and when they fell due. The fact that the Applicant entered into a deed of arrangement does not impinge upon this position.
The RATA declared by the Applicant to be true to the best of his knowledge and belief was patently untrue and not consistent with the accounting records then maintained by the company. No qualification was made to the information contained in the RATA nor was mention made of this situation in the answers to the questionnaire, also certified by the Applicant. There is an obligation resting upon a person such as the Applicant to provide information to a Liquidator such as to enable the Liquidator to more properly conduct the affairs of the liquidation. The Applicant in this case clearly adopted a position of not personally examining records or, indeed, the document that he signed. A statement that there are "nil" sundry debtors and "?" creditors, clearly is at odds with appropriate responsibility.
The debt owed to ACC by Park Road Projects Pty Limited was one that was raised in the context of ACC carrying on its business activities. No demand was made on the company for payment. The debt was forgiven by resolution of the directors of ACC, the Applicant not, per medium of the minutes, disclosing his interest in Park Road Projects or his guarantee of its debts. There was no benefit to ACC in the debt being forgiven. At the time the debt was forgiven, ACC was unable to pay its debts as they became due. The agreement was entered into and the debt forgiven in aid of the personal interests of the Applicant. It cannot be said that the Applicant was acting in the interests of ACC and he was not discharging his moral obligation as a director to that company.
It was said, by the Liquidator, that the Applicant failed to deliver to him all of the books of account and records of ACC. On the material before the Tribunal, it is not satisfied that this was so. It is mainly contended that certain files were not provided. There is evidence of an employee of the Liquidator examining files at the office of the Applicant and of those files being forwarded to the Liquidator some months later. No particular files have been identified as having been mislaid or not made available.
As to the alleged failure to produce Profit & Loss Accounts and Balance Sheets, the Tribunal has already noted the existence of a 1995 Balance Sheet and the probability, if not certainty, that there was in existence a Profit & Loss Account as a financial statement preceding the Balance Sheet. The 1996 Profit & Loss Account and Balance Sheet were not due for completion at the time of the liquidation. The Tribunal is not satisfied that any conduct on the part of the Applicant has here been shown as relevant to the issue of the prohibition notice.
It has been contended that the Applicant acted in the management of ACC whilst he was an undischarged bankrupt. The letters written under the hand of the Applicant on the letterhead of ACC are clearly such as to indicate to a third party that it is the Applicant who has the conduct of the particular negotiations and arrangements and the Applicant who will make decisions as to the course the company is to pursue. It is clear from the face of the correspondence that the Applicant was acting as a manager and consistent with the principles above referred to and as outlined in Cullen (supra) the Tribunal is satisfied that the Applicant was so acting in breach of his duty as an undischarged bankrupt.

The position so far as Barroleg is concerned is somewhat different to that of ACC. It is said that on the material before the Liquidator, the company could have been insolvent since the time of its incorporation. It is true that in due course the Liquidator declared a deficiency of assets and liabilities as already indicated. However, the accounts of the Barroleg Trust, as prepared by the accountant, disclose a surplus and there is no explanation as to the transactions that occurred or events that transpired between the date of the accountant's accounts and the calculation of a deficiency by the Liquidator. The Tribunal cannot be satisfied on the evidence before it that there was any absence of directorial responsibility on the part of the Applicant in this regard.
Thus the Tribunal is satisfied that various of the findings made by the delegate were justified and that the Applicant did carry out his directorial responsibilities in such a way as to negate his obligations as a director. The Tribunal is satisfied that the Applicant has breached the appropriate standards of commercial morality and has displayed incompetence in conduct of the affairs of the companies including incompetence in discharge of his obligations to the Liquidator. The Applicant has acted in disregard of his statutory obligations so far as the provision of a RATA is concerned, has acted while ACC was insolvent, has acted improperly in the forgiving of a debt and acted in the management of ACC whilst he was an undischarged bankrupt. As the Tribunal sees it, each one of these matters would be sufficient to maintain the prohibition order.
The delegate saw it as appropriate in the circumstances of this matter to prohibit the Applicant from managing a corporation without the leave of the court for a period of five years commencing from the date of service of the notice of the prohibition dated 3 November 1998. The evidence before the Tribunal is that service of the notice was effected on or about the date it bears.
It is noted that the Applicant was disqualified for the maximum possible period. There was no expressed reason given by the delegate as to the appropriate length of the penalty and no justification, according to the Applicant, displayed for the length of penalty imposed. Likewise, it was submitted there was no evidence, no proper basis for the disqualification order being made as it was. The period of disqualification, it is submitted, was manifestly excessive and entirely unjustified in the reasons.
The factors which are to be considered with reference to the period for disqualification have been referred to in Cullen (supra) where at 128 it is said:
"… There is not much authority on this point [period for disqualifications]. In Re Civica Investments Ltd. (1983) B.C.L.C. 456, Nourse J. held that the maximum period of disqualification should be reserved for defaults of a serious nature such as dishonesty or a large number of defaults not substantially alleviated by appropriate remedial action and/or convincing assurances that they would not recur."

And at 129:

"… I am of the view that I should follow the view of Nourse J. This is not the worst case, but on the other hand it is not a trivial case and I think in all the circumstances, especially as this is one of the first cases where this sort of conduct has come under consideration for disqualification, that disqualification for two years from today would be appropriate."

The Tribunal is satisfied that the Applicant in the present matter has been in default in the number of instances displayed. Not only has he been a relevant person in relation to at least two relevant companies, enlivening thereby the operation of section 600 of the Law but the Tribunal is satisfied that he carried on activities of ACC whilst it was insolvent, that he failed to give full disclosure in a report as to affairs that he acted in his own interests in forgiving a debt due to ACC and that he acted in the management of ACC while an undischarged bankrupt. These matters are all serious and warrant the imposition of a period of disqualification. The Tribunal does not hold that the conduct of the Applicant was dishonest and accepts that the Applicant may well have believed that he could trade ACC out of its financial difficulties. However, that is not to point. The Applicant clearly conducted the affairs of the company as if its affairs were his own and regardless of the interests of creditors. There are a number of defaults and they have not been alleviated by remedial action and there has not been a convincing assurance that they would not recur. The Tribunal, however, does not consider that the present case is at the extreme end of instances where a prohibition order should issue and considers it apposite that the period of disqualification should be less than five years and should be for a period of three years from the date of service of the notice of prohibition.
For the reasons herein before set forth, the decision under review is set aside and in lieu thereof the Applicant is prohibited from 3 November 1998 for a period of three years from being a director or promoter, or from being in any way (whether directly or indirectly) concerned in or taking part in the management of a corporation without the leave of the court.
I certify that the 91 preceding paragraphs are a true copy of the reasons for the decision herein of:
The Hon Mr R N J Purvis, QC, Deputy President; and
     Ms j a Shead, Member
Signed:         .....................................................................................
  Assistant
Date/s of Hearing  13 and 14 December 1999
Date of Decision  28 April 2000
Counsel for the Applicant        Mr Marcus Pesman
Counsel for the Respondent    Mr James Stevenson