Hammond and Australian Securities and Investments Commission - [2020] AATA 1325

Hammond and Australian Securities and Investments Commission [2020] AATA 1325 (13 May 2020)
Division:Taxation and Commercial Division
File Number(s): 2018/5125
Re:Jason Hammond
APPLICANT

AndAustralian Securities and Investments Commission
RESPONDENT

DECISION
Tribunal:Mr Rob Reitano, Member
Date:13 May 2020
Place:Sydney

The decision of the delegate is varied so that the Applicant is disqualified from managing a corporation for a period of 3 years from 30 July 2018.
........................[SGD]................................................
Mr Rob Reitano, Member
CATCHWORDS
CORPORATIONS – disqualification under s 206F of the Corporations Act 2001 (Cth) – decision by Australian Securities and Investments Commission to disqualify Applicant from managing corporations for a period of 5 years – whether the Applicant was a director or officer of two or more corporations – shadow director – grounds for disqualification – superannuation obligations – management of corporations – protection of public interest – corporate responsibility – tax liability – decision under review is varied
LEGISLATION
Corporations Act 2001 (Cth) – ss 206F, 206F(1)(b), 206F(1)(a)(ii), 206F(a), 206F(b), 206F(1)(c), 206F(2), 533, 533(1), 9, 9(a), 9(b)(i), 9(b)(ii), 9(b)(iii)
CASES
Australian Securities & Investments Commission v King [2020] HCA 4
Quinlivan v Australian Securities and Investments Commission [2010] AAT 113
Murdaca v Australian Securities and Investments Commission [2009] FCA 92
REASONS FOR DECISION
Mr Rob Reitano, Member

The management of companies whether small or large, family or publicly listed companies, involves the carrying out of duties and responsibilities that are imposed on all officers of those corporations to protect the public against the exigencies of corporate limited liability. The duties so imposed are to be carefully monitored to ensure compliance with the regulatory regime lest damage be done to the public at large. This is a case that involves one aspect of the myriad of protective provisions that are directed to protecting the public against officers who are involved in repeated corporate failures and the means by which the legislature has seen fit, by resort to what has been described as ‘a cheap and quick alternative to Court action’, to deal with such repeated failures.[1]
[1] Murdaca v Australian Securities and Investments Commission [2009] FCA 92 at [101].
On 30 July 2018, a delegate of the Australian Securities and Investments Commission (ASIC) wrote to Mr Jason Hammond (Mr Hammond) telling him that she had decided to disqualify him from managing corporations for 5 years from 30 July 2018.[2] The letter enclosed a document that was titled ‘Decision’ which set out the reasons for why the delegate had decided to disqualify Mr Hammond from managing corporations for 5 years. Those reasons came down to the fact that the delegate was satisfied that the criteria in s.206F of the Corporations Act 2001 (Cth) (Act) had been made out and the failures on Mr Hammond’s part were sufficiently egregious to warrant a disqualification for 5 years.
[2] Exhibit 1.1, at 10.
Mr Hammond has applied for a review of the delegate’s decision. I have decided to vary the decision so that Mr Hammond’s disqualification period is reduced to 3 years because I consider such a period of disqualification is justified and will serve to protect the public interest. I set out below my reasons for that decision.
WHAT ARE THE ISSUES?
Before turning to the facts, it is convenient at the beginning to set out s.206F of the Act because it assists in appreciating why the facts are relvant. Section 206F provides:
(1) ASIC may disqualify a person from managing corporations for up to 5 years if:
(a) within 7 years immediately before ASIC gives a notice under paragraph (b)(i):
(i) the person has been an officer of 2 or more corporations; and
(ii) while the person was an officer, or within 12 months after the person ceased to be an officer of those corporations, each of the corporations was wound up and a liquidator lodged a report under subsection 533(1) (including that subsection as applied by section 526-35 of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 ) about the corporation's inability to pay its debts; and
(b) ASIC has given the person:
(i) a notice in the prescribed form requiring them to demonstrate why they should not be disqualified; and
(ii) an opportunity to be heard on the question; and
(c) ASIC is satisfied that the disqualification is justified.
(1A) To avoid doubt, the references in paragraph (1)(a) to corporations include references to Aboriginal and Torres Strait Islander corporations.
Grounds for Disqualification
(2) In determining whether disqualification is justified, ASIC:
(a) must have regard to whether any of the corporations mentioned in subsection (1) were related to one another; and
(b) may have regard to:
(i) the person's conduct in relation to the management business or property of any corporation; and
(ii) whether the disqualification would be in the public interest; and
(iii) any other matters that ASIC considers appropriate.
(2A) To avoid doubt, the references in subsection (2) to a corporation includes a reference to an Aboriginal and Torres Strait Islander corporation.
(3) If ASIC disqualifies a person from managing corporations under this section, ASIC must serve a notice on the person advising them of the disqualification. The notice must be in the prescribed form.
Start of Disqualification
(4) The disqualification takes effect from the time when a notice referred to in subsection (3) is served on the person.
By notice dated 21 May 2018, ASIC alleged that Mr Hammond was an officer of three corporations which engaged the operation of s.206F.[3] The three companies were LLM Rivits Pty Limited (which was previously known as Valley Taxation Accounting Pty Ltd) (Rivits), Newcastle Bridal Pty Limited (Bridal) (which after 21 May 2018 was only known by its Australian Company Number) and Dongrove Pty Ltd (Dongrove). The notice offered Mr Hammond an opportunity to be heard. He did not avail himself of that opportunity, which, of course, was his right. I need go no further with the issues around these matters as on the material so far I am able to find that the requirements of ss.206F(1)(b) are met.
[3] Exhibit 1.1 at 20.
This case is more concerned with the pre-condition for action by ASIC under ss.206F(a) which requires that a person be an officer of 2 or more corporations and that whilst that person was an officer, or within 12 months of them ceasing to be an officer of those corporations, each corporation was wound up and a liquidator lodged a report under ss.533(1) about the corporations inability to pay its debts. The issue is whether Mr Hammond was an officer of each of the companies referred to at the time they were wound up, or was so in the 12 months preceding their winding up. This is because there is no issue that each company was in fact wound up and that in each case a report under ss.533(1) was lodged. Mr Hammond only needs to be found to be an officer of two of the companies for the section to be engaged.
If ss.206F(a) and (b) are satisfied there is a another issue about whether I am satisfied that disqualification is justified and, if so, for what period it is justified.
It is necessary to deal with the facts relevant to each corporation separately, but before doing so it is necessary to briefly provide some background about Mr Hammond.
MR HAMMOND’S BACKGROUND
Mr Hammond has been a practising accountant since 1998.[4] At least part, if not a substantial part, of his practice was as a tax agent.[5] Mr Hammond was for some time registered with the Taxation Practitioners Board. Mr Hammond was at one time a certified practicing accountant. He holds a Bachelor of Commerce degree and Master of Business Administration degree from the University of Newcastle.[6] These matters are of some importance especially when regard is had to some of the particular findings I have made in relation to Mr Hammond’s ability to understand business matters and his business acumen more generally.
[4] Exhibit 6.
[5] supra.
[6] ST8.
Mr Hammond has occupied positions as a director of twenty-eight companies.[7] Mr Hammond explained that part of his business activities involved setting up companies for clients, getting the business started and then selling the business to clients. He also explained that at times he would purchase dormant companies and sell them to clients.[8]
[7] Exhibit 6.
[8] supra.
Mr Hammond’s domestic partner is Michelle Lee Stephens (Ms Stephens). There was no direct suggestion that Mr Hammond and Ms Stephens were in any way business partners though as it turns out, I have found at least in an informal sense, that is loosely speaking what they were in the running of Bridal. Ms Stephens was at the relevant time a director and secretary of Bridal.
RIVITS
Rivits was incorporated on 16 April 2003.[9] According to the company extract Mr Hammond was the only director and the secretary of Rivits between 12 May 2003 and 1 May 2013.[10] He was also the sole shareholder.
[9] T3.
[10] T3.2. 57.
On 20 December 2013, a Form 484 signed by Mr John Holder-Keeping was submitted to ASIC. The form indicated that from 1 May 2013 Mr Hammond was removed as a director and secretary of Rivits and Mr Holder-Keeping was appointed as the only director and the secretary of Rivits.[11]
[11] T3.8, 261 – 262.
On 1 January 2014 and 6 January 2014 Mr Holder-Keeping confirmed that he was the director and shareholder of Rivits, and that the form shown to him by the liquidator was the Form 484 signed by him. Although the liquidators appeared to at one time have some doubt, there was no suggestion in the evidence or submissions of ASIC that the Form 484 was not authentic. I will return to this in a moment.
At the same time, ASIC was notified of the transfer of all the shares in Rivits from Mr Hammond to Mr Holder-Keeping.[12] There is no evidence one way or the other about why Mr Holder-Keeping acquired Rivits, but in the absence of some evidence suggesting otherwise it seems prudent to presume that the transaction was genuine. There was no submission by ASIC to the contrary.
[12] supra.
The registered office for Rivits was at all relevant times Mr Hammond’s home address.
On 19 December 2013 two external administrators were appointed to Rivits. They became its liquidators on 26 August 2014. That is the date of winding up for relevant purposes.
On 9 December 2015, the liquidators lodged a report under s.533 in which the expressed, amongst other things, the opinion that Rivits was unable to pay its debts. Another s.533 report was lodged on 5 September 2017 that expressed the same opinion. The supplementary report recorded that there were outstanding claims by creditors totalling $861,361.45.
Mr Hammond said in his evidence that he ceased to be a director of Rivits on 1 May 2013 when he sold the company to Mr Holder-Keeping who then became its sole director and shareholder. There were no documents produced to support the sale of the company, perhaps other than the Form 484 I have referred to, but this only evidenced the change in officers and shareholders. Mr Hammond could not recall the sale price, but said he thought it was for $100. He did not obtain a receipt.
Mr Hammond said that Rivits did not trade after 1 May 2013 but he engaged in what he described as ‘residual activity’.[13] Mr Hammond said he remained the accountant for Rivits after he ceased being a director, [14] but this was not as its ‘independent accountant’, but rather as someone who was working as an accountant for it ‘tidying up client loose ends.’[15]
[13] Exhibit 6.
[14] Exhibit 3, [2.2] and [2.3].
[15] Transcript, P-20.05 -20.35.
I accept Mr Hammond’s evidence about these matters mainly because there is no evidence to the contrary and it is at least in part corroborated by the hearsay evidence concerning conversations between Mr Holder-Keeping and employees of the liquidator, and the Form 484. There was no suggestion by ASIC that the document was anything other than genuine and what it purported to be. I will return to the evidence about this in a moment because ASIC placed some reliance on it.
The only evidence other than his ‘tidying up’ activities that connects Mr Hammond to Rivits in the period after 1 May 2013, are the facts that he remained a signatory on its bank accounts up until the date of the appointment of the liquidators[16] and that its registered office and principal place of business was Mr Hammond’s home address. There is some evidence about dealings which Mr Hammond had with the Australian Taxation Office (ATO). This evidence is equivocal because it is not clear whether Mr Hammond was dealing with those issues because he was protecting himself, because of his statutory guarantee as a director before 1 May 2013 for superannuation guarantee purposes and because of some other loans that he had made to Rivits or personally guaranteed before that date. In any event, there is no evidence of any dealing directly by Mr Hammond with the ATO after 26 August 2013 which is the date 12 months before the date on which the liquidator was appointed.
[16] T3.4 at 77.
ASIC relied in part on the administrators’ dealings with Mr Holder-Keeping after their appointment in December 2013 when, in a telephone conversation on 30 December 2013 with a Mr Burns, an employee of the administrator, Mr Holder-Keeping denied that he was a director of Rivits. Mr Holder-Keeping was sent an email later that day which enclosed, I infer, a copy of the Form 484 which he had signed evidencing the removal of Mr Hammond as a director and his own appointment as a director from 1 May 2013. Mr Holder-Keeping was asked in the email to confirm that the signature on the document was not his and that he had never consented to act as a director of Rivits. On 1 January 2014, Mr Holder-Keeping attributed what he had said on the phone to Mr Burns to a ‘mix up’ and confirmed that he was a director of ‘the company in reference which is now in administration.’[17] On 6 January 2014, Mr Holder-Keeping was contacted again by Mr Burns and asked to confirm that he prepared and issued the 1 January 2014 email of his own accord. Mr Holder-Keeping confirmed this, but as things would have it, he was asked nothing more about his role or involvement with Rivits.
[17] Exhibit 7, Annexure C.
One explanation offered by Mr Hammond for the ‘mix up’ in Mr Holder-Keeping identifying his role with Rivits was that at that time, Mr Holder-Keeping acquired the company it was called ‘Valley Taxation Accounting Pty Ltd’ and Mr Holder-Keeping did not connect the new name of the company with the company he knew as Valley Taxation Accounting Pty Ltd.[18] Mr Hammond said that Mr Holder-Keeping had said to Mr Hammond he could change the name of Rivits so that Mr Hammond could keep the name Valley Taxation Accounting.[19] I accept that this evidence is more than a little odd, or as ASIC suggested a ‘big call’, but that does not assist much in determining the issue at hand. It is also relevant that Mr Hammond was being asked to recall the detail of things that had happened some six years before.
[18] Transcript P30.10-P30.45.
[19] Transcript 30.40 to 33.7.
There is no evidence one way or the other about Mr Holder-Keeping’s involvement with Rivits beyond the communications on 30 December 2013, 1 and 6 January 2014. Given Mr Holder-Keeping’s apparent co-operation with the administrators and his identification of himself as a director since 1 May 2013, it is, to say the very least, curious as to why he was not asked more about his role with Rivits by the administrators (or liquidators) or by ASIC.
I find, consistent with the communications between Mr Holder-Keeping and the liquidators in the phone calls and emails referred to, that as from 1 May 2013, Mr Holder Keeping was the sole director and secretary of Rivits.
In their report of 9 December 2015, the liquidators expressed the opinion that Mr Hammond was a director or shadow director in the period 1 May 2013 to the date of their appointment on 19 December 2013. Mr Tang, one of the two administrators appointed repeated his opinion about Mr Hammond being a shadow director after 1 May 2013 in his evidence before the Tribunal.[20] Mr Tang formed this opinion not just because of Mr Hammond’s status as a signatory on Rivits’ bank accounts, but also because of the fact that Mr Holder-Keeping was not to be seen at the registered office of Rivits on the single occasion when two of the administrators’ employees attended shortly after their appointment; because he did not know if Mr Holder-Keeping was a tax agent and that Mr Hammond was one, and the business of Rivits was in tax matters; because ‘none of the books and records provided to date indicate Mr Holder-Keeping was at any time involved in any decision-making or management of the Company's business and financial affairs’; and because Mr Hammond was the person who had supplied all the relevant books and records of Rivits and completed the Report as to Affairs form (RATA) submitted to the administrators. Again, considering the significant matters that were not known about Mr Holder-Keeping, it is curious that he was not contacted and asked about them.
[20] Exhibit 7 at [12].
WAS MR HAMMOND AN OFFICER OF RIVITS?
The issue is, given that Mr Hammond was not an officer or director of Rivits when Rivits was wound up on 26 August 2014, whether he ceased being an officer of Rivits before 26 August 2013, that is, before the expiry of the 12 month period preceding its winding up. If he had ceased being an officer or director before 26 August 2013 and did not act as a director or officer of Rivits after that date, the criteria in ss.206F(1)(a)(ii) cannot be satisfied.
Section 9 of the Act so far as is relevant here defines ‘officer’ to mean:
(a) a director or secretary of the corporation; or
(b) a person:
(i) who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or
(ii) who has the capacity to affect significantly the corporation's financial standing; or
(iii) in accordance with whose instructions or wishes the directors of the corporation are accustomed to act (excluding advice given by the person in the proper performance of functions attaching to the person's professional capacity or their business relationship with the directors or the corporation); or…
Section 9 of the Act defines ‘director’ to mean:
(a) a person who:
(i) is appointed to the position of a director; or
(ii) is appointed to the position of an alternate director and is acting in that capacity;
regardless of the name that is given to their position; and
(b) unless the contrary intention appears, a person who is not validly appointed as a director if:
(i) they act in the position of a director; or
(ii) the directors of the company or body are accustomed to act in accordance with the person's instructions or wishes.
Subparagraph (b)(ii) does not apply merely because the directors act on advice given by the person in the proper performance of functions attaching to the person's professional capacity, or the person's business relationship with the directors or the company or body.
Mr Hammond was not formally appointed a director or secretary, of Rivits as is defined by ss.9(a) on 26 August 2013 because he had resigned as its director and secretary on 1 May 2013. The question then is whether he was an officer within the definition in ss.9(b)(i), (ii) or (iii) or a director within the definition of that word in ss.9(b)(i) or (ii) at that time.
I will deal first with the question of whether Mr Hammond could be said to be an officer of Rivits. It is not necessary to identify any particular ‘office’ that he might be said to have occupied.[21] All that is necessary is to determine whether it can be said that Mr Hammond fell within any of the relevant parts of the definition of the term ‘officer’ as it appears in the Act. It is convenient to deal with each aspect of the definition in turn.
[21] Australian Securities & Investments Commission v King [2020] HCA 4 at [48] to [59].

There is no evidence that Mr Hammond participated in making decisions that affected the whole part of the business of Rivits or, even that he had any authority to make those decisions after 1 May 2013. He was not an officer within the meaning of ss.9(b)(i).
Merely because he was a signatory to Rivits bank is not in my view enough to define him as an officer within ss.9(b)(ii). That can simply be explained by the fact that at one time, notably before 1 May 2013, he was in fact a director or secretary of Rivits and no-one ever bothered to tell the bank. That has some plausibility about it given Rivits did not trade after that date and given there is no evidence that the bank account was operated after that date. I do not even know if Rivits had any money in its bank accounts or if it transacted any business through them at the time. Even if there was evidence that Mr Hammond exercised his power over those accounts by reason of being signatory to them at some point after 26 August 2013, and there is none, the position is equivocal in terms of whether he was an officer because the definition in ss.9(b)(ii) requires that he have the capacity to affect significantly the corporation’s financial standing. The other circumstance referred to by ASIC, providing records and documents to the administrators, speaks of nothing more than the fact that he had possession of the documents by reason of his previous involvement as director and his current involvement tidying up some of its remaining business.
There is no evidence that suggests that as the director of Rivits, Mr Holder-Keeping was a person who acted in accordance with Mr Hammond’s instructions. There is nothing that would permit a finding as to customary conduct one way or the other. This is enough to take him out of the definition in ss.9(b)(iii) of officer and ss.9(b)(ii) of director.
There is no evidence that Mr Hammond acted in the position of director after 26 August 2013. There is no evidence that anyone acted in that position at all other than that Mr Holder-Keeping was appointed as a director of Rivits at that time. I have accepted Mr Hammond’s evidence that Rivits did not trade after 1 May 2013 other than in respect of ‘tidying up client loose ends.’ There is no evidence to the contrary. The suggestion that no records were produced to suggest that Mr Holder-Keeping had involvement by way of decision making or management of the company in Rivits after his appointment as its director or shareholder is consistent with the fact that Rivits did not trade after 1 May 2013. The proposition is as good for Mr Hammond as it is for Holder-Keeping.
I am a little sceptical about the suggestion that Mr Hammond was obliged to call Mr Holder-Keeping in order to make good his contention that he was not an officer or director, actual or shadow, at the relevant time and his failure to do so leads to some inference being drawn. I am not persuaded that in administrative review proceedings to which a regulator, especially one with significant investigatory and compulsive powers, is a party is entitled as a general proposition to the benefit of such an inference given its regulatory role and powers. The notion of ‘camps’ does not, in my view, assist greatly in regulatory proceedings. In general, it is true that a party seeking a favourable determination on an issue in administrative proceedings is required to bring evidence to support its position on an issue, but whether a regulator should adopt a position on an issue in the absence of complete, and in this case what would have been highly probative, evidence that it could have, upon due inquiry have obtained, is entirely another thing.
In any event, in circumstances where there appears to be no significant evidentiary dispute, I am not convinced that such an inference can or should be drawn. Mr Hammond did not need the assistance of Mr Holder-Keeping’s evidence to prove any matter upon which he relied as there was no direct evidence contrary his evidence. And, as I have said, I have accepted his evidence about those things.
I am not satisfied that Mr Hammond was at any time after 26 August 2013 a director, shadow director, or officer of Rivits.
BRIDAL
Bridal was incorporated on 7 May 2007 at which time Mr Hammond was its only director and secretary. On 1 March 2010 he resigned from both of those positions and Ms Stephens became its only director and secretary. It is not entirely clear, but at some stage after she became the director and shareholder of Bridal, most likely at some time in 2010, Ms Stephens also became its sole shareholder. The business of Bridal involves the retail sale of wedding dresses and other wedding garments.
Mr Hammond said in his evidence that he was not involved in the business at all: ‘I did the accounting, that was it’ both before and after he sold it to Ms Stephens in 2010.[22] Mr Hammond had no formal retainer, was not paid for his work and did not even render any fees to Bridal.[23] Of course, it should be remembered that contextually this was probably not all that surprising given that he and Ms Stephens were domestic partners.
[22] Transcript 70.35 – 70.45.
[23] Transcript 81.35 – 81.46.
Ms Stephens’ evidence was that she was fully responsible for the operations of Bridal.[24] She said she was the sole signatory on its bank accounts, that she made all purchases with suppliers, paid all monthly accounts and was fully in control of all aspects of the business.[25] She described Mr Hammond as ‘the accountant‘ who ‘dealt with all accounting matters’.[26] Ms Stephens said she was in control of Bridal.[27] Ms Stephens variously described the relationship between herself, Bridal and Mr Hammond in her evidence. In general it was reflected by her statement ‘when it comes to the legal side of it, I go to him for my advice’.[28] So, when the administrators visited Ms Stephens’ shop to speak to her about the administration she directed them to Mr Hammond;[29] when she was asked to complete the report as to affairs and provide the books and records of Bridal, Mr Hammond ‘helped her’ because she would not have known what to do;[30] she went to Mr Hammond for ‘accounting work’ and ‘when [she] needed assistance even though there was no formal arrangement in place about that’;[31] so far as the report as to affairs was concerned, Ms Stephens discussed matters with Mr Hammond and she did what Mr Hammond asked her to do.[32] Mr Hammond was an authorised signatory on Bridal’s bank account,[33] but did not ever transact on the account.[34] All of Bridal’s dealings with the ATO were undertaken by Mr Hammond.[35]
[24] Exhibit 5 at [e].
[25] supra.
[26] supra at [f].
[27] Transcript 118.25.
[28] Transcript 118.44.
[29] Transcript 120.10 – 120.15.
[30] Transcript 121.15 – 121.35.
[31] Transcript 129.40-45; 132.10-30.
[32] Transcript 152.20 -30.
[33] Transcript 129.5-129.15; Exhibit 1 page 395.
[34] Transcript 77.15 – 77.20.
[35] Transcript 150.1 -15; 151.15 – 35; 154.30-35.
On 1 March 2016, Bridal agreed to sell its business and assets to a company called Michelle Bridal Pty Ltd. Ms Stephens was the only director and shareholder of Michelle Bridal. Ms Stephens said in her statement that ‘the valuation and sale of the stock to myself, I was responsible for the valuation and transaction involved. Jason was not asked for advice in this matter’.[36] The statement is a little ambiguous referring as it does to ‘the transaction’ which is capable of referring to the transaction concerning the sale of the stock rather than the sale of the business. In any event, Mr Hammond was intimately involved in the sale of business transaction having given advice about it,[37] having witnessed the agreement[38] and most probably having prepared it.[39] The whole genesis of the sale of business agreement was in a discussion that Ms Stephens had with Mr Hammond. I infer from Ms Stephens’ evidence, especially her reliance upon Mr Hammond for ‘advice’ about matters and her apparent lack of knowledge of the details of matters to do with accounting, taxation, and legal matters, that it was more likely than not Mr Hammond’s idea to sell the business of Bridal to Michelle Bridal. It is unlikely that Ms Stephen could have come up with the idea herself. She, like in all legal and accounting matters, did what Mr Hammond told her to do. Her own evidence was that she had no idea about such matters. Ms Stephens did not know the amount paid for the business.[40] Ms Stephens did not know if Bridal had a lease in place over its premises.[41] Mr Hammond eschewed ‘any involvement in the transaction’[42] yet conceded in his evidence he witnessed the document, more significantly, gave advice about the transaction.[43] It was clear from Ms Stephens evidence about matters connected to accounting and taxation and legal matters she did not simply take advice from Mr Hammond, she did what he told her to do, or even just had him deal with those matters[44]. She knew nothing about such matters and so, it made sense, to leave them to ‘Jason’.
[36] Exhibit 5, paragraph [i}.
[37] Transcript 157.10 -157.15; 158.35-45.
[38] Transcript 160.25.
[39] Transcript 166.
[40] Transcript 169.15; 169.30 – 40.
[41] Transcript 170.40 171.10.
[42] Exhibit 6 page 5.
[43] Transcript 94.30 – 90.35.
[44] Transcript 154.30
Perhaps the most telling evidence as to Mr Hammond’s role in Bridal is found in the questionnaire that was submitted to the liquidators. Ms Stephens said she and Mr Hammond completed the document together.[45] Mr Hammond signed the document. There is a question asked in the document: ‘’Who was responsible for the day-to-day management of the company?” the handwritten answer in Mr Hammond’s handwriting[46] appears “Jason Hammond.”[47] Ms Stephens was unable to explain why the document recorded Mr Hammond’s name even though she maintained that that it was not a correct statement.[48] Mr Hammond sought to explain the handwriting by saying that “I actually thought when I was reading that, who was the company accountant and was in charge of the day to day accounting which I’m in charge of the accounting, that’s how I read that question[49]”.
[45] Transcript 144.10 -145.15.
[46] Transcript 86.26.
[47] Exhibit 2 at 443.
[48] Transcript 145.40 - 146.25.
[49] Transcript 86.30.
I accept ASIC’s submission that the explanations for this apparent ‘error’ are simply not credible. There are several reasons for this. First, the words in the question are plain, ordinary English words and it is difficult to read the word ‘business’ as ‘accountant’, but for one possible explanation to which I will return to in a moment. Second, the document itself draws the distinction between who runs the business on the one hand and who ‘is the accountant’ on the other hand.[50] Third, other answers within the document specifically use the word ‘accountant’. Fourth, Mr Hammond is obviously well acquainted and qualified in business matters holding the educational qualifications and having the experience he does. That he would misunderstand the words ‘accountant’ and ‘business’ when used in such a document does not ring true. Fifth, both Mr Hammond and Ms Stephens prepared the document together and it is difficult to understand how they both, sitting down together completing such a document, would have got things so terribly wrong in relation to answering what on their evidence was a completely vanilla question.
[50] Transcript 86.36.
There were answers in the document that Mr Hammond signed that appeared to be clearly wrong, such as those concerning whether Bridal had disposed of assets other than in the ordinary course of business, whether it had leased premises and when it was first realised that the company might have to go into external administration.[51] When presented with his signature certifying to the truth of his answers on the document Mr Hammond initially tried to deny any such acknowledgment, but when shown the certification, accepted that his answer relating to the question about external administration ‘wasn’t true and complete.’[52] It rather suggests that Mr Hammond completed the document without a great deal of care or regard for the truth of what he was writing and perhaps in the same way, was ‘unguarded’ in respect of some of his answers concerning his role in Bridal such as his role as the person responsible for the day to day operations of the business.
[51] Transcript 88.25 – 90.45.
[52] Transcript 91.20 -25.
There is another aspect to this which may also explain Mr Hammond’s answer, namely that the line that he drew between being the accountant for the business and running the business on a day to day basis was not so neatly drawn as others might see it or, more relevantly, how objectively it might be regarded. So, for example, giving ‘advice’ about the sale of business agreement was seen by him as no more and no less than giving accounting, or even legal, advice. It was much more than that because Ms Stephens routinely turned to, and did, what he told her to do in relation such matters. The dividing line between being the accountant and running the business, at least for Mr Hammond, was probably even less clear given that Ms Stephens was his domestic partner.
It was also evident from some of the evidence that Mr Hammond often expressed his answers about questions concerning the business using the first person plural pronoun referring to himself and Ms Stephens.[53] On its own this may not be significant, but taken together with the other evidence, it strongly suggests that Mr Hammond was much more than in any objective sense the accountant for Bridal.
[53] Transcript 64.24, 64.26, 64.46, 63.1, 97.32, 101.32.
I do not need to find that the business was operated as a family business for the purpose of this decision, but loosely speaking, that is probably fairly close to the fact of the matter; Ms Stephens undertaking the hands-on work of managing the shop and selling the dresses, and Mr Hammond directing the financial and legal aspects associated with the business. Mr Hammond’s role went far beyond just dealing with ‘paperwork’ as Ms Stephens’ evidence persuasively demonstrated. So far as matters of taxation, superannuation, accounts, workers compensation, and ultimately ‘selling’ the business, they were matters with which Mr Hammond was intimately involved and which he directed because he was, after all, the businessman who Ms Stephens left such matters to. When Mr Hammond said in the questionnaire that he was responsible for the day to day running of the business that was, in fact, a correct statement.
On 23 March 2016 Bridal was wound up. On 29 April 2016, the liquidator lodged a s.533 report in relation to Bridal in which he suggested that Bridal would return less than 50 cents in the dollar to creditors and that there may have been misconduct in the management of Bridal.[54] The creditors were identified as Mr Hammond, Ms Stephens and the ATO.
[54] Exhibit 1 at 299 - 355.
On 6 July 2017, the liquidator lodged a further report expressing the opinion that Mr Hammond may have been a shadow director of Bridal. It also identified an outstanding taxation liability of something in the order of about $283,000 of which $195,000 was attributable to the superannuation guarantee charge.
WAS MR HAMMOND AN OFFICER OF BRIDAL?
Mr Hammond was not formally a director or officer of Bridal at any time after 1 March 2013. After then, I find that he was an officer within the definition of that term in ss.9(b) and a shadow director within the meaning of the word director in ss.9(b).
I find that Mr Hammond participated in making decisions that affected the whole or a substantial part of Bridal’s business. The sale of the business from Bridal to Michelle Bridal is the most significant aspect of his participation which is found in the evidence. But that is not to say that he was not involved in participating in other decisions being responsible as he was for the day to day management of Bridal and having responsibility for the financial and legal aspects of the business. He had the capacity to affect Bridal’s financial position if only because in all such matters, as Ms Stephens said in her evidence, she relied upon his ‘advice’ which she acted upon without demur because she simply had no idea about such matters; he was the person whose instruction Ms Stephens customarily acted upon. It is significant that any ‘advice’ that Mr Hammond gave could not be fairly considered as advice given by him in the performance of professional capacity or by reason of his business relationship with Ms Stephens. Nor in reality was it advice at all because Ms Stephens simply acted upon it without question.
The so called ‘advice’ was not given in any professional capacity at all, if anything being a product of his personal relationship with Ms Stephens and was not part of any business relationship. In almost every respect, his conduct came within the definition of officer in the Act. It also fell within the definition of director: having regard to Ms Stephens’ evidence, it is clear that she acted in accordance with Mr Hammond’s instructions, if not wishes, over almost every aspect of the company’s activities.
DONGROVE
The company extract for Dongrove shows that Mr Hammond was the director and shareholder of Dongrove between 12 November 2012 and 30 June 2013, a period of about 7 and a half months.[55] On 16 July 2013, only weeks after Mr Hammond ceased being its director, Dongrove was wound up.[56] There is no satisfactory evidence that would displace the findings that follow from those documents. On 19 August 2013, a report was submitted by the liquidator under s.533 of the Act which indicated that no dividend would be paid to creditors and that the total debts owing at the time were $46,606.
[55] Exhibit 2 at 964-965.
[56] Exhibit 2 at 966.
THE THRESHOLD IS PASSED
It follows from the findings I have made in relation to Bridal and Dongrove that Mr Hammond was an officer who within 12 months after he ceased to be an officer of each of them, each of them was wound up and a liquidator lodged a report under ss.533(1) about the corporation's inability to pay its debts. He was involved in the relevant sense in two corporate failures within the prescribed 7 year period. The section is engaged because together with that finding I have found already that the notice and procedural fairness requirements in s.206F(1)(b) are satisfied.
IS DISQUALIFICATION JUSTIFIED?
The next question is, whether as provided for by ss.206F(1)(c), disqualification is justified. Sub-section 206F(2) requires that account be taken of whether the companies in question are related, the person’s conduct in relation to the management business or property of any corporation, whether disqualification is in the public interest and any other matters that are considered appropriate.
The two corporations considered here are not related corporations within the meaning of the Act.
It is fair to describe Mr Hammond’s conduct in relation to Bridal at a bare minimum as careless. The effect of the sale of business agreement between Bridal and Michelle Bridal for which he was almost singularly responsible had the resultant effect that superannuation guarantee charges were left unsatisfied and employee entitlements were disregarded. This was one undoubted effect of the sale of business agreement.
Nor is it a matter of technicality that the liquidator expressed the opinion that Bridal intentionally disregarded its superannuation guarantee obligations and that it had done so over most of its years of operation between 2009 and 2016.[57] Mr Hammond was the person who gave instructions about taxation and legal matters: the payment of superannuation guarantee contributions, and any shortfall, were exclusively within his sphere. That there was a sustained long term failure to pay workers compensation premiums is also important.[58] These kinds of matters were the very kinds of matters upon which Ms Stephens customarily relied upon his instruction about, especially as they involved matters to do with taxation and dealings with the ATO. That the taxpayer is out of pocket in the order of something like $280,000 is a significant matter to consider in determining whether disqualification is justified and for what period.
[57] Exhibit 1 at 315-316.
[58] Exhibit 1 at 316.

While, the liquidator could not express a view about insolvent trading, it is apparent that Bridal for many years of its operations, six of the last eight, traded at a loss.[59] In the view I take, that is a significant factor given that one of the important objects of s.206F is to guard against a pattern of corporate failure.[60]
[59] Exhibit 1 at 320..
[60] Quinlivan v Australian Securities and Investments Commission [2010] AATA 113 at [70].
I am satisfied that there is enough evidence to sheet home to Mr Hammond’s responsibility for the plight of Bridal and the fact that it was able to avoid completely a significant liability by recourse to the sale of its business only weeks before it was wound up.
Mr Hammond did not express any remorse or contrition for his behaviour. This might be explained by reference to what I have said about his lack of understanding about the line which he failed to see between giving instructions to Ms Stephens and giving her advice, but whatever the explanation may be, it does not excuse his conduct. His lack of insight into his conduct is relevant in so far as protection of the public in concerned.
It is important that apart from the fact of Mr Hammond’s directorship of Dongrove and its failure, ASIC does not rely on any fact relevant to it. Nonetheless it failed and Mr Hammond was one of the people at its helm during the period of 12 months before it was wound up. Its failure brings with it, for Mr Hammond, the fact that he was involved in two corporate failures within about 4 years.
The public interest is of considerable importance to the question of whether a disqualification order should be made. The public must be protected from corporate failure especially in my view where those corporate failures are at a cost to the taxpayer. The long period over which losses were incurred and superannuation contributions were not made as well as the significant amount that was left owing to the ATO are important considerations in the public interest. The public must be protected and the imposition of a period of disqualification will serve as both a personal deterrent for Mr Hammond and general deterrent for other directors and officers of corporations. The importance of complying with superannuation obligations like any other employee entitlements is something that directors and officers of corporations must take care about. Only by imposing a period of disqualification can those things be brought home to the corporate community and to Mr Hammond personally.
I am satisfied that a disqualification is justified and that the appropriate period of any disqualification should be 3 years.
ORDERS
The decision of the delegate will be varied so that Mr Hammond is disqualified from managing a corporation for a period of 3 years from 1 August 2018.

I certify that the preceding 66 (sixty-six) paragraphs are a true copy of the reasons for the decision herein of Mr Rob Reitano, Member

...........................[SGD].............................................
Associate
Dated: 13 May 2020

Date(s) of hearing: 26 November 2019, 27 November 2019 and 28 November 2019

Applicant: In person

Counsel for the Respondent: Mr A Hoel

Solicitors for the Respondent: Ms J Birch

Date(s) of hearing:	26 November 2019, 27 November 2019 and 28 November 2019
Applicant:	In person
Counsel for the Respondent:	Mr A Hoel
Solicitors for the Respondent:	Ms J Birch