Wang and Australian Securities and Investments Commission - [2023] AATA 1568

Wang and Australian Securities and Investments Commission [2023] AATA 1568 (7 June 2023)
Division:TAXATION AND COMMERCIAL DIVISION
File Number: 2022/1035
Re:Harry Wang
APPLICANT

AndAustralian Securities and Investments Commission
RESPONDENT

DECISION
Tribunal:R Cameron, Senior Member
Date:7 June 2023
Place:Melbourne

The Tribunal sets aside the reviewable decision and, in substitution, decides that the applicant should not be disqualified from being involved in the management of corporations pursuant to section 206F of the Corporations Act 2001.
...............[sgd].........................................................
R Cameron, Senior Member
Catchwords
CORPORATIONS – ASIC – banning order – determination pursuant to section 206F of the Corporations Act 2001 (Cth) by a delegate of ASIC that the applicant should
be disqualified from managing corporations for five years – reviewable decision set
aside and substituted
Legislation
Corporations Act2001 (Cth)
Cases
ASIC v GetSwift Ltd (Liability Hearing) [2021] FCA 1384
ASIC v Healy (2011) 196 FCR 291
Lee v ASIC [2020] AATA 2661
Murdaca v ASIC (2009) 178 FCR 119
Seymour v ASIC [2017] AATA 2581
Wang v ASIC [2022] AATA 457
Zivanovic v ASIC (No 2) (2018) 126 ACSR 634
REASONS FOR DECISION
R Cameron, Senior Member
7 June 2023
INTRODUCTION.

The applicant seeks review of a decision made on 21 January 2022 by a delegate of the respondent disqualifying him from managing corporations without its leave for a period of five years under section 206F of the Corporations Act2001 (“the reviewable decision”).[1]
[1] The reviewable decision is document T-2.3 of the T documents.
On 18 February 2022 the Tribunal stayed the operation and implementation of the reviewable decision until the hearing and determination by the Tribunal of this application for review.[2]
[2] Wang v ASIC [2022] AATA 457.
THE EVIDENCE BEFORE THE TRIBUNAL.
The following witness statements were tendered in evidence:
(a)Harry Wang dated 22 March 2022 and 24 May 2022;
(b)Michelle Wang dated 30 March 2022 and 30 May 2022;
(c)Glen Anthony Crisp dated 22 March 2022;
(d)Michael Thomas Lescai dated 22 March 2022;
(e)Stuart Hayes dated 22 March 2022; and
(f)Michael Edward Lhuede dated 30 May 2022 and 24 August 2022.
Several of the above witness statements had attached to them a significant volume of documentary material.
Each of the witnesses who made witness statements gave evidence from the witness box.
In addition to the several witness statements and documents annexed to them, that were lodged and are referred to above, the T documents, the supplementary T documents and further supplementary T documents were also in evidence before the Tribunal.
SECTION 206F OF THE CORPORATIONS ACT.
Section 206F of the Corporations Act confers upon the respondent the power to disqualify a person from managing a corporation for up to 5 years. The discretion conferred by this section is enlivened if the conditions contained therein are satisfied. It is appropriate to reproduce the relevant subsections of section 206F in full:
Power to disqualify
(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) 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.
(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.
The power of a decision maker, such as the respondent or this Tribunal, under section 206F of the Corporations Act was the subject of some consideration in submissions made by the parties to this application. Its application has been the subject of careful review in several authorities that were referred to.
The application of section 206F is fairly well-settled when one reviews those authorities. Such a power to disqualify a person from the management of corporations must be exercised for the purposes for which it was granted. Such purposes are firstly, the protection of all persons who deal with corporations from the consequences of the actions of directors who, either through incompetence or dishonesty or a combination of the two, bring about the failure of corporations and thus cause loss to others. A further purpose is the maintenance of professional management standards in the public interest.[3]
[3] Reference was made on submissions by both parties to the decision of the Full Court of the Federal Court of Australia in Murdaca v ASIC (2009) 178 FCR 119 at [101].
Notwithstanding these purposes, a decision-maker is not required to be satisfied as to

the existence of incompetence, dishonesty or both before exercising the power under section 206F.[4]
[4] Zivanovic v ASIC (No 2) (2018) 126 ACSR 634 at [28].
The extent of a director’s causal contribution to the failure of a company is a particularly important consideration for the decision-maker, such as the Tribunal or the respondent, having regard to the protective purpose identified in the authorities.[5]
[5] Seymour v ASIC [2017] AATA 2581 at [242], referring to the passage of the Full Court of the Federal Court of Australia in Murdaca, ibid (n 3), at [101].
There may be an occasion where a director’s conduct in relation to the affairs of a company may be worthy of criticism, but not weigh heavily in favour of disqualification where such shortcomings were not the cause of the insolvency or failure of the company.[6]
[6] See for instance Lee v ASIC [2020] AATA 2661 at [35]-[36].
General deterrence is an important object of and may justify a disqualification order under section 206F.[7]
[7] Zivanovic v ASIC (No 2) at [39].
SOME OBSERVATIONS ON THE APPLICANT’S EVIDENCE.
The applicant made two witness statements.[8] He also gave viva voce evidence. He was searchingly cross-examined. Whilst occasionally his evidence in the witness box was somewhat vague, overall, the Tribunal found him to be a credible witness. His evidence was not exaggerated, embellished or reconstructed. He did not present as a witness who was unreliable or otherwise untruthful.
[8] The first witness statement of the applicant was dated 22 March 2022. The second witness statement of the applicant was dated 24 May 2022.
The respondent, particularly in its closing submissions, contended that the Tribunal should not accept what was asserted in his witness statements.[9] The Tribunal infers also that the submission went so far as to contend that his evidence overall should be rejected. The Tribunal, because it found him to be a credible witness, cannot accept these contentions on behalf of the respondent and accepts the evidence given by the applicant both in his witness statement and from the witness box.
[9] Paragraph 18 of the respondent’s Outline of Closing Submissions dated 15 July 2022 is referred to. The respondent also contended that the Tribunal should not accept what was contended in the Submissions for the Applicant dated 6 June 2022 lodged on his behalf.
BACKGROUND.
There were four companies with which this application is concerned that the applicant has been a director of, which were wound up and a liquidator appointed who lodged reports under section 533(1) of the Corporations Act.
It is not controversial in this case that the discretion under section 206F(1)(a) of the

Corporations Act
to disqualify the applicant has been enlivened. Lest it needs to be repeated, this is because he was a director of four companies which have been wound up with no distribution to unsecured creditors. Details of those companies and their liquidation will be outlined later in these reasons.
The applicant was a director of Jade Capital Partners Pty Ltd (“Jade Capital”) from

1 September 2017 until 19 February 2019. Jade Capital was wound up on 26 April 2019 and Clifford John Sanderson (“Sanderson”) was appointed liquidator. On 12 July 2019 the liquidator lodged with the respondent a report under section 533(1) of the Corporations Act estimating that the dividend to unsecured creditors to be zero cents in the dollar.[10]
[10] See Form EX01 lodged by the liquidator document T-4.3 of the T documents, heading “Unsecured creditors”, at page 103.
The applicant was a director of Recycling Solutions (Vic) Pty Ltd (“Solutions”) between

18 November 2016 and 2 September 2020. Solutions was wound up on 4 February 2019 and Glen Anthony Crisp (“Crisp”) was appointed liquidator. On 30 April 2019 the liquidator lodged with the respondent a report under section 533(1) of the Corporations Act estimating that the dividend to unsecured creditors would be zero cents in the dollar. The estimated deficiency for Solutions was $5,778,537.[11]
[11] See the liquidator’s “Funded supplementary report to ASIC", document T-4.9 of the T documents at page 549, section 5.1 "Assets and liabilities/report as to affairs/estimated deficiency."
In a Funded Supplementary Section 533 report to the respondent concerning the applicant, Crisp expressed a liquidator’s opinion as to Solutions’ failure. They were:
(a)a result of insufficient sales, large overhead costs and loss of funding from a related party creditor, the Holding Company (Recycling Solutions Holdings Pty Ltd (“Holdings”)). The Holding Company’s funding was primarily provided by entities related to the applicant.
(b)The failure was also attributable to the following activities purportedly conducted by a co-director, Salvatore Cala (“Cala”):
(i)issuing duplicate invoices which overstated the company’s profitability; and
(ii)unauthorised salary increases made by Cala to himself and his wife.[12]
[12] T Documents T-4.9, page 548 part 4.2 “Liquidator’s opinion as to the Company’s failure”.
As noted, Crisp the liquidator determined that as at the date of winding up Solutions’ unsecured creditors were owed $5,778,537. The majority of this unsecured debt, directly or indirectly, was owed to the applicant or entities related to him. (Indeed, the respondent acknowledged that the failure of the recycling companies had a significant financial impact on the applicant.[13]) These included the following debts:
(a)Holdings: $4,845,369.57;
(b)Fortune Capital Fund Pty Ltd: $306,621.53. The applicant is the sole director and shareholder of Fortune Capital.
(c)The applicant: $496.06.[14]
[13]
[14] See the liquidator’s “Funded supplementary report to ASIC", document T-4.9 of the T documents at page 551, section 6 “Details of liabilities", 6.3 "Ordinary unsecured creditors".
The applicant was the sole director of Recycling Solutions Hire (Vic) Pty Ltd (“Solutions Hire”) having been appointed on 18 November 2016. It was also wound up on 4 February 2019 and Crisp appointed liquidator. On 29 April 2019 Crisp lodged with the respondent a report under section 533(1) of the Corporations Act estimating that the dividend to unsecured creditors would be zero cents in the dollar. The estimated deficiency for Solutions Hire was $386,426.
The applicant was a director of Recycling Solutions Capital (Vic) Pty Ltd (“Solutions Capital”).[15] He was also appointed a director of this company on 18 November 2016. This company was also wound up on 4 February 2019 and Crisp appointed liquidator. On

30 April 2019 Crisp lodged with the respondent a report under section 533(1) of the Corporations Act estimating the dividend to unsecured creditors would be zero cents in the dollar. The estimated deficiency for Solutions Capital was $50,267.
[15] Solutions, Solutions Hire and Solutions Capital are collectively referred to as “the recycling companies”.
Holdings was the sole shareholder of Solutions, Solutions Hire and Solutions Capital.
It is also not controversial that the recycling companies were fully owned subsidiaries of Holdings and were thereby related to one another.[16] Jade Capital was a separate and distinct company and not related to the recycling companies.
[16] Section 260F(2)(a) Corporations Act.
On 27 September 2021 the respondent prepared a “Notice to demonstrate why disqualification should not occur” (“the 206F notice”) The 206F notice was served on the applicant. Attached to that notice was a document described as “Areas of Concern Relating to Harry Wang”.[17] Therefore, the requirements of section 206F(1)(b) were satisfied by the respondent. The concluding paragraph of the “Areas of Concern Relating to Harry Wang” attachment to the 206F notice stated that the respondent was concerned that:
(a)the applicant may have failed to understand the role and duties of a director;
(b)
the applicant may have failed to perform, or perform adequately, the duties of

a director;
(c)It may not be in the public interest to allow a director of multiple failed corporations that are unable to pay any or any substantial part of the debts owed to unsecured creditors to continue being concerned in the management of corporations.
[17]
The 206F notice contained a section headed “Opportunity to be Heard”, which informed the applicant that he could exercise his right to be heard by making a written submission and/or appearing before a person the respondent had appointed to hear the matter (the delegate) and making submissions orally and appearing before the delegate to present evidence.
On 6 December 2021 the applicant’s then lawyers, in the exercise of his right to be heard contained in the 206F notice, served on the respondent written submissions.[18] On

14 January 2022 annexures referred to in those written submissions were also served on the respondent.[19]
[18] Document T-5 of the T documents.
[19] Document T-6 of the T documents.
On 21 January 2022 the reviewable decision was made by a delegate of the respondent. The reviewable decision included “Reasons for Decision” made by the delegate.[20]
[20] Document T-2.3 of the T documents.
It is useful to summarise some of the key points that emerge from the delegate’s reasons:
(a)The discretion under section 206F(1) to disqualify the applicant was enlivened because the applicant was a director of the companies which had been wound up with an estimated distribution to unsecured creditors of zero cents in the dollar.
(b)The recycling companies were fully owned subsidiaries of a common holding company. However, Jade was separate and distinct, and not related to such entities.
(c)With respect to the recycling companies, the applicant’s purported delegation of his duties for the first two years of his directorship and his reliance on Mr Cala created an oversight vacuum that allowed the conduct of Mr Cala to remain undetected.
(d)That the applicant did not involve himself in the company’s management, critically evaluate the information he was given, or otherwise attend to his director’s duties in any way.
(e)That he did not appropriately involve himself in the management of the companies.
(f)That the applicant does not understand the obligations, duties and responsibilities of a director.
(g)The applicant failed to ensure that Jade and Solutions made the required lodgements.
(h)The applicant breached his obligation to prevent Jade Capital from trading while insolvent.
(i)The applicant was not entitled to rely upon the business judgment rule as he had not exercised any judgment and had failed to take an active interest in the affairs of the companies.
(j)The applicant did not fulfil his obligations and duties to take an interest in the management of the companies and did not avail himself of his rights as a director. By failing to do so he was taken advantage of, and his investments failed.
(k)It would not be in the public interest to allow a director who has demonstrated that he does not understand the role and duties of a director to continue to be involved in the management of corporations.
COMPANY DIRECTORS’ DUTIES.
The applicable principles concerning the duties and role of company directors assume critical importance in this application. Several authorities were referred to in submissions made by counsel appearing for the parties.
A helpful summary of the duties and role of company directors can be found in the decision of Middleton J in ASIC v Healy.[21] It is worthwhile quoting several paragraphs from that decision.
[21] (2011) 196 FCR 291.
[16] The case law indicates that there is a core, irreducible requirement of directors to be involved in the management of the company and to take all reasonable steps to be in a position to guide and monitor. There is a responsibility to read, understand and focus upon the contents of those reports which the law imposes a responsibility upon each director to approve or adopt.
[17] All directors must carefully read and understand financial statements before they form the opinions which are to be expressed in the declaration required by s 295(4). Such a reading and understanding would require the director to consider whether the financial statements were consistent with his or her own knowledge of the company’s financial position. This accumulated knowledge arises from a number of responsibilities a director has in carrying out the role and function of a director. These include the following: a director should acquire at least a rudimentary understanding of the business of the corporation; whilst not required to have a detailed awareness of day-to-day activities, a director should monitor the corporate affairs and policies; a director should maintain familiarity with the financial status of the corporation by regular review and understanding of the financial statements; a director, whilst not an auditor, should still have a questioning mind.
[18] A board should be established which enjoys the varied wisdom, experience and expertise of persons drawn from different commercial backgrounds. Even so, a director, whatever his or her background, has a duty greater than that of simply representing a particular field of experience or expertise. A director is not relieved of the duty to pay attention to the company’s affairs which might reasonably be expected to attract enquiry, even outside the area of the director’s expertise.
[19] The words of Pollock J in the case of Francis v United Jersey Bank (1981) 432 A 2d 814 quoted with approval by Clarke and Sheller JJA in Daniels v Anderson (1995) 37 NSWLR 438, make it clear that more than mere “going through the paces” is required for directors. As Pollock J noted, a director is not an ornament, but an essential component of corporate governance.
[20] Nothing I decide in this case should indicate the directors are required to have infinite knowledge or ability. Directors are entitled to delegate to others the preparation of books and accounts and the carrying on of the day-to-day affairs of the company. What each director is expected to do is to take a diligent and intelligent interest in the information available to him or her, to understand that information, and apply an inquiring mind to the responsibilities placed upon him or her. Such a responsibility arises in this proceeding and adopting and approving the financial statements. Because of their nature and importance, the directors must understand and focus upon the content of financial statements, and if necessary, make further enquiries of matters revealed in these financial statements call for such enquiries.
…
[171] The position of non-executive directors (as distinct from directors in general) has also been the subject of judicial consideration. In
ASIC v MacDonald, Gzell J noted at [255] that:
While Clarke and Sheller JJA in Daniels rejected the test propounded by Rogers CJ Comm Div for the limit of a director’s entitlement to rely on management, they did recognise that the role of a non-executive director was to guide and monitor the management of the company rather than to be involved at an operational level.

With respect to company directors’ obligations to take reasonable steps to place themselves in a position to guide and monitor the management of a company, they are entitled to rely upon others. However, this ability to place reliance upon others is subject to an exception where the director knows, or by the exercise of ordinary care should know, facts that would deny such reliance. It is established that a non-executive director may rely on management and other officers to a greater extent than an executive director, but beyond this no general statement can be made.[22]
[22] ASIC v GetSwift Ltd (Liability Hearing) [2021] FCA 1384 at [2535] per Lee J and the authorities referred to therein.
THE ISSUES.
The Tribunal considers that having regard to the construction of section 206F(2) of the Corporations Act the following issues arise for its consideration:
(a)Whether the applicant understands and fulfils the obligations, duties and responsibilities of a director having regard to his conduct;
(b)Whether disqualification would be in the public interest, including:
(i)Whether the applicant is a person from whom the public ought or needs to be protected.
(ii)Whether the applicant’s conduct in his directorships of any of the affected companies brought about their failure.
(iii)Whether the public interest weighs in favour of or against disqualification.
(c)Whether any other matters weigh in favour of or against disqualification.
JADE CAPITAL.
The applicant was a director of Jade Capital from 1 September 2017 until 19 February 2019. He stated that he was a “non-executive director” and did not receive any remuneration for serving as a director. As he put it, he was not involved in the day-to-day running of the business or a member of its executive management team. He said he relied upon the executive management team to manage the day-to-day operations of the company.
Much was made in cross-examination and in submissions by the respondent about the applicant’s use of the words “non-executive director” in his witness statements and when in the witness box. The term was not used in submissions made by the applicant to the respondent’s delegate, which he readily conceded had been prepared in accordance with his instructions.[23] The Tribunal does not consider that the applicant’s use of the term more recently detracts from the credibility of his evidence. The applicant stated in the witness box, and the Tribunal accepts such evidence, that he was aware of the term a long time ago. From the evidence given by the applicant it appears that the term was more likely than not referred to by his legal advisers in the course of preparation for this application, and understandably he has resorted to its use more frequently because it is the terminology adopted in many of the authorities, and more commonly used by lawyers familiar with the intricacies of company law and directors’ duties.
[23]
The applicant in a submission to the delegate, and in the witness box, readily admitted that the day-to-day management of Jade Capital’s business was delegated to the other directors.[24] He also admitted he was a passive investor and director.[25] He also stated that he was not the one making on the day-to-day running of the business.
[24] See the letter dated 6 December 2021 from the applicant’s then lawyers to the delegate (Document T-5.1). See also Transcript page 168, lines 40-44 and page 169, lines 5-6.
[25] Transcript page 176, lines 1-2.
The respondent contends that these concessions are admissions made by the applicant which confirmed his passive director status and a complete lack of involvement in the decision-making and management of Jade Capital. For reasons that will be articulated later, whilst the Tribunal accepts that the applicant was a passive investor as he described it, it does not accept that this concession, or admission, is an acknowledgement that he in some way abrogated his responsibilities as a company director of Jade Capital. He may well have delegated the day-to-day management to his fellow executive directors, which is understandable and quite permissible, but it does not mean that he neglected his responsibilities to the company as a director. One is prompted to recall the observations of Middleton J in ASIC v Healy that directors are entitled to delegate to others the preparation of books and accounts, and the carrying on of the day-to-day affairs of the company.[26] They are not required to have a detailed awareness of day-to-day activities.
[26] See ASIC v Healy (2011) 196 FCR 291 at [20].
The applicant gave evidence to the Tribunal describing precisely what he did in the execution of his duties as a non-executive director of Jade Capital.
He stated that he attended board meetings, read and considered board papers that were furnished to him, together with Jade Capital’s financial statements. His evidence was that all board members received a set of board papers containing such documentation in advance of directors’ meetings. In addition to the current financial statements, the board papers included minutes of previous directors’ meetings that were held. His evidence was that upon receipt of such documentation he would closely consider them.
Additionally, the applicant stated that by reason of the examination of the board papers that he undertook, and other enquiries that he made, he was at all times satisfied that Jade Capital kept adequate books and records in accordance with all of its obligations. He was also aware that proper books and records were kept because the company’s auditors signed off on the accounts each year. In the witness box he described how as a non-executive director he was not involved in the day-to-day running of the business. He explained that he was more involved in making high-level decisions such as how to improve the performance of the business. He described it as being more on the strategic level.[27]
[27] Transcript page 176, lines 12-16.
The applicant said that he also undertook his own investigations, including probing staff members and co-directors of Jade Capital, to more accurately understand the workings of the company and properly assess its financial position. By way of example, the applicant referred to receiving on 13 March 2018 from the Financial Controller of Jade Capital copies of the company’s balance sheet and profit and loss statements as at 28 February 2018, together with the minutes of the previous board meeting held on 12 December 2017. Following review of those documents, he formed concerns with respect to the company’s cash flow and profitability. He arranged a face-to-face meeting with two of his co-directors James Clinnick (“Clinnick”) and Matthew McCrow (“McCrow”), who were executive directors of Jade Capital, to express his concerns. He also received by email on 4 April 2018 from Clinnick a cash flow forecast to the end of that financial year for the purposes of subsequent discussion at the meeting to be held on that day.[28] At that meeting the cash flow forecast was reviewed and discussed by all those present. The applicant says that he suggested that capital raising be discussed at the next board meeting. He says that this approach to consideration of the company’s financial affairs was indicative of what he did throughout his time as a director of Jade Capital. This evidence is accepted by the Tribunal.
[28] The email from Clinnick to the applicant together with the attached cash flow forecast to 30 June 2018 is at pages 96-97 of exhibit “HW-A” of his first witness statement.
The applicant joined in a board meeting in February 2019 during which there were significant deliberations concerning legal proceedings that had been brought against Jade Capital. A claim was made by a customer of a Corporate Authorised Representative (“CAR”) of the company to the Australian Financial Complaints Authority (“AFCA”). The applicant probed his fellow directors and executives as to what steps had been taken to defend such a claim. He also probed them as to what measures had been implemented to prevent such events that gave rise to such a claim recurring. Suggestions were made by the co-directors, particularly Clinnick, as to what could be done about the claim and the implementation of measures to prevent a recurrence.
The respondent did not contend that the applicant was in any way involved in the conduct that led to the claims to AFCA being made.[29] However, it did submit that the fact the applicant became a director of a company in which such conduct was taking place highlighted the importance of him paying attention to the affairs of the company at all times. Additionally, it contended that the fact that there was an ongoing dispute with AFCA was relevant to the appropriateness of the applicant seeking to delegate his responsibilities as a director. The Tribunal finds this contention difficult to accept. There are several reasons for this. Firstly, as will be explained in more detail later, the subject matter of the first claim made by a customer of a CAR to AFCA occurred before he became a director. The second claim occurred shortly afterwards. They arose from the day-to-day trading operations of Jade Capital, not matters that a non-executive director would normally be expected to be involved in. Further, the respondent did not identify what the applicant could have done, acting as a competent director properly undertaking his role and duties as a non-executive director, over and above what occurred and what he did. He was appraised by the executive directors of the steps that had been undertaken to defend the claim and probed them about ensuring there would be no recurrence of such claims. It seems that all that could have been done with respect to these claims had been attended to by the executive directors with whom the applicant conferred, namely Clinnick and McCrow.
[29] See paragraph 53 of the respondent’s Statement of Facts, Issues and Contentions dated 12 May 2022.
In his capacity as a director of Jade Capital the applicant periodically conferred with his fellow directors concerning the business and its operations. He attended its offices in Sydney from time to time. During such attendances he probed its staff as to its functions. This questioning included details of the software used by Jade Capital to carry out its trading. On one occasion, a staff member in the office demonstrated to him the operation of the company’s trading platform. Additionally, he was shown the company’s trading history data and profits made from such trades. They were steps that a company director acting prudently would carry out. This evidence is accepted and such steps also seem to be consistent with him carrying out his functions as a director in a prudent manner.
During the contact that the applicant clearly regularly had with Clinnick and McCrow he probed them as to how they managed client money. They explained to him how this was undertaken showing him the bank account into which client funds were deposited and managed by two directors and the financial controller. The applicant also probed them about the source of the company’s clients or customers. McCrow explained to him that Jade Capital worked with people who were described as “introducers” to whom the company paid a one-off commission. These steps are indicative of a competent company director bringing a considered mind to the task.
The applicant also probed his co-directors concerning which bank was used as a clearing house for Jade Capital’s transactions including foreign exchange settlements. He suggested to them that they contact a Westpac officer that he knew together with Velocity Trade who he had been trading with sometimes as they may have been able to offer the company a better deal.
The liquidator of Jade Capital, Sanderson, prepared a Funded Supplementary

Section 533 report dated 12 June 2020.[30]
[30] Document T-4.4 of the T documents.
At the outset it should be observed that in the supplementary report Sanderson stated that he was unable to form an opinion regarding the causes of the company’s failure.[31] The applicant contends, with some force and effect, that in the light of this conclusion how can it be open to the Tribunal as decision-maker to conclude that the applicant’s conduct as a non-executive director caused such failure when the operative causes themselves could not be identified by the liquidator? The Tribunal agrees with this contention.
[31] See paragraph 4.2 of the Funded Supplementary Section 533 report of Sanderson at paragraph 4.2 “Liquidator’s Opinion as to the Cause of the Company’s Failure” (pages 120-121of the T documents). In that paragraph, he identifies three factors that in his opinion were likely to have contributed to the company's failure. They were, continuing trading losses, a failure to comply with statutory reporting obligations and complaints made against it by former clients to the Australian Financial Complaints Authority.
Sanderson also opined in the Funded Supplementary Section 533 report that the applicant may have failed to comply with his obligations as a director of Jade Capital to maintain proper books and records. He identifies 12 categories of books and records that he considered the company of that type should as a minimum maintain. The applicant contends with some force and effect that Sanderson did not identify what documents, if any, were lacking. It is also contended by him that in Annexure 13 of that report the liquidator’s supplementary report was a schedule of books and records of Jade Capital held by him. The schedule occupies four pages and includes most of the classes, or categories of documents that were identified by Sanderson as books and records he would expect a company such as Jade Capital to maintain. The Tribunal observes that the schedule included, amongst others, the company’s general ledgers and journals, bank statements, financial statements, tax returns, depreciation schedules, aged payables, aged receivables, creditors’ invoices, debtors’ invoices and a variety of ASIC documents.
Another point concerning books and records made by the applicant with respect to their adequacy is, as noted earlier, the fact that Jade Capital’s accounts were audited and signed off each year by an external auditor. Audited accounts were in fact exhibited to the report concerned. For an auditor to sign off on the company’s accounts each year, its books and records must have been in order and complied with any requirement to maintain proper books and records in the circumstances. The audits were conducted in accordance with the Australian Auditing Standards.[32] It should be noted that the auditors expressed the belief that the audit evidence they had obtained was sufficient and appropriate to provide a basis for their audit opinion. Also appended to the company’s audited accounts for the financial year ended 30 June 2018 was a Directors’ Declaration of 31 October 2018 in which the opinion was expressed by the directors that there were reasonable grounds to believe that the company would be able to pay its debts as and when they became due and payable. This declaration was not qualified by the auditors. The accounts and notes to them were not qualified in any way by the auditors. Naturally, had there been any concerns, the auditors, as they were obliged to do by the Australian Auditing Standards, would have appropriately qualified Jade Capital’s accounts and the notes to them.
[32] See for instance, the "Auditors Responsibilities for the Audit of the Financial Report" of the accounts for the financial year ending 30 June 2018 (T documents, T-4.4 at page 312).
The applicant was aware that the auditors signed off on the company’s accounts each year and also relied upon this fact to be satisfied that it maintained adequate books and records in accordance with all requirements.
By reason of the details of books and records maintained by Jade Capital contained in the schedule annexed to the liquidator’s funded supplementary report, which the Tribunal considers were adequate, and the fact that the auditors signed off on the financial statements for the relevant years, the Tribunal concludes that the company did at all material times maintain adequate books and records.
Sanderson expressed the opinion that Jade Capital may have traded whilst insolvent. He stated that he was of the opinion that the company was insolvent from at least 3 March 2018. The Tribunal should observe that the basis for reaching this conclusion by Sanderson is not altogether clear from his report. He relied upon evidence of continuing losses and a continued decline of revenue for the financial years 2016, 2017, 2018, and from 1 July 2018 to 26 April 2019; outstanding Income Tax Return and Activity Statement lodgements to the ATO; and a dispute arising with a client of one of the CARs.
Audited accounts prepared by Gauld Tulloch Bove for the financial year ended 30 June 2018 were in evidence. The balance sheet revealed a surplus of cash over current liabilities (which were the company's total liabilities) which would indicate applying the balance sheet test that the company was solvent. The cash flow statement for the same financial year indicated a net increase in cash held. Applying the cash flow test, it would seem that the company was solvent as at that date also. These factors highlight that it was not clear cut that the company was insolvent at least from 3 March 2018 and also in any event the amount incurred by way of insolvent trading if the liquidator’s analysis is accepted, was relatively minimal in the scheme of things. A director carefully reading and understanding the financial statements as at 30 June 2018 would not necessarily have concluded that the company was insolvent at that time.
It was apparent, as the applicant acknowledged, that cash flow was tight. In cross-examination he described it as “manageable”.[33] However, it did not mean that the company was insolvent. The board recorded that it was making constant efforts of cost reduction whenever possible and that staff cuts were in progress, presumably as a cost saving measure. This would indicate that the board of Jade Capital were bringing considered minds to addressing the questions of cash flow and solvency. The applicant also gave evidence to this effect and stated that after, in particular, the board meeting of 10 April 2018, which he was referred to in cross-examination, the board introduced “action plans” to cut costs.[34] These plans included rental reductions or moving the company’s office to Melbourne where it could share the applicant's office to save rent. He also assisted by introducing Jade Capital to new brokers for the purposes of generating additional business and revenue.
[33] Transcript page 177, line 37.
[34] Transcript page 177, lines 44-45.
The total debts incurred whilst Jade Capital was alleged to have been insolvent were in Sanderson’s opinion $43,360. The applicant was a director when only $36,546 of such sum was incurred. He has at all times denied that that Jade Capital traded whilst insolvent. He readily acknowledged, as observed earlier, that there were cash flow issues. Such issues were apparent from some of the documentation in evidence before the Tribunal.
A significant event occurred on 14 February 2019 when AFCA made a determination in favour of a client of Jade Capital in the sum of $275,000. AFCA also issued invoices against Jade Capital arising from this determination in the sum of $109,086. These two debts were the biggest single unsecured creditors in the administration.[35] The applicant emphasised that until the claims before AFCA were determined he was satisfied that Jade Capital was meeting its debts as and when they fell due. He had no reason to suspect that it was insolvent. He did resign as a director of Jade Capital promptly after the AFCA determination on 19 February 2019. Realistically, it seems that this event was the financial death knell (or as the applicant submitted the “tipping point” of its failure) of Jade Capital.
[35] See paragraph 7.6 of the liquidator’s report at page 125 of the T documents which contains details of the "Largest Creditors" of Jade Capital. It reveals that the two single biggest creditors of Jade Capital were Cruickshank in an amount of $275,000 and AFCA in the amount of $109,086. It is further evidence of how these two unliquidated claims made against the company really did, as the applicant submits, "tip it over" into insolvency.

The Tribunal observes that there were two complaints by a dissatisfied client, made to AFCA against Jade Capital. The complaints related to the conduct of one of the CARs run by one Mark McCabe (“McCabe”). Such claims were made against Jade Capital as it was the relevant financial licence holder, and therefore considered to be the “financial firm” against whom such complaints could be made and be liable for compensation. The relevant claims were made by a client, Cruickshank, who by reason of the success of those complaints became the major creditor in the liquidation of Jade Capital. The dispute between Cruickshank and Jade Capital related to 2 service contracts entered into in February 2017 and in September 2017. Such contracts were entered into between CARs, controlled by McCabe, not Jade Capital. The first contract was entered into in February 2017 before the applicant became a director of Jade Capital, and the second contract arose approximately 27 days after his appointment as a director on 1 September 2017.
By reason of the foregoing matters the Tribunal cannot conclude that the applicant breached his obligation to prevent Jade Capital from trading whilst insolvent.
Sanderson noted in his report that there was suspected misconduct in that there was a failure to comply with statutory obligations to lodge various returns. They included an income tax return for the year ended 30 June 2018, an activity statement for the month of January 2019 and activity statement for the December 2018 quarter. As for the tax return, it is not known whether the date due for its lodgement had expired. For instance, it may well have been part of a lodgement program that specified a later deadline for lodgement. Often this means that the tax return is not due until long after the end of the financial year; frequently, well into the next calendar year. As for the activity statements, the applicant contends, and the Tribunal agrees, that it was not an endemic problem and occurred at the end of the company’s life. It was a task that was appropriately delegated to the executives including the executive directors of the company. The Tribunal sees no reason why the applicant was not entitled to rely upon those executives to ensure that statutory obligations to lodge tax returns and activity statements were undertaken.
The Tribunal should record that at paragraph 8.5 of the liquidator’s Funded Supplementary Section 533 report he referred to the applicant engaging in “Possible Phoenix Activity”. He referred to the fact that the applicant had been a director of 42 companies. It was also stated by him that some of those companies have similar names and appeared to be involved in similar businesses to Jade Capital. Then he stated that it was possible that goodwill associated with the client base of Jade Capital was potentially transferred to, or used by, one or more of those other companies of which the applicant was a director. The Tribunal observes on the material before it there was simply no evidence to justify the liquidator reaching this conclusion or expressing this opinion as he did in the report.
The Applicant points to several things in addition to the absence of evidence justifying the liquidator reaching the conclusion he did about possible “phoenixing” activities. Of relevance is that contrary to the liquidator’s assertions, none of the companies of which the applicant was a director had the name “Jade Capital” or “Jade” in them. None of those companies were engaged in similar form of business activity to Jade Capital. Finally, as already noted, there was simply no evidence found by the liquidator to record the transfer of any assets from Jade Capital to any of those companies, let alone an exploitation of its goodwill or a diversion of a corporate opportunity.
The Tribunal agrees with the contention of the applicant that it is indeed troubling that a suggestion of possible Phoenix activity was raised by the liquidator in the absence of any evidence whatsoever justifying such a suggestion. The suggestion was raised by the applicant on his behalf that it was possible that reference to this conduct by the liquidator in his Funded Supplementary Section 533 report may have sparked a suspicion on the part of the respondent of the applicant and informed its pursuit of him. The Tribunal is not obliged to, and cannot reach a conclusion on this submission. It is recorded that the respondent has now acknowledged for the avoidance of doubt, that the disqualification decision made by it with respect to the applicant did not involve any finding of “phoenixing” activity, and in this application, it does not contend that any such activity took place.[36]
[36] See paragraph 54 of the respondent’s Statement of Facts, Issues and Contentions of 12 May 2022.
It should also be recorded by the Tribunal that in the course of his administration of the liquidation of Jade Capital, the liquidator did not seek from the applicant any books, records or other documentary material, nor seek any further information from him concerning the affairs of the company.
The Tribunal also observes that Sanderson did not in his report, or anywhere else for that matter, make a recommendation that the respondent consider the applicant for banning under section 206F of the Corporations Act. Presumably, as an experienced liquidator, had Sanderson reached a conclusion that the applicant’s conduct with respect to his time as a director of Jade Capital justified the respondent considering him for a banning order, he would have said so in the report.
FURTHER OBSERVATIONS ON JADE CAPITAL AND THE APPLICANT.
The respondent placed considerable emphasis on part of an email that the applicant sent to Sanderson, the liquidator of Jade Capital, on 24 January 2021. The relevant part of the email stated as follows:
I was a passive investor and director for 17 months, I was not invoiced [sic] with any running the business nor any decision making. I resigned my directorship when I was aware that the AFS licence got cancelled by ASIC before the liquidator was appointed.[37]
[37] Page 434 of exhibit “HW-A” to the applicant’s first witness statement.
Also, concerning the applicant’s role as a director of Jade Capital in cross-examination, he was taken to a passage from a submission made by his then solicitors to the respondent’s delegate of 6 December 2021.[38] That passage stated, “and the management of Jade Capital’s business was delegated by Mr Wang to Mr McCrow and Mr Clinnick”. In response to a question concerning this passage the applicant agreed that is what happened with Jade Capital and that he did not play any central role in its management.
[38] Paragraph 14(c) of Document T-5.1 of the T documents.
It is contended that this confirmed his passive director status and was wholly inconsistent with him having any active engagement with the affairs of Jade Capital. The applicant on the other hand disputes such contention and points to a number of facts, which the Tribunal accepts were indicative of him discharging his duties as a director of Jade Capital in a proper way. These will be touched on shortly.
The respondent is also critical of the applicant insofar as it contends, he has produced limited documentation to corroborate his evidence as to what he did as a director of Jade Capital. The applicant gave evidence that he produced all documents that were available to him. Much of the documentary material that was furnished to him whilst he was a director was sent to an email account that he conducted. The applicant gave evidence which the Tribunal accepts that the documents he produced are the ones he downloaded off the server to keep. All the other emails and records sent to this particular account known as the “[redacted domain]” email account may still exist. However, they are stored on a virtual cloud-based server to which he does not have access.
Several things should be taken into account when considering the respondent’s submissions on this question. Firstly, as noted earlier, the several authorities referred to by the parties to this application confirm that it is well-settled that a non-executive director is entitled to delegate to others the preparation of the books and accounts and the carrying on of the day-to-day affairs of the company.[39] A non-executive director may rely on management and other officers to a greater extent than an executive director.[40] Directors may rely on others to assist them in fulfilling a requirement even where it is one directly imposed upon them by the Corporations Act. To a degree, the directors can rely upon the processes they have put in place.[41] It is correct as contended for by the applicant that, all non-executive directors by definition are not employed in a company’s business, and therefore of necessity must delegate such tasks as preparation and maintenance of the company’s business records and the carrying on of its day-to-day business activities. This is what occurred with respect to the applicant’s discharge of his functions as a director of Jade Capital.
[39] ASIC v Healy (2011) 196 FCR 291 at [20].
[40] ASIC v GetSwift Ltd (Liability Hearing) [2021] FCA 1384 at [2535] per Lee J.
[41] ASIC v Healy (2011) 196 FCR 291 at [240].
The fact that the applicant delegated the management of Jade Capital’s business to Messrs McCrow and Clinnick, who were its executive directors, does not mean that he breached his duties and obligations as a company director. He did what the authorities enabled him to do when delegating such functions to them. It does appear, as contended for by the applicant, that the contentions of the respondent equated delegating management tasks to the executive directors to doing nothing, and therefore, to a breach of his director’s duties. This is not the case in this instance both in fact and law.
The applicant as noted earlier, gave evidence as to what he actually did in the discharge of his duties as a director of Jade Capital. This evidence has been accepted by the Tribunal.
He attended and participated in board meetings. It was contended by the respondent that he did not attend many board meetings. On the other hand, however, the applicant gave evidence, which is accepted by the Tribunal, that he attended several board meetings by telephone, or as he put it circulated by email.[42] Where he attended by telephone it was not recorded in the minutes. He recalls having discussions as recorded in the minutes even though those minutes on occasion do not record him as being physically present.[43] For meetings he did not attend, he gave evidence that he read the material that was supplied to him and was aware of what happened during such board meetings. Additionally, the applicant had regular contact with other board members in person, by telephone and by email between board meetings in which the affairs of the company were discussed. The applicant stated that he had produced all the board minutes he was able to locate that he had retained as previously noted, which had been downloaded from emails that were sent to him using his “[redacted username]@[redacted domain]” email address.[44]
[42]
[43] For instance, the applicant gave evidence that he attended a board meeting on 13 March 2018 which he joined by telephone. The minutes of that meeting were in evidence before the Tribunal at page 135 of the applicant’s material. They record the applicant as “Absent”. The Tribunal accepts his evidence that he attended this meeting by telephone. The applicant’s evidence about this meeting is found in the transcript at page 159.
[44] The respondent in its Outline of Closing Submissions at paragraphs 17 to 19 was highly critical of the applicant's evidence concerning his use of the email address "[redacted username]@[redacted domain]". It contended that given some of the concessions made in his evidence with respect to such use of the relevant email address, the Tribunal should reject what is asserted in the applicant's first witness statement and at paragraphs 57 to 67 of his Opening Submissions with respect to his purported "overseeing and monitoring the management of" the recycling companies. The Tribunal will consider these submissions in more detail later in these reasons.
The applicant gave evidence that he regularly received emails from the Financial Controller of Jade Capital attaching financial statements, including but not limited to, the balance sheet and profit and loss statements. These usually included minutes of the previous board meetings. The applicant gave evidence, which once again is accepted by the Tribunal, that he reviewed and closely considered the documents contained in the board papers and distributed to him by the Financial Controller.
The applicant also satisfied himself that Jade Capital maintained proper books and records. He stated that he could see this reflected in the board papers that were provided to him. He also emphasised that he was aware that the auditors were satisfied when they signed off on company accounts for each financial year.
The applicant stated that he reviewed and closely considered the financial statements that were furnished to him as well as the board papers. He gave an example in his evidence of receiving on 13 March 2018 an email from the Financial Controller including the financial statements and minutes of the previous board meeting held in December 2017. Upon reviewing such documents, he developed concerns about the profitability of Jade Capital and its cash flow. He requested a meeting with two fellow directors for the purposes of discussing his concerns. A meeting was held on 4 April 2018 between the applicant and his fellow directors at which the cash flow forecast was reviewed. Proposals were also discussed at that meeting to engage in capital raising.
Concerning the claim made to AFCA mentioned earlier, the applicant gave evidence of attending a board meeting in February 2019. He joined that meeting on the telephone. During the board meeting the AFCA complaint was discussed in some detail. He was informed that Jade Capital had retained lawyers to defend such a claim. The applicant asked what measures were in place to prevent such an occurrence occurring again.

The Tribunal is satisfied that he was an active participant in that board meeting. It is also satisfied that he was an active participant in all the board meetings that he attended on several occasions.
The applicant also stated that he periodically conferred with his co-directors in relation to the business and operations of Jade Capital. Additional probing by him related to such topics as the management of client monies, details of the bank accounts into which client funds were paid and managed and enquiries of the source of its clients. The Tribunal accepts this evidence from the applicant.
The applicant expressed the opinion that the collapse of Jade Capital was largely due to the findings made against it by AFCA which have been referred to earlier. This does seem apparent as noted earlier, that it was the financial death knell of the company.
The Tribunal cannot see what more the applicant could have done with respect to Jade Capital in discharge of his director’s duties. When one considers the principles and duties of a non-executive director as outlined by Middleton J in ASIC v Healy it fails to see that he breached such duties. It accepts that the applicant carefully read and understood the financial statements that were provided to him. It is apparent having accepted his evidence that the applicant had more than a rudimentary understanding of the business of the company. It is apparent that he did by reason of his regular contact with his co-directors, and the Financial Controller monitor the company’s corporate affairs and policies. He maintained a familiarity with the financial status of the company and certainly had a questioning mind. By reason of these facts as outlined, the Tribunal cannot see that the applicant’s conduct with respect to the affairs of Jade Capital justified him being banned as a company director.
CONCLUSIONS WITH RESPECT TO THE APPLICANT’S CONDUCT CONCERNING JADE CAPITAL.
Having considered the evidence articulated above, and in particular having accepted the applicant’s account of what he did when he was a director of Jade Capital the Tribunal is satisfied that he discharged his duties as a director in the manner that he was required to do in accordance with the obligations imposed on him by the Corporations Act and as explained in several authorities.
In particular, the Tribunal is satisfied by reason of accepting his evidence that as a non-executive director of Jade Capital he properly undertook all reasonable steps to be in a position to guide and monitor its affairs. As he said in his evidence he read, understood and focused upon the contents of the documents that were furnished to him from time to time, which the Tribunal accepts he received. These documents included financial statements, cash flow forecasts and minutes of board meetings. This is not to mention other documents he received by email from time to time. It accepts that the applicant also consulted with several of his current directors to probe them carefully so as to satisfy himself as far as was possible, of the company’s state of affairs. Both by reason of consulting his co-directors and attending at the premises of the business, he acquired more than a rudimentary understanding of its business. Contrary to the findings of the delegate of the respondent, the Tribunal concludes that the applicant did appropriately involve himself in the management of Jade Capital to the requisite standard of a non-executive director.
It is also apparent that the applicant carefully read and understood the company’s financial statements. He did, as the authorities require, maintain familiarity with the financial status of the corporation by regular review and understanding of those financial statements. The Tribunal is satisfied that in doing so he brought to the task a questioning mind as required. It is also satisfied that the applicant did not as was contended for by the respondent merely go “through the paces”.
Also, in terms of the applicant’s conduct, the Tribunal repeats for the reasons articulated earlier, that it does not find that the applicant failed to comply with his obligations as a director of Jade Capital to maintain proper books and records. It is considered that the books and records recovered by the liquidator and referred to in the schedule to his Funded Supplementary Section 533 report did satisfy the company’s recordkeeping obligations. Additionally, the Tribunal is fortified in reaching this conclusion by reason of the fact that the auditors signed off on the financial statements each year and did not express an opinion that there had been a failure to keep and maintain the required books and records. They certainly would have qualified their report if there were any doubt as to the adequacy of

its recordkeeping.
Finally, with respect to Jade Capital, the Tribunal concludes, also for the reasons previously articulated, that the applicant did not permit the company to trade whilst it was insolvent. Whilst unquestionably, cash flow for the company at all relevant times was tight, there were available cash reserves. It is also apparent that the board of the company addressed the issue by several measures including cost-cutting, staff redundancies and investigating the possibility of changing its existing rental arrangements. The Tribunal reiterates that it considers that what did deliver the financial death knell of the company were the two determinations made by AFCA which it had no possibility of satisfying. As previously recorded, shortly after those adverse determinations were made by AFCA, the applicant resigned as a director of Jade Capital.
Therefore, the Tribunal concludes that no act or omission on the part of the applicant as a director contributed to Jade Capital going into liquidation.
THE RECYCLING COMPANIES.

The respondent contends that the applicant has repeatedly failed to meet the minimum standards required of a director with respect to these companies.
It is also contended on behalf of the respondent that the applicant’s failure to understand and fulfil his obligations to the recycling companies contributed to their failure due to a lack of appropriate oversight on his part. The respondent’s submissions are referred to in their entirety for their full force and effect. However, several key points emerged from the material that is relied upon by the respondent in support of its contentions. They are:
(a)the fact that, even after the applicant became aware of the alleged misconduct of his co-directors, Messrs Cala and Interlandi, the applicant took no steps to notify an appropriate regulatory agency.
(b)the applicant failed to take any steps to ensure that the recycling companies’ books were adjusted to reflect their true financial position; and
(c)none of the facts, matters, circumstances or things that the applicant discovered in approximately July and or August 2017 (at the latest) were recorded in any of the board minutes that were in evidence before the Tribunal.
The applicant was appointed a director and became a shareholder of the recycling companies on 18 November 2016. For the first eight months following his appointment he was a non-executive director and not employed in the recycling companies’ business.
Following his appointment as a director he attended monthly board meetings with his co-directors Salvatore Cala (“Cala”) and Vito Interlandi (“Interlandi”). Cala was the managing director of the recycling companies. Interlandi, in addition to being a director of the recycling companies, had since 2015 been the applicant’s accountant and a member of the accounting firm known as “Nexia”. He worked in the recycling companies one day per week until he resigned in October 2017. Interlandi had procured the applicant’s investment in the recycling companies. He informed the applicant that they required an injection of capital and following this initial approach introduced him to Cala which ultimately led to the applicant’s investment.
Following the resignations of Cala and Interlandi, the applicant reported irregularities that he found with the recycling companies’ affairs to the police. As part of this process, he made a statement, a copy of which was in evidence before the Tribunal. In that statement he referred to himself “as a silent partner to the company.” The applicant was searchingly probed about this observation, particularly in cross-examination. The thrust of his evidence concerning this question, both in his witness statement and within the witness box, was to the effect that what he meant by the use of the term “silent partner” was that he was not involved in the day-to-day running of the recycling companies’ business. He was not employed in the business, and as such the responsibility for day-to-day operations, given their experience within the recycling industry, and their existing relationships with key stakeholders, rested with Cala and Interlandi.
The Tribunal is satisfied after having had the opportunity to observe the applicant in the witness box and consider all the evidence that has been put before it, that in using the term “silent partner” he did not mean that he abrogated, and in fact he did not abrogate, his responsibilities as a director (non-executive) of each of the recycling companies. It should not be lost sight of that English is not the applicant’s first language, and at times he probably did grapple with being able to accurately convey the intended meaning to words that were used by him. However, it is apparent from the evidence that as he said he was not involved in the day-to-day running of the recycling companies. More will be said about what he actually did in the discharge of his functions and duties as a director of each of the companies shortly.
The board meetings of the recycling companies were held at Nexia’s offices. In addition to Cala, Interlandi and the applicant being present at such meetings, they were usually also attended by Liana Demarte and/or Justin Chambers of Nexia.[45] During such meetings Cala reported in detail on the key issues that had arisen from the day-to-day operations of the recycling companies. The participants in such meetings considered and discussed these details. The applicant says, and the Tribunal accepts, that he asked questions and was told about how the funds he had invested in the companies were being applied.
[45] For instance, there were minutes of a Directors’ Meeting held on 9 March 2017 (page 544 of exhibit “HW-A”) in evidence which showed the applicant, Cala, Interlandi, Demarte and Chambers all present.
Prior to each meeting of the board of the recycling companies, the directors were by email furnished with several documents. In some emails this documentation was collectively referred to as a “Board Pack”. This documentation included a Management Report, Profit and Loss Statement, Balance Sheet, minutes of the previous directors’ meeting, a document headed “KPI Results”,[46] a table described as “Installation and Commissioning Schedule”, a table showing the actual performance and weekly income derived from the operations of the companies’ Washing Plant-Processing and their Compounding-Resin manufacturing facilities and an “Action and Status Plan”.[47]
[46] The KPI Results document was broken up into several subject headings which included: Profitability, Activity, Efficiency, Asset Usage, Liquidity, Coverage, Gearing, Cash Flow and Growth. With respect to each of these subject headings, an analysis of the Result, Target, Trend and Importance was provided.
[47] Similarly, the Action and Status Plan was broken up into various subject headings that included a commentary headed, “Latest status & next action/s”.
The applicant gave evidence to the effect that when he received such documentation, he carefully considered the contents in anticipation of the prospective board meeting. An examination of each of the minutes of directors’ meetings that were in evidence before the Tribunal reveal that they do not identify which director said or contributed what during the relevant meetings. However, they are broken up into subject headings which do capture a range of topics that one would expect diligent and competent directors, whether executive or non-executive, to address during such a meeting. They include such topics as sales and gross profit, inventory, budget assumptions, cash flow forecasts, business outlook and pipeline and operations management.
During the first eight months when the applicant was a non-executive director, in addition to attending board meetings, he also attended at the companies’ factory premises in Campbellfield on multiple occasions. During those visits he met with key staff including the Financial Controller, Human Resources Manager and Plant Manager. He spoke with them to, amongst other things, obtain information about the business and its operations. At this stage it was agreed between Cala, Interlandi and the applicant, that Cala and Interlandi would continue to run the day-to-day operations of the business, and the applicant remain a non-executive director. It should be noted that Interlandi worked at the companies’ business premises for one day a week. The applicant gave evidence, and the Tribunal accepts it, that it was also agreed between the three of them that Cala and Interlandi (who it will be recalled was also the applicant’s accountant who he clearly trusted) would immediately alert the applicant to any issues that arose within the business so that he could consider them, and they could jointly make properly informed decisions concerning the companies’ business.
At all times whilst the applicant was a director of the recycling companies, the board members received a monthly set of board papers in advance of each meeting. These board papers included the companies’ financial statements. Minutes of several board meetings of the recycling companies were in evidence before the Tribunal at the hearing. They reveal that a range of topics were addressed at each of those meetings. The Tribunal has no reason to doubt the applicant’s evidence that these minutes typically recorded the subject matter canvassed at board meetings. These subjects included sales and gross profit, inventory, budget assumptions and template, cash flow forecast for the next 30 to 60 days, business outlook and pipeline and operations management discussion. Under each of these subject headings there was considerable detail in the minutes as to what was discussed concerning these items. As well as recording the detail of each of these subjects the minutes also noted what prospective actions were to be taken as a result of the discussions that took place.
The applicant gave evidence that in the discharge of his duties as a director of the recycling companies he exercised independent skill and judgement and did not simply confine his activities and tasks to those matters, or issues that were exclusively raised by his co-directors Interlandi and Cala. As he put it, he did not simply accept what he was told by them without scrutiny. He said that he probed them from time to time when he identified issues arising from the documentation and financial statements that were furnished to him when it was evident that more information was required for him to be more accurately informed with respect to the companies’ position. He apparently endeavoured to the best of his ability to seek to accurately monitor their affairs and the performance of management.
Additionally, the minutes of the meeting held on 9 March 2017 reveal that the applicant was to be provided with an up-to-date cash flow forecast at the end of each week. It was the applicant’s evidence that following such decision he was regularly provided with monthly cash flow forecasts which he reviewed and considered. He requested that he be provided with up-to-date cash flow forecasts on a weekly basis so that he could as far as possible better monitor the companies’ affairs in his own right. The Applicant gave evidence, which is also accepted by the Tribunal, that he read and considered the board papers including financial statements, together with cash flow forecasts. He identified issues and asked questions where appropriate seeking further information with respect to the companies’ management and financial performance. He says he was an active participant in the process.
During the initial period of approximately eight months that the applicant was a non-executive director of the recycling companies, in addition to attending board meetings and undertaking the tasks which have already been described, he gave evidence that he visited the companies’ factory premises in Campbellfield multiple times. He gave evidence to the effect that the purpose of those visits was to gain more information about, and a better understanding of, the workings of the business. He recalled that during those visits he met with key staff including the companies’ financial controller, human resources manager and plant manager. The reason for meeting with them was to firstly get to know them and also obtain additional information or perhaps a deeper understanding about the business and the particular work that each of them undertook. Another reason for the visit to the premises by the applicant was because it had become apparent to him when he attended board meetings that some of the production information discussed at such meetings was of a highly technical nature concerning the plastics recycling industry. There was an added imperative to gain an appreciation or understanding of that industry and its particular technical aspects.
The applicant also attended the companies’ factory premises on occasion when he took potential overseas buyers to inspect them and show them the products produced.
During the first eight months that the applicant was a non-executive director of the recycling companies, he emphasised in his evidence that he was not employed in the business and did not carry out any responsibility for their day-to-day operations. The day-to-day operations were overseen by Cala and Interlandi. The applicant also contends that this needs to be seen in the light of both their experience in the recycling industry and the existing relationships that they had developed with the businesses’ key stakeholders.
By approximately June or July 2017 the applicant’s position with respect to the recycling companies changed. He gave evidence that he was still being asked to advance extra monies to the businesses which caused him concern. His concern was triggered by the fact that at board meetings he was provided with financial statements which projected a favourable outlook for the companies’ future trading. Cala and Interlandi in response to concerns that were expressed by the applicant provided an explanation with respect to the need for further capital injections, which included that there had been equipment breakdowns that required repairs. Despite these explanations from his co-directors, the applicant decided that he should better appraise himself of the companies’ affairs to reassure himself as to what he was being told.
Therefore, as and from July 2017 the applicant commenced full-time employment with the recycling companies. Such full-time employment did not attract any remuneration and was not formalised. He did so in order to better understand the business, its financial state and determine why it did not appear to be making any money given the financial contributions that he had made. Another reason advanced by the applicant for working full-time in the companies was to satisfy himself that they were paying their debts.
The applicant gave evidence that once he commenced to be engaged in the recycling business full-time he undertook an investigation into certain aspects of its affairs. He had access to the companies’ accounting software program Quickbooks, and therefore was able to read and consider the financial statements generated by that program. However, he did not at that time have access to business records recording day-to-day sales information. Amongst other things, during these investigations he cross checked purchase orders of stock and compared them against sales. In short, he found a disconnect between the recorded purchase orders for stock and sales. When he raised this discrepancy with his co-directors Cala and Interlandi, Cala blamed such discrepancy on a floor supervisor who he said was stealing stock. Cala then dismissed the floor supervisor. The applicant observed that the problems seem to resolve themselves after that event.
In October 2017 Interlandi resigned as a director of the recycling companies. Subsequently in March 2018, after unsuccessful negotiations had taken place between the applicant and Cala, the details of which need not be recounted for the purposes of these reasons, Cala resigned as a director of the recycling companies. Following Cala’s resignation, the applicant then took over management control of the recycling companies.
Further investigations undertaken by the applicant following the resignations of Cala and Interlandi revealed what he described as several questionable dealings involving them.
The applicant unearthed the payment of $500,000 to Interlandi’s accounting firm, Nexia, for what was described as “consulting fees”. The applicant was not aware of this transaction and stated that it was not authorised. He also considered such fees to be excessively high. To add to the difficulties caused by this transaction, a loan was taken out by the recycling companies to pay for such “consulting fees” without the applicant being informed. The loan agreement was apparently signed by Cala and Interlandi, also without the applicant’s knowledge.
Cala had instructed the companies’ payroll officer to increase wages payable to him and his wife, without the consent of the board and during a period when the recycling companies were trading unprofitably. This increase in wages took place after Cala had, just prior to Christmas 2017, requested a pay rise which the applicant refused due to the fact that the companies were not making sufficient profits to justify such a pay rise. The payroll officer of the recycling companies Breanna Grant made a statement to police on 18 June 2018 confirming what Cala had instructed her to do.
Another improper practice that the applicant discovered that Cala had engaged in was the issue of duplicate invoices. These duplicate invoices were recorded in the recycling companies’ accounts, the effect of recording the duplicate invoices in the accounts were that sales recorded in them were inflated. Such duplicate invoices were later reversed.
Further discoveries of misconduct by the former directors Cala and Interlandi were then unearthed by the applicant. This included that Cala had caused Solutions to pay an uncommercial and excessively high rent for the premises from which the recycling business was conducted.
Notwithstanding his resignation as a director of the recycling companies, Cala remained a 20% shareholder in them. The applicant reached the conclusion that given the history of what had occurred between him and Cala their relationship had irrevocably broken down. Cala was in no position to make any future contributions towards the recycling businesses. The applicant was not prepared to continue with any business relationship with him. He reached the conclusion that he had no choice but to cause the recycling companies to cease trading, which they did from 30 June 2018. Each of those companies was subsequently wound up as has been noted earlier in these reasons.
THE LIQUIDATOR OF THE RECYCLING COMPANIES AND SECTION 533 REPORTS.
The Tribunal should observe at the outset that the liquidator of the recycling companies Crisp gave evidence by both witness statement and from the witness box. The Tribunal accepts his evidence and finds him to be a credible witness who understood his role to genuinely assist the Tribunal. It has no reason to doubt any of his evidence or any opinions that he expressed during such evidence. He is a registered liquidator of 26 years’ experience. He is a chartered accountant and has been in the accounting profession for approximately 41 years.
At one stage in cross-examination, it was expressly put to Crisp that in giving evidence before the Tribunal in this application he had adopted the role as an advocate for the respondent rather than somebody coming along as an independent witness.[48] He denied such suggestions. The Tribunal did not see him as an advocate for the respondent at all.
[48] Transcript page 224, lines 36 to 39.
Crisp gave evidence that, during the course of his investigations into the affairs of the recycling companies, he investigated any potential breaches of sections 180 and 588G of the Corporations Act that may have been committed by the applicant, or a co-director of those companies, Cala.
On 19 July 2019 in a letter to the applicant concerning the recycling companies, Crisp informed him, amongst other things, that: “I confirm that I, as Liquidator of the above companies, do not intend to conduct any litigation against you in respect of your conduct as a director of the above companies or generally.”[49]
[49] The letter from Crisp to the applicant is at pages 754 of exhibit "HW-A” to the first witness statement of the applicant.
Crisp was requested by the respondent to prepare supplementary reports to it under

section 533(2) of the Corporations Act with respect to Solutions and Solutions Hire and the conduct of the applicant. Those reports were dated 23 October 2019.[50] The contents of both reports are very similar to each other, save and except for the contents of Section 5: “Company assets and liabilities” and Section 6: “Details of liabilities”. In each of those sections precise particulars of the actual sums are included.
[50] The "Funded supplementary report to ASIC” in respect of Solutions is document T-4.9 of the T documents. The “Supplementary report to ASIC" in respect of Solutions Hire is document T-4.13 of the T documents. Both supplementary reports are signed by Crisp and dated 23 October 2019.

The applicant has been a director of Advanced Circular Polymers Pty Ltd (“ACP”) since 20 March 2017, save and except for the brief period between the disqualification decision taking effect on 31 January 2022 and a stay being granted by the Tribunal on 18 February 2022. The Applicant led extensive evidence concerning his involvement with ACP and the nature of its operations about which more will be said later.
The respondent has accepted that the evidence led by the applicant concerning his involvement with ACP is relevant because:
(a)it tends to show that the applicant has been attentive to his duties as a director of ACP; and
(b)it is also of relevance to the consequences for ACP and its stakeholders should the applicant be disqualified as a company director.[69]
[69]
For the purposes of these reasons, it is not necessary to embark upon a detailed excursion into the capital structure and shareholding of ACP. Suffice to say, that the funding for the business has been provided primarily by its shareholders. The applicant’s family interests have invested approximately $11 million. Interests associated with one Yazhou Li (“Li”) have invested approximately $10 million.[70] Additionally, the applicant’s family interests have advanced by way of loans further funds in excess of $1 million. Recently, [redacted].
[70] Li has been a director of ACP since 30 July 2018.
ACP was established in 2018 and first commenced production in July 2019. It is engaged in the business of processing recycled plastics. It conducts its operations from a facility in Somerton. It currently employs 81 personnel. ACP’s Somerton factory is apparently the largest plastics recycling plant in Australia. In short, the operation involves the sorting of various recycled plastic products and processing of them into flakes. The flakes are then sold to domestic manufacturers for reuse. Obviously, the process means that significant quantities of plastic waste are not disposed of in landfills. The business was established by the applicant as a result of him recognising an opportunity in the recycling industry that arose as a result of China, in approximately July 2017, banning the importation of recycled plastic products for processing. Prior to this ban by China most of Australia’s plastic waste was exported there for reprocessing, and in many cases subsequent re-importation.
At all times the applicant has been the managing director of ACP. In his evidence he explained his role and the duties that he discharges in performance of the function of managing director. He stated that he has been responsible for all aspects of ACP’s business including its creation and start up, managing its day-to-day activities, running of its manufacturing facility, the creation of markets for the sale of product and the provision of raw material.
Additionally, the applicant gave evidence that he has primary responsibility for managing environmental risks on site by reason of the nature of ACP’s business and the volume of recycling waste that it processes.
He is also involved in ACP’s R&D activities. A number of grants have been obtained by ACP to support such R&D activities. In pursuit of these activities, ACP, the University of Melbourne and an organisation known as “Prompt Automation” received a grant from the Cooperative Research Centres Projects of $2 million to develop and commercialise an AI-enabled autonomous sorting system and automated plant and polymer technology needed to upcycle residue plastics. A further grant of $300,000 has been received from the Recycling Victoria Research and Development Fund by a joint venture between ACP, Monash University’s Institute of Railway Technology, Yarra Trams and Integrated Recycling. The grant is being used to develop methods to use recycled plastics for production of modular components to be used in the construction of what are described as “New Generation Tram Stop Platforms” throughout the Melbourne metropolitan Tramway system. Another grant of $500,000 was obtained by ACP from Sustainability Victoria’s Resource Recovery Infrastructure Fund. This grant was made to ACP to enable it to process baled plastics from post-consumer material recovery facilities together with commercial and industrial sources.
In February 2021, to assist him in managing ACP’s business, the applicant formed an Advisory Board. The Advisory Board was formed after the applicant had on behalf of ACP retained one Stuart Hayes (“Hayes”), an experienced accountant and high-level business executive, to provide him with management training to expand on his existing skills as well as to provide some business coaching. Following the retainer of Hayes, the applicant was introduced by him to one Michael Lescai (“Lescai”) who is an experienced consultant and corporate advisor. Both Hayes and Lescai made witness statements and gave evidence at the hearing of this application. They are, as was contended for by the applicant, highly credentialled in corporate conduct and governance. This is not to mention the fact that they clearly have significant business management experience. Following his introduction to both Hayes and Lescai, the applicant on behalf of ACP retained them to develop a comprehensive business plan. Hayes stated it was the applicant’s highest priority. Such business plan was developed and is in evidence before the Tribunal.[71] The business plan, amongst other things, recorded the aim for a 200% return in two years.
[71] The business plan, which had been developed in six iterations, consists of 30 pages and forms part of the confidential exhibit to the applicant's witness statement. It is quite a comprehensive and detailed document.
The Advisory Board meets at least monthly. It has no binding decision-making authority or executive function. What it does is provide advice to the applicant and ACP with respect to the following:
(a)the strategy, governance and best use of the allocated budget of ACP;
(b)strategy and policy including prioritisation of activities;
(c)ACP’s systems of risk management and internal controls;
(d)the legitimate interests held by other ACP stakeholders;
(e)performance of ACP; and
(f)building a culture for ACP consistent with its values and agreed behaviours.[72]
[72] See Lescai’s witness statement at [21] and Hayes’ witness statement at [18]. Lescai at paragraph [27.3] of his witness statement also recorded that the Advisory Board reviews and discusses the quarterly accounts of ACP at its meetings. [redacted]. More will be said about this later. It should also be observed that in cross-examination none of the contents of Lescai’s or Hayes’ witness statements was challenged. The Tribunal has no reason not to accept the contents of each of them.
Lescai also gave evidence that the primary services rendered by the Advisory Board to ACP are the preparation for and participation in monthly meetings. These meetings provide and discuss corporate and business management advisory opinions. Additionally, the members of the Advisory Board participate in “ad hoc” phone calls and discussions between the monthly meetings. As well as the provision of ad hoc advice, both Hayes and Lescai rendered additional services to the applicant and ACP, on what was described as “sessional”, and “project” work. The sessional project work that they engage in cover a variety of tasks. Lescai, for instance, gave an example of his implementation of a “MyCash Dashboard”, which is apparently a formal software system which can provide accurate data on the business’ future daily cash flow.
Lescai gave evidence that he has agreed to become a non-executive director of ACP. He stated that he has conducted investigations to satisfy himself that the company’s affairs have been properly undertaken to date. His evidence was that he was satisfied it has occurred.
Another measure that has been adopted with respect to the management and governance of ACP concerns the [redacted] as the company’s accountants. The services provided by [redacted].
The applicant’s wife, Michelle Wang, who gave evidence at the hearing of this application, explained that she has been ACP’s finance and human resources manager. She explained what her duties and responsibilities were in these roles.[73] It was also explained by her that the company uses the Xero Cloud accounting software system and employs bookkeeping staff to ensure accounting records are maintained on a daily basis. She reviews the entries recorded in its accounts by those staff. Ms Wang gave evidence that she is regularly in touch with [redacted] staff who render the various accounting services to ACP. [redacted] forward to her draft financial statements for review, consideration and discussion by her, the company’s board members, and of course the Advisory Board.
[73] See paragraph [9] of the witness statement of Michelle Wang.
Both Hayes and Lescai in their evidence, which was not challenged, confirmed the [redacted] by ACP. They also confirmed that the company maintains proper books and records from which [redacted] which are reviewed and discussed by the Advisory Board at its meetings. Additionally, such accounts are used to prepare budgets which are closely monitored, and adjusted as required, because budgeting is typically difficult for firms growing significantly, particularly where it is a start-up business.
Hayes and Lescai also in their evidence made several observations of the capacity of the applicant as a director of ACP.[74] This evidence was not challenged in cross-examination. It is accepted by the Tribunal. The observations made by both Lescai and Hayes concerning the applicant’s capacities and qualities as a director of ACP are testament to someone who has met the core irreducible requirements of directors to be involved in the management of the company, and one who takes all reasonable steps to be in a position to guide and monitor. It is apparent that he has at all times discharged his responsibilities to, amongst other things, read, understand and focus upon the contents of the company’s accounts and financial statements. From their evidence it is also apparent that he has acquired much more than a rudimentary understanding of the company’s business. He does not merely “go through the paces”. The Tribunal is satisfied that these two experienced witnesses have verified that he has diligently, actively and searchingly involved himself in every aspect of the business conducted by ACP. It is also satisfied from their evidence that they have not observed any conduct that in their experience would call into question his ability to manage a company in accordance with the duties and obligations imposed upon him.
[74] Reference is made to paragraphs [26] and [30] of Lescai’s witness statement, and paragraph [22] of Hayes’ witness statement. The contents need not be reproduced in detail for the purposes of these reasons. They are referred to in their entirety.
Lescai in his witness statement addressed the question of the impact of any banning of the applicant from being a company director. He expressed the conclusion that there would be adverse consequences for ACP and its stakeholders were this to occur.[75] The adverse consequences that Lescai identified were as follows:
[75] Paragraphs [31] and [32] of Lescai’s witness statement are referred to.
(a)it would result in immediate operational problems for ACP, because the applicant is closely involved in the company’s strategy and growth, research and development and its day-to-day operations;
(b)it would have an irreparable adverse impact with key stakeholders. He stated that in his experience where issues of integrity arise with respect to management of a company, institutional stakeholders tend to distance themselves from dealings with such company. Key stakeholders of ACP he identified included Melbourne University and government instrumentalities;
(c)
the applicant is the person dealing with ACP’s R&D grants. Recent involvement has been with the University of Melbourne, and the applicant’s inability to be involved in the management of the business would threaten the viability of the company’s

R&D projects. He considered that it may also derail current discussions concerning

further grants.
Lescai also expressed the opinion that the applicant’s banning would be a serious matter with broad, damaging consequences. He stated that based on his observations and experience, ACP’s stakeholders, employees and the public, would be better served with the applicant’s ongoing stewardship of the company.
The applicant himself also addressed the impact of his potential disqualification. He contended that there is a material risk that his disqualification as a director of ACP, apart from having a material and irreparable adverse impact on his reputation in the industry and his financial interests, may have material adverse consequences for ACP and its stakeholders as follows:
(a)He has had primary responsibility for the management of ACP since its inception;
(b)His removal from the management of ACP will likely have a significant impact on the company’s business with a loss of confidence by its myriad of stakeholders including government, employees, financiers, suppliers and the wider community;
(c)Damage to ACP’s business is likely to risk the job security of its employees;
(d)
The potential for loss of hands-on management expertise which he has provided

to date;
(e)[redacted];[76]
(f)He has had primary responsibility for managing the environmental risk on the company’s manufacturing site because of the nature of the business and the volume of waste that it is processing, he contends that his expertise requires him to be hands-on in managing such risks; and
(g)He has been leading the company’s R&D activities, and as he contends, the company is halfway through several projects.
[76] The applicant relied on [redacted].
By way of completion, it should also be observed that the applicant’s wife, Ms Wang, who as noted earlier is the company’s finance and human resources manager, also gave evidence about the impact of a banning order being made against the applicant.[77] Her evidence largely echoed that of the applicant himself together with that of Hayes and Lescai. It need not be repeated.
[77] Paragraphs [29] to [33] of her witness statement are referred to.
With respect to the impact or consequences of disqualification of the applicant the respondent raises several contentions.
Firstly, that a disqualification order will not prevent the applicant from being an employee or consultant to ACP and it can retain his expertise albeit in a different capacity.
Secondly, stakeholders in the market generally, should be entitled to expect that the directors of companies with which they deal do meet their statutory obligations. It is contended further in this respect that it is not in the public interest not to make a

section 206F order to shield the company from the consequences of the conduct of its director. The Tribunal takes this to mean the prior conduct of the director with respect to the companies which have failed and been referred to above.
Thirdly, that external entities providing such things as R&D grants, for instance the University of Melbourne, are likewise entitled to expect the directors of companies with which they deal to meet their statutory obligations. It is contended that the Tribunal should not accept that there is some public interest in ACP in particular obtaining future grants. Therefore, it is contended that should ACP not obtain a grant, it can be expected that such monies it otherwise would have obtained, or might have obtained, would flow to other applicants or entities.
The Tribunal is persuaded by the applicant’s contentions that there will be a significant impact on the business of ACP if the applicant is banned from being a company director. It is apparent from the material before it that the applicant is the principal and guiding mind of ACP. It seems that without the applicant as a director of the company, it will struggle to some considerable extent. The Tribunal acknowledges the respondent’s contention that a disqualification order would not necessarily prevent the applicant from continuing with ACP in another capacity, such as an employee or a consultant, so as to retain his expertise. Whilst this may be so to some extent, disqualification as a director would necessarily limit all the tasks and functions that the applicant could undertake. It appears that it would certainly, as contended by Lescai result in some immediate operational problems.
The Tribunal also accepts the evidence given on behalf of the applicant that a banning order against him would almost certainly have an irreparable adverse impact on various stakeholders. It seems more probable than not that there is likely to be significant reputational damage and impacts that would be experienced in several respects. Such stakeholders include suppliers, purchasers of processed material, the company’s financiers and lenders, its employees and those parties with whom it has dealings in the R&D space, not to mention those that it deals with for the purposes of obtaining grants. It is also apparent to the Tribunal that the recycling industry is highly competitive and rival traders would almost certainly exploit the opportunity occasioned by the applicant’s disqualification to gain a commercial advantage by seeking to capture and increase market share from the company.
The Tribunal is also concerned about the potential impact on ACP’s employees. It will be recalled that it is a significant employer of labour, with 81 people currently working for it. If the company were to lose the benefit of the applicant as its guiding mind and the business were to suffer there is obviously the risk that several employees may have their services terminated.
There is also the applicant’s responsibility for addressing environmental risk management at ACP’s plant. If high volumes of plastics that are processed as part of a recycling scheme are not carefully managed there is a significant risk to the environment particularly from such events as fire. One can see that it is important that the company have the benefit of the applicant’s hands-on management with respect to such risks.
Whilst it is by no means certain that if the applicant is disqualified from being a company director [redacted], it cannot be discounted. It is a factor that the Tribunal considers must weigh against disqualification of the applicant.
DOES THE APPLICANT UNDERSTAND AND FULFIL THE OBLIGATIONS, DUTIES AND RESPONSIBILITIES OF A DIRECTOR HAVING REGARD TO HIS CONDUCT?
The Tribunal finds that the applicant does understand and fulfil the obligations, duties and responsibilities of a company director when one has regard to his conduct concerning the several companies which have been considered in the hearing of this application.
The Tribunal has throughout these reasons endeavoured to explain by reference to the applicant’s conduct with respect to several companies what he did during the relevant times that he was a director of them. Those reasons are referred to and repeated.
The Tribunal accepted the applicant’s evidence as to what he did in the discharge of his duties and obligations of a company director. There was an array of documentary evidence, together with his witness statements and evidence from the witness box, which articulated in considerable detail precisely what he did as a director of the relevant companies concerned. The Tribunal concludes that he does understand the obligations, duties and responsibilities of a director when all his conduct is taken into account. The Tribunal is also fortified in reaching this conclusion for several other reasons.
There was the evidence of both Hayes and Lescai who are, as it will be recalled, an experienced accountant with high level business management experience in the case of Hayes and an experienced, director, consultant and corporate advisor in the case of Lescai. Their evidence was not challenged by the respondent and is accepted by the Tribunal. It was important independent evidence verifying the applicant’s qualities and capacities as a company director. Clearly given these witnesses’ skill and experience, they would not have given the evidence they did about his qualities as a director unless they genuinely believed it to be so.

Additionally, the Tribunal places some reliance or weight upon the fact that with respect to the applicant’s conduct concerning Xinying there was a favourable report prepared by Your Compliance Pty Ltd. There was no suggestion that Your Compliance Pty Ltd was anything other than an independent auditor or compliance professional. No adverse findings were made in that report against the applicant. This is in a highly regulated setting concerning the applicant’s conduct as a director of a holder of an AFSL.
With respect to the operations of ACP, which is a significant undertaking, there was substantial evidence from all the witnesses concerning the quality of management of that company and the systems it has in place to ensure that there is a high level of good governance. Additionally, there was the evidence of [redacted] which is a further reflection of the seriousness with which the applicant takes his responsibilities as a director of this company.
DID THE APPLICANT’S CONDUCT AS A DIRECTOR OF THE RELEVANT COMPANIES CAUSE THEIR FAILURE?
For the reasons articulated above the Tribunal is satisfied that the applicant’s conduct as a director of the companies concerned did not cause or contribute to their insolvency and subsequent failure. There was no evidence that the applicant’s conduct contributed to the failure of Jade Capital. It should be repeated that the “tipping point” or death knell of that company was a result of the adverse findings made against it by AFCA. There was nothing that the applicant did with respect to the claims made by the former client of a CAR of Jade Capital that led to the adverse findings being made against it. In addition to accepting the applicant’s evidence with respect to the failure of the recycling companies, the Tribunal has also accepted the evidence of the liquidator, Crisp. This evidence did not identify a neglect or breach of director’s duties on the part of the applicant.
The Tribunal concludes that the applicant did not actively mismanage the business of any of the companies concerned, he did attend to his duties as a director of each of them to the requisite standard of skill, care and diligence and he certainly did not heedlessly permit them to continue trading. Therefore, the Tribunal accepts his contention that he is not a person who comes within the purpose for which the power in section 206F must be exercised.[78] Those purposes it should be recalled being, firstly, the protection of all those persons who deal with corporations from the consequences of the actions of those corporate officeholders who, either through incompetence or dishonesty, or a combination of the two, bring about the failure of corporations and thus cause loss to others, and secondly, the maintenance of professional management standards in the public interest.
[78] Murdaca v ASIC (2009) 178 FCR 119 at [101].
Also, as noted above there was extensive evidence before the Tribunal concerning the applicant’s activities as a director of ACP. This evidence, particularly that from Lescai and Hayes, two experienced and highly qualified company directors, does indicate that he is conducting himself as a company director in accordance with all the obligations that are cast upon him in accordance with the law. The applicant contends, and the Tribunal agrees, that overall and certainly with respect to this company, the public does not require protection from him.
Therefore, the Tribunal concludes with respect to the applicant’s conduct in relation to the relevant companies concerned, disqualification is not justified.
DOES THE PUBLIC INTEREST WEIGH IN FAVOUR OF, OR AGAINST DISQUALIFICATION OF THE APPLICANT?
The respondent has contended that the applicant has failed to understand the proper role of a company director and, as it puts it, the duty of due diligence that is owed to a company. By reason of the evidence before the Tribunal it submits that he has failed to fulfil the duties and responsibilities of a competent director of the relevant companies concerned.
On the other hand, the applicant contends that when due regard is had to all of the evidence that was before the Tribunal, it must be concluded that he did not cause any of the corporate failures by act or omission and therefore did not cause loss to others. Therefore, the applicant is not an individual who comes within the purpose for which the power in section 206F must be exercised.
The applicant also contends that the evidence has demonstrated that he did, and does understand, and undertook his various duties as a director properly and in accordance with the law. In particular, the applicant emphasises what he is actually done as managing director of ACP.
As has been explained in several decisions of both courts and this Tribunal, section 206F permits the decision-maker to weed out directors who have demonstrated they fall short on their basic obligations. It is designed to assist the regulator to protect the public from delinquent company directors who have already demonstrated that they are incompetent or potentially risky to an unacceptable level. The section also operates as a deterrent against poor conduct by directors or potential future breaches of their obligations imposed upon them. It has also been identified that the section performs a function of specific deterrence as disqualification will deter a delinquent company director from potential future breaches of his or her obligations.
The applicant also contends that there is a further dimension to public interest considerations that should be considered by the Tribunal in deciding whether to disqualify the applicant. It is submitted that the public interest in the encouragement of free enterprise and entrepreneurship together with the public, community and stakeholder interest in the applicant’s ongoing role in success of the ACP business weighs against disqualification. He also submits that it is preferable that the applicant be able to continue to advance the plastics recycling business undertaken by ACP and the important research and development projects it is engaged in advancing. The Tribunal agrees of these submissions.
The Tribunal concludes that in all the circumstances the public interest does not weigh in favour of disqualifying the applicant from being a company director. There are several reasons for reaching this conclusion.
Having concluded that there was no conduct on the part of the applicant that caused the relevant companies concerned to fail, it cannot be said that he has already demonstrated that he is a bad company director, or otherwise poses an unacceptable risk in the future. It has been found that the applicant properly discharged his duties as a director of those companies. Further, the evidence adduced by the applicant (particularly that of Lescai and Hayes who are two skilled and experienced management advisory experts) which is extremely strong and canvassed earlier in these reasons, leads the Tribunal to conclude that he is unlikely to be associated with any future corporate collapses. ACP in particular, on the evidence that is before the Tribunal, is being extremely well run. Therefore, the Tribunal concludes that the applicant is not a person from whom the public ought or needs to be protected.
Another aspect of the evidence given by Lescai was that if the applicant were to be banned as a company director it would cause immediate and significant operational difficulties for ACP and its several stakeholders due to the strong hands-on involvement that he has in the management and guidance of the company.
The Tribunal also accepts the applicant’s contention that there is a public interest in the encouragement of free enterprise and entrepreneurship, and the public, community and stakeholder interest in the applicant’s ongoing role in and the success of the ACP business being allowed to continue. As such it weighs against disqualification. Amongst other things, it is a significant employer of labour in the northern suburbs of Melbourne. The growth of such a business is to be encouraged and is certainly in the public interest. There was significant evidence concerning the nature of the business undertaken by the company and that it is a leader in the area of plastic recycling. Additionally, there was also evidence concerning the R&D activities that it has undertaken. It is apparent from this evidence that the company is driven by the applicant’s endeavours and is making a significant contribution to the improvement of plastic recycling. This is of significant environmental benefit to the public as a whole. The objects of these endeavours are to enable more plastic to be recycled rather than disposed of in landfills or other environmentally unfriendly ways, and also to promote the use of sophisticated technology and processes which would, amongst other things, lead to lower costs of processing. It would also improve the commercial attractiveness of plastic recycling activities.
Several other adverse consequences which would be against the public interest if the applicant were disqualified from being a company director were raised by the applicant with which the Tribunal agrees.
There is a potential for a loss of confidence or reputational damage to the business of ACP. This includes such entities as government, financiers, employees (as already mentioned) suppliers, parties to buy and sell recycled plastics and the broader community at large.
The possibility of a default under lending facilities that ACP has with its bankers were also raised. Needless to say, an event of default could give rise to enforcement proceedings being taken by such lenders which could have serious consequences for the future of the business.
Additionally, there is also the possibility that several of the creative R&D projects that the applicant has been a driving force with respect to and have been undertaken by ACP could be placed in jeopardy.
ARE THERE ANY OTHER MATTERS THAT WEIGH IN FAVOUR OF OR AGAINST DISQUALIFICATION?
Limited submissions were made by the parties concerning this consideration which arises under section 206F(2)(b)(iii) of the Corporations Act.
The Tribunal, observes that any need to protect the public from the conduct of a particular director is balanced against the potential personal impact on him.[79]
[79] Seymour v ASIC [2017] AATA 2581 at [240].
There can be no doubt for the reasons that have already been canvassed above that were the applicant to be disqualified it would have significant personal impact upon him. He submitted that there would be significant reputational and financial impact upon him personally. Details have already been recorded about the significant investment in ACP that has been made by him or his family interests. Lest it needs to be repeated there has been an investment of $11 million together with a loan of $1 million. He also points to a significant reputational impact on his standing in the recycling industry and amongst ACP’s various stakeholders including its key R&D partners.
The Tribunal accepts these submissions. It also accepts that as managing director of ACP he is the driving force and guiding mind of that company. Even though as the respondent contends, were he to be disqualified he would not be prevented from being an employee or consultant to the company, the Tribunal considers that it would nonetheless lead to a significant management vacuum with respect to the company. Additionally, the absence of the applicant as a director of ACP is likely to significantly damage the company’s reputation and potential future dealings with external stakeholders. This is of particular concern with respect to the company’s banking facilities and its R&D activities, particularly its attempts which have been quite successful to date in obtaining grants from that sector.
The Tribunal should also note that it does not consider that if the applicant is allowed to continue as a company director that it will have implications for the respondent. Nor did the respondent submit that it would. It should be stated, lest there be any doubt, that the Tribunal does not wish these findings that it has made to be in any way a reflection on the decision of the delegate from which this application was made. It should be recorded that the delegate had very limited information by way of submissions before her when she made the decision that she did. The applicant’s counsel in submissions to the Tribunal acknowledged that the submissions made by the practitioners previously acting for him were somewhat limited. Additionally, the Tribunal has had the benefit of a vast array of extra documentary evidence; the evidence of several witnesses based on witness statements and from the witness box; together with extensive submissions both oral and in writing. Very little of this evidence was before the delegate.
CONCLUSION.
By reason of the foregoing matters, having considered all the evidence before it, the Tribunal considers that the correct and preferable decision is to set aside the reviewable decision. In substitution, the Tribunal decides that the applicant should not be disqualified from being involved in the management of corporations pursuant to section 206F of the Corporations Act.

I certify that the preceding 234 (two hundred and thirty-four) paragraphs are a true copy of the reasons for the decision herein of R Cameron, Senior Member

............................[sgd]............................................
Associate
Dated: 7 June 2023

Date of hearing: 7 June 2022, 8 June 2022 & 26 August 2022

Counsel for the Applicant: Ms Carrie Rome-Sievers

Solicitors for the Respondent: Piper Alderman

Counsel for the Respondent: Mr Sam Rosewarne

Solicitors for the Respondent: Chief Legal Office, Australian Securities and Investment Commission

Paragraph 41 of the respondent’s Statement of Facts, Issues and Contentions dated 12 May 2022 are

referred to.

T-3.2 of the T documents. Also, attached to the 206F notice was a document entitled "List of Documents Upon Which Concerns are Based" (T-3.3 of the T documents). It identified 17 documents relied upon by

the respondent in support of the concerns raised in the document described as "Areas of Concern Relating to Harry Wang".

The written submissions sent by the applicant's former lawyers to the respondent's delegate are dated

6 December 2021. They are document T-5.1 of the T documents. Paragraphs 4 to 20 of that document contain the applicant's submissions concerning Jade Capital. It is fair to say that the document is comparatively spartan. Paragraph 14 of those submissions address the applicant's role as a director of Jade Capital in the

following terms:
“14. Prior to or at the time of Mr Wang signing of the Shareholders Agreements, Mr McCrow and Mr Clinnick had agreed with Mr Wang that:
(a)Mr McCrow and Mr Clinnick had run the Jade Capital’s business as directors for many years, and would continue to run the day-to-day management of the business after Mr Wang became a director and shareholder of Jade Capital.
(b)It was critical for the business’ continued success and growth, that directors without specific experience in the industry did not play a central role in the management of Jade Capital, particularly from a standpoint of Mr Wang's nascent foray into Jade Capital's business, until they had gathered sufficient experience. This was understood by parties to take a few years.
(c)A certain level of trust among directors was needed for the parties to continue in their respective capacities within Jade Capital, and the management of the Jade Capitals business was delegated by Mr Wang to Mr McCrow and Mr Clinnick, who were to alert and communicate with Mr Wang any issues which arose within the business which were required to be brought to Mr Wang's attention.
(d)Mr Wang would not receive any remuneration for his role as a director of Jade Capital.
(e)Mr Wang would not have access to any of Jade Capital's bank accounts.
(f)Mr McCrow and Mr Clinnick would alert and inform Mr Wang of any issues and red flags including if Jade Capital's financial position was not satisfactory and needed review."

In cross-examination the applicant was specifically asked how many board meetings he had attended during the approximately 18-month period that he was a director of Jade Capital. He responded that he attended in person at least two, but with all other board meetings he did so on the phone or was circulated by email (see transcript page 171, lines 36-43). This evidence was not challenged. Importantly, the respondent now contends at paragraph 28 of its Outline of Closing Submissions that the applicant's evidence on this topic should

be rejected. It does so because the matters are not recorded in the board minutes and the applicant has

not established that the board minutes are not accurate (thereby proving to the contrary for the purposes of section 251A(6) of the Corporations Act). Secondly it is contended that when questioned about the minutes of several meetings which recorded the applicant as having been absent, he conceded he could not recall attending those meetings. It was not put to him that his recollection was imprecise, faulty or otherwise perhaps false. Having accepted the applicant's evidence on this topic, the Tribunal is prepared to find that in this respect the board minutes in not recording the presence of the applicant by telephone were not accurate.

Paragraph 67 of the respondent’s Statement of Facts, Issues and Contentions of 12 May 2022 is

referred to.

Details

AGLC: Wang and Australian Securities and Investments Commission [2023] AATA 1568
Case: [2023] AATA 1568
Decision Date: 7 June 2023

CaseChat Overview and Summary

The Administrative Appeals Tribunal reviewed a decision by a delegate of the Australian Securities and Investments Commission (ASIC) to disqualify Mr. Harry Wang from managing corporations for five years. The dispute arose after ASIC, pursuant to section 206F of the *Corporations Act 2001* (Cth), determined that Mr. Wang should be disqualified. This decision was based on his directorships of four companies that were subsequently wound up, with liquidators lodging reports indicating an inability to pay debts and no distribution to unsecured creditors.

The primary legal issue before the Tribunal was whether the disqualification of Mr. Wang was justified under section 206F of the *Corporations Act*. This required the Tribunal to consider the conditions under which ASIC may disqualify a person, including the requirement that the person has been an officer of two or more corporations that were wound up within a specific timeframe, and that ASIC has provided notice and an opportunity to be heard. The Tribunal also had to determine whether, in ASIC's discretion, disqualification was justified, having regard to factors such as the relatedness of the companies, the individual's conduct, and the public interest.

The Tribunal's reasoning focused on Mr. Wang's conduct as a director of Jade Capital Partners Pty Ltd, one of the four companies in question. ASIC contended that Mr. Wang's evidence should not be accepted, but the Tribunal found him to be a credible witness and accepted his testimony. The Tribunal concluded that Mr. Wang, as a non-executive director, had discharged his duties appropriately by carefully reading and understanding financial statements, maintaining familiarity with the company's financial status, and actively monitoring its affairs through regular contact with co-directors and attendance at business premises. The Tribunal was satisfied that he brought a questioning mind to his role and did not merely "go through the paces," thus not justifying disqualification in relation to Jade Capital.

Consequently, the Tribunal set aside the reviewable decision made by ASIC's delegate. The Tribunal substituted its own decision, finding that Mr. Wang's conduct in relation to Jade Capital did not warrant disqualification.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

The respondent, particularly in its closing submissions, contended that the Tribunal should not accept what was asserted in his witness statements.[9] The Tribunal infers also that the submission went so far as to contend that his evidence overall should be rejected. The Tribunal, because it found him to be a credible witness, cannot accept these contentions on behalf of the respondent and accepts the evidence given by the applicant both in his witness statement and from the witness box.[9] Paragraph 18 of the respondent’s Outline of Closing Submissions dated 15 July 2022 is referred to. The respondent also contended that the Tribunal should not accept what was contended in the Submissions for the Applicant dated 6 June 2022 lodged on his behalf.BACKGROUND. There were four companies with which this application is concerned that the applicant has been a director of, which were wound up and a liquidator appointed who lodged reports under section 533(1) of the Corporations Act. It is not controversial in this case that the discretion under section 206F(1)(a) of the Corporations Act to disqualify the applicant has been enlivened. Lest it needs to be repeated, this is because he was a director of four companies which have been wound up with no distribution to unsecured creditors. Details of those companies and their liquidation will be outlined later in these reasons. The applicant was a director of Jade Capital Partners Pty Ltd (“Jade Capital”) from 1 September 2017 until 19 February 2019. Jade Capital was wound up on 26 April 2019 and Clifford John Sanderson (“Sanderson”) was appointed liquidator. On 12 July 2019 the liquidator lodged with the respondent a report under section 533(1) of the Corporations Act estimating that the dividend to unsecured creditors to be zero cents in the dollar.[10][10] See Form EX01 lodged by the liquidator document T-4.3 of the T documents, heading “Unsecured creditors”, at page 103. The applicant was a director of Recycling Solutions (Vic) Pty Ltd (“Solutions”) between 18 November 2016 and 2 September 2020. Solutions was wound up on 4 February 2019 and Glen Anthony Crisp (“Crisp”) was appointed liquidator. On 30 April 2019 the liquidator lodged with the respondent a report under section 533(1) of the Corporations Act estimating that the dividend to unsecured creditors would be zero cents in the dollar. The estimated deficiency for Solutions was $5,778,537.[11][11] See the liquidator’s “Funded supplementary report to ASIC", document T-4.9 of the T documents at page 549, section 5.1 "Assets and liabilities/report as to affairs/estimated deficiency." In a Funded Supplementary Section 533 report to the respondent concerning the applicant, Crisp expressed a liquidator’s opinion as to Solutions’ failure. They were:(a)a result of insufficient sales, large overhead costs and loss of funding from a related party creditor, the Holding Company (Recycling Solutions Holdings Pty Ltd (“Holdings”)). The Holding Company’s funding was primarily provided by entities related to the applicant.(b)The failure was also attributable to the following activities purportedly conducted by a co-director, Salvatore Cala (“Cala”):(i)issuing duplicate invoices which overstated the company’s profitability; and(ii)unauthorised salary increases made by Cala to himself and his wife.[12][12] T Documents T-4.9, page 548 part 4.2 “Liquidator’s opinion as to the Company’s failure”.

Evidence

Evidence Before The Court

On 18 February 2022 the Tribunal stayed the operation and implementation of the reviewable decision until the hearing and determination by the Tribunal of this application for review.[2][2] Wang v ASIC [2022] AATA 457.THE EVIDENCE BEFORE THE TRIBUNAL. The following witness statements were tendered in evidence:(a)Harry Wang dated 22 March 2022 and 24 May 2022;(b)Michelle Wang dated 30 March 2022 and 30 May 2022;(c)Glen Anthony Crisp dated 22 March 2022;(d)Michael Thomas Lescai dated 22 March 2022;(e)Stuart Hayes dated 22 March 2022; and(f)Michael Edward Lhuede dated 30 May 2022 and 24 August 2022. Several of the above witness statements had attached to them a significant volume of documentary material. Each of the witnesses who made witness statements gave evidence from the witness box. In addition to the several witness statements and documents annexed to them, that were lodged and are referred to above, the T documents, the supplementary T documents and further supplementary T documents were also in evidence before the Tribunal.SECTION 206F OF THE CORPORATIONS ACT. Section 206F of the Corporations Act confers upon the respondent the power to disqualify a person from managing a corporation for up to 5 years. The discretion conferred by this section is enlivened if the conditions contained therein are satisfied. It is appropriate to reproduce the relevant subsections of section 206F in full:Power to disqualify(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; andii.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) about the corporation’s inability to pay its debts; andb. ASIC has given the person:i.a notice in the prescribed form requiring them to demonstrate why they should not be disqualified; andii.an opportunity to be heard on the question; andc. ASIC is satisfied that the disqualification is justified.(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; andb. may have regard to:i.the person’s conduct in relation to the management, business or property of any corporation; andii.whether the disqualification would be in the public interest; andiii.any other matters that ASIC considers appropriate. The power of a decision maker, such as the respondent or this Tribunal, under section 206F of the Corporations Act was the subject of some consideration in submissions made by the parties to this application. Its application has been the subject of careful review in several authorities that were referred to. The application of section 206F is fairly well-settled when one reviews those authorities. Such a power to disqualify a person from the management of corporations must be exercised for the purposes for which it was granted. Such purposes are firstly, the protection of all persons who deal with corporations from the consequences of the actions of directors who, either through incompetence or dishonesty or a combination of the two, bring about the failure of corporations and thus cause loss to others. A further purpose is the maintenance of professional management standards in the public interest.[3][3] Reference was made on submissions by both parties to the decision of the Full Court of the Federal Court of Australia in Murdaca v ASIC (2009) 178 FCR 119 at [101].

Decision

Reasons for decision

The Tribunal cannot see what more the applicant could have done with respect to Jade Capital in discharge of his director’s duties. When one considers the principles and duties of a non-executive director as outlined by Middleton J in ASIC v Healy it fails to see that he breached such duties. It accepts that the applicant carefully read and understood the financial statements that were provided to him. It is apparent having accepted his evidence that the applicant had more than a rudimentary understanding of the business of the company. It is apparent that he did by reason of his regular contact with his co-directors, and the Financial Controller monitor the company’s corporate affairs and policies. He maintained a familiarity with the financial status of the company and certainly had a questioning mind. By reason of these facts as outlined, the Tribunal cannot see that the applicant’s conduct with respect to the affairs of Jade Capital justified him being banned as a company director.CONCLUSIONS WITH RESPECT TO THE APPLICANT’S CONDUCT CONCERNING JADE CAPITAL. Having considered the evidence articulated above, and in particular having accepted the applicant’s account of what he did when he was a director of Jade Capital the Tribunal is satisfied that he discharged his duties as a director in the manner that he was required to do in accordance with the obligations imposed on him by the Corporations Act and as explained in several authorities. In particular, the Tribunal is satisfied by reason of accepting his evidence that as a non-executive director of Jade Capital he properly undertook all reasonable steps to be in a position to guide and monitor its affairs. As he said in his evidence he read, understood and focused upon the contents of the documents that were furnished to him from time to time, which the Tribunal accepts he received. These documents included financial statements, cash flow forecasts and minutes of board meetings. This is not to mention other documents he received by email from time to time. It accepts that the applicant also consulted with several of his current directors to probe them carefully so as to satisfy himself as far as was possible, of the company’s state of affairs. Both by reason of consulting his co-directors and attending at the premises of the business, he acquired more than a rudimentary understanding of its business. Contrary to the findings of the delegate of the respondent, the Tribunal concludes that the applicant did appropriately involve himself in the management of Jade Capital to the requisite standard of a non-executive director. It is also apparent that the applicant carefully read and understood the company’s financial statements. He did, as the authorities require, maintain familiarity with the financial status of the corporation by regular review and understanding of those financial statements. The Tribunal is satisfied that in doing so he brought to the task a questioning mind as required. It is also satisfied that the applicant did not as was contended for by the respondent merely go “through the paces”.

Ratio Decidendi

Legal Principle Established

In addition to the several witness statements and documents annexed to them, that were lodged and are referred to above, the T documents, the supplementary T documents and further supplementary T documents were also in evidence before the Tribunal.SECTION 206F OF THE CORPORATIONS ACT. Section 206F of the Corporations Act confers upon the respondent the power to disqualify a person from managing a corporation for up to 5 years. The discretion conferred by this section is enlivened if the conditions contained therein are satisfied. It is appropriate to reproduce the relevant subsections of section 206F in full:Power to disqualify(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; andii.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) about the corporation’s inability to pay its debts; andb. ASIC has given the person:i.a notice in the prescribed form requiring them to demonstrate why they should not be disqualified; andii.an opportunity to be heard on the question; andc. ASIC is satisfied that the disqualification is justified.(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; andb. may have regard to:i.the person’s conduct in relation to the management, business or property of any corporation; andii.whether the disqualification would be in the public interest; andiii.any other matters that ASIC considers appropriate. The power of a decision maker, such as the respondent or this Tribunal, under section 206F of the Corporations Act was the subject of some consideration in submissions made by the parties to this application. Its application has been the subject of careful review in several authorities that were referred to. The application of section 206F is fairly well-settled when one reviews those authorities. Such a power to disqualify a person from the management of corporations must be exercised for the purposes for which it was granted. Such purposes are firstly, the protection of all persons who deal with corporations from the consequences of the actions of directors who, either through incompetence or dishonesty or a combination of the two, bring about the failure of corporations and thus cause loss to others. A further purpose is the maintenance of professional management standards in the public interest.[3][3] Reference was made on submissions by both parties to the decision of the Full Court of the Federal Court of Australia in Murdaca v ASIC (2009) 178 FCR 119 at [101]. Notwithstanding these purposes, a decision-maker is not required to be satisfied as to the existence of incompetence, dishonesty or both before exercising the power under section 206F.[4][4] Zivanovic v ASIC (No 2) (2018) 126 ACSR 634 at [28].

Date of hearing:	7 June 2022, 8 June 2022 & 26 August 2022
Counsel for the Applicant:	Ms Carrie Rome-Sievers
Solicitors for the Respondent:	Piper Alderman
Counsel for the Respondent:	Mr Sam Rosewarne
Solicitors for the Respondent:	Chief Legal Office, Australian Securities and Investment Commission