(1) Where:
(a) it appears to the Court or to ASIC that a liquidator has not faithfully performed or is not faithfully performing his or her duties or has not observed or is not observing:
(i) a requirement of the Court; or
(ii) a requirement of this Act, of the regulations or of the rules; or
(b) a complaint is made to the Court or to ASIC by any person with respect to the conduct of a liquidator in connection with the performance of his or her duties;
the Court or ASIC, as the case may be, may inquire into the matter and, where the Court or ASIC so inquires, the Court may take such action as it thinks fit.
2 The plaintiff filed in court today a Second Further Amended Originating Process in which it sets out the defaults made by the defendant in his capacity as liquidator, administrator or administrator of a deed of company arrangement in relation to a number of companies.
3 The proceedings were commenced in 2008 as a result of investigations into the conduct of the defendant commenced by ASIC in 2007. The matter has been case managed and was listed for hearing before me commencing today for a period of some six weeks. In the weeks leading up to the hearing, the defendant appeared firstly without representation but subsequently instructed his present solicitor, Mr Wright, who appears today.
4 At the previous directions hearings in relation to the matter, the parties indicated that the defendant wished, with the benefit of his legal representative, to discuss a way forward in respect of the allegations made against him. Today, the parties have proffered a proposed Consent Order.
5 The plaintiff has tendered a large volume of affidavit material and exhibits to which no objection has been taken. The defendant has sworn an affidavit dated today and has given very short evidence. The plaintiff did not wish to cross-examine the defendant.
6 The defendant was born on 3 September 1963. He worked at Ernst and Whinney in Sydney from 1986 to 1989; at Pannell Kerr Forster from 1989 to 1990; at Star Dean-Willcocks in Sydney from 1991 to 1998, as both a manager and later as a director; and then at Star Dean-Willcocks Crosbie, as it became known, from 1998 to 2003, during which time he was in charge of the Newcastle office.
7 In 2003, the defendant commenced his own practice, practising in the style Stuart Ariff Insolvency Administrators and it appears that his services may be provided through a company, S Ariff Nominees (No 2) Pty Ltd, although there is no detail of that arrangement in evidence.
8 The defendant has admitted a series of facts relating to each of the companies. The conduct which the defendant has admitted is contained in annexure A to the Short Minutes of Order.
9 The CarLovers group of companies operated the business of car washing. The defendant was appointed as administrator of those companies on 10 July 2003, and as Deed Administrator on 5 December 2003. The conduct admitted by the defendant includes, but obviously is not limited to, the defendant charging the CarLovers companies for overseas travel for himself and his family members, including travel expenses, accommodation charges and the like over a period 2003 through to 2007. It appears from the admitted facts that those expenses had absolutely nothing to do with the business of the CarLovers companies. The admitted facts also includes admissions of conduct by the defendant by which he paid his family members large amounts of the companies' money claimed to be for services to the companies but which had nothing to do with the CarLovers companies.
10 Compounding this conduct is the defendant's inability to produce any documents relating to the amounts identified in the annexure the subject of the admitted facts. The administration of the CarLovers company was concluded on 1 November 2007 by an order of the Court.
11 The next company, Sid Fogg & Sons Pty Ltd, and a company Visidet Pty Ltd, were companies providing bus services. The defendant was appointed as administrator of those companies on 22 December 2005 and as Deed Administrator on 27 February 2006. That administration was concluded on 18 April 2008.
12 The facts admitted to by the defendant in respect of those two companies include the lodgment of false accounts in respect of the period February 2008 to April 2008 and a myriad of failures to properly establish and administer the Deed Fund; making unauthorised payments to himself and charging the company Sid Fogg & Sons Pty Ltd over $100,000 in disbursements during the period 2 August 2007 to 18 March 2008 for GST liabilities, notwithstanding that he had not paid them and in fact did not do so until the deed was effectuated on 18 April 2008.
13 There are a number of smaller companies, one previously known as Sermacs Pty Ltd and another, MDC Entertainment Pty Ltd, the latter of which operated a Melbourne nightclub. The defendant was appointed as administrator of Sermacs on 2 May 2006 and as liquidator of that company on 29 May 2006. He was appointed as administrator of MDC on 17 May 2007. That ended on 23 May 2007. The defendant has admitted that he improperly caused Sermacs to pay $10,866 to a corporation for work performed by that company for MDC and he failed to lodge any accounts with ASIC for the winding up of Sermacs prior to 2 March 2009, despite the winding up commencing on 29 May 2006.
14 Another small company Zelous Creations Pty Ltd, a boat trim business, is also the subject of an admitted fact, that is, that the defendant accepted appointment as administrator of that company in circumstances where he knew or ought to have known that his appointment was improper, invalid and/or ineffective. He was appointed as administrator on 20 December 2004 and as Deed Administrator on 11 February 2005, which came to an end on 16 March 2007.
15 The company Austen Entertainment Limited is also the subject of admitted facts. It operated a publishing business. The defendant was appointed as administrator on 9 May 2005, as Deed Administrator on 17 August 2005 and as liquidator on 6 June 2008. The defendant has admitted to failing to call meetings, improperly receiving payments of $93,550 and allowing companies to remain in control of assets inappropriately.
16 The next company the subject of the admissions is P & J Smith Engineering Pty Ltd, a metal fabrication company. The defendant has admitted improperly paying himself $29,600 in respect of that company and he has admitted failing to pay any dividend to Westpac Banking Corporation when he should have done so. The defendant was appointed as administrator on 29 March 2007 and as Deed Administrator on 23 May 2007, which came to a conclusion on 27 April 2009.
17 The next company, Singleton Earthmoving Pty Ltd, is, as the name suggests, an earthmoving company. The admissions made by the defendant in respect of this company are a little more complex. He admits, amongst other things, lodging false accounts with the plaintiff and failing to lodge accounts with the plaintiff for a period from December 2004 to June 2005.
18 The defendant sought to defend an action brought by a third party who alleged it had paid moneys to Singleton Earthmoving when it should have, or intended to, have the moneys paid to the former principal of that company, Mr Wood. The defendant gave evidence before White J in this Court in proceedings identified as Wambo Coal Pty Ltd v Ariff (2007) 63 ACSR 429. The structure of the admissions made by the defendant is such that he admits that White J made findings of misconduct and dishonesty against him and admits paragraphs 51 to 54 in White J's judgment, which includes findings of a most serious kind in relation to Mr Ariff's conduct in that case, in respect of the Singleton Earthmoving company.
19 The next company is Independent Powder Coating Pty Ltd, a company conducting a business of powder coating in Newcastle and later in Dungog. The defendant was appointed as administrator on 13 February 2006 and as liquidator on 9 May 2006. The admitted facts include an improper communication with the Insolvency Practitioners Association of Australia in which the defendant admits he improperly advised that association that he had received an offer for the purchase of the business of the company. He admitted that he charged the company nearly $6,000 for expenses incurred as a result of an improper authorisation of his employees to enter private premises and to seize assets on that land when he knew or ought to have known that the land was privately owned and that the ownership of the assets was in dispute. The defendant also admits to failing to pay superannuation to employees and PAYG tax to the Australian Taxation Office.
20 The next companies are Bulla Tip & Quarry Pty Ltd and Bulla Tip & Quarry Operations Pty Ltd, operating a tip. The defendant was appointed as administrator on 13 December 2006 and as Deed Administrator on 4 April 2007. He was removed on 13 December 2007. The admitted conduct by the defendant includes acceptance of the appointment as administrator of those companies where he knew or ought to have known, as he admits, that his appointment was improper, invalid and/or ineffective.
21 He admits that he issued a circular to creditors in which he represented that State Securities Pty Ltd had advanced an amount of $800,000 to the Bulla companies under a loan agreement, when no such payment had been made. He admits that he paid $400,000 to State Securities Pty Ltd on 12 January 2007, when he knew that State Securities had not paid that amount to the Bulla companies and he admits that he expected that State Securities would use the money to buy out a $400,000 debenture held by St George Bank Ltd over a company of which the defendant was Deed Administrator, known as the Armidale YCW Rugby League Football Club Ltd. He admits to having paid himself remuneration which had not been approved by the creditors in the amount of $55,573. He admits that he knew that the creditors had only approved $200,000 by way of remuneration rather than $255,573. There are other admissions in respect of these companies relating to improper payments for consulting fees, failures to collect amounts that should have been collected and an improper failure to accept an offer from a company to purchase land.
22 That brings me to the last company, HR Cook Investments Pty Ltd. That was a family company which owned and held property for the benefit of the Cook family. The defendant was appointed as the voluntary liquidator on 9 June 2006 as a result of the demise of the principal of the company. He ceased as voluntary liquidator on 29 March 2009. He used the company's money to pay legal fees for totally unrelated services. Lawyers who provided their services in a variety of unrelated retainers were paid by the defendant using the moneys of HR Cook Investments Pty Ltd. He even paid a judgment amount to a firm of solicitors arising from the proceedings before White J to which I have referred. The amounts of money that he paid to the legal firms for the provision of their services, to companies unrelated to the HR Cook Investments Pty Ltd, amounted to hundreds of thousands of dollars.
23 The defendant has provided evidence in support of the application for consent orders. His evidence is that when he commenced his practice in 2003 in Newcastle he only had one employee. That practice grew rapidly to approximately 25 members of staff, including 16 professional staff. As soon as he started his own practice it appears that he was approached by CarLovers and accepted the appointment as administrator, almost immediately after the practice began.
24 The defendant's evidence included the following: