Don’t look and don’t ask isn’t a luxury insolvency practitioners can afford, especially when the number of appointing directors is a matter of dispute.
As a recent decision of a disciplinary committee convened under s40-50 Schedule 2 of the Corporations Act demonstrates, ignoring a director’s complaint that he never signed a letter of resignation is fraught, with the liquidator in question’s unblemished record probably the only thing sparing him more draconian sanctions.
As it was the Committee – which we know is always chaired by a delegate from the ranks of the accuser – decreed that the NSW-based transgressor be publicly reprimanded.
The journey to an unsupressed shaming began for PKF partners’ Simon Thorn in 2023 when a judge of the NSW Supreme Court delivered her reasons in respect of an application Thorn brought to court seeking validation of his appointment as administrator of Premier Energy Resources (PER).
Thorn brought the application some two months after being appointed by director Luke Connor, whom Thorn believed to be the sole director after Connor produced a resignation letter signed by co-director Richard Clark.
Despite protestations from Clark that the signature on the resignation letter was forged for approximately two months Thorn resisted for Clark’s request that Thorn apply to the court to validate his appointment.
That delay and the excuses Thorn provided to the court for it elicited criticisms from Justice Kate Williams that would’ve been difficult for ASIC to ignore and a little under three years later it issued the Show Cause Notice.
The Committee essentially found that Thorn’s primary crime was tardiness. By resisting Clark’s requests to investigate the resignation letter he let the question of validity fester.
In its published decision the Committee said Thorn failed to make reasonable enquiries to satisfy himself that he’d been validly appointed.
Further the Committee said Thorn failed in his responsibility under general law to promptly bring an application to court to confirm the validity of his appointment where that validity was questioned.
Further reading:
Over the years I have seen this many times. The lesson is that an application should be made ASAP after the dispute becomes apparent. It probably also would have been picked up first purposes of report to creditors