Conflict concern over ARITA director referral

Katherine Barnet leaving the Supreme Court Photo: iNO Images

Liquidator Kate Barnet has taken leave of absence from her role as a director of the board of the Australian Restructuring, Insolvency & Turnaround Association (ARITA) following her referral to a s40-45 disciplinary committee by ASIC.

As was first reported last week in Insolvency News Online (iNO) Barnet and former Bentleys colleague Bill Fletcher were referred to the committee under section two of the Insolvency Practice Schedule onJuly 10 after they failed to satisfy show cause notices issued by ASIC in 2019.

While the issues identified by ASIC involve Fletcher and Barnet in their capacity as liquidators of the Octaviar, at least one rival association has questioned how the committee process can be independent given one of the three nominees required to convene a committee must be a registered liquidator nominated by ARITA.

The Association of Independent Insolvency Practitioners (AIIP) published an open letter expressing its disappointment with the referral, “In particular, the situation with Ms Barnet who is a member of ARITA’s National Board and is chairman of important ARITA committees,” AIIP president Stephen Hathway said.

“Given the essential role ARITA performs during the Disciplinary committee process, we have assured our members that ARITA will continue to implement the highest standards of independence,” Hathway said.

As well as being an ARITA fellow and member of the national board, Barnet sits on the ASIC/AFSA joint liaison committee, ARITA’s finance committee, and its Diversity and Inclusion Committee, also known as the Balance Taskforce.

ARITA chief executive John Winter told iNO he had worked extremely hard to identify a member who was sufficiently arms length to satisfy himself and ASIC that the nominee was independent and would be seen to be so.

“When it eventually becomes public as to who the delegates are, I think people will be satisfied there’s no potential for bias – this was an overriding consideration for me,” Winter said.

Some AIIP members however went so far as to so far as to question whether Norton Rose Fullbright deputy chairman Scott Atkins should remain in his role as ARITA President, given his formerly close involvement as a senior lawyer acting for Fletcher and Barnet in the Octaviar liquidation.

The most recent Form 5602 covering the 12 month period to September 2019 however reveals that Norton Rose Fullbright undertook no work for Barnet and Fletcher in their capacity as liquidators of Octaviar during the period.

While Atkins was chairman and lead partner of Henry Davis York’s (HDY) insolvency and restructuring practice, HDY generated millions in fees providing legal advice to the Octaviar liquidators.

That relationship however appears to have ended, perhaps after Norton Rose Fullbright acquired HDY in 2017.

Winter also replied to the AIIP open letter with correspondence of his own, pointing out that the disciplinary committees “are constructed by legislation to require a level of independence from both regulators to ensure a fair and comprehensive hearing for practitioners,” Winter said. 

“This independence is something we advocated strongly for in the drafting of the ILRA. 

“We believe the effectiveness of this regime has been demonstrated by the quality of outcomes from those s40-45 committees that have ranged from almost complete exoneration through to removal from the profession,” Winter said. Support INO’s continued chronicling of the insolvency sector.

Further reading:

Octaviar Liquidators Referred To Committee

Lit Funder’s Conduct Allegedly Unconscionable: Octaviar

6 Comments on "Conflict concern over ARITA director referral"

  1. James T Johnson | 29 July 2020 at 11:05 am | Reply

    The approach taken by Ms Barnett is a proper position.

    It seperates her from any decision making whilst the referral remains unresolved and also from the relavent appointment by ARITA of a member of the Commiittee

  2. Bill Themall | 29 July 2020 at 11:30 am | Reply

    Maybe someone should do an itemised list of the AIIP’s founders, “leadership” and active members to see how many of them have ASIC enforcable undertakings, ARITA conduct actions or damning court judgements against them.

    People in glasshouses and all…

    • I’d like to think most in the profession could rise above that sort of pettiness, Bill. Having said that, feel free to investigate about the conduct of the AIIP and its members and compare same to ARITA’s diminishing membership base.

  3. Winter is a person who does not recognise a conflict when he sees it. ARITA is in a position of conflict, judging one of its own. Any resignation from ARITA bodies does not cure the conflict.

    • John Winter | 29 July 2020 at 1:27 pm | Reply

      There is no conflict. It’s not ARITA doing the judging.

      ASIC disciplinary committees are comprised of an ASIC legal officer (not from the insolvency team), an appointee by the Minister (who is not allowed to be a liquidator) and an unconflicted, registered liquidator of more than 5 years registration chosen by ARITA. We usually, but are not required, to chose that liquidator from the near 85% of RLs we represent.

      After the appointment, the Committee member acts independently and at full arms length of ARITA and they are not able to share information with us under the confidentiality provisions of the ASIC Act.

      This is precisely the process that has been successfully followed in every other conduct matter both for ASIC and AFSA. And it ensures that registered liquidators and trustees have an expert practitioner on their committees to ensure a fair and technically informed hearing. But, do note, that the ARITA appointee is in a 2 to 1 minority.

      Regardless, though, “judging one of its own” is what a genuine professional body is required to do. Perhaps consider the lead story in Acuity this week, if you will, Pnut?

  4. An “open letter” from AIIP that is not on their website. A reply from John Winter that is not on the ARITA website. So all just posturing for INo’s benefit then?

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