Editor’s Note: On Friday, August 18, 2023 Justice Brigitte Markovic of the Federal Court of Australia dismissed ASIC’s case against liquidator Jason Bettles and ordered the regulator to pay Bettles’ costs.
While ASIC landed no killer blow yesterday Worrells partner Jason Bettles could not be said to have exited the Federal Court witness box unburdened by any remaining questions in respect of his involvement in the Members Alliance Group (MAG) and Benchmark Wealth affairs.
The most obvious of those stubbornly clinging questions is why.
Why did he decline to ask questions and demand answers at critical times? Why did he trust people who couldn’t be trusted?
iNO makes no suggestion of any wrongdoing and in between the can’t recalls Bettles had answers, of sorts.
He relied on directors of solvent related entities complying with the obligations. Or he took steps to prevent excesses once he discovered what the players he couldn’t trust had been up to.
For iNO the regulator’s case – which seeks a judicial inquiry into Bettles’ conduct in respect of MAG and Benchmark – highlights the difficulties unfunded liquidators face when they are appointed to a company that is the sole shareholder of various subsidiaries whose assets would be imperilled if they were wound up.
In the case of MAG there were entities holding Australian Financial Services Licenses (AFSLs) that had to be ring fenced from their insolvent brethren so that their assets – things like client books with trailing commissions – could be realised.
That meant relying on the solvent entities’ directors. Unfortunately for Bettles that reliance was misplaced.
One director – Richard Marlborough – has since been charged with 21 counts of trading while insolvent; 10 counts of dishonestly using his position as a director; one count of disposing of property after becoming (or was about to be) a bankrupt; and one count of fraud.
All of the charges relate to the fall of MAG and Benchmark and involve the arrangements Marlborough and the other controllers and moving minds put in place to profit from those proposed asset realisations at the expense of the wider group’s creditors, of which the ATO dominated with a $26 million debt.
Much of ASIC’s case focusses on Bettles’ attendance at a series of meeting with the moving minds in mid-2016, shortly before he and colleague Raj Khatri were appointed “on spec” as joint & several liquidators of MA Group entity Iridium Holdings Pty Ltd on July 22, 2016.
ASIC has made no allegations against Khatri in respect of any wrongdoing.
Because aspects of the pre-appointment arrangements reeked of a phoenix, ASIC surmised that Bettles was either in on it, had chosen to look the other way or otherwise failed to act with the level of diligence expected of a registered liquidator.
ASIC commenced proceedings for a judicial review of Bettles’ conduct in 2019.
As you can imagine, Bettles was having none of that and has consistently rejected the allegations while pointing out the limitations of liquidators when they are unfunded.
To that end iNO should point out that Victorian liquidator Jim Downey sought assistance from ASIC to pursue a $7 million insolvent trading claim against Marlborough and MacVicar in the liquidation of related entity MA Human Resources Pty Ltd.
Documents shown to the court yesterday included a letter from Murdoch Cooch of Downy’s office to Worrells’ Erin Phipps dated September 26, 2016 in which Cooch canvasses the possibility of them amalgamating their investigations given Downey was unfunded.
ASIC declined to fund Downey and his approach to Bettles led nowhere but if Bettles had pursued funding from ASIC with more vigour he’d perhaps now be sitting behind an impregnable defence, assuming the regulator would have commenced these proceedings knowing it had refused Bettles the means to conduct investigations.
As it is ASIC thinks Bettles is vulnerable on a number of fronts, one of them being Worrells’ connection with the MAG moving minds which ASIC counsel yesterday showed extended beyond the impugned pre-appointment meetings and the July 2016 appointment to Iridium Holdings.
Little more than 12 months earlier Bettles provided another MAG director – Colin MacVicar – with detailed advice about his affairs.
The upshot of the advice was that MacVicar need to amend MAG’s existing corporate structure and provide greater detail about how the payments he was sucking out were calculated and justified, otherwise those payments might be vulnerable to any claim a liquidator might make in the future.
As the court heard, Bettles’ DIRRI made no reference to the MacVicar advice and he was forced to reject ASIC’s counsel’s assertion that his DIRRI was “deficient” for failing to detail the relationship with MacVicar or disclose any detail about the advice provided.
MacVicar it should be noted has since been charged with 13 counts of trading while insolvent; one count of dishonestly using his position as a director; and one count of disposing of property after becoming (or was about to be) a bankrupt.
The charges against Marlborough, MacVicar and others however came after ASIC forced Bettles and Khatri out in 2017 and replaced them with Grant Thornton’s Mike McCann.
The day ended with Bettles being asked to explain how Worrells manages its files. Stirring stuff as you can imagine but Bettles seemed more energetic in applying himself to the questions than he had at any time that day. Perhaps it was the burst of energy one gets when the finish line’s in sight? The parties will return to court on August 4.
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