Regulator enforcement action a reality

As part of the September issue of “The Personal Insolvency Regulator” newsletter, the Australian Financial Security Authority (AFSA) released an enforcement snap-shot for the April to June 2018 quarter (Quarter) (Snapshot).1

The indication given by this Snapshot, together with recent media releases about specific cases of enforcement activity,2 is that AFSA has both the tools and power to investigate and refer potential offences in appropriate circumstances.

Indeed, the most recent statistics disclose a total of 37 persons were prosecuted on referral from AFSA and 51 charges were proven with conviction, carrying a total dollar value of $3,924,179.00, ranging across 18 different offences under the Bankruptcy Act.3

Separately, AFSA issued three infringement notices to registered trustees.

Some of the major repeat offences which AFSA has observed related to:

  • making a false declaration in contravention of section 267(2) of the Act;
  • failing to file a statement of affairs under section 54(1) of the Act; and
  • offences under section 265(4)(a) of the Act in relation to concealing, removing, or dealing with property within 12 months of bankruptcy.
A recent example of a section 265 offence was a decision by the Townsville Magistrates Court reported on by AFSA last week, whereby the defendant was convicted of three charges:
 
  • one charge under section 265(4) of the Act for concealing a boat he had an interest in from his trustee; and
  • two charges under section 269(1)(ac) of the Act for obtaining goods and services without disclosing his bankruptcy to the provider of those goods and services.4

Further a case decided only last month in the Downing Street District Court in New South Wales has led to the sentencing of bankrupt to 12 months imprisonment for breaches (referred by AFSA to the Commonwealth DPP) which included disposing of property with intent to defeat creditors, and attempting to leave Australia without consent of a trustee.5

Lavan comment

AFSA’s role in the context of bankruptcy extends well beyond simply overseeing the regulatory framework within which trustees operate.

Cases such as these and others recently reported by AFSA reflect that AFSA takes its responsibility to ensure the proper administration of bankrupt estates, including that creditors are made aware of the bankruptcy status of individuals, trustees are not misled about what assets are available to creditors, and bankrupts do not attempt to siphon assets away from creditors, very seriously.   In the most extreme of cases, this can mean referring matters for prosecution of offences which attract prison sentences.

AFSA’s assertive approach towards utilising the enforcement provisions of the Act should provide comfort to practitioners and the market that in the appropriate circumstances AFSA will take steps to ensure possible breaches are investigated and prosecuted.

The breadth and number of offences suggest that AFSA is allocating significant time and resources to this role.
 
23 November 2018
Personal Bankruptcy Updates
AUTHOR
Alison Robertson
Partner
AUTHOR
Dan Butler
Senior Associate
SERVICES
Recovery, Reconstruction and Insolvency


FOOTNOTES

[1] Australian Financial Security Authority, ‘Enforcement snap-shot’ (Media Release, September 2018) <https://www.afsa.gov.au/professionals/pir-newsletter/enforcement-snap-shot>.

[2] Australian Financial Security Authority, ‘NSW (Xenos) – Bankrupt convicted for obtaining credit without disclosing his bankruptcy’ (Media Release, May 1, 2018) <https://www.afsa.gov.au/about-us/newsroom/media-release-nsw-xenos-bankrupt-convicted-obtaining-credit-without-disclosing-his>;  Australian Financial Security Authority, ‘VIC (Mandri) Former Bankrupt ordered to perform 18 months community service for making false declarations’ (Media Release, 19 June 2018) <https://www.afsa.gov.au/about-us/newsroom/media-release-vic-mandri-former-bankrupt-ordered-perform-18-months-community>; and Australian Financial Security Authority, ‘VIC (Boulad) – Convicted for removing property and failing to comply with trustee’s direction’ (Media Release, 19 June 2018) <https://www.afsa.gov.au/about-us/newsroom/media-release-vic-boulad-convicted-removing-property-and-failing-comply-trustees>.

[3] 1966 (Cth) (Act).

[4] Australian Financial Security Authority, ‘QLD (PAGE) – Ex-bankrupt pleads guilty to concealing boat and obtaining goods and services without disclosing bankruptcy (Media Release, 15 November 2018) <https://www.afsa.gov.au/about-us/newsroom/media-release-qld-page-ex-bankrupt-pleads-guilty-concealing-boat-and-obtaining>.

[5] Australian Financial Security Authority, ‘NSW (Khalsa) Midwife sentenced for bankruptcy offences’ (Media Release, 19 November 2018) <https://www.afsa.gov.au/about-us/newsroom/nsw-khalsa-midwife-sentenced-bankruptcy-offences>.