Dean Royston  McVeigh/ ASIC/ Failure to carry out duties

IN THE MATTER of an Application by the Australian Securities and Investments
Commission to the Companies Auditors and Liquidators Disciplinary Board
pursuant to section 1292 of the Corporations Act 2001
MATTER NO: 10/VIC08
AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Applicant
DEAN ROYSTON McVEIGH
Respondent
DECISION of the Board to exercise its powers under section 1292 of the
Corporations Act. Notice of this decision will be given to the Respondent under
section 1296(1)(a) of the Corporations Act and a copy of that notice will be lodged
with ASIC under section 1296(1)(b) of the Corporations Act.
19 January 2010
Panel:
Donald Magarey
David Olifent
Ian Ramsay


EXECUTIVE SUMMARY
This is a case brought by ASIC against Mr Dean McVeigh, a registered liquidator
who practises under the name Foremans Business Advisors at Sandringham in
Melbourne. ASIC has applied to the Board for Mr McVeigh to be dealt with under
s1292 of the Corporations Act 2001.
In its application, ASIC contends that in respect of each of ten companies of which
Mr McVeigh was appointed voluntary administrator or liquidator or both, Mr
McVeigh has failed to carry out or perform his duties adequately and properly.
The principal areas where it was contended that Mr McVeigh had failed to carry out
his duties were:
- independence/conflicts (6 administrations);
- failure to conduct an adequate investigation under s438A (7 administrations);
- failure to conduct an adequate investigation as a liquidator
(7 administrations);
- failure to provide an adequate report to creditors under s439A
(8 administrations);
- failure to provide a timely or adequate report to ASIC under s533
(6 administrations);
- failure to provide to creditors adequate details of proposed remuneration
(9 administrations); and
- failure to carry out duties of a liquidator with an adequate degree of care and
diligence under s180(1) (2 administrations).
With the exception of one contention and two alternative sub-contentions which
were not established and one alternative sub-contention which was withdrawn, all
the contentions brought by ASIC were established to the satisfaction of the Board.
As a result, the Board ordered that:
1. The registration of Mr McVeigh as a liquidator be suspended for a period of 18
months.
2. Mr McVeigh must undertake an educational program in the areas of
independence/conflicts, investigation, reporting and office procedures and
systems.
3. On completion of his suspension, Mr McVeigh will be subject to peer review
of his first five voluntary administrations and his first five creditors' voluntary
liquidations.


Contention 38

Mr McVeigh failed adequately and properly to disclose to creditors
sufficient particulars of tasks performed and hours worked in the
voluntary administration by Mr McVeigh and his staff from the date of
his appointment as VA of AFT to the date of the second meeting of
creditors as required by law and by the SBP Rem.
Contention 39
Mr McVeigh failed adequately and properly to lodge a report as
required by s533(1) of the Act and PN 50 in relation to conduct of an
officer or officers of AFT that may have constituted an offence under
the Act, the misapplication or retention of property of AFT or a default,
breach of duty or breach of trust in relation to AFT.
2.2 ASIC made it clear that contentions involving Mr McVeigh's failure to
carry out adequately and properly the duties of a liquidator (ie under
s1292(2)(d)(i)) related to his conduct as a liquidator and that contentions
involving Mr McVeigh's failure to carry out adequately and properly
duties or functions required by the Act to be carried out or performed
by a registered liquidator (ie under s1292(2)(d)(ii)) related to his
conduct as a VA. This accords with our understanding of the correct
construction of s1292(2)(d).
3. Preliminary matters
3.1 Role of the Board
(a) The statutory question which we have to determine is whether
we are satisfied that Mr McVeigh has failed to carry out or
perform adequately and properly the duties of a VA and of a
liquidator ("the statutory question"). Thus in respect of each
contention or sub-contention, ASIC must firstly establish to our
satisfaction that Mr McVeigh had a particular duty either as a VA
or as a liquidator. Then ASIC must, by appropriate evidence,
prove to our satisfaction that the relevant contention or subcontention has been established and that the statutory question
should therefore be answered in the affirmative. We believe that
ASIC accepts these tasks.
(b) There are various sources from which a VA's or a liquidator's
duties may arise including statutory provisions, the general law,
codes and standards promulgated by professional bodies and
generally accepted standards of professional conduct.
(c) In this case ASIC has framed a number of its contentions as being
constituted by a failure to do something "as required by" or


received no appointments as VA, deed administrator or
liquidator in a creditors' voluntary liquidation.
(iii) In the period between 1993 (when Mr Georgakis first
became a registered liquidator) and 2008, Mr Georgakis
has been appointed as VA (and subsequently liquidator)
of one company in 1997 and was appointed as VA (and
subsequently liquidator) of three companies in 1998.
Those three companies were simultaneous related matters
and were controlled by a single person who was the
principal director and also directly or indirectly, the
principal shareholder.
(iv) Since becoming a registered liquidator Mr Georgakis has
compiled two s439A reports.
(d) In relation to the substitute liquidator appointments, there was
no evidence as to the stage which each liquidation (or the
DOCA) had reached or what remained to be done at the date Mr
Georgakis and Mr Scales were appointed. Furthermore there
was no evidence of how much of the remaining work was done
in each case by Mr Georgakis and how much by the joint
appointee Mr Scales. In relation to his appointments generally,
Mr Georgakis gave no worthwhile evidence as to his actual
experience gained in such appointments and how much
experience he had had in such matters as conducting an
investigation, selling a business, dealing with conflicts or
independence issues, dealing with secured creditors, preparing
reports to creditors or to ASIC or seeking approval of creditors
for remuneration.
(e) Mr Georgakis did not accept criticism of his lack of experience in
voluntary administrations. When it was put to him in cross
examination that he was not in a position to provide any
assistance to the Board at all, as an expert or otherwise, as to the
appropriate practices in general of insolvency professionals in
relation to Part 5.3A of the Act, he stated that he felt comfortable
that he was able to respond accordingly. He said that the
voluntary administrations we are considering here all reverted to
liquidations and that he had done many liquidations over the
years so he felt comfortable in answering questions of the nature
that he was asked in his reports. Mr Georgakis was asked by the
Panel to prepare a note setting out the sort of work he had done
over the last 10 years which he believed qualified him to give the
opinions he gave in his evidence. In response to that, Mr
Georgakis produced a letter to the Board dated 20 April 2009.
That letter concentrated on Mr Georgakis's opinion that the skills




(o) Mr McVeigh advised in the report that a formal valuation of
WW’s assets had “not yet been completed”. He confirmed that
the RATA detailed an amount of $112,500 which was: “proceeds
from a contract of sale of the business dated 23 December 2005.
The director has advised that this amount is fully realisable. I
further advise that I am currently reviewing this sale
agreement”. The report does not disclose that the sale was to a
company owned and controlled by the director Mr Curtain.
(p) The report stated that there were “no identifiable [voidable]
transactions which, prima facie, may be recoverable by a
liquidator” and “on the face of the information available, such
action [for insolvent trading] would seem unlikely”. There is




This is not the usual form of generic pre-appointment advice
given to an insolvent company. This is not generic advice about
the insolvency process and options available to the company.
(g) We have concluded that contention 27 has been established.
6. Investigation
6.1 Structure of the contentions and of our reasons
(a) Most of the contentions in this category (other than 32(PV) which
relates only to Mr McVeigh's position as liquidator and 14(IH)
which relates only to Mr McVeigh's position as VA) are couched
in the form of two sub-contentions, the first relating to Mr
McVeigh's position as VA and the second relating to his position
as liquidator. In each case we regard the two sub-contentions as
separate and distinct (rather than alternatives) because they
relate to separate periods of time and the duties arise from
different sources. We shall consider the two sub-contentions
separately. We think it is convenient if we deal with all the first
sub-contentions (including 14(IH)) first and as a group and if we
preface that with a summary of our understanding of the nature
of the professional duty created by s438A(a). Then we will deal
with all the second sub-contentions (including 32(PV)) as a group
and we shall preface that with a summary of our understanding
of the relevant professional duty created by s180(1) and the
common law.
(b) The contentions in this category are established, so ASIC
contends, on the basis of various matters which ASIC has
specified in the SOFAC and which we call "particulars". In each
case we shall discuss each particular unless that is unnecessary in
the circumstances. We have treated the particulars not just as
allegations of fact (a good number of which are admitted as such
by Mr McVeigh) but as allegations that on the strength of those
facts, Mr McVeigh has failed to perform his relevant duties as a
VA or as a liquidator. When we conclude that a particular
contention has been established, we mean that both of these
aspects have been established.
(c) We have taken the view that if any one particular specified by
ASIC in relation to a contention or sub-contention is established
then that relevant contention or sub-contention is established.
(d) In the SOFAC, ASIC sets out a list of particulars supporting each
contention. However, there is only one list in each case which
we therefore take to be intended to apply to each of the
voluntary administration period and the liquidation period



o the question of validity
or enforceability. In his evidence, Mr McGinness stated
that the charge secured a loan of $490,000 under an
agreement, a copy of which was lodged with ASIC. In an
email of 22 November 2005 to Mr McVeigh, Mr Dear
noted the fact that the AKD charge had not been
registered within 45 days and the effect that may have on
its validity. Mr Dear added, "If those views are to be acted
upon, we would require counsel's advice specifically on
this point". We note that Mr Dear was not acting for Mr
McVeigh but we think it was a statement which Mr
McVeigh should have taken into account when deciding
whether or not he needed legal advice. These matters are
seldom completely certain and in all the circumstances
and given the importance in any administration of
establishing the validity of any charge over property of the
company, we think that a proper and adequate
investigation would have included obtaining legal advice.
Mr McVeigh submitted that to succeed in this particular,
ASIC must establish that the AKD charge was enforceable.



g the litigation)
and no evidence as to why proceedings were not
commenced against Mr Curtain for recovery of the




report adequately and properly as required by that section. In
most cases, Mr McVeigh does not deny and therefore admits the
omissions but denies that the matters should not have been
omitted and that the omissions constituted such a failure by him.
We shall mention in our discussion below those matters which
Mr McVeigh denies. All other omissions are admitted by Mr
McVeigh and we shall not mention that each time. Mr McVeigh
also raises some specific matters in relation to individual
contentions which we shall deal with in our discussions below of
the relevant contentions. Mr McVeigh also raises in respect of
some contentions two matters which we have already dealt with
as general themes of defence (see paras 3.6.1 and 3.6.3 above) and
which we shall not deal with again here, namely the 2003
Meeting and the knowledge of creditors.
(g) Finally, we should note that in relation to a particular for a
certain voluntary administration which is similar to a particular
relating to the same voluntary administration in the investigation
section, we have dealt with that particular on the basis of the
knowledge which we believe Mr McVeigh would have had (if
there be a difference from the knowledge which he actually had)
if he had conducted an adequate and proper investigation into
the same particular in the voluntary administration period. Thus
in reaching our conclusion on the adequacy of Mr McVeigh's
s439A Report on that voluntary administration, we have not had
regard (unless it be the same) to his actual state of knowledge at
the time he issued that s439A Report.
7.2 Preliminary remarks
(a) All of the contentions in this category rely on a failure by Mr
McVeigh to report adequately and properly to creditors as
required by s439A(4)(a), including by failing to address the
requirements of the SBP CAR. We note that the reference to
failure to address the requirements of the SBP CAR is not
couched in these contentions as a separate sub-contention but as
being included within the contention arising from s439A(4)(a).
We have taken this to mean that the contention alleges a failure
by Mr McVeigh to perform his professional duties arising from
s439A(4)(a) and that that is substantiated by his failing to address
the requirements of SBP CAR. We therefore propose to comment
on some aspects of the SBP CAR.
(b) The SPB CAR came into effect on 1 July 2001 and therefore
applied to all the s439A Reports the subject of the contentions in
this category except that relating to TGW which was issued on 19
June 2001. In connection with the administration of TGW



cross examination Mr McVeigh maintained that he did not
have an indemnity although other answers he gave
certainly conceded that he had discussed it with Mr Ng
who "indicated that he would cover it" and conceded that
he would probably have gone to Mr Ng to pay any
shortfall of substance. Paul Gronsbell-Luntz, (a chartered
accountant retained by Livingspring) in his affidavit of 16
March 2006 deposed that Mr McVeigh told him that Mr
McVeigh "had been given an assurance by Mr Ng that he
would pay the shortfall but nothing was in writing". We
accept that there was nothing in writing and we do not
decide whether there was anything legally enforceable.
However, we have concluded that there was an
arrangement that amounted to an "indemnity" which Mr
McVeigh felt was sufficiently reliable that he was
prepared to accept the appointment. He stated that, "I
took it that I would get paid in the end". In our opinion
the disclosure of an indemnity arrangement is a matter
which is relevant for creditors to know. In addition, we
have concluded that the arrangement was within the type
contemplated by SBP CCCM para 4.1 and therefore that
Mr McVeigh had a duty to disclose the arrangement in his
s439A Report. We have concluded that this particular has
been established.
(c) We have concluded that contention 15 has been established.
7.7 Contention 19 – TIM
Mr McVeigh failed adequately and properly to report on TIM’s
business, property, affairs and financial circumstances as required by
s439A(4) of the Act, including by failing to address the requirements
of the SBP CAR.
(a) Mr McVeigh was appointed as VA of TIM on 13 February 2006
and issued his s439A Report on 2 March 2006.
(b) ASIC relies for this contention on three particulars namely that
Mr McVeigh:
(i) failed to include in his report any, or any proper, account
of his carrying on the business of TIM, the costs
associated therewith, the realisations therefrom, or any
matters arising from that trading that were materially
relevant to the creditors' decision about TIM's future.
Mr McVeigh says that he did not include this in his s439A
Report because he did not need to as it was only for two
weeks and the business was carried on to maximise the



additional work to be undertaken by the Liquidators,
estimated at $15,000 plus outlays, plus GST. A detailed
schedule of the professional fees incurred by myself, as
Liquidator, and my staff, for the period 1 April 2005 to
30 September 2005 will be available for inspection at the
meeting of creditors."
(f) Mr McVeigh submits that the level of information provided by
Mr McVeigh in the contentions in this category after the 2003
Meeting was essentially the same as that provided by Mr
Jefferson. We do not accept that submission. Mr Jefferson was
not called to give evidence and we have no way of knowing that
this is an actual and complete copy of documents circulated by
him or the circumstances in which he may have done so. In any
event, from the face of the document in evidence it appears that
Mr Jefferson intended to provide details in support of his
proposed remuneration to creditors at the meeting. That
relevantly distinguishes that situation from those involving Mr
McVeigh with which we are concerned here, where Mr McVeigh
says that he would have provided the details to any creditor who
made contact with his office and requested the information. We
do not accept the evidence constituted by the copy of Mr
Jefferson's report to be an answer for Mr McVeigh to the
contentions in this category.
(g) ASIC has submitted that the contentions in this category can be
conveniently dealt with in three groups. Mr McVeigh has not
objected to that and we have decided to deal with the
contentions like that in our Decision.
9.2 First group of contentions in this category
(a) This group comprises contentions 13 (IDKF), 16 (IH), 20 (TIM), 25
(WW), 30 (SOP) and 38 (AFT). All of these contentions are based
on disclosure made by Mr McVeigh in each of the relevant s439A
reports, all of which disclosures are made in much the same
terms.
(i) There was a statement of Mr McVeigh's proposal to
request approval of remuneration in each report. There
are only negligible variations between the various
versions.
(ii) Each report was accompanied by the list of hourly rates
referred to in the report, but the list is in the form of a
complete list of Mr McVeigh's staff at the relevant time
(not simply a list of those who have worked or will work
on the particular administration over the period in