Australian Financial Security Authority wants a fight over the future of bankruptcy and dodgy deals
The bankruptcy regulator is stepping out of the shadows of the financial sector and plans to go on the offensive over bad behaviour and dodgy deals.
The bankruptcy regulator will use its powers to prosecute people who hide assets and low-ball their creditors, and the trustees that enable them.
Australian Financial Security Authority boss Tim Beresford wants to make an example of both bankrupts, who attempt to play the system, as well as their trustees who are supposed to supervise the dealings of their clients.
AFSA is not an agency known for its tough posture and few would have even heard of it.
But AFSA plays a critical role overseeing the bankruptcy system, which 12,257 people went through last year after they were either made bankrupt or struck a debt deal.
Mr Beresford told The Australian he wanted to send a clear message in the wake of the agency’s rare and sensational intervention in the saga of failed Sydney pub baron Jon Adgemis, who proposed a plan that offered his creditors 0.15c in the dollar to avoid bankruptcy.
Mr Beresford said he was very concerned about Mr Adgemis’ attempt to avoid bankruptcy, and along the way, AFSA repeatedly warned WLP Restructuring trustees Scott Pascoe and Benjamin Ho over their handling of the case.
“We are obviously looking to further investigate that matter and further look at things in the fullness of time,” he said. “I can say we have a very high expectation of officers of the court, which (Mr Pascoe and Mr Ho) are.”
AFSA stopped a meeting of creditors from putting Mr Adgemis’ affairs to a vote, concluding in him being made forcibly bankrupt by the tax office.
WLP Restructuring, in the opinion of the regulator, had “not adequately investigated the debtor’s estate or provided a sufficiently detailed report to creditors”.
Mr Beresford said Mr Adgemis’ proposal “didn’t pass the pub test”.
The AFSA boss, who has held senior roles at Austrade and across government and in banking, wants to send a clear message of deterrence, both generally and specifically. Mr Beresford said the manipulation of the bankruptcy system, or the misuse of funds seized by trustees, was harmful and unlawful.
“There are more than a few bad apples.”
AFSA will pursue bankruptcy trustees who fall short or break the law. Last Wednesday, it lodged a case against fugitive bankruptcy trustee Paul Leroy, who allegedly transferred millions of dollars overseas after the cash was seized from former Health Services Union of Australia national secretary Kathy Jackson.
Jackson was found to have misused her role at the union to splurge on herself, including paying down her own mortgage.
AFSA alleges Leroy took $4m from at least five bankrupt estates between 2021 and 2023 that he had charge over, using that money to fund his own lifestyle.
But AFSA’s action could also see the bankruptcy sector more broadly held to account, with Leroy’s former firm Mackay Goodwin set to be dragged to the Federal Court.
AFSA is demanding Mackay Goodwin “account for all remuneration approved and/or received” in connection with the five estates and pay the money back.
This is the first time AFSA has taken such action.
Mr Beresford took charge of the agency in 2022, with the regulator running a review of how it operated and others perceived it.
“We’re shifting the organisation from a technical administrator to a regulator with a strong posture,” he said. “We’re going to take proportionate and practical outcomes based on regulation.”
He said AFSA wanted to “expand the perimeter of what we can do under the Bankruptcy Act”.
He cited the ACCC as a good example of an assertive regulator, looking to expand its remit.
“I’m willing to take the risk and learn as well.”
Mr Beresford said he also wanted to shake-up other elements of the finance system AFSA had oversight of, including the PPSR registration system used to lodge debts.
AFSA was concerned about thousands of debts lodged against people or assets by lenders which concerned money that had already been repaid, but the notice never removed. These ‘dead notices’ made it near impossible to refinance or for people to move on, and lenders had a responsibility to remove them.
“This stops commerce, that reduces productivity,” he said.
AFSA was planning on a gentle reminder to the broader financial system before moving to “targeted enforcement”.
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Originally published as Australian Financial Security Authority wants a fight over the future of bankruptcy and dodgy deals
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