The Restructuring Insolvency and Turnaround Association of New Zealand (“RITANZ”) declined Mr Kamal’s application for membership on character grounds. The High Court dismissed his application to quash that decision, but issued a declaratory judgement in his favour. The Court of Appeal upheld RITANZ’s decision to decline his membership application and allowed a cross-appeal by RITANZ against the declaratory judgement, which relaxed the procedural standards the High Court set for RITANZ when determining applications.
Mr Kamal was a former accountant who was subject to disciplinary sanctions by the New Zealand Institute of Chartered Accountants (“NZICA”) in 2009, 2010, and 2011. He was also convicted of six criminal tax offences in 2013, and sentenced to three months’ home detention and 150 hours of community service.
He resigned his membership with the NZICA before he could be removed, and began practicing as a liquidator. In 2015 he was found personally liable for a mishandled liquidation, and in 2018 was falsely holding himself out as a chartered accountant to prospective clients.
The Insolvency Practitioners Regulation Act 2019 (“Act”) required liquidators to become members of either NZICA or RITANZ. In 2020, the NZICA declined Mr Kamal’s application for readmission. In 2021, RITANZ also declined his application for membership, on the basis that he was not of good character.
Mr Kamal sought a judicial review of RITANZ’s decision to decline his membership. The High Court found that RITANZ had erred in its decision-making but only granted declaratory relief, giving a statement that RITANZ had been mistaken in the process it took to determine Mr Kamal’s application, but declining to overturn the decision itself. Mr Kamal appealed the High Court’s decision to uphold RITANZ’s refusal of membership, while RITANZ cross-appealed the High Court’s declaratory relief.
Fit and proper person test
The Act requires NZICA and RITANZ to issue insolvency practicing licences only if they are satisfied that the applicant is a “fit and proper” person. The Court of Appeal held that the standard was not perfection, but that RITANZ had ample evidence to show they were entitled to decline Mr Kamal’s application on the grounds that he was not “fit and proper”.
Mr Kamal submitted that the “fit and proper” test is forward looking, and that the Act contemplated that applicants who would not meet the test unconditionally may do so if they were given extra requirements, such as mentoring and supervision. The Court of Appeal agreed that the test was forward looking, but disagreed that he might be eligible for a conditional licence. The Court considered that conditional approvals would erode the “fit and proper” test so much that it would undermine the purpose of the licensing regime. It declined to quash RITANZ’s decision.
Cross-Appeal: the High Court declarations
The High Court identified four errors in how RITANZ’s declined Mr Kamal’s application for members and gave declaratory relief, without quashing the decision. These included not referring to and assessing three separate mitigating matters in a forward-looking way, and breaching the principles of natural justice by not putting an adverse finding against Mr Kamal to him.
On the mitigating factors, the Court of Appeal found that RITANZ was not required to dwell significantly on them, nor refer to them explicitly in its decision. RITANZ’s characterisation of Mr Kamal’s previous offending was accurate and relevant nonetheless, and the mitigating factors did not impact the overall outcome. This fact was acknowledged by the High Court’s refusal to quash the decision. The Court of Appeal found that omitting reference to those mitigating factors was not an error of law.
On the alleged breach of natural justice, the High Court found that RITANZ had put four adverse inferences to Mr Kamal, but not the adverse conclusion they had drawn from it, which was a breach of natural justice. The Court of Appeal held that despite not putting the conclusion to Mr Kamal, it had given him several opportunities to speak to the issues at hand before RITANZ drew its conclusions, and they were not required to adopt a more rigorous approach. Again, RITANZ had not made an error in law and the Court of Appeal quashed the High Court’s declaratory judgement.
The Court of Appeal dismissed Mr Kamal’s appeal and upheld RITANZ’s decision to decline his application for membership. The Court also upheld RITANZ’s cross-appeal and quashed the High Court’s declaratory judgement. Mr Kamal would not be allowed to practice as a liquidator.
By declining Mr Kamal the ability to meet the “fit and proper” test with a conditional licence, the Court showed how the test is a minimum standard that all insolvency practitioners must meet. This case also shows how professional bodies retain some leeway on how they decide membership applications. This is particularly so in circumstances where, despite minor procedural irregularities, the outcome would have remained the same.
For further information on this case or similar issues contact Director, Brigitte Morten.
