In Peter Grossman v Australian Securities and Investment Commission [2011] AATA 6, the Administrative Appeals Tribunal upheld a 5 year disqualification period against former director Mr Grossman who was at the helm of 3 companies that met financial demise. The Tribunal affirmed ASIC’s decision to grant the maximum disqualification period made pursuant to s 206F of the Corporations Act which was returned after finding Mr Grossman participated in phoenix activities deemed to lack commercial morality and blatantly disregard the interests of creditors.

The Tribunal considered:  

  1. whether any of the companies involved were related (s 206F(2)(a));
  2. an evaluation of the applicant’s conduct in relation to the management, business or property of the companies involved (s 206F(2)(b)(i)); 
  3. whether disqualification would be in the public interest (s 206F(2)(b)(ii); 
  4. any other appropriate matters (s 06F(2)(b)(iii); and
  5. the justifiable length of disqualification.

Mr Grossman was found not to be a suitable person to manage corporations and it was found that he should be disqualified.

Mr Grossman’s behaviour identified as being “phoenix-like” included:  

  1. the proceeds of one company’s only property was paid to Mr Grossman and his wife rather than to the ATO;
  2. the transfer of the company ‘Bico Designs’ to ‘Bico Australia Pty Ltd’ was to avoid paying unsecured creditors, including the ATO;
  3. Mr Grossman allowed Bico Designs to acquire Hot Metal’s business without assuming liability for its statutory debts;
  4. plant and equipment of Hoy Metal was sold to Mr Grossman’s wife;
  5. Hot Metal failed with debts of $76,731 owing in superannuation entitlements for employees and a total of $296,068 owing to the ATO;
  6. Bico Designs directors, Mr Grossman and Mr Biton, were the same directors of Bico Australia, and the transfer of the former to the latter excluded responsibility for liabilities, in particular, those to the ATO.  

The 5 year disqualification was upheld as appropriate.