DISCIPLINARY COMMITTEE OF THE ASSOCIATION OF CHARTERED CERTIFIED ACCOUNTANTS

Transcription

1 DISCIPLINARY COMMITTEE OF THE ASSOCIATION OF CHARTERED CERTIFIED ACCOUNTANTS REASONS FOR DECISION In the matter of: Mr Nemchand Proag Heard on: Thursday, 15 September 2016 and Thursday 30 March 2017 Location: The Chartered Institute of Arbitrators, 12 Bloomsbury Square, London, WC1A 2LP and The Adelphi, 1/11 John Adam Street, London, WC2N 6AU Committee: Mr Michael Cann (Chairman), Mr John Hamilton (Accountant), Ms Lorna Jacobs (Lay) Legal Adviser: Mr Robin Havard Persons present and capacity: Ms Samantha Hatt (Case Presenter on behalf of ACCA on 15 September 2016) and Ms Leeann Mohamed (Case Presenter on 30 March 2017), Miss Rachael Davies (Hearings Officer), Mr Nemchand Proag (Member), Mr Edward Henry (Counsel for Mr Proag), Mr Raj Boodhoo and Mr Goldan Lambert (Member Representatives) Observers: Ms Collette Higham and Ms Eleanor Wilson 1

2 ALLEGATIONS 1. (a) Pursuant to byelaw 8(a)(i), Mr Nemchand Proag is guilty of misconduct by reason of refusing to pay back 300 which had been mistakenly been paid into his business account by Person A. (b) Mr Nemchand Proag's conduct in respect of 1(a) above was: (i) dishonest; (ii) contrary to the Fundamental Principle of Integrity, as applicable in 2015 DECISION ON FACTS/ALLEGATIONS AND REASONS Allegation 1(a) 2. The Committee had been provided with a hearing bundle (pages 1-12 and 1-64), four additional bundles (pages 65-66, 73-74, and 88-89), an adjournment bundle (pages 1-6) a service bundle (pages 1-24) and a further service bundle (pages 31-37). The Committee had also heard evidence from Person A and Mr Proag. 3. On 15 July 2003, Mr Proag first registered as an ACCA member and he is the sole proprietor of his company, Proag & Co. 4. On 7 September 2015, Person A went into the Clacton branch of Bank A to transfer 300 into the business account of a company called Company A, a recording business run by Person A's son, Person B. 5. Person A stated, and the Committee found, that, despite being provided with such instructions, the assistant at the bank incorrectly transferred the sum of 300 to the account of GPRS Accountants Limited, the business account of Mr Proag. 2

3 6. When Person A realised later that day that the 300 had not been credited to her son's account, she requested Bank A to recall the payment. Having made that request, the manager at Bank A advised her that it would be quicker for her to request Mr Proag to pay the money back to her. 7. Person A stated that she subsequently contacted Mr Proag by telephone who accepted that he was aware that the sum of 300 had been paid into his business account from Person A. 8. It was stated by Person A that Mr Proag confirmed he would repay her the sum of 300 which had been incorrectly paid into his account by means of a cheque. 9. Person A indicated that, on 5 October 2015, she went to Mr Proag's office to collect the cheque but, even though Mr Proag's car was at the office, he did not answer the door. 10. On 6 October 2015 and 8 October 2015, Person A tried unsuccessfully to contact Mr Proag by telephone. 11. Person A stated that, subsequently, on the evening of 8 October 2015, Person A was contacted by Mr Proag's assistant who indicated that they had been told by Mr Proag's bank, Bank B, that he was not obliged to repay the money as this was an error on the part of Bank A. 12. By a letter dated 9 October 2015, Person A wrote to Mr Proag setting out her concerns which are consistent with the chronology outlined, confirming that it was her intention to report Mr Proag to the Financial Reporting Council in London. 13. By a letter dated 9 October 2015, Person A did indeed send a complaint to the Financial Reporting Council in which she said the following: "I would now like to make a formal complaint of what I see as misconduct. My accountant, who I owe no money to, is refusing to pay back my 300 which he agrees was paid to him in error." 3

4 14. On 28 October 2015, the Financial Reporting Council referred the matter to ACCA. 15. On 19 November 2015, ACCA wrote to Mr Proag setting out the circumstances as ACCA understood them, asking for Mr Proag's comments with regard to Person A's complaint. 16. On 19 November 2015, ACCA also wrote to Person A asking her to provide any further observations. 17. The date of Person A's response is not entirely clear but, in that response, Person A reasserted that the sum of 300 had been paid into the account of Mr Proag by mistake and that Mr Proag was refusing to repay the money on the basis of advice provided by his bank, Bank B. In that response, Person A stated that the only other information she had was in the form of a letter from her bank, Bank A, advising her to take the matter further but the Committee had not seen that letter from Bank A. 18. On 16 December 2015, Mr Proag sent a response to ACCA containing an explanation why he believed he was entitled to keep the 300 paid into his business account which was as follows: "I purchased the practice called Financial and Secretarial Services on and I inherited Company A as one of the clients whose director is Person B. I have prepared 2 years' account ( and ) and I have invoiced the company 480 each year per the invoices attached. I was paid 480 more than one year later and I was told by that the second invoice will be paid shortly. I received 300 from Person B on on my bank statement and is part payment of my second invoice and 180 still remains unpaid. This is my money and I do not owe Company A any money but they instead owe my company 180 for my services."(sic) 19. The firm's invoices were attached to Mr Proag's response. 20. On 25 January 2016, ACCA wrote to Mr Proag asking him for his bank statements showing the 300 paid into his account. He duly provided the 4

5 bank statements which show that, on 7 September 2015, Person A paid an amount of 300 into Mr Proag's bank account with a reference "Person B". 21. In response to a request for further information from ACCA, in an of 25 January 2016, Person A provided to ACCA the following: (i) a letter dated 9 October 2015 sent by Person A to Bank A by recorded delivery outlining her complaint. Person A only sent to ACCA the first page of her letter to the Bank. The second page was provided to the Committee in the course of the hearing on 15 September 2016; (ii) a letter to Mr Proag of 9 October 2015 sent by recorded delivery setting out the basis of her complaint and the attempts that she had made to recover the money from Mr Proag; (iii) a letter of complaint dated 10 January 2016 sent to Bank B by Person A setting out the basis of that complaint; (iv) a letter from Bank A dated 14 October 2015 in response to the complaint pursued by Person A. 22. In its response of 14 October 2015, Bank A accept that the account provided by Person A was correct. For the reasons contained within their response, Bank A accepted an error had been made by a staff member at the Clacton branch when Person A had requested the sum of 300 to be paid into the business account of Person B's company, Company A. It states: "After investigating the issue, we agree this error was caused on our behalf and have agreed to refund you the full amount of 300. I am sorry for the inconvenience this has caused. I have sent your feedback to the branch manager and have noted the feedback as part of a complaint." 23. On 18 February 2016, ACCA wrote to Mr Proag asking for further clarification as it appeared that the 300 was paid into his account by 5

6 Person A with the reference as "Person B". Mr Proag responded saying the following: "Person A has transferred 480 on 22/4/15 and 300 on 7/9/15 on behalf of her son, Person B. The payment of 480 on 22/4/15 was for the first invoice No and the payment for the 300 on 7/9/15 was a part payment for invoice No " 24. Person A provided a statement and, at paragraph 6 of her statement, she says the following: "Mr Proag admitted on the phone to me that he knew he had been paid 300 into his account in error by myself. Mr Proag said he did not know how to make a BACS payment so instructed me to come to his office in St Osyth on 5 October and he said he would reimburse me by cheque for 300. Which I did but he would not open the door when I arrived there." (sic) 25. In paragraph 8 of her statement, Person A says: "I would like to confirm that Mr Proag had admitted to me that the money had appeared in error in his bank account." 26. In paragraph 9, Person says: "I would also like to confirm that my son's business, Company A, owe no money to Mr Proag. I paid Mr Proag in full 480 which was two years' accounts as this was an ongoing agreement with the previous accountant which Mr Proag agreed to honour." 27. Finally, at paragraph 10 of her statement Person A says: "I have not submitted any accounts to Mr Proag since the outstanding amount of 480 was paid on 20 April in full final payment. We owe him nothing more as he has done no work for us since so we have no invoice. I have engaged a new accountant who is dealing with the next set of accounts for period 1 July June 2015." 6

7 28. When giving oral evidence, Person A remained consistent in her account. The Committee found her oral evidence was also consistent with the written accounts she had provided in correspondence with Mr Proag, ACCA and the Financial Reporting Council and her written statement. Bank A had also accepted that the payment had been made to Mr Proag's firm in error and had compensated Person A. Person A stated, and the Committee found, that she performed the role of book keeper for her son's firm, Company A. A previous payment had been made by her of 480 on behalf of her son in satisfaction of the fees owed by her son's company to Mr Proag's firm for preparing the accounts for the financial years ending 2013 and The Committee found that the mistake on the part of Bank A was to replicate the earlier payment even though that was not the intention of Person A who wished to pay 300 to her son. 29. In both his written and oral account, Mr Proag accepted that he had received the payment of 300 from Person A. It was denied that the sum of 480 previously paid by Person A represented the fees for preparation for the accounts for two years i.e for the years ending 30 June 2013 and The fee for the preparation of each year's accounts was 480 and therefore the sum of 480 remained outstanding. 30. Mr Proag said that he did speak with Person A on the telephone and that Person A had stated that the 300 had been paid into his account in error. However, Mr Proag asserted that, in that telephone conversation, Person A had agreed to allow Mr Proag to set off the 300 against the 480 outstanding. 31. The panel had not found Mr Proag's account to be credible. When giving evidence, he had said that he had spoken to Person A in October and the following exchange took place, "I think she spoke to me sometime in October, I think. I'm not quite sure which date. She rang me and she said "oh, I can't fit around that day", yes, but I yes, that was for my previous invoices for my second invoice. Do you want to pop in?" Said, "No, I was transferring to my son and didn't have to pay me back. I said, "No, that is not the case, because you said to me would paid the money back", paid my pay, so I have already offset it against my payment" And then after a while 7

8 she was a bit annoyed, she put the phone down. That's it. Nothing else" (sic) 32. Later in his cross-examination, Mr Proag suggested that Person A had simply put the telephone down and that he believed Person A had accepted that he could retain the 300. He said that, " she [Person A] didn't say it wasn't meant for me.". He then suggested that, at the end of the conversation, when Mr Proag had stated to Person A that he had set off the 300 against the outstanding fees, she had not put down the phone rudely but had agreed and said, " okay". 33. That was inconsistent with his earlier account when he confirmed that Person A had been annoyed and put the phone down. It was also inconsistent with the subsequent correspondence from Person A to Mr Proag, the Financial Reporting Council, and ACCA. This illustrated her insistence that she wished to pursue a complaint against Mr Proag despite having been reimbursed by the Bank. Person A had also attended the hearing to give evidence. 34. If, as Mr Proag suggested, Person A had accepted that it was appropriate for him to retain the money, there is no reason why she would have been annoyed when he told her that he intended to do so, ending the conversation by putting the phone down on him. Furthermore, there would have been no reason for her to persist in her complaint even though she had been repaid the money by Bank A. 35. In summary, the Committee found that Person A acted as bookkeeper for her son's Company, Company A. On a previous occasion on 20 April 2015, Person A had instructed Bank A to transfer 480 from her account to that of Company A's account in satisfaction of fees owing to Mr Proag's firm. 36. On 7 September 2015, Person A had instructed Bank A to transfer the sum of 300 from her account to that of her son, Person B, as opposed to the account of Mr Proag's firm. In error, Bank A transferred the sum to the account of Mr Proag's firm. 8

9 37. The obligation to pay any outstanding accountancy fees owed by Person B and/or Company A did not rest with Person A. In the course of a telephone conversation in October 2015, Person A made it clear to Mr Proag that the sum had been paid to him in error and that it should be repaid. Mr Proag stated that he had set off the sum of 300 against what he stated to be outstanding fees. Person A then became annoyed and hung up. 38. By a letter dated 9 October 2015, Person A wrote to Mr Proag referring to those conversations and confirming the error, requesting repayment of the sum of Despite further correspondence, Mr Proag has persistently refused to accept that he had any responsibility to repay Person A despite knowing that that the sum of 300 had been paid to him in error and that Person A had no personal liability to pay any fees which may have been outstanding from Company A. In the Committee's judgment, it should have been obvious to Mr Proag that he did have a responsibility to repay the 300 to Person A as soon as he recognised the payment had been made in error. 40. In failing to repay the sum of 300 in such circumstances, the Committee was satisfied that Mr Proag was guilty of misconduct in that such behaviour brought discredit to Mr Proag, the Association and the accountancy profession. Allegation 1(b)(i) 41. In reaching its findings in respect of the allegation that Mr Proag had acted dishonestly, the Committee relied on its findings of fact as set out above. In refusing to repay the sum of 300 to Person A once he realised that the sum had been paid into his firm's account in error, the Committee found that, by the standards of reasonable and honest people, such conduct was dishonest. 42. However, the Committee had listened carefully to the submissions made on behalf of Mr Proag and also considered carefully the evidence as to his character. Even though he realised the fact that the sum of 300 had been paid in error, the Committee found that he had convinced himself, wrongly, 9

10 that he was entitled to retain that money to represent part-payment of the balance of the fees owing to his firm. Consequently, the Committee had not found Mr Proag to be subjectively dishonest and therefore this allegation was not found proved. Allegation 1(b)(ii) 43. In reaching its findings in respect of the allegation that Mr Proag's conduct was contrary to the Fundamental Principle of Integrity, again the Committee relied on its findings of fact as set out above. 44. Again, once Mr Proag had realised that the sum had been paid into his firm's account in error, he should have taken steps to repay the money to Person A without the matter developing to the extent that Person A felt that she had no alternative other than to lodge a complaint with regard to Mr Proag's conduct. In failing to ensure that the sum incorrectly paid by Person A was repaid promptly, and in failing persistently to recognise his responsibility to make such repayment, the Committee found that Mr Proag had not acted in a straightforward and fair manner. On this basis, the Committee found this allegation proved. SANCTION AND REASONS 45. The Committee carefully considered what sanction, if any, to impose taking into account all it had read in the bundle of documents, Mr Proag's representations, ACCA s Guidance for Disciplinary Sanctions (December 2016) and the principle of proportionality. It had also listened to legal advice from the Legal Adviser which it accepted. 46. The Committee considered the available sanctions in increasing order of severity having decided that it was not appropriate to conclude the case with no order. 47. The Committee was mindful of the fact that its role was not to be punitive and that the purpose of any sanction was to protect members of the public, maintain public confidence in the profession and in ACCA and to declare and uphold proper standards of conduct and performance. 10

11 48. The Committee had read with care the references and testimonials which had been provided by Mr Proag. They were all relevant and highly supportive. The Committee was satisfied that Mr Proag was of good character and, prior to these proceedings, had a good disciplinary record. 49. Indeed, the Committee had decided that, based on such evidence, Mr Proag was a fundamentally honest person but he had shown a substantial and serious error of judgment in allowing himself to become embroiled in a significant dispute. He had acted in an intransigent manner where, had he taken a step back, he may have recognised that his approach was inappropriate. 50. Whilst these proceedings arise out of one episode and to that extent can be described as isolated, the Committee was concerned that Mr Proag has persistently failed to acknowledge his responsibilities. 51. Linked with that finding, the Committee remained concerned that Mr Proag had not shown insight into the circumstances of his conduct or of his failings nor has he shown any remorse. 52. Mr Proag has still not repaid the sum of 300. Whilst Bank A had reimbursed Person A, Mr Proag has benefited by that amount of money to which he was not entitled. It was said on his behalf that the Committee had not made any findings in relation to the fees to which Mr Proag's firm was entitled. It was submitted that the documents, to include the accounts, show that the amount of fees which had been properly charged to Company A was 480 for the preparation of each of the financial years ending 2013 and The Committee was prepared to accept that this may have been the case but it is not directly relevant to the allegations made against Mr Proag, namely that he had retained money in his firm's account which he knew had been paid in error. 53. The Committee concluded that neither an admonishment nor a reprimand would adequately reflect the seriousness of the Committee's findings. 11

12 54. The Committee considered whether a severe reprimand would be an appropriate sanction. 55. The Committee relied on its conclusions as outlined above. The testimonials were positive, supportive and relevant. The Committee also concluded that Mr Proag had a previous good record. Finally, and most importantly, the Committee accepted that there had been no repetition of such behaviour. It was also the Committee's view that, taking account of the current findings, a repetition of such behaviour was unlikely. 56. The Committee concluded that the appropriate, proportionate and sufficient sanction to impose in this case was that Mr Proag should be severely reprimanded. COSTS AND REASONS 57. The Committee concluded that ACCA was entitled to be awarded costs against Mr Proag. The amount of costs for which ACCA applied was 6, The Committee noted that ACCA had not claimed any costs in respect of the second day. Whilst the allegation of dishonesty had not been established, the Committee considered that it was properly alleged. The allegations of misconduct and breach of the Fundamental Principle of Integrity had also been found proved based on the same evidence. Unfortunately, Mr Proag had not provided the Committee with details of his means in advance of the hearing. However, having considered the oral representations of Mr Henry with regard to Mr Proag's financial status and his ability to pay, the Committee considered that it was reasonable and proportionate to award costs to ACCA in the reduced sum of 4, EFFECTIVE DATE OF ORDER 58. The Committee decided that the order shall take effect from the date of the expiry of the appeal period referred to in the appeal regulations. Mr Michael Cann Chairman 30 March