DISCIPLINARY COMMITTEE OF THE ASSOCIATION OF CHARTERED CERTIFIED ACCOUNTANTS. Heard on: Monday 16 October 2017 to Friday 20 October 2017

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1 DISCIPLINARY COMMITTEE OF THE ASSOCIATION OF CHARTERED CERTIFIED ACCOUNTANTS REASONS FOR DECISION In the matter of: Mr Martin Paul Halligan Heard on: Monday 16 October 2017 to Friday 20 October 2017 Location: The Chartered Institute of Arbitrators, 12 Bloomsbury Square, London, WC1A 2LP Committee: Mr Ian Ridd (Chairman), Mr Constantinos Lemonides (Accountant) and Mr Philip Jewell (Lay) Legal Adviser: Mr Richard Ferry-Swainson Persons present and capacity: Mr Paul Ozin QC (ACCA Case Presenter) Ms Pamella Ramphal (Hearings Officer) Mr Martin Paul Halligan ( Member) Mr Steven Fennell (Counsel for Mr Halligan) Mr Ian Defty (Expert Witness for ACCA) Observers: None Summary: OUTCOME - Allegations 1, 2, 3, 4(a) & (d) and 5 not proved Allegation 4(b) & (c) admitted and found proved No sanction No order as to costs

2 SERVICE OF PAPERS 1. The Committee convened to consider five Allegations against Mr Halligan. Mr Halligan appeared and was represented by Mr Steven Fennell. Mr Ozin QC appeared on behalf of ACCA. 2. The papers before the Committee were in a main bundle A to Z and AA to GG and numbered 1 to 469. There were additional bundles numbered 470 to 475, 476 to 505, 506 to 529, 530 to 543, 544 to 552, 553 to 557, 558 to 563, 564 to 568 and 569 to 574. There was also a service bundle numbered 1 to 33. ACCA APPLICATION TO AMEND ALLEGATION 3. At the outset of the hearing, Mr Ozin made an application to amend Allegations 3 and 5 to include the words as applicable 2009 under each sub-heading, as had been done in Allegations 1, 2 and 4. Mr Ozin said this had been an omission and that all the Allegations were concerned with what happened in 2009 and they were therefore the applicable Statement of Insolvency Practice guidance ( SIP ) and Bye-laws. He submitted there would be no prejudice to Mr Halligan. Mr Fennell did not oppose the application. 4. The Committee considered the application and accepted the advice of the Legal Adviser. The Committee could see that the omission of the words as applicable 2009 was clearly an administrative error, since it appeared in all the other Allegations. It noted the lack of opposition by the Defence and could see no prejudice to any party in allowing the application. 5. Accordingly, the Committee allowed the application and the Allegations detailed below are as amended. ALLEGATIONS (as amended) 6. Mr Halligan faced the following allegations:

3 Allegation 1 By reason of Mr Halligan's failure to obtain the location and safeguard and list High Speed's books, records and accounting information, and/or his failure adequately to record the steps taken by him to do so: (a) Pursuant to paragraph 1 of SlP2 it is alleged that Mr Halligan has breached paragraph 3 of SlP2 (as applicable 2009); and/or (b) Pursuant to bye-law 8(a)(ii) (as applicable 2009) it is alleged that Mr Halligan has performed his work erroneously, inadequately, inefficiently or incompetently. Allegation 2 By reason of Mr Halligan's failure to conduct an adequate initial review into High Speed's affairs and his failure to consider whether there were grounds for further investigation: (a) Pursuant to paragraph 1 of SlP2 it is alleged that Mr Halligan has breached paragraphs 4 and 5 of SlP2 (as applicable 2009); and/or (b) Pursuant to bye-law 8(a)(ii) (as applicable 2009) it is alleged that Mr Halligan has performed his work erroneously, inadequately, inefficiently or incompetently; and/or (c) Pursuant to bye-law 8(a)(i) (as applicable 2009) it is alleged that Mr Halligan is guilty of misconduct. Allegation 3 By reason of Mr Halligan's failure to consult with creditors/the committee in relation to carrying out a further investigation:

4 (a) Pursuant to paragraph 1 of SlP2 it is alleged that Mr Halligan has breached paragraphs 2, 7, 8, 9 and 10 of SlP2 (as applicable 2009); and/or (b) Pursuant to bye-law 8(a)(ii) (as applicable 2009) it is alleged that Mr Halligan has performed his work erroneously, inadequately, inefficiently or incompetently; and/or (c) Pursuant to bye-law 8(a)(i) (as applicable 2009) it is alleged that Mr Halligan is guilty of misconduct. Allegation 4 By reason of Mr Halligan's failure to report to the Secretary of State that the director of High Speed may have been guilty of an offence in relation to the company for which he may be criminally liable and/or by reason of his failure to report to the Secretary of State conduct on the part of the director which it appeared to him likely the Court would find made that director unfit to be concerned in the management of a company: (a) Pursuant to paragraph 1 of SlP2 it is alleged that Mr Halligan has breached paragraph 13 of SlP2 (as applicable 2009); and/or (b) Pursuant to paragraph 1 of SlP2 [it] is alleged that Mr Halligan has breached paragraph 14 of SIP2 (as applicable 2009); and/or (c) Pursuant to bye-law 8(a)(ii) (as applicable 2009) it is alleged that Mr Halligan has performed his work erroneously, inadequately, inefficiently or incompetently; and/or (d) Pursuant to bye-law 8(a)(i) (as applicable 2009) it is alleged that Mr Halligan is guilty of misconduct.

5 Allegation 5 By reason of his failure to make adequate efforts to collect in the book debts of High Speed and/or his assignment of those book debts: (a) Pursuant to bye-law 8(a)(ii) (as applicable 2009) it is alleged that Mr Halligan has performed his work erroneously, inadequately, inefficiently or incompetently; and/or (b) Pursuant to bye-law 8(a)(i) (as applicable 2009) it is alleged that Mr Halligan is guilty of misconduct. ADMISISONS 7. Mr Halligan admitted Allegation 4(b) on the basis only that he had used the wrong form when communicating with the Insolvency Service and had sent it to the wrong address. The Committee therefore found that part of the Allegation proved. During his closing submissions Mr Fennell accepted, on Mr Halligan s behalf, that the sending of the wrong form to the wrong address was both erroneous and inefficient and so amounted to a breach of bye-law 8(a)(ii) in that respect. Mr Halligan denied all the other Allegations. BRIEF BACKGROUND 8. Mr Halligan became a member of ACCA in 1997 and is licensed by ACCA to accept insolvency appointments. He is the managing director of MPH Recovery and carries on business as a licensed insolvency practitioner, accepting appointments as liquidator. 9. On 13 March 2009, Mr Halligan was appointed liquidator of High Speed Business Limited ("High Speed") following High Speed entering into Creditors' Voluntary Liquidation. High Speed was a wholesaler of electronic equipment, primarily mobile telephones. 10. The largest (non-dissolved) creditor of High Speed was Company A which was owed over 80% of the total claims (excluding dissolved creditor claims).

6 Company A itself had entered liquidation on 25 July Mr A of Grant Thornton was appointed liquidator of Company A. 11. The director's report to the meeting of creditors of High Speed held on 13 March 2009 ("the Director's Report") included the following information: (i) High Speed had traded between November 2005 and June During its trading history none of its customers had paid for the goods supplied to them, leaving outstanding book debts of around 23 million. (i) High Speed had also failed to pay any of its suppliers which debts also amounted to around 23 million. (ii) The draft management accounts incorporated within the Director's Report showed that for the year to 28 February 2006 High Speed had a turnover of 2,062,449, current assets of 322,383 and current liabilities of 275,493. (iii) For the year to 28 February 2007 the turnover had increased to 217,694,062, the current assets lo 22,891,439 and its current liabilities to 22,895, By Deed of Assignment dated 31 July 2009, Mr Halligan assigned the book debts of High Speed in their entirety to Company B in consideration of the sum of The Deed of Assignment entitled High Speed to 25% of any of the debts that were recovered. 13. By letter dated 13 August 2009, Mr A in his capacity as liquidator of Company A requested that Mr Halligan convene a meeting of creditors under section 171(2)(b) of the lnsolvency Act 1986 for the purpose of appointing a new liquidator to replace him. 14. By notice dated 10 June 2010, Mr Halligan convened a meeting of members and creditors to take place on 16 July That meeting was adjourned. At the adjourned meeting held on 2 August 2010 Mr Halligan was removed as liquidator and Mr B and Mr C of Grant Thornton were appointed as joint liquidators ( the JLs ) in his place.

7 15. Partly by reason of their own investigations into the trading transactions of the 'buffer' companies which were already in liquidation, the JLs discovered that High Speed appeared to have been involved in Missing Trader lntra- Community ( MTIC ) VAT fraud. 16. On 17 July 2009, following a telephone conversation with Mr D of the JL s staff, Mr Halligan became aware that High Speed may have had an offshore bank account with Bank A. This bank had had its banking licence revoked on 1 October 2006 under suspicion of involvement in money laundering and VAT fraud. By dated 17 July 2009, Mr Halligan requested details of all the accounts the company held with Bank A. The was acknowledged on 28 July 2009 and on 27 August 2009 Bank A provided a Transaction Enquiry Report for the period 27 October 2005 to 9 November 2006, which showed all monies going into and out of High Speed s account together with the current balance, interest accruing and a narrative. The JLs subsequently obtained the bank statements of High Speed's account with Bank A that disclosed transactions totalling 239 million between December 2005 and August These allegations arise out of Mr Halligan s conduct whilst liquidator for High Speed, as analysed and assessed by ACCA s expert witness Mr Ian Defty FCCA FABRP ACA. Mr Defty has for the last 15 years specialised in insolvency cases concerned or linked with fraud. DECISION ON ALLEGATIONS AND REASONS 18. The Committee considered carefully the oral evidence of Mr Defty and Mr Halligan and the documentary evidence, particularly the SIP2, together with the submissions made by Mr Ozin and those by Mr Fennell. The Committee accepted the advice of the Legal Adviser. The Committee bore in mind that it was for ACCA to prove its case on the balance of probabilities, not for Mr Halligan to prove his innocence. 19. The Committee found Mr Defty to be helpful in some limited respects but, as he readily acknowledged, as an Insolvency Practitioner with a specialism in fraud, it was difficult for him to approach a case without having in mind all he knew about fraud and in particular MTIC/carousel fraud. This impacted

8 upon the weight that the Committee gave to his evidence and furthermore the Committee considered that at times he was applying too high a standard when saying what he believed Mr Halligan could and should have done. 20. Mr Halligan gave evidence and the Committee found him to be a credible, honest and reliable witness who was doing his best to assist. The Committee noted that during his career as an accountant, Mr Halligan had worked at a number of significant accountancy firms before deciding to set up on his own as MPH Recovery carrying out insolvency work. The Committee was satisfied that his notes of meetings with, for example, the director, the accountant, Grant Thornton and the Insolvency Service, were accurate accounts of what had transpired, and the Committee concluded it could place reliance upon them. The Committee accepted that on the home visit to the director in May 2009, Mr Halligan was told by a neighbour that the director had gone back to Pakistan. 21. Mr Halligan said that at the time of accepting the appointment as liquidator for High Speed, he was unaware of the term MTIC fraud and had never heard of Bank A. Mr Defty concluded that this was so and the Committee, having seen and heard from Mr Halligan, agreed. It was clear to the Committee that at the time of appointment, although no doubt an experienced Insolvency Practitioner, Mr Halligan was inexperienced and naive when it came to identifying carousel or MTIC fraud. This fact was also recognised by Grant Thornton, who were to replace Mr Halligan as liquidator of High Speed. In a letter from Grant Thornton s solicitors to Mr Halligan dated 25 September 2009, referred to further below, it was said: it appears to our client that High Speed was involved in Missing Trader Intra Community ( MTIC ) fraud and it is our client s understanding that MTIC is not within your particular area of expertise. 22. The Committee accepted Mr Halligan s assertion that the first time he became aware of the Bank A and the term MTIC was when he spoke to Mr D at Grant Thornton in July In addition, although he had heard of the term carousel fraud, he knew little about how such a fraud operated. With reference to the sent by Mr Halligan to Bank A on 13 July 2009, the Committee considered his wording which suggested, wrongly, that he was

9 already aware that High Speed held an account at Bank A, was sloppy drafting, but no more. It did not believe that Mr Halligan had used this phrasing because he had somehow previously become aware of the existence of the account at the Bank A. It was Mr D who mentioned how it was often the case that carousel fraudsters used the Bank A and immediately after that conversation, Mr Halligan sent the to Bank A enquiring about an account High Speed held at the bank. There had not been time for Mr Halligan to have discovered whether in fact that was the case and he only knew it was in fact the case when Bank A responded a month later. Mr Halligan said at this stage he did not know that the Bank A was synonymous with fraud, but rather assumed it was a bank which fraudsters might use. 23. The Committee accepted Mr Halligan s account of a dawning awareness that High Speed may have been involved in a fraud. This followed the failure of the director to deliver the books and records as promised, followed by the accountant saying he had no records and later the director saying that it was the accountant who had the records. Following Mr Halligan s home visit to the director in May 2009, it became apparent that the director had left the jurisdiction. None of the creditors attended the creditors meeting held in March 2009 and none responded to the questionnaire he sent out to them. All the debtors he was able to contact appeared to have gone into liquidation, or its equivalent, allegedly as a result of being owed money by HMRC. 24. The Committee accepted his account that it was only when the Bank A responded that there was an account and provided the transaction enquiry report that he formed the view that High Speed may have been involved in a fraud of some kind. The enquiry report was in a form he had never seen before and he realised he was out of his depth. At that stage, he already knew that Grant Thornton were set to replace him. He had been made aware in forceful terms by Grant Thornton s solicitors that they were the experts and he was not. 25. At the time, Grant Thornton were acting for the main creditor of High Speed, Company A, which had itself gone into liquidation and which with hindsight was clearly involved in the same fraud as High Speed. Consequently, Grant

10 Thornton took action to replace Mr Halligan as liquidator of High Speed. They had written to him on 13 August 2009 pointing out that they were already the liquidator of Company A, the main creditor of High Speed, and that as a creditor Company A required Mr Halligan to convene a meeting of creditors under section 170(2)(b) of the Insolvency Act 1986 for the purpose of appointing a new liquidator to replace him. When Mr Halligan asked why he was being replaced he received a letter from solicitors Clyde & Co, which stated that their client, Grant Thornton, was not obliged to show cause or give reason. The letter, as noted above, then went on to say that it appeared to their client that High Speed was involved in Missing Trader Intra Community ( MTIC ) fraud and it is our client s understanding that MTIC is not within your particular area of expertise. 26. The Committee was satisfied on the evidence that at the time that it was arranged for Grant Thornton to replace Mr Halligan. He, quite reasonably expected Grant Thornton to take over fairly swiftly, within a month or two at the most. He could not have known at that time that Grant Thornton would delay matters considerably by quibbling over the payment of Mr Halligan s services for arranging the creditors meeting that would facilitate his replacement. 27. The Committee also concluded that it was not unreasonable of Mr Halligan to have decided to take no further action once it was clear that Grant Thornton were to take over. It was accepted by both Mr Halligan and Grant Thornton they were the experts when it came to dealing with cases of MTIC fraud and, as Mr Halligan put it, he did not want to step on their toes once he knew they were to replace him. Furthermore, he recognised that he would have been out of his depth in trying to investigate a fraud of this nature. The Committee also accepted that at that stage, namely late 2009, there was in reality very little more that Mr Halligan could have done that would have in any way protected the creditors. This case had to be viewed against the background whereby the director of High Speed had not approached Mr Halligan for the purposes of putting his company into liquidation until three years after it had ceased trading. It was clear that at that stage the chances of recovering any money was virtually non-existent and that in any event the creditors of High Speed were themselves almost

11 certainly buffer companies involved in the fraud, as indeed were the debtors. 28. In general terms, it seemed to the Committee that the main issues raised by ACCA were that Mr Halligan did too little too late and that it was wrong of him to defer action when Grant Thornton proposed to replace him. Mr Ozin submitted that this was no doubt due to the fact that it became apparent to Mr Halligan that he was not going to get paid for any of his work, a fact emphatically denied by Mr Halligan who said it was not unusual to take on cases where he received little or no payment. The Committee accepted Mr Halligan s assertion that his actions had not been influenced by whether or not he was likely to be paid. Allegation 1 (a) & (b) - FOUND NOT PROVED 29. Mr Halligan first met with Mr E, the sole director of High Speed, a month before he took on the role of liquidator. A written record of that meeting demonstrated that he asked a number of pertinent questions, as confirmed by Mr Defty, and identified a number of documents that the director was to provide, including the company s books and records. At that stage, the director said he had the books and records at home and he would provide them. Straight after that meeting, in a letter dated 13 February 2009, Mr Halligan wrote to Accounting Firm A requesting copies of all accounting records held on behalf of High Speed. The same day he sent a letter to Bank B, the director having identified this as the company s bank, requesting copies of bank statements. The Committee noted that although the director had provided the name and address of the bank he said was used by High Speed, he did not provide any account number. The Committee accepted Mr Halligan s evidence that, based on his experience, it often took banks six to eight months to respond to such requests and it was not unusual to hear nothing. 30. On 13 March 2009, Mr Halligan was appointed liquidator to High Speed and the same day he convened a creditors meeting in accordance with Section 98 of the Insolvency Act 1986 for delivery up of the company's books and records. Only Mr Halligan and the director were present, with no creditors attending and the director failed to deliver the books and records. The

12 written record of that meeting again showed a number of pertinent questions being asked by Mr Halligan about the matters outstanding, including the books and records. Mr Halligan then met with the accountant on 16 March His written record of that meeting demonstrated that he asked the right questions of the accountant (as confirmed by Mr Defty), including questions about the large liabilities and also the bank used by the company. Mr Halligan also asked if the accountant had any suspicion of fraud or wrongful trading and the accountant said no. He was told that the accountant had no records for High Speed. Mr Halligan said he had no reason to doubt what the accountant was telling him at that time. 31. The same day, Mr Halligan sent a letter to the shareholder and letters to the creditors. He requested any information they might have which might assist him in his investigations and he also provided a questionnaire to be completed, a copy of which was provided to the Committee. None of the creditors responded. 32. Mr Halligan also contacted all the known debtors, where possible, and established that none were in a position to pay any debts owed. This was largely due to the fact the the debtors were themselves in a similar situation, doubtless because they were buffer companies involved in the same fraud. Mr Defty said these checks were appropriate but that Mr Halligan should have submitted a proof of debt to the liquidators of the debtors. Mr Halligan said that he did not have documentation to support any such proof of debt, for example, copies of invoices, purchase orders and delivery notes. The Committee accepted Mr Halligan s position on this point. 33. Mr Defty agreed with Mr Fennell that up to this point Mr Halligan had been complying with SIP 2, although he thought more should have been asked of the accountant about his accounting records and working files to see what he had relied on when doing the accounts. 34. Having received nothing from Bank B, Mr Halligan wrote again to them on 16 March 2009 requesting details of High Speed s accounts. 35. On 7 May 2009, Mr Halligan sent a letter to Mr A (the director of High Speed) asking him to fill out a questionnaire for directors stating that he (Mr Halligan)

13 is required to submit a report to the DTI on the conduct of directors. He also visited Mr A s home in an attempt to speak to him and this was when he was told by the neighbour that Mr A had gone back to Pakistan. Mr Defty acknowledged that the home visit was above and beyond what would be expected of an Insolvency Practitioner. 36. On 17 July 2009, Mr Halligan had the conversation with Mr D at Grant Thornton referred to above. The same day, he sent an to Bank A requesting information in relation to accounts held in the company name. Bank A acknowledged receipt on 28 July 2009, before substantively responding on 27 August 2009 with a copy of a Transaction Enquiry Report of High Speed s account held with them. 37. Mr Halligan wrote again to the director on 21 August 2009 chasing up his initial request. In that letter, he referred to the fact that Grant Thornton were considering calling another creditors meeting with a view to replacing him as liquidator on the basis, as he put it, that they consider that the Company may have been involved in Carousel fraud. The director did not respond to this letter but did eventually return the completed questionnaire he had been sent in May. However, this was not until 9 September 2009 and indicated that all books and records were with the accountants. Mr Halligan knew this not to be the the case having visited the accountant. By that stage, Mr Halligan had received the Bank A enquiry report and knew he was out of his depth. He also knew that Grant Thornton were due to replace him. 38. It was ACCA s case that there was, however, no evidence that anything else was done after late 2009 to ascertain what had happened to the books and records. Mr Halligan had been told by the director to look to the company accountants having been previously told by the company accountant that they had no books and records. Mr Ozin said that there were three avenues that Mr Halligan should have explored further. He should have gone back to the accountant and asked to see his working notes to establish what material the accountant had relied on when completing the accounts. He should have continued to chase the Bank B for the company s bank statements and he should have got in touch with the company secretary to see if they could shed any light on the emerging picture.

14 39. The Committee did not accept these criticisms to be valid. Allegation 1 relates to High Speed s books, records and accounting information and not to the working notes of a third party. The Committee accepted Mr Halligan s assertion that banks often take a long time to respond and in any event did not even have an account number. Furthermore, if the Natwest did have bank account details for High Speed they were not going anywhere and so were effectively safeguarded. The Committee did not consider it realistic to approach a company secretary when that company secretary was a formation agent and so highly unlikely to have any information about the trading of High Speed. 40. Mr Ozin also criticised the seven week delay between the creditors meeting and Mr Halligan chasing the director for the books and records. The Committee did not consider this period to be unreasonable in the context of a company that had ceased trading some three years earlier and during a period which included Easter. 41. Equally, for the reasons referred to in paragraphs 31 and 32 above, the Committee was not persuaded that Mr Halligan had been in any way tardy by not pursuing matters further in the period between September 2009 and August 2010 when Grant Thornton replaced him. By this stage, it was apparent that no urgent steps were needed to safeguard the records. They almost certainly no longer existed or were not traceable and indeed this was borne out by the fact that Grant Thornton themselves were unable to make any more progress than that made by Mr Halligan. When the JLs completed their report to creditors dated 17/5/13, it stated No information or company records have been received from the director. Furthermore, The director has failed to cooperate and no company records have been received from him. Subject to any additional information there are no matters to investigate. 42. The Committee considered it important to emphasise that at the time Mr Halligan received the Bank A statements which, prima facie revealed some very suspicious activity on the part of High Speed, the two main creditors, HMRC and Company A, as represented by Grant Thornton, had already taken steps to replace him as liquidator not least because it was recognised

15 by all concerned that Mr Halligan did not have the requisite experience to deal with such a case. 43. Mr Ozin further submitted that in the event that it was considered Mr Halligan had taken adequate steps to ascertain the location of and safeguard the relevant records, he should have adequately recorded these steps to comply with paragraph 3 of SlP2. The Committee was satisfied that Mr Halligan had created an adequate record of the steps he had taken, having documented every stage referred to above. 44. Accordingly, the Committee was not satisfied that Mr Halligan had failed to obtain the location and safeguard High speed s relevant records, or that he had failed to document the steps he had taken and found this Allegation not proved. Having found the stem not proved the Committee did not have to consider Allegation 1(a) and (b). Allegation 2 (a), (b) & (c) - NOT PROVED 45. At the outset of his appointment as liquidator, in accordance with SIP2, Mr Halligan was under an obligation to: i. Conduct an analytical review, based upon the information available, in order to assess whether there was a prima facie case for further, more detailed, investigation into any aspect of the company's affairs (paragraph 4, SlP2); ii. Make enquiries of the officers of the company and other senior officials as to the company's affairs, including the reasons for failure and the location of its records and property, and in the event of non-cooperation to clearly record the steps taken by him (paragraph 4.2, SlP2); iii. Compare the statement of affairs with the last audited, filed or management accounts in order to ascertain whether all significant fixed and current assets could be identified and material movements in fixed and current assets could be properly explained (paragraph 4.3, SlP2); and

16 iv. Consider whether the initial review disclosed any matters that suggested there were grounds for more detailed investigation, or possible rights of action which the company or the liquidator may have against third parties, having regard to the size of the case, the level of assets available to fund any further investigations or actions, and the materiality of the matters disclosed (paragraph 5, SlP2). 46. Upon his appointment, Mr Halligan had at his disposal the very limited information identified above included within the Director's Report, as provided by the accountant, which he could then compare with the limited information the director had provided. He had noted the very high turnover and the dramatic increase from the year before and had asked both the director and the accountant relevant and pertinent questions about that, as agreed by Mr Defty. Mr Halligan s initial review followed his pre-appointment meeting with the director, the creditors meeting in March 2009 and his meeting with the accountant, also in March The Committee was therefore satisfied that Mr Halligan had complied with SIP2 paragraphs 4.1, 4.2 and 4.3, particularly given the very limited information available upon which to conduct a review. 47. On speaking with Mr D at Grant Thornton and being made aware of the possibility of an overseas bank account with Bank A, Mr Halligan immediately put in train the relevant enquires to establish if there were one. This demonstrated that he had considered the need for further investigation. Furthermore, once he received the Bank A enquiry report, which he described as like nothing he had seen before, he recognised the need to make further enquires as was born out by his request to the Insolvency Service for a three month extension before submitting the requisite D form. 48. It was ACCA s case that Mr Halligan had done too little, too slowly not least because time was of the essence. Whilst recognising the importance of acting expeditiously, the Committee did not accept that Mr Halligan had done too little and acted too slowly, particularly given the background of the case and the fact that the company had ceased trading some three years before his appointment as liquidator. Mr Defty accepted that any assets

17 were highly unlikely to be available after three years and that with MTIC frauds, it is very unlikely that the director would deliver up any of the books. 49. The Committee therefore found that Mr Halligan had conducted an adequate initial review and had considered whether there were grounds for further investigation and this Allegation is not proved. Having not found the stem of Allegation 2 proved the Committee did not need to consider Allegation 2(a), (b) and (c) which were predicated on the basis of a failure being established as referred to in the stem of the Allegation. Allegation 3 (a), (b) & (c) - FOUND NOT PROVED 50. ACCA alleged that since Mr Halligan should have concluded, pursuant to paragraph 5 of SIP2 (2007), that there were grounds for further investigation, he was under an obligation to: i. Discuss this with the liquidation committee/creditors in order to ascertain and assess their views on further work and provide the committee with such information as they might reasonably require to enable them to form their views (paragraphs 7 and 10 SlP2); ii. ln the event that he decided further work should be undertaken, discuss this and funding issues with the committee/creditors (paragraphs 8 and 10 SlP2); and iii. Report to the committee/creditors on the progress of the investigation at specified intervals or at appropriate stages, providing details of costs to date, and seeking the views of the committee/creditors on the continuation of the investigation (paragraphs 9 and 10 SlP2). 51. Mr Fennell said that Mr Halligan did not accept that he had failed to engage with the creditors. He said that it was common ground that the principal victim (and creditor) of MTIC fraud is HMRC. Mr Halligan did engage with HMRC, who confirmed that Customs and Excise had no claim. HMRC

18 made no mention of any VAT claims being withheld and provided no information as to the possible MTIC fraud. Mr Fennell said that Mr Halligan could hardly be to blame for HMRC s own apparent failure to identify the liquidation as involving an MTIC fraud, indeed he argued that HMRC s failure to identify such a fraud provided considerable support to Mr Halligan s case that he was not guilty of misconduct for failing to do so himself. Nor could Mr Halligan be held accountable for HMRC s refusal to engage with him as the duly appointed liquidator of High Speed. Mr Fennell said that the creditors had been provided with questionnaires which none of them actually completed. Thus, as Mr Defty observed, the creditors were properly asked to provide information and that they could have brought matters to Mr Halligan s attention, but they failed to do so. 52. Mr Halligan identified the need to carry out further investigations, as referred to above. The criticism made of him is that he failed to consult with the creditors about this. This alleged failure must be viewed in the light of the behaviour of the creditors. None of them attended the creditors meeting in March None of them engaged by responding to the letters and questionnaires sent by Mr Halligan to them. It was clear that the principal creditors were potentially HMRC and Company A, both of which had appointed by Grant Thornton to represent their interests in the liquidation and to investigate on their behalf. 53. Grant Thornton wrote to Mr Halligan on 13 July 2009, indicating that Company A was a substantial creditor and asking for a copy of his report to the creditors presented at the Section 98 creditors meeting. The letter stated that should he have any queries, he should contact Mr D at Grant Thornton. The same day, Mr Halligan telephoned Mr D and a note of that conversation was included within the papers before the Committee. That note is both important and revealing. Mr Halligan recorded that Mr D confirmed that Grant Thornton were liquidators of Company A and many other companies involved in MTIC fraud and that Grant Thornton specialise in MTIC fraud cases. The note records how Mr Halligan told Mr D how he had not come across MTIC fraud before and although he had heard of carousel fraud he had no real knowledge of it. During that conversation Mr D, the man with expertise in this area, asked Mr Halligan if the company had a bank account with Bank A because companies involved in MTIC

19 fraud tended to use this offshore bank. Mr Halligan stated he was not aware of one. 54. As stated above, the same day Mr Halligan set enquiries in train with Bank A to establish whether or not High Speed did indeed have such an account. It was only when, in late September and after he knew of Grant Thornton s intention to replace him, that he received the Bank A enquiry report which he recognised needed further investigation. The Committee was satisfied that it was only at that stage that the requirement to consult with creditors in relation to carrying out further investigation arose. The Committee was equally satisfied that at that stage there was no one that he could usefully have consulted with. None of the other creditors were engaging. That only left Company A, or more specifically Grant Thornton. Mr Halligan recognised that he was not equipped to investigate further the Bank A statements and Grant Thornton had made it very clear they were the experts in this field. Given that Grant Thornton were due to replace him any consultation with them would have been entirely without purpose. The Committee therefore did not consider there to be a failure in this regard and found this matter not proved. 55. There being no failure as referred to in the stem of Allegation 3, it follows that the Committee did not have to consider Allegation 3 (a), (b) and (c). Allegation 4 (a), (b), (c) & (d) - (a) & (d) FOUND NOT PROVED, (b) and (c) ADMITTED AND FOUND PROVED 56. It was ACCA s case that Mr Halligan was under an obligation to: i. Report the matter to the Secretary of State if it should come to his notice that the director of the company may have been guilty of any offence in relation to the company for which he was criminally liable (paragraph 13 SlP2); and ii. Report forthwith to the Secretary of State on the conduct of any past or present director where it appears to him that the Court will find that the conduct of that director makes him unfit to be concerned in the management of a company (Company Directors Disqualification Act 1986, section 7(3) -

20 (paragraph 14 SIP 2) this is achieved by submission of a D1 return to the Insolvency Service. 57. In the view of the Committee, paragraphs 13 and 14 of SIP2 place separate duties upon a liquidator. The Committee was satisfied that Mr Halligan had complied with paragraph 13. On receiving the Bank A enquiry report, his dawning comprehension of the presence of fraud had crystallised. That report was received on 27 August The Committee was thus satisfied that his duty to report the matter to the Secretary of State first arose on that date. Paragraph 13 does not stipulate a time frame within which any such report should be made, nor does section 218 of the Insolvency Act On 12 September 2009, he wrote to the Insolvency Service advising that the director had not delivered the company s books and records and that the company was alleged to have been part of a carousel fraud. He added that investigations needed to be made into an overseas bank which had just come to light. Neither paragraph 13, nor section 218 of the Insolvency Act 1986, indicate the form in which such a report should be made and the Committee was satisfied that the letter sent on 12 September 2009 fulfilled Mr Halligan s duty. 58. Having found this to be the case, it was not necessary to consider Allegation 4(a). 59. With reference to the duty under paragraph 14, the Committee was satisfied, in accordance with Mr Halligan s admissions, that he had sent the wrong form to the wrong address and that in that limited respect he had failed to report to the Secretary of State. Mr Halligan said that the wrong address arose out of his copying and pasting a previous letter sent to the Insolvency Service and he missed the fact that the Insolvency Service had moved address. He accepted that this was both erroneous and inefficient. 60. Mr Halligan said that sending the wrong form arose out of a conversation he had with the Insolvency Service in which he was advised to submit a D2 form. He had asked for a three month extension to allow time to investigate further a foreign bank account. He was told he could not have an extension and he should submit a final D2 form now and if further information came to light he could submit a further return later on. In response to that advice, Mr

21 Halligan submitted the D2 form when he should have been submitting a D1 form. However, in submitting the D2 form Mr Halligan did include on that form the fact that the company director had failed to deliver up the books and records to the liquidator. Furthermore, he included the covering letter which made clear reference to the fact that the Company was alleged to be part of a carousel fraud and that investigations needed to be made into overseas bank transactions which had just come to light. By submitting the wrong form, albeit with the qualifying statements, Mr Halligan accepted that his actions had been both erroneous and inefficient. 61. The Committee accepted Mr Halligan s explanations and agreed that his actions had been careless in this limited extent and that he had acted erroneously and inefficiently. The Committee did not consider, in all the circumstances, that his actions went beyond this and did not find him to have acted inadequately or incompetently. Thus, to the extent identified, the Committee found Allegation 4(b) and (c) proved. 62. Having found Mr Halligan culpable to this very limited extent the Committee did not consider his actions were sufficiently serious to amount to misconduct. They were not such as would be likely to bring discredit to him, ACCA or the profession. The Committee therefore found Allegation 4(d) not proved. Allegation 5 (a) & (c) - FOUND NOT PROVED 63. Allegation 5 alleges a failure to make adequate efforts to collect in the book debts and in effect criticises Mr Halligan s subsequent assignment of those debts. 64. The Committee accepted Mr Halligan s evidence that he made the decision to assign the book debts on purely commercial grounds. He had made such investigations as were possible in the circumstances to ascertain what, if any, debts could be recovered and had fairly and reasonably concluded that there was no realistic prospect of any recovery. Although not able to rely on the benefit of hindsight, the Committee noted that Grant Thornton, in the many years since they had taken over from Mr Halligan, had been unable to recover any debts either.

22 65. On being provided with a list of the debtors by the accountant Mr Halligan contacted six out the eight, the other two being uncontactable and insignificant. Of the six he did manage to contact the story was the same. None could pay any debts owed to High Speed because they themselves were in financial difficulties following the refusal by HMRC to pay certain VAT returns. Mr Halligan was told in emphatic terms that there would be no recoverable debts. The Committee accepted that these steps were adequate in the circumstances of this case and accepted also that Mr Halligan had reasonably and properly reached his conclusion that no recovery was likely. 66. The Committee considered carefully ACCA s argument about the assignment being ill advised and premature, but was satisfied that, in circumstances where he had appropriately and reasonably arrived at the conclusion that there was no realistic prospect of recovery, the assignment was commercially justifiable. The Committee did not accept that the assignment was made prematurely in that it was done before the results of Bank A enquiries were known, because the Bank A material would not have assisted with the recovery of debts from the known debtors. 67. When speaking to Mr D at Grant Thornton on 13 July 2009, Mr Halligan had explained about Universal s interest in purchasing the debtor ledger and the terms thereof and that he had taken legal advice on the matter. The Committee considered it reasonable of him to have thought that if Grant Thornton, as the representative of the principal creditor, objected to the proposed assignment they would have said something. They did not, and he allowed the assignment. The Committee did not think this unreasonable. 68. The Committee was satisfied by Mr Halligan s account that he had no other means of realising the book debts. He was faced with the certainty of getting nothing if he did not assign them and a fairly low prospect of recovery if he did. He concluded that a chance of recovery, even if low, was better than the certainty of no recovery. 69. Having not found any failures in relation to the book debts as alleged, it followed that Allegation 5(a) and (b) were not proved.

23 SANCTION AND REASONS 70. In reaching its decision on sanction, the Committee took into account all the evidence and the submissions made by Mr Ozin and Mr Fennell, together with all matters of personal mitigation. The Committee also referred to the Guidance for Disciplinary Sanctions issued by ACCA and had particular regard to Section H of the Insolvency Common Sanctions Guidance (including Part 2-indicative sanctions for various breaches of the Insolvency Act 1986, other relevant legislation, the Statement of Insolvency Practice and the Insolvency Code of Ethics). The Committee had in mind the fact that the purpose of sanctions was not to punish Mr Halligan, but to protect the public, maintain public confidence in the profession and maintain proper standards of conduct, and that any sanction must be proportionate. The Committee accepted the advice of the Legal Adviser. 71. The Committee took into account the following mitigating factors: previous good character; Mr Halligan said he had learned from this experience and his firm s procedures had been updated accordingly; the errors were innocent errors with no adverse consequences. 72. The Committee found there to be no aggravating factors. 73. The Committee had already indicated in its findings of fact that it accepted Mr Halligan s explanation of how it was that the incorrect D form came to be sent to the wrong address. The wrong address arose out of a carelessness on Mr Halligan s part which resulted in a delay in the Insolvency Service, and thereby the Secretary of State, being notified as soon as they should have been. That delay, which was only for a period of some four months, did not have any adverse consequence. The use of the wrong form arose from the erroneous instruction given by the Insolvency Service to Mr Halligan to use that form. This error was mitigated by what he had written on the D2 form and in the covering letter. 74. The Committee was satisfied that the breaches were innocent errors with no adverse consequences and extremely unlikely to be repeated. The Committee considered that in all the circumstances taking no further action

24 was proportionate, there being no risk to the public and no public interest in imposing a sanction. 75. The Committee therefore decided to take no further action. COSTS AND REASONS 76. ACCA applied for costs in the sum of 32, Mr Ozin submitted that notwithstanding the Committee s findings and the one matter that was found proved, which was on admission, the case was correctly brought and the application for costs was an appropriate and reasonable one. 77. Mr Fennell submitted that no order should be made in light of the findings of the Committee. He said in all the circumstances, it would not be reasonable to make an order against Mr Halligan when the vast majority of the matters alleged had been found not proved. He said it was not possible from ACCA s costs schedule to know what actual work was done and so it was very difficult to say whether the costs were proportionate and reasonably incurred. However, he submitted, the costs associated with Allegation 4(b) and (c) alone, must be a fraction of the overall costs. 78. With reference to his means, Mr Fennell said that Mr Halligan was of very limited means as reflected in the statement of means he provided, which Mr Halligan expanded upon to the Committee. He added that the personal cost to him in defending the case had been 25, The Committee considered that the amount applied for was a reasonable sum for the work undertaken and that ACCA had acted reasonably in bringing the charges and prosecuting them to a final hearing. The Committee considered there to be a strong public interest in allegations against professional accountants being fully and publicly investigated, particularly in cases involving ACCA members who have been licensed to carry out insolvency work. The Committee was satisfied that the papers revealed a prima facie case which needed answering, with nothing admitted beforehand, but a case which Mr Halligan did in fact answer during the course of the hearing.

25 80. However, the Committee did not consider it to be fair and reasonable to order Mr Halligan to pay those costs in a case where he had, in effect, been the successful party and had successfully defended everything he set out to defend, at significant personal cost. The Committee was of the view that this decision was reinforced given Mr Halligan s very limited means. 81. The Committee therefore decided that, in the rather unusual circumstances of this case, it was fair and proportionate to make no order for costs. Mr Ian Ridd Chairman 20 October 2017