APPEAL COMMITTEE HEARING OF THE ASSOCIATION OF CHARTERED CERTIFIED ACCOUNTANTS REASONS FOR DECISION In the matter of: Mr Lee Christopher Jones Heard on: 25 January 2016 Location: The Chartered Institute of Arbitrators, 12 Bloomsbury Square, London WC1A 2LP Committee: Mr Mike Cann (Chairman), Mr George Auger (Accountant) and Ms Lindsay Addyman (Lay) Legal Adviser: Ms Juliet Gibbon Persons present and Ms Julia Faure-Walker Case Presenter, Ms Jill capacity: Baldwin (Hearings Officer), Mr Lee Christopher Jones (Member) and Mr Carl Johnson (Member s Representative) Observers: Ms Wendy Yeadon (Trainee Chairman) Mr Maurice Cohen (Trainee Chairman) 1. The Committee had before it a bundle of papers numbered A-G and 1-226, additional papers numbered 227-244 and 245-250 and a service bundle, numbered 1-11. 2. Ms Julia Faure-Walker represented ACCA. Mr Lee Jones was present at the hearing and represented by Mr Carl Johnson. APPLICATION TO APPEAL 3. This is Mr Jones application to appeal an order of the Disciplinary Committee ( the DC ) made on 16 September 2015. On that day Mr Jones had appeared, unrepresented, before the DC and, following his admission as to the facts of the allegation, he was found guilty of misconduct and the DC determined that the appropriate and proportionate sanction was that he be excluded from membership of ACCA. The DC also made an order that Mr Jones pay ACCA s costs in the sum of 1,834.
PERMISSION TO APPEAL 4. On 12 November 2015 an Appeal Committee Chairman considered Mr Jones application for permission to appeal and found the argument that insufficient weight was given by the DC to the mitigating factors in this case was persuasive and that there was a real prospect of the appeal against the order for exclusion succeeding. The Chairman granted permission to appeal on the two grounds of appeal under the Chartered Certified Accountants Appeal Regulations 2014, as amended (the Regulations), set out in the application, namely Regulation 5(2)(b) the Committee misinterpreted any of the Association s bye-laws or regulations or any relevant guidance or technical standards, which would have altered one or more of the Committee s Orders and Regulation 5(2)(e) one or more of the Committee s orders is disproportionate and/or unreasonable. BACKGROUND 5. At the DC Hearing on 16 September 2015 Mr Jones faced one allegation that pursuant to byelaw 8(a)(i), Mr Jones was guilty of misconduct in that on 19 September 2014 he was disqualified from holding the position of director of a company or acting as an insolvency practitioner for a period of 2 years. The allegation was brought against Mr Jones on the basis that he had failed to ensure that payments of Tax, National Insurance and VAT had been made to HMRC by a company of which he was the sole director and which was compulsorily wound up as a consequence. Mr Jones admitted the facts of the allegation at the hearing and the DC subsequently found him guilty of misconduct and imposed a sanction that he be excluded from ACCA membership. 6. Prior to his exclusion, Mr Jones had been an ACCA member practising at Company B, a firm of Chartered Certified Accountants and Business Advisers. Mr Jones had been the sole director of Company A. On 19 September 2014, in the Manchester District Registry of the High Court and pursuant to Section 6 of the Company Directors Disqualification Act 1986, Mr Jones was disqualified from holding the position of director of a company or acting as an insolvency practitioner for a period of two years.
7. Company A was incorporated on 22 September 2006 and from 28 April 2008 Mr Jones had been the sole director of the company. On 28 November 2014 HMRC presented a winding up petition in respect of Company A claiming that it had not paid NIC Class 1, NIC Class 1 Interest, PAYE, PAYE Interest, estimated PAYE/CIS and NIC and VAT totalling 54,543.12. On 28 January 2013 Company A was wound up by order of the Companies Court. On 19 June 2014 the Official Receiver applied for a disqualification order in respect of Mr Jones and on 19 September 2014 Mr Jones was disqualified for a period of two years. The Official Receiver sought Mr Jones disqualification on the basis that Mr Jones, as a director of Company A, had failed to ensure that Company A fulfilled its statutory obligation, during a 39 month period from September 2009 to December 2012, to make payments to HMRC when due and, without making sufficient provision for those payments, caused Company A to trade to the detriment of HMRC. 8. The DC considered the following to be aggravating factors:- The harm to the public purse arising out of the non-payment of taxes by Company A; The background to the disqualification was sustained conduct of neglect over a long period; That Mr Jones was experienced in dealing with companies in financial difficulties. He had a thorough understanding of his responsibilities as a director and yet did not know that payments to HMRC were not being paid; The effect of his lack of attention to his role as a director and discharge of his duty led to taxes not being paid and the company to carry on trading and incurring losses that were, in effect, financed by HMRC; Although his conduct was not deliberate, it was reckless; He had shown only limited insight into his failings. 9. The DC considered the following to be mitigating factors:- The two testimonials submitted from a colleague and a client;
Mr Jones admissions and co-operation with both the insolvency process and the regulatory process; Mr Jones previous good history; The length of the disqualification was the minimum the Court could impose. 10. The DC considered that the misconduct was a very serious departure from professional standards. The Committee was satisfied that the behaviour rendering Mr Jones not fit to be a director was fundamentally incompatible with his remaining an ACCA member. GROUNDS OF APPEAL 11. Mr Jones appealed the Order excluding him from membership of ACCA. In his written application he relied on Regulation 5(2)(b) of the Regulations, the Committee misinterpreted any of the Association s bye-laws or regulations or any relevant guidance or technical standards, which would have altered one or more of the Committee s Orders, and Regulation 5(2)(e) one or more of the Committee s orders is disproportionate and/or unreasonable. Mr Jones did not seek to appeal the DC s finding of misconduct or the order for costs. 12. Mr Jones had provided the Appeal Committee ( the Committee ) with written Reasons in Support of Grounds of Appeal. In reliance of the ground under Regulation 5(2)(b) he submitted that the DC misinterpreted ACCA s Guidance on Disciplinary Sanctions ( the GDS ) and that if it had been properly applied, a Severe Reprimand ought to have been imposed by the DC. 13. In reliance of the ground under Regulation 5(2)(e) he submitted that the order of exclusion was both disproportionate and unreasonable in light of the DC s findings, in particular that his misconduct was not deliberate but reckless. 14. Mr Jones invited the Committee to consider the DC s sanction in another case where the ACCA member received a Severe Reprimand having been disqualified as a director of a company for a period of 6 years after a
company he was sole director of had gone into liquidation having accrued a liability of 212,669 to HMRC. SUBMISSIONS 15. Mr Johnson informed the Committee that he did not seek to persuade it that the DC had misinterpreted the GDS and he would focus on the ground of appeal set out at Regulation 5(2)(e) that the sanction imposed was disproportionate and/or unreasonable in light of the Committee s findings and the order excluding Mr Jones from membership of ACCA should be substituted for a Severe Reprimand. 16. Mr Johnson reminded the Committee that Mr Jones had reported the matter to ACCA himself; that there was no suggestion that he had benefitted financially from his position within Company A; that with the benefit of hindsight he would not accept such a directorship in the future and that the disqualification had been the minimum that the Court could impose. 17. Mr Johnson referred the Committee to paragraph C5.1 of the GDS that sets out the circumstances where exclusion may be appropriate. He submitted that the majority of the circumstances listed were not present in Mr Jones case. He reminded the Committee that there had been no abuse of trust/position; no dishonesty on the part of Mr Jones; no attempt to cover up the misconduct; no persistent denial of misconduct; no breach of a regulatory order and no collusion to cover up his conduct. 18. Mr Johnson then referred the Committee to Paragraph C4.1 of the GDS that sets out the factors to be considered in relation to imposing a Severe Reprimand. He submitted that the majority of factors were present in Mr Jones case. He reminded the Committee that Mr Jones had acted recklessly, not intentionally; that there was a genuine expression of regret; that Mr Jones had a previous good disciplinary record; that Mr Jones had admitted a single incident of misconduct; that Mr Jones had provided the DC with appropriate references and that he had cooperated throughout the investigation stage.
19. Mr Johnson referred the Committee to the ACCA case of Harmey. He submitted that this was for illustrative purposes only and accepted that this was not binding on the Committee. He submitted that a Severe Reprimand was a sufficient sanction in Mr Jones case. 20. Ms Faure-Walker submitted that Paragraph C5 of the GDS provided that Exclusion may be appropriate when the conduct involves any or all of the following circumstances. She informed the Committee that C5.1 b. applied because there had been a loss to the public purse by the non payment of taxes; that C5.1 e. applied to some extent because the DC had found that Mr Jones had only limited insight and that C5.1 f. applied because the misconduct had continued over a sustained period of time and was not, therefore, an isolated incident. 21. Ms Faure-Walker submitted that Mr Jones was under a duty to notify ACCA when he became aware that proceedings were to be taken to disqualify him as a director of a company. She referred to distinguishing factors in the case of Harmey and submitted that Mr Jones case was more serious. DECISION ON APPEAL AND REASONS 22. The Committee gave careful consideration to the submissions made by Mr Johnson, on behalf of Mr Jones, and Ms Faure-Walker, on behalf of ACCA. It considered that insufficient weight had been given by the DC in respect of the substantial mitigation put forward by Mr Jones at the DC Hearing and that Mr Jones misconduct, in light of the mitigation advanced, was not fundamentally incompatible with being a member of ACCA. In the circumstances the Committee determined that the order imposed by the DC excluding Mr Jones from membership of ACCA was both disproportionate and unreasonable in light of its findings. 23. The Committee considered that Mr Jones had satisfied it that the ground of appeal under Regulation 5(2)(e) had been made out. The Committee decided to substitute an order under Regulation 13(1)(b) of the Chartered Certified Accountants Complaints and Disciplinary Regulations 2014, as amended, severely reprimanding Mr Jones in place of the order imposed by the DC excluding Mr Jones from membership of ACCA.
24. ACCA did not make an application for costs. Mike Cann Chairman 25 January 2016