The Insolvency Practitioners Association yesterday (Thurs, May 22) launched a code of practice designed to “weed out any unethical operators” in the industry.
As we’re witnessing a global increase in the rate of corporate defaults, and a sure and steady rise in the liquidation business, one question presses: is there a need for the professional association to stay the hand of rogue elements in the legal profession?
“Absolutely not,” says the head of insolvency at Henry Davis York, the only law firm on the legal panels of all six of the big banks.
John Evans told Justinian that yesterday’s move by IPA is a recognition by insolvency practitioners that it is preferable to hop in first and self-regulate than have an imposed compulsory scheme.
According to IPA president, Paul Cook, the code of practice “helps us define right from wrong”.
There is also the longstanding tendency for codes of practice to turn into restraints of trade by protecting the insiders from those wanting to break-into the territory.
Evans poo-poos the suggestion that the IPA is simply wheeling out a code of behaviour in response to a recent upturn in insolvencies.
“This is a very considered and sensible response to proper self-regulation.”
Attorney General Robert McClelland (pic) spoke at yesterday’s shindig at the Sheraton on the Park for the launch of the code. He was his measured self, saying:
“We must ensure that Australia’s insolvency systems are viewed as entirely effective and credible, at home and abroad… Integrity is not peripheral to the business of insolvency practice.”
HDY’s Evans told Justinian yesterday that he thought the code to be “a very nice glossy book”, though he hadn’t yet had a chance to read it.
The whole urge to codify the ethical conduct of those vested with the task of transforming chaos into order for the benefit of creditors originally came from suggestions made at a Queensland chin-wag by Justice Bob Austin of the NSW Supreme Court.
According to Evans:
“So this really is a creature of benign insolvency times. The IPA was working on this long before the recent significant upswing in insolvency.”
Asked whether the code was an effort to rein-in “rogue” operators in the guise of ethical principles, the HDY partner replied that there will always be professionals who try and “reinvent and re-bandage themselves”.
“If there is a downturn in one side of the industry, someone will try and take that opportunity.
The insolvency professionals that our clients [banks] use are the larger reputable firms… Banks, by and large, have a very good relationship with the insolvency profession.”
Even so, there are some he’d prefer were not plying the trade but, reassuringly, “they tend to get weeded out”.
Until now it’s been a bit of a dry spell for insolvency lawyers and accountants, but now the good old grim times have arrived. John Evans puts it far more sagely:
“It has been a very benign period and those in the insolvency sphere are feeling a certain excitement, which is understandable. The correction had to come, it has come, and just how significant that correction will be no-one knows.”
Justice Austin also had a few words to say, pointing to “some uncomfortably long liquidations [that] corrupt our court statistics on the speed of completion of litigation”.
He hoped the code might play a part in speeding things up.