On 9 February 1953, William Wentworth, a NSW member of federal parliament, aired allegations concerning Arthur's associations with Reginald Aubrey Doyle, a conman who was wanted on fraud charges concerning forged shares in Placer Development Ltd.[1] Doyle had a lengthy criminal history, having been sentenced to 9 terms of imprisonment between 1931 and 1940,[2][3] for a total of 36 years, however many of the terms were concurrent and he was released in 1942.

[7] Arthur voluntarily stood down as a minister while declaring he would fight to clear his name, and the state government set up a royal commission into the allegations,[8] to be conducted by Judge George Amsberg of the District Court.

The terms of reference for the commission were to investigate:(1) Whether Joshua George Arthur acted corruptly or improperly in any association or dealing with Reginald Aubrey Doyle.

[11] Doyle was bankrupted with debts of more than £100,000, imprisoned for contempt of court for failing to reveal the whereabouts of $9,000,[12][13] and then pleaded guilty to 15 charges of fraud, forgery, utering and stealing in relation to the Placer Development shares, for which he was sentenced to 10 years in prison.

The Commission accepted that "improper" meant:Conduct which is discreditable, dishonourable, disreputable or seriously reprehensible on the part of a person occupying the position of a Minister of the Crown; or conduct which is a serious or substantial breach of recognised standards of rectitude and decency to be expected of a person fulfilling the office of a Cabinet Minister, and such as would meet with general condemnation by right-minded citizens.

[14] The report concluded in relation to the principal allegation that:(a) In view of what has been said earlier, I find that Joshua George Arthur did not act corruptly in any dealing or association with Reginald Aubrey Doyle.

[9] After the report was tabled in the Legislative Assembly, Arthur spoke for 75 minutes in his defence, before tendering his resignation as the member for Kahibah, stating his intention to contest the resulting by-election.

[16] The matter of his continued membership of the Labor was initially undecided, but when it became clear that the state executive would not support him, Arthur announced that he would resign from the party and not contest the by-election.

[18] Doyle remained an undischarged bankrupt in 1964, when he was charged with fraud involving £160,000 of bogus invoices,[19] and was sentenced to a further 12 years in prison.