A decision from the NSW Supreme Court this week shines an unforgiving light on the handling of an administration by two Sydney practitioners who’ve been ousted after a creditor applied to have a deed of company arrangement (DoCA) terminated.
“… unusually, in my experience, Mr Hogan indicated in evidence that the Administrators would now not seek to recover remuneration beyond the amount of that estimate.” Justice Ashley Black.
In the matter of ACN 613 909 596 Pty Ltd (formerly Minle Wine Negociants of Australia Pty Ltd) (subject to Deed of Company Arrangement) [2023] NSWSC 753 Justice Ashley Black recounts various decisions made by Hogan Sprowles principals Michael Hogan and Brendan Copeland in their capacities as administrators and then deed administrators of the company that led one creditor to commence proceedings to have the DoCA terminated, the company wound up and liquidators appointed.
Needless to say, Hogan and Copeland didn’t leverage the experience they derived as administrators into appointments as liquidators.
The decision they made that brought about their demise was to refuse the proof of debt submitted by by Monoova Global Payments Pty Limited (MGP) (Formerly Moneytech Limited) (“Monoova”), which provided foreign exchange trading services to the company in its guise as a wholesale liquor exporter.
Incensed, MGP amended its proof and provided supporting documentation, a day before the director, Mr Thanh Heip Le, proposed his DoCA on February 1, 2023.
The proposal included a contribution from Le of $100,000 to the deed fund, though given the administrators had a lien over that amount to guarantee their remuneration how much would go to creditors was unclear.
The DoCA proposal however also coincided with the distribution of Hogan and Copeland’s Report to Creditors, a document that MGP attacked in the subsequent termination proceedings on the basis that the administrators had undertaken inadequate investigations.
While the judge made no findings as to conduct or competency, his conclusions do highlight the dangers facing practitioners presented with limited information and a tight deadline.
“By their report to creditors dated 1 February 2023 (Ex P3, 484) the Administrators noted that the Company had operated an alcohol wholesale and export business in Australia and exported to China, Singapore and Hong Kong and that:
“The Company ceased to trade on or around October 2020 after the Company’s directors decided it was not in the Company’s best interest to trade beyond this date, as a result of the impacts of the COVID-19 pandemic, changes to excise duty drawback legislation, China imposing an embargo on wine imports and cashflow shortages.
“That explanation of the circumstances in which the Company ceased to trade was likely false, where, in about the same period that Mr Le caused the Company’s business to be “wound down”, he and Mr Minissale also caused Wine Vendor to commence an export trade, structured in a somewhat different manner, and Wine Vendor undertook that export business with apparent success notwithstanding the suggested obstacles to doing so.”
iNO is no expert but the above appears to resemble a phoenix transaction, particularly when you consider that stock held by the company wound up with Wine Vendor but the liabilities attaching to that stock stayed with the company.
No doubt those and other transactions will be examined closely by Ankura’s Liam Healey and Quentin Olde, who are the appointed liquidators and who are being funded by MGP with $20,000 to undertake initial investigations. Hopefully they’ll uncover more than their predecessors.
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