Creditor takes on Mosaic liquidators over conflict

A failure to find a buyer may be one of the reasons why Mosaic Brands‘ creditor Shaoxing Newtex Import & Export Co Ltd (Shaoxing) has commenced proceedings in the Federal Court seeking to have incumbent liquidators Vaughan Strawbridge, Kate Warwick, Kathryn Evans and David McGrath dumped.

“… it is not clear whether the Safe Harbour eligibility criteria were met at all times” – Vaughan Strawbridge, Kate Warwick, Kathryn Evans and David McGrath.

The Chinese textile group is, according iNO’s mail, intending to make a case that the FTI Consulting foursome, and Strawbridge in particular, have an intolerable conflict.

iNO was told the disgruntled creditor believes there is a too-cosy-by-half relationship between Strawbridge, the company’s external lawyer Hamilton Locke partner Nicholas Edwards, Mosaic chairman Richard Facioni, and ceo Erica Berchtold. iNO makes no such suggestion.

A glimpse at the foursome’s DIRRI shows that the October 28, 2024 VA appointment evolved out of an engagement Strawbridge accepted on September 4 to “provide contingency planning services in relation to the Group for a potential voluntary administration appointment should one occur”.

That’s approximately two months of pre-appointment work Strawbridge and the other appointees will have to objectively assess for appropriateness having been appointed liquidators at a meeting of creditors on July 1.

Unless Shaoxing succeeds in its bid to have them replaced.

We understand that Safe Harbour advice obtained by the directors is causing the disgruntled creditors significant grief because the liquidators have refused to divulge details to any Committee of Inspection (COI) member who hasn’t signed a confidentiality deed.

This means the results of investigations the FTI quad undertook in their capacities as administrators have been withheld from the wider body of creditors, though Strawbridge and his colleagues have provided some detailed opinion on the topic in their 439A report dated June 13 which included the comment that “it is not clear whether the Safe Harbour eligibility criteria were met at all times and further investigation is required”.

The 439A report also reveals that while that insolvent trading claims valued at between $38 million and $77 million (before costs and funding) could be available none of the entities within the Mosaic Group had D&O coverage.

The matter is to be referred to a judge for hearing next month.