Deed administrators facing termination bid

To defend or to not defend? It’s a question insolvency practitioners accept as part of their general lot, one in which the correct answer frequently reveals itself only after the benefits of hindsight have crystallised in full.

On Monday this week a court heard that the deed administrators (DAs) of Minle Wine Negociants of Australia Pty Ltd hadn’t yet filed a notice of appearance in respect of an application to terminate a Deed of Company Arrangement (DoCA) creditors voted to accept in February this year.

On Monday the NSW Supreme Court heard that while the DAs – Michael Hogan and Brendan Copeland of Hogan Sprowles – didn’t know the nature of the allegations being made against them, “they have to assume that their conduct is being impugned”.

In those circumstances it was difficult for them to know if they should oppose the application or adopt the more usual approach of neither consenting nor objecting.

That state of affairs however evaporated rapidly as counsel for the applicant told Justice Ashley Black why his client wanted the DoCA terminated and a liquidator appointed.

The DAs he said had undertaken “inadequate investigations” in respect of Minle’s failure.

As a consequence he alleged there were “deficiencies” in Hogan and Copeland’s S439A Report, which was sent to Minle’s creditors on February 1, 2023.

In their 439A Report Hogan and Copeland describe the company as an alcohol wholesaler exporting liquor to China, Singapore and Hong Kong.

Pummelled by the Chinese Communist Party’s trade embargo on Australian produce and the Australian Government’s changes to the excise duty drawback scheme, Minle director Hiep Thanh Le and related party creditors ceased trading in late 2022.

But dictatorships and democracies weren’t the only issues driving the decision to fold.

The application to terminate the DoCA is being brought by debtor finance outfit Monoova Global Payments Pty Limited (Formerly Moneytech Limited) (“Monoova”) which emerged out of the 2022 restructure of Moneytech Group.

According to the 439A Report Monoova provided Minle with a foreign exchange trading account on or around 11 March 2019.

“During the period 1 May 2019 to 18 February 2020, Minle entered into various Ratio Knock-Out Enhanced Forward and Ratio Target Accrual Redemption Forward transactions using the trading account.

“On 17 March 2020, Monoova closed-out each of the relevant transactions, with the mark to market value of each of the terminated transactions calculated as $1,641,985.”

On September 28, 2020, Monoova set-off amounts paid by Minle to Monoova in the sum of $334,944 which was being held by Monoova as collateral and demanded that the Company pay to Monoova the sum of $1,307,041.

Payment was obviously not forthcoming and on December 15, 2020, Monoova commenced proceedings against Minle in the Supreme Court of New South Wales seeking $1,307,041 plus interest and costs.

Minle responded by filing a defence and cross claim in March 2021. The latter related to alleged damages for breach of contract, negligence, section 953B of the Corporations Act 2001 (Cth) (the Act) and/or section 1022B and/or section 1317HA of the Act in the amount of $1,641,985 and restitution in the amount of $334,944.

While those proceedings remain unresolved Monoova filed a proof of debt in the administration of Minle in the amount of $1,307,041 and attached its statement of claim.

After obtaining legal advice Hogan and Copeland rejected the proof, telling creditors in the S439A Report that there was insufficient information in the statement of claim for them to determine if the claim is reasonable, particularly in light of Milne’s defence and cross claim, to which Monoova had not responded at the time of their report.

Now Monoova has decided to up the ante by attacking the appointees’ S439A, which at several points refers to decisions and justifications for not undertaking further investigations.

Monrovia’s application is set to be heard on Friday. Hogan did not respond to emails seeking comment.