PPSA problems? Perish the thought

Three McGrathNicol partners had more justification than most to plead urgency when they came to court on May the 30th seeking to be appointed as receivers.

Two days earlier the trio had been appointed liquidators via members voluntary resolutions of five entities within the corporate group backed by prominent Brisbane-based chef and restaurateur Shannon Kellam, an inevitable step after Kellam copped a Director Penalty Notice (DPN) from the ATO.

“To add to the confusion, it appears that, as a result of some of the perishable goods being cooked or part cooked and frozen, the original ingredients have been commingled into new items, and that makes the identification issue rather more difficult.” Justice Roger Derrington.

After attending the premises and conducting a stocktake it was crystal that the assets most likely to generate a return were those most in danger of very shortly being rendered worse than worthless.

This was because much if not most of the realisable stock comprised of cooked, semi-cooked and frozen food, all of it perishable. Kellam’s tucker needed selling stat.

But as is explained by Federal Court judge Roger Derrington in Holland, in the matter of BCNCulinary Arts Pty Ltd (in liq) [2024] FCA 752 obstacles existed.

Each of the companies to which Mark Holland, Jamie Harris and Anthony Connelly had been appointed as liquidator was a corporate trustee.

In accordance with the respective trust deeds each entity had had its relationship with the underlying trust severed at the moment the liquidators were appointed. The McGrathNicol trio lacked the powers necessary to deal with the trust assets. And that wasn’t all.

In his affidavit in support of the application for their appointment as receivers lead appointee Holland described how identifying which perishable ingredients belonged to which entity in the group would be fatally time consuming, particularly in respect of part cooked and frozen food which contained a range of ingredients.

Worse, the perishable valuable were in many instances subject to security interests.

Identifying which secured suppliers owned how much of a particular product seems an all but impossible task when those same products need to be sold ASAP if they are to generate any kind of return and not become a cost to creditors if allowed to spoil.

As his honour explained with it seems to iNO more than necessary understatement, “To add to the confusion, it appears that, as a result of some of the perishable goods being cooked or part cooked and frozen, the original ingredients have been commingled into new items, and that makes the identification issue rather more difficult.”

So with some of the foodstuffs bearing expiry dates as early as May 31, it was off to the Federal Court on May 30, where Kellam’s lawyers Mahoneys helpfully assisted the liquidators in obtaining orders to have the liquidators appointed as receivers without security so Kellam’s goodies could be offloaded whilst still edible.

In granting the application his honour highlighted the need in the circumstances to turn the assets into cash while that was possible and worry about ownership afterwards.

“Very appropriately, they have instead expressed an intention to sell those perishable assets, thereby liquidating them into cash, and to thereafter make the relevant investigations to ascertain the rights and liabilities in respect of the assets that will then identify the entitlements to the proceeds of any sale,” the judge said.