Vaughan Strawbridge.
Outraged at having their independence impugned (and their appointments imperilled), the liquidators of the Mosaic Brands Group (Mosaic) have struck back, launching a security for costs application against Shaoxing Newtex Imp & Exp Co Ltd (Shaoxing), the China-based creditor that wants them punted.
Last Friday the Federal Court made orders requiring Vaughan Strawbridge, Kate Warwick, Kathryn Evans and David McGrath to file their interlocutory process and affidavit in support of their security
for costs application, as well as an outline of submissions, by 4:00pm yesterday.
iNO‘s request for a copy was not complied with.
The security for costs application comes as the FTI Consulting foursome defends Shaoxing’s application to have them replaced by Wexted Advisors‘ Joe Hayes, Jessie Wang and Andrew McCabe.
Shaoxing is incensed by what it sees as intolerable conflicts between Strawbridge, Mosaic’s legal advisors Hamilton Locke and Strawbridge’s old firm Deloitte.
It wants Strawbridge and his colleagues removed or alternatively, Hayes, Wang and McCabe appointed as special purpose liquidators (SPLs) to investigate potential claims against the Mosaic directors, Hamilton Locke, Deloitte Financial Advisory and BDO Audit.
Deloitte was retained by Mosaic in 2020 to help it find a new lender to take over its ANZ loans. The Commonwealth Bank (CBA) obliged.
Three years later and with a balance sheet ravaged by COVID Mosaic asked Deloitte to market its plate of decaying creditworthiness again, no doubt because CBA had had all it could stomach.
Demonstrating that it had either an appetite for offal or no sense of smell, Hilco Capital subsidiary HUK 137 Limited snapped up the debt in 2024.
Strawbridge left Deloitte in December 2020 after 22 years and the DIRRI lodged after the FTI foursome were appointed as voluntary administrators (VAs) on October 28, 2024 discloses the impugned relationships in full and mentions the attendance at various pre-appointment meetings of Sam Marsden, the former PwC partner who joined Deloitte in 2020.
In a July 11 circular to creditors Strawbridge and his colleagues rejected Shaoxing’s allegations and said they would be strenuously defended.
Shaoxing meanwhile may also be seeking to litigate issues around claims of safe harbour advice provided to Mosaic’s directors.
In the July 11 circular the liquidators made a series of potentially contradictory claims.
The first was that Hamilton Locke engaged Deloitte to provide Safe Harbour advice to Mosaic’s directors after Strawbridge resigned from Deloitte in November 2020 and that neither he or the other liquidators had provided any such advice to Mosaic’s directors.
The liquidators then say that it hadn’t been necessary for the directors to seek Safe Harbour advice because of the Federal Government’s moratorium on prosecutions for insolvent trading in force between March 25, 2020 and March 31, 2021.
Presumably, Deloitte didn’t charge Mosaic for advice it knew it didn’t need to provide?
Finally the liquidators add that they believe there’s a strong prima facie case for insolvent trading and that they are not satisfied that all of Mosaic’s directors have proved eligibility for the Safe Harbour protection for the entirety of the period from March 2020 to the date of the FTI foursome’s appointments as VAs, which makes you wonder why the temporary moratorium was mentioned.
Shaoxing commenced the removal proceedings on July 7, a week after the reconvened second meeting of Mosaic creditors saw the company wound up and the resolution to appoint the Wexted trio defeated.
How the costs of the liquidators’ defence of the proceedings will affect the commitment from Mosaic’s receivers for up to $3 million in funding for the liquidators remains to be seen.
It was Hilco that appointed KPMG’s Amanda Coneyworth, Ryan Eagle, Gayle Dickerson and Dave Hardy as receivers on October 28, 2024, only nine months after scooping up CBA’s leavings. Team Deloitte knows how to apply lipstick.
While the receivers have recovered approximately $30 million of what Hilco’s owed as senior first ranking secured creditor, there’s still more than $10 million outstanding.
The parties are set to return to court on July 23 to consider the issue of subpoenas and the arguments of the non-compliant.
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