Replacement bid a “material delay” for Mosaic

Few things can be more frustrating for penniless liquidators anticipating a legal issue’s swift resolution than the dawning realisation that their expectations were ill-founded.

“It was anticipated that the Replacement Application would be resolved in a relatively short period of time and on that basis there would not be a material delay to the Liquidators’ investigations and potential commencement of actions in respect to the Recoverable Transactions.” Vaughan Strawbridge, Kathryn Evans, David McGrath and Kate Warwick, FTI Holdings.

Reality sets in. Windows of opportunity inch towards closure. Funding negotiations stall. Staff eye more billable horizons. And judgment remains reserved.

For FTI Holdings’ Vaughan Strawbridge, Kathryn Evans, David McGrath, Kate Warwick that realisation must’ve been front of mind as the compiled their latest statutory report for creditors of the Mosaic Brands Group, (Mosaic) to which they were appointed liquidators on July 1 this year after a fruitless voluntary administration (VA) process.

The report, delivered on October 1, demonstrates that the liquidators have identified a range of potential claims but haven’t been able progress them because Federal Court judge Cameron Moore continues to deliberate over his decision in Shaoxing Newtex IMP & EXP Co Ltd v Vaughan Strawbridge & Ors.

These proceedings were commenced on July 7 by a China-based Mosaic creditor that wants Strawbridge and his colleagues axed and Andrew McCabe, Jessie Wang and Joe Hayes of Wexted Advisory installed. Failing that Shaoxing Newtex IMP & EXP Co Ltd wants an order appointing the Wexted trio as special purpose liquidators (SPLs).

The replacement application was heard on August 25 and 26. While the liquidators don’t provide creditors with a reason for their initial confidence in respect of a rapid resolution, there’s no missing the report’s disconsolate tone.

“It was anticipated that the Replacement Application would be resolved in a relatively short period of time and on that basis there would not be a material delay to the Liquidators’ investigations and
potential commencement of actions in respect to the Recoverable Transactions,” they said.

Given the average punter knows justice’s wheels turn slower than a watched kettle boils, why four seasoned insolvency professionals anticipated a resolution in a “relatively short period of time” is a mystery.

Such seeming naivety does perhaps explain though why none of the four thought to demand that a passage betraying such preposterous optimism be deleted from the report in draft.

If there’s an upside for the incumbents it’s that any hostility engendered by the delay can be deflected toward a higher power, one apparently beyond their ken.

Addressing that higher power directly the liquidators told creditors: “We are unable to confirm when judgment may be delivered. While this application remains unresolved, our further investigations, negotiations with litigation funders, and pursuit of Recoverable Transactions have been limited.”

That was in October. The Federal Court file now shows that Justice Moore is due to deliver judgment on Monday.

One way or another it’ll be game on, presuming any “material delay” doesn’t kill claims.