Mossgreen Auctions Australia in Administration. Total KAPUT?

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Re: Mossgreen Auctions Australia in Administration. Looks KA

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New tenant for old Mossgreen premises
https://www.realestate.com.au/news/james-said-setting-up-sho ... e-theatre/

James Said setting up shop in old Armadale Picture Theatre

Herald Sun Real Estate
Nathan Mawby
21 Feb 2019

Image
926-930 High St, Armadale
The former Armadale Picture Theatre has had a tumultuous few years.


The former Armadale Picture Theatre is set to premiere a new look as the Melbourne home of a popular luxury furniture retailer, following a dramatic few years.

Furnishings group James Said will open its flagship store at the historic High St building on April 11 after taking up a lease for the landmark property late last year.

The business is filling the gap left by Paul Sumner’s Mossgreen auction house empire, which went into voluntary administration in 2017.

It’s particularly good news for Melbourne QC John Karkar, considered one of Australia’s top barristers, who bought the historic property a few months before the auction house capitulated. CBRE handled the deal but were unable to comment.

James Said has restored the building as part of an overhaul that will see them fill the entire 1400sq m.

The company’s Perth-based Bethany James (pictured) — known for her Hollywood Regency style — has stores in Perth and Sydney.

The Melbourne store will be four times the size of those.

Ms James said it would function more as a gallery, with interior designers instead of sales staff on hand for customers to talk to.

“We have put $1 million into the shop fit,” Ms James said.

The renovation has also uncovered period details covered over by the previous tenant, and given these complement the classic style of the modern furniture they will be kept on display.

“It’s perfect for us, all of our furniture has a nod to the past,” Ms James said.

“And there’s something special about the building, and if we searched high and low we wouldn’t find something like it.”

Display rooms will feature old-fashioned wainscoting alongside more modern black and white glass.

The upper level will showcase 20 room settings, a digital design hub and a concierge, with champagne or a bite to eat from the ground floor restaurant and wine bar on hand for those who linger.

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Re: Mossgreen Auctions Australia in Administration. Looks KA

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BDO East Coast Partnership ABN 83 236 985 726 is

TO THE CREDITOR AS ADDRESSED

9 August 2019

Dear Sir/Madam

MOSSGREEN PTY LTD (IN LIQUIDATION) ACN 163 353 053 (‘the Company’)

UPDATE TO CREDITORS

We refer to our appointment as Administrators of the Company on 21 December 2017, subsequent appointment as Liquidators on 4 May 2018 and our latest circular to creditors dated 7 June 2019.

Remuneration Application

In accordance with the Court Orders dated 6 June 2019, please find enclosed a Form 16 Notice and affidavit in support.

The exhibits to the affidavit can be obtain from our website:

https://www.bdo.com.au/en-au/insights/appointments/br/mossgreen-pty-ltd

In accordance with Section 50 of the Evidence Act 1995, we have prepared evidence in the form of a summary due to the voluminous nature of the supporting documentation.

The summaries have been prepared by the Liquidators’ staff who have a thorough knowledge of the matter. Should any party wish to examine or copy the detailed supporting documents, please contact Kani Zhang of my office on (02) 8264 6636 or kani.zhang@bdo.com.au.

Court Orders –8 August 2019

At a Committee of Inspection meeting on 26 June 2019, the Liquidators sought approval for remuneration incurred in the liquidation from Committee members.

The resolutions were not passed.

Accordingly, we have included an application for the Liquidators’ remuneration to be approved in the current Federal Court proceedings.


Please refer to the attached Orders dated 8 August 2019, amending the Orders of 6 June 2019, in order for the Liquidators’ remuneration to be considered in the current proceedings.

Should you have any queries in relation to the above, please contact Kani Zhang of my office on (02) 8264 6636 or kani.zhang@bdo.com.au.

Yours faithfully ANDREW SALLWAY
Joint and Several Liquidator

= = =

More reading here -

https://www.bdo.com.au/en-au/insights/appointments/br/mossgreen-pty-ltd
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Re: Mossgreen Auctions Australia in Administration. Looks KA

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The wad of paperwork above that BDO have attached makes fascinating reading in parts.
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The only financial winner from the entire mossgreen mess was Torsten Weller I'd suggest - he negotiated the deal of the Century it appears. :D

If he paid, as it appears, just $A70,000 for the entire stamp and coin operation as it sat, that was a steal. I’ve literally just paid more than that to have 4 non-functioning chimneys repaired externally!

My guess is the massive stamp reference library Gary Watson (largely) had built up over decades, and their stamp reference book stock on hand there, was worth way over that price alone.

The huge large value of the 20 year Prestige/mossgreen website archive, and immense goodwill, and entire mailing list and database was arguably worth that much again.

Far more lucrative was the very many $100,000 of stamp and coin and postcard lots already lotted up, scanned and described, and vendor advices already done, all work paid for already by Mossgreen Pty Ltd, when the Liquidator moved in at Xmas.

Auctions take about 35% in buyer and seller fees combined, so $500,000 of such material sold, clearly grosses about $175,000 in instant income - sitting there, all vendor consigned, all were lotted and scanned and ready to collect, when the first Abacus auctions ran. Money for jam. Fees Income from just sale #1 would appear to have easily paid for the entire purchase cost $70,000. Double that probably.

The deal looks to me a bit like BDO cheerfully accepting $30 each to sell a wad of $100 currency notes sitting in stock. And now of course BDO, despite agreeing to such terribly bad deals, ''on behalf of all other creditors'', are still chasing $100,000s in fees for their alleged "expertise" in liquidation matters, in accepting about 30% of true value for valuable assets such as these etc.

There was no tender called for, or advertising seeking competing offers, or expressions of interests by BDO, for this incredibly valuable and profitable part of the business. In my mind that clearly appears to breach their responsibilities and duties as Liquidators, who are charged in law with getting top dollar for all assets of a failed company to pay to creditors - but what would I know.

No criticism of Torsten Weller - he clearly was savvy enough to make an offer at the right time to these BDO Vultures, and was lucky enough for it to be accepted. As I recall it was speculated he traded off some of his potential mossgreen staffer entitlements as part of the deal. Whether the dozens of other mossgreen staff ever got those entitlements paid out, I have no idea, but ''a bird in the hand'' as they say, and Torsten certainly did the right deal at the right time it seems clear.

I hope the Court knocks BDO back on their vast fees demands, as they bungled the entire exercise. The hide of charging vendors a $350+ PER LOT RANSON DEMAND to get their own goods back, was absolutely outrageous. And refusing to negotiate on that even for large numbers of lots, that were easy to locate and identify.

Vendors literally dying of cancer, and under intense Chemo treatment should not have been exposed to that worry, and pressure and stress. James “Scotty” White and BDO Australia repeatedly acted like callous blood sucking vultures, and quite rightly were admonished and denied by Justice Perram for these cowboy actions.

No wonder the bungling BDO James “Scotty” White was sent scuttling back to the UK out of sight. He and BDO Australia deserve NOTHING extra for their part in this fiasco. They have been denied all down the line so far.

The $100,000s they are attempting to gouge here, should instead be distributed to the ripped off mossgreen clients, who otherwise will get zero it seems.

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Re: Mossgreen Auctions Australia in Administration. Total KA

Post by traralgon3844 »

It appears that BDO are acting as administrators for another business in trouble at the moment.

Twenty one Harris Scarfe stores across five states will close over the next four weeks after the retailer was placed in receivership in December.

The administrators say 44 stores will continue to trade with the group offered for sale. The closures include Harris Scarfe’s flagship store on Adelaide’s main shopping strip of Rundle Mall.

Deloitte Restructuring Services partner Vaughan Strawbridge says the move to close stores was a difficult decision but necessary to position the Harris Scarfe business for a successful sale.


In a story in todays Herald Sun it appears that BDO have become involved. All I would suggest that creditors read this thread.

https://www.heraldsun.com.au/business/prefall-splurge-suppli ... 8694f24808

Pre-fall splurge: Suppliers accuse Harris Scarfe of stockpiling in advance

Suppliers have hit out at insolvent retailer Harris Scarfe, accusing the department store’s owners of unusual business behaviour before going belly-up.

Harris Scarfe dramatically ramped up its ordering of stock before it was tipped into voluntary administration, suppliers have claimed.

Serious concerns about the behaviour of the private equity group that purchased Harris Scarfe shortly before declaring the business insolvent have been aired at the first meeting of creditors.

Minutes from the meeting, held in Melbourne, show unsecured creditors including suppliers and landlords are owed $98 million.

Suppliers have complained Allegro Funds, the private equity group that purchased Harris Scarfe, failed to make a scheduled payment on December 2, the minutes show.

That was the day it formally took control of the business. Allegro put Harris Scarfe into voluntary administration on December 11.

Suppliers have also asked the administrator, accounting firm BDO, to probe whether Allegro received “safe harbour” legal advice before declaring the business insolvent.

The legal provisions, introduced in 2017, provide company directors with protection from insolvency breaches.

Questions raised by suppliers indicate there is serious concern Allegro is using the voluntary administration process to break its lease liabilities and close stores, leaving dozens of suppliers out of pocket along the way.

One supplier, who declined to be named, told Business Daily Harris Scarfe was “ordering like crazy” in the lead-up to it being tipped into administration.

Heavy ordering would not be unusual given the retailer was preparing for the key Christmas trading period, but the supplier said the level of stock requested was considerably larger than in other years.

The minutes record a complaint from a supplier that Harris Scarfe was requesting “substantial volumes of stock” in the period between the completion of Allegro’s takeover and the appointment of administrators.

Deloitte Restructuring Services partner Vaughan Strawbridge, who is acting as receiver, told Business Daily he had engaged with several suppliers over their concerns.

Mr Strawbridge said his analysis of the business showed Harris Scarfe had not placed any orders from December 2 onwards, the date Allegro took control.

He also said the level of inventory was not unusually high for the Christmas period when compared with that of previous years.

“That may not be the case for an individual supplier but overall the level of stock was not unusually high,” he said.

The collapse of Harris Scarfe is complicated as Allegro is also its key secured creditor, having taken over $70 million in debt when it bought the business.

Being a secured creditor means it will be paid back before unsecured creditors from any money raised during the restructuring and sales process.

It is not clear how much Allegro paid for the debt as part of its deal to buy Harris Scarfe. Allegro directed Business Daily’s requests for comment to Deloitte.

Major unsecured creditors include homewares suppliers Linen House and Sheridan and kitchenware suppliers Sheldon & Hammond and Classica Kitchen and Giftware.

Melbourne-based Linen House is owned (? sic) $3.3 million, Sheldon & Hammond $2 million, Classica $1.2 million and Sheridan $1 million.

Harris Scarfe this week announced it would shut 21 stores — almost one in three — over the next month in a move set to result in more than 400 job losses.

The store closures, including three in Victoria, will reduce the retailer’s network to 44 outlets. Deloitte is working to find a buyer for the business.

Allegro bought Harris Scarfe from Freedom and Fantastic Furniture owner Greenlit Brands in a deal that also handed the private equity firm Best & Less. That chain is unaffected by Harris Scarfe’s administration.

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Re: Mossgreen Auctions Australia in Administration. Total KA

Post by David Smitham »

Whilst the previous post is very sad for those affected, I do not see that it has any relevance to Mossgreen going bung.

Perhaps a mod ought to delete it?

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Re: Mossgreen Auctions Australia in Administration. Total KA

Post by MJ's pet »

The Mossgreen mailing list was not sold exclusively - Charles Leski also paid for it and received a copy.

These things happen in distressed sales. Stewart Wright paid next to nothing for Status IIR after the Barry Jarrett phonecards collapse.

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Re: Mossgreen Auctions Australia in Administration. Total KA

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The Mossgreen affair finally splutters to an end.

The Administrators receive court-approved remuneration of $616,131.50 (plus GST, total $677,774.65) from the Mossgreen assets. For all the light and fury, this is pretty standard remuneration and was always going to be in this ballpark.

The Administrators did a deal with Jadig (Jack Gringlas) to reduce their fees, presumably to create room from Jadig to receive what was left. How much this was is unclear, but it was hardly enough to warrant the effort. (Back of envelope calculation: VA fee reduction of $150,000 would have gone to Jadig).

Remember too that many of the court battles in the dying days were Jagid vs unsecured unpaid Mossgreen vendors vs BDO as Jadig tried to jump ahead of them in the queue. That's right: Jack Gringlas was insisting that he be paid ahead of Mossgreen vendors.

There is also the separate matter of Hickinbotham v Gringlas, Leski, Jolley & Sumner and others, a fight over the $3 million painting in the Supreme Court of South Australia. That has gone quiet - probably settled by Jack Gringlas for an undisclosed amount? The Hickinbotham's are very wealthy so it is difficult to see them walking away.

Then there is the Jadig claim against Sumner over the $6 million "guarantee". That has gone quiet and will seemingly go nowhere.

While Jack made around $6 million on the Mossgreen premises property play, that was in effect wiped by his failed loans (+ Interest) to Mossgreen, which found itself hopelessly over-extended - while Jack was on the board approving all this. Karma is a bastard. No-one has explained why these loans were even necessary as auction buyers pay on the day.

Mossgreen vendors are still owed $5 million for goods sold, with no hope of getting it back.

Three viable philatelic and art businesses destroyed - Charles Leski Auctions, Prestige Philately and Sumner's art business.

Finally, it seems that the poor Danish family never received the $225,000 they were owed for the sale of a philatelic collection.

To rub salt into the wound, it appears that no philatelic auction traders in Australia can be bothered to maintain trust accounts, something that real estate agents find completely normal and do not bat an eyelid at.


https://insolvencynewsonline.com.au/mossgreen-liquidators-obtain-fee-approval/
Mossgreen Liquidators Discount Voluntary Administrator Fees

POSTED BY: PETER GOSNELL 1 NOVEMBER 2019

Andrew Sallway and Nick Martin have finally obtained clarity around their remuneration on what the BDO pair might privately concede has been one of the more onerous exads of their careers.

iNO (Insolvency News Online) is speaking of Mossgreen Pty Ltd, which dragged Sallway, Martin and ex-BDO partner James White into a nether world of vendors, consignors and inadequately catalogued inventory after they were appointed voluntary administrators (VAs) of the failed auction house back in December, 2017.

In the Federal Court yesterday, Justice Nye Perram ruled the BDO duo were entitled to $431,075.50 plus GST for the work they did as VAs and $185,056 plus GST for their labour as liquidators. See: Sallway, in the matter of Mossgreen Pty Ltd (in liq) (Remuneration of Liquidators) [2019] FCA 1771

The original sum sought for the VA period from December 21, 2017 to May 4,2018 was $766,962.50 but this was substantially discounted by reason of a confidential settlement Sallway and Martin agreed made with secured creditor Jadig Investments.

As iNO reported in Minotaur Stalking Mossgreen Labyrinth Jadig – an entity connected with former Mossgreen chairman and backer Jack Gringlas – was seeking to recover $6 million.

Given the settlement has led to a 43.8% discount on their VA fees of $335,887.00, Sallway and Martin aren’t the only ones copping a haircut.

It’s yet another example of insolvency practitioners doing substantial unpaid work. Let’s hope that issue is raised at Ms Carnell’s insolvency inquiry.

The judge also capped remuneration for the remaining work to be done at $30,000 and offered an exceptionally clear analysis in terms of whether the work done was necessary, proper, proportionate and reasonable.

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Re: Mossgreen Auctions Australia in Administration. Total KA

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MJ's pet wrote:
There is also the separate matter of Hickinbotham v Gringlas, Leski, Jolley & Sumner and others, a fight over the $3 million painting in the Supreme Court of South Australia.

That has gone quiet - probably settled by Jack Gringlas for an undisclosed amount? The Hickinbotham's are very wealthy so it is difficult to see them walking away.
I heard from an excellent source last year the Hickinbotham Family were very happy with how the matter ended. :idea:

For those who did not follow it, a painting from the Father's Estate sold at mossgreen mid year for near $3 million, and it was paid for in full the day after the sale.

Vendor was essentially told the buyer was paying it off on a LayBy type deal, were offered a generous interest rate, and of course you can guess the rest of the story when they went bust a half year on.

Seems like NO charges were laid against anyone in this entire mossgreen Ponzi scheme, (outrageous) and also that stamp auction AND vendors have not learned anything after Velvet and mossgreen, and none of them run an audited and escrowed Trust Account for Vendor monies.
ABC News wrote:
There was much hype surrounding the auction of Russell Drysdale's painting Grandma's Sunday Walk.

Painted by the Australian artist in 1972 just before his eyesight started to fail, the depiction of outback life was touted as a "10 out of 10" painting — a "masterpiece" that was sure to fetch a big price.

"We're very confident this work will set a new Australian auction record for the artist", Mossgreen CEO and director Paul Sumner said at the time, in June last year.

"[It's] the most important painting Mossgreen has ever handled."

Very important indeed. It is alleged the auction house's future was riding on it.

When it went under the hammer on June 25, three bidders sent the price rocketing.

By the time the gavel fell it had reached $2.97 million — the fifth-highest price ever paid for an Australian work at auction.

The administrator of Mossgreen believes criminal charges should be laid over what happened next.

In a scathing report delivered to creditors last week, the administrator accused Mr Sumner of running a "Ponzi scheme" and participating in what it compared to "insider trading".

It said from June last year, Mr Sumner was using the proceeds of one vendor auction to pay the vendors owed from the previous auction, until the money ran out and the company collapsed in December.

The report was blunt about Mr Sumner's alleged role in that collapse.

"In layman's terms the director could no longer 'rob Peter to pay Paul'," it said.

BDO Australia alleged Mr Sumner and former Mossgreen directors Jack Gringlas and Charles Leski breached several sections of the Corporations Act.

But it is only Mr Sumner who they will recommend be pursued by the Australian Securities and Investment Commission (ASIC) for potential criminal charges.

One of the dealings BDO wants examined centres around that June auction of the Drysdale painting.

Prominent Adelaide businessman Alan Hickinbotham, who amassed a fortune founding a building company, bought the painting in 1990 for $231,000.

He died in 2010, and the painting was to be auctioned along with some of his and his wife's other belongings, in June last year.

As the auction approached, Mossgreen whipped up a marketing frenzy around the sale of the painting.

BDO alleged Mr Sumner told the Hickinbotham family there was one party who was very interested, but that the potential buyer could only afford to pay in instalments.

The Hickinbothams agreed to the terms.

When the auction rolled round, attendance was high and the $2.97 million price tag exceeded all expectations.

Mr Sumner informed the Hickinbothams the bidder he had told them about had won, and would pay in instalments over 10 months.

But that was a lie, according to BDO.

The administrator said the winning bidder paid the almost $3 million the next day, and alleged Mr Sumner used the money to enable Mossgreen to continue to trade whilst insolvent.

"It is arguable that from the date of the Hickinbotham transaction, the director was running Mossgreen as a ponzi scheme," the BDO report said.


"Old vendors could only be paid from the proceeds from sales of new vendor goods.

"The ponzi scheme effectively came to an end on 21st December 2017 as the director realised that with no auction scheduled until early February 2018, there was insufficient 'new' vendor funds to meet fixed overheads and pay out old vendors.

"Given the nature of the conduct (including intentional dishonesty), we have recommended to ASIC that criminal charges be considered once the company is in liquidation."

http://www.abc.net.au/news/2018-05-06/paul-sumner-mossgreens ... ng/9726134
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Re: Mossgreen Auctions Australia in Administration. Total KA

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MJ's pet wrote:To rub salt into the wound, it appears that no philatelic auction traders in Australia can be bothered to maintain trust accounts, something that real estate agents find completely normal and do not bat an eyelid at.
I'm not 100% certain, but it is my understanding that Torsten and Gary at Abacus Auctions do operate a Trust Account for vendors of their auctions. (After all, they had front-row seats at the MossGreen debacle...)
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Re: Mossgreen Auctions Australia in Administration. Total KA

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mcgooley wrote:
MJ's pet wrote:To rub salt into the wound, it appears that no philatelic auction traders in Australia can be bothered to maintain trust accounts, something that real estate agents find completely normal and do not bat an eyelid at.
I'm not 100% certain, but it is my understanding that Torsten and Gary at Abacus Auctions do operate a Trust Account for vendors of their auctions. (After all, they had front-row seats at the MossGreen debacle...)
An independently audited Trust Account, (.i.e. NO-ONE can touch the funds as they are wholly for Vendor) or an auction vendor's account accessible by the business - as mossgreen had. A WORLD of difference. :!:

Both Gary and Torsten are trained Lawyers - see any written mention of Trust Accounts here - or anywhere? - the only rubbery mention of payment in 45 days, that I can recall seeing, is shown below-

https://www.prestigephilately.com/services/terms_of_consignments.php

What I do see is -

GOVERNING LAW: These Vendor Terms shall be governed by and interpreted in accordance with the laws of the State of Victoria.

And the State Of Victoria has sadly, no law covering the necessity to set up a TRUST ACCOUNT PROTECTING VENDOR MONIES for any stamp auction. An auction CAN choose to do it of course, and if I were a vendor, I'd be demanding it be done, if I was handing over something that was not to be sold for 6 months, and hoping for the dough 45 days after that.

I do recall seeing a mission statement at the onset Auction (below) along the broad and pretty vague lines of - "Golly gosh, we won't let a mossgreen occur with YOUR money, no sirreee - you can count on us" but that is not, sadly, a formally Audited Vendor Funds Trust Account. mossgreen told everyone they "could count on them" too. And vendors lost $A5 million - forever.

I could be wrong of course - I hope I am - Torsten is a member here, and will I am sure chime in if I am. :idea:

abacus seem to be doing well and good on the team there for the world class job they do. I am simply pointing out what others have here - there is NOT an audited Trust Account guaranteeing your proceeds, as far as I am aware.

One can only query, after the mossgreen disaster - WHY NOT?
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Re: Mossgreen Auctions Australia in Administration. Total KA

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Corporate Justice Australia style – see below. Pass it on to anyone interested as only creditors got it, and few have seen the final wash up.

Paul Sumner when still CEO and on the board, was in media AFTER BDO appointed promising not ONE vendor would lose ONE penny.

NO Directors will be charged by ASIC, no charges of any kind will be laid, and BDO waltz away with ~$715,000 in fees, inc GST, and an ocean of their legals were apparently taken separately from the rest of the assets.

GREAT work if you can get it. :roll: :roll: :roll:

Many observers might comment that a HUGE slab of the billable hours now cheerfully paid to BDO from vendor monies, were them defending and setting up and debating the outrageous $350 or whatever PER Lot Ransom change they demanded from hapless vendors.

The Court at the time criticised that cheeky demand, the Media ran with it, and BDO were told by the Courts they could not charge it, but they got paid way over $100,000 for their own self-created folly here chasing and insisting on that loopy brain fart. Seems like they can do as they wish. AND get huge hourly rates for wacky ideas the Court prohibit them from following.

BDO takes away around $715,000, the lawyers another vast sum I am sure, so not a money left in the honey pot for them to chase any Director via the Courts, and pay even a penny in the dollar to the innocent vendors. What a world.

IF there had been a Trust Fund for vendor monies and Directors had knowingly plundered, there would likely have been be FRAUD charges laid long ago.

Those innocents aboard who argue Auction Trust Accounts are not necessary should think on that. :roll:

Any blue highlights below added by me.


Level 11, 1 Margaret St
Sydney NSW 2000
Australia

Tel: +61 2 9251 4100
Fax: +61 2 9240 9821

http://www.bdo.com.au

BDO East Coast Partnership ABN 83 236 985 726 is a member of a national association of independent entities which are all members of BDO Australia Ltd
ABN 77 050 110 275, an Australian company limited by guarantee. BDO East Coast Partnership and BDO Australia Ltd are members of BDO International Ltd,
a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved
under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.

TO THE CREDITOR AS ADDRESSED

21 February 2020

Dear Sir/Madam
MOSSGREEN PTY LTD (IN LIQUIDATION)
ACN 163 353 053 (‘the Company’)

UPDATE TO CREDITORS

We refer to our appointment as Administrators of the Company on 21 December 2017, subsequent appointment as Liquidators on 4 May 2018 and our latest circular to creditors dated 9 August 2019.

Report to Australian Securities and Investment Commission (‘ASIC’)

The Liquidators filed a report with ASIC pursuant to section 533 of the Corporations Act 2001 (Cth) (‘the Act’) on 23 August 2018. This initial report outlined the findings of the Liquidators’ investigations into the affairs of the Company and the conduct of the director and former directors of the Company.

ASIC subsequently requested that the Liquidators prepare a supplementary report pursuant to section 533(2) of the Act. The supplementary report (including detailed analysis and documentary evidence) was filed with ASIC on 7 May 2019.

Despite our recommendation, ASIC decided to take no action in relation to the matters reported. ASIC has provided the Liquidators with clearance to finalise the Liquidation.

Remuneration Application and Costs

As outlined in our last circular to creditors, the Liquidators applied to the Federal Court of Australia for approval of the remuneration of the Administrators and Liquidators.

On 31 October 2019, the Federal Court made the following orders:

1. The remuneration of the Administrators for the period 21 December 2017 to 4 May 2018 be fixed in the amount of $431,075.50 (plus GST);

2. The remuneration of the Liquidators for the period 4 May 2018 to 26 May 2019 be fixed in the amount of $185,056.00 (plus GST);

3. The Liquidators be entitled to payment of further reasonable remuneration from 27 May 2019 to the finalisation of the Liquidation up to an amount of $30,000 (plus GST); and

4. The costs of the Court application filed on 29 March 2018 be costs and expenses in the
administration of the Company and be paid out of the assets of the Company.

A copy of the Judgement is attached for your reference.

Finalisation of the Liquidation

Although we believe there are rights of action available to the Liquidators and the Company against the director and former directors, as we are without funds in the Liquidation we will not commence those actions. In addition:

1. ASIC has declined to take any action;

2. The Liquidators explored funding with potential litigation funders, including the Fair
Entitlements Guarantee (‘FEG’), however, there has been no interest in providing funding to
pursue the potential claims against the director and former directors; and

3. In our circular to creditors dated 7 February 2019, we requested any creditors interested in funding potential actions to contact our office. There were no creditors who indicated an
interest in providing funding.

As a result, we now intend to finalise the liquidation. Following lodgement of our final returns with the Australian Taxation Office, we will retire as Liquidators and the Company will be deregistered three months from the date of our retirement.

Should you have any queries in relation to the above, please contact Jeff Marsden of my office on (02) 8264 6692 or jeff.marsden@bdo.com.au

Yours faithfully

ANDREW SALLWAY
Joint and Several Liquidator

= = = = =

FEDERAL COURT OF AUSTRALIA

Sallway, in the matter of Mossgreen Pty Ltd (in liq) (Remuneration of
Liquidators) [2019] FCA 1771

File number: NSD 318 of 2018

Judge: PERRAM J

Date of judgment: 31 October 2019

consideration of relevant principles
Legislation: Corporations Act 2001 (Cth) ss 438A, 439A, 497, 533,
1581, Sch 2
Corporations Regulations 2011 (Cth) reg 10.25.01, Sch 13
Cases cited: Burns Philp Investment Pty Ltd v Dickens (No 2) (1993) 31
NSWLR 280
Re Custometal Engineering Pty Ltd (in liquidation) [2018]
VSC 726
Re Lonnex Pty Ltd (in liq) (No 2) [2019] VSCA 62; 56 VR
238
Morgan, in the matter of Brighton Hall Securities Pty Ltd
[2018] FCA 2029
Re NR Wolli Creek Pty Ltd (recs & mgrs appointed) [2019]
NSWSC 313
Re Sakr Nominees Pty Limited [2017] NSWSC 668
Sanderson v Sakr [2017] NSWCA 38; 93 NSWLR 459
White, in the matter of Mossgreen Pty Ltd (Administrators
Appointed) [2018] FCA 471; 125 ACSR 163
White, in the matter of Mossgreen Pty Ltd (Administrators
Appointed) v Robertson [2018] FCAFC 63; 125 ACSR 390
White, in the matter of Mossgreen Pty Ltd (Administrators
Appointed) (No 6) [2019] FCA 17

Date of hearing: 10 September 2019

Registry: New South Wales
Division: General Division

National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Category: Catchwords
Number of paragraphs: 45

Counsel for the Plaintiffs: Ms J Granger

Solicitor for the Plaintiffs: King & Wood Mallesons

ORDERS

NSD 318 of 2018

IN THE MATTER OF MOSSGREEN PTY LTD (IN LIQUIDATION)
ACN: 163 353 053

BETWEEN: ANDREW THOMAS SALLWAY AND NICHOLAS JOHN
MARTIN IN THEIR CAPACITIES AS LIQUIDATORS OF
MOSSGREEN PTY LTD (IN LIQUIDATION)
(ACN 163 353 053)

First Plaintiffs
MOSSGREEN PTY LTD (IN LIQUIDATION)
(ACN 163 353 053)

Second Plaintiff
JUDGE: PERRAM J

DATE OF ORDER: 31 OCTOBER 2019

THE COURT ORDERS THAT:

1. Order 2 of the orders made on 6 June 2019 is amended nunc pro tunc so as to read ‘By
no later than 9 August 2019, the First Plaintiffs issue a Form 16 Notice and any affidavit
in support of order 1 above in accordance with Rule 9.2(2) and (6) of the Federal Court
(Corporations) Rules 2000 (Cth)’.

2. The First Plaintiffs be entitled to the payment of remuneration as administrators and
liquidators of the Second Plaintiff in the amounts identified in orders 3 and 4 below.

3. The remuneration of the First Plaintiffs as administrators and then liquidators of the
Second Plaintiff be fixed in the amounts indicated:
(a) The remuneration of the First Plaintiffs as administrator of the Second Plaintiff
in the period 21 December 2017 to 4 May 2018 be fixed in the amount of
$431,075.50 plus GST;
(b) The remuneration of the First Plaintiffs as liquidator of the Second Plaintiff in
the period 4 May 2018 to 26 May 2019 be fixed in the amount of $185,056 plus
GST.

4. The First Plaintiffs be entitled to the payment of further reasonable remuneration from
and including 27 May 2019 up to an amount of $30,000 plus GST.

5. The Plaintiffs’ costs of and incidental to this application and the application made on
29 March 2018 be costs and expenses in the administration of the Second Plaintiff, and
be paid out of the assets of the Second Plaintiff.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

PERRAM J:

Introduction

1 The final issues for determination in this proceeding concern remuneration and costs sought by
the First Plaintiffs in respect of work they performed (or will soon perform) as administrators
and now liquidators of the Second Plaintiff (‘Mossgreen’ or ‘the company’).

2 The First Plaintiffs were appointed the joint and several voluntary administrators of Mossgreen
on 21 December 2017. The originating process in this proceeding was filed on 7 March 2018
and prayers 1 to 5 and 7 to 14 were the subject of decisions of this Court and the Full Court on
appeal: White, in the matter of Mossgreen Pty Ltd (Administrators Appointed) [2018] FCA
471; 125 ACSR 163 and White, in the matter of Mossgreen Pty Ltd (Administrators Appointed)
v Robertson [2018] FCAFC 63; 125 ACSR 390 (‘Appeal Reasons’).

3 On 4 May 2018, Mossgreen’s creditors resolved to wind up the company and the First Plaintiffs
were appointed its joint and several liquidators. The First Plaintiffs filed an amended
originating process on 21 September 2018 and prayer 6 was the subject of a further judgment
of this Court: White, in the matter of Mossgreen Pty Ltd (Administrators Appointed) (No 6)
[2019] FCA 17 (‘Mossgreen (No 6)’).

4 The Court has also heard and determined various additional applications made by consignor
creditors. An application by a secured creditor, Jadig Investments Pty Ltd (‘Jadig’) dated
21 September 2018 in respect of the First Plaintiffs’ right of indemnity from assets of the
company was resolved by agreement without admission by the First Plaintiffs.


5 There now remains for determination prayers 17, 20, 21 and 22 of the further amended
originating process filed on 30 August 2019. Prayers 20-22 concern the First Plaintiffs’
application for remuneration. They are as follows:

Remuneration of the Administrators and Liquidators

20 The First Plaintiffs be entitled to the payment of remuneration as
administrators and liquidators of the Second Plaintiff in the amounts identified
in orders 21 and 22.

21 The remuneration of the First Plaintiffs as administrators and then liquidators
of the Second Plaintiff be fixed in the amounts indicated:
(a) The remuneration of the First Plaintiff[s] as administrator of the
Second Plaintiff in the period 21 December 2017 to 4 May 2018 be
fixed in the amount of $431,075.50 plus GST;
(b) The remuneration of the First Plaintiff[s] as liquidator of the Second
Plaintiff in the period 4 May 2018 to 26 May 2019 be fixed in the
amount of $185,056 plus GST.

22 The First Plaintiff[s] be entitled to the payment of further reasonable
remuneration from and including 27 May 2019 up to an amount of $30,000
plus GST.

6 Prayer 17 deals with costs. It is as follows:

Costs and other orders

17 The Plaintiffs’ costs of and incidental to this application be costs and expenses
in the administration of the Company, and be paid out of the assets of the
Company.
7 In support of their application, the First Plaintiffs relied upon two affidavits of Andrew Thomas
Sallway sworn 9 August 2019 and 5 September 2019 and an exhibit accompanying each.

Relevant principles

8 External administrations commencing after 1 September 2017 are regulated by the Insolvency
Practice Schedule (Corporations) (‘IPSC’), being Sch 2 to the Corporations Act 2001 (Cth)
(‘the Act’): s 1581 of the Act; Corporations Regulations 2001 (Cth) reg 10.25.01 and Sch 13.
Division 60 of the IPSC applies uniformly to all external administrators, which s 5-20 defines
to include both administrators and liquidators.

9 An external administrator of a company is entitled to receive remuneration for work performed
by them in relation to the external administration in accordance with a remuneration
determination: IPSC s 60-5(1). The Court’s power to make a remuneration determination is
conferred by s 60-10(1)(c). The onus is on the liquidator to establish that the remuneration
claimed is reasonable and it is the Court’s function to determine the remuneration by
considering the material and bringing an independent mind to bear on the relevant issues:
Sanderson v Sakr [2017] NSWCA 38; 93 NSWLR 459 (‘Sanderson’) at 470 [54] per
Bathurst CJ; Morgan, in the matter of Brighton Hall Securities Pty Ltd [2018] FCA 2029 at
[17] per McKerracher J.

10 The principles relevant to remuneration determinations were summarised by Black J in Re Sakr
Nominees Pty Limited [2017] NSWSC 668 (‘Sakr Nominees’) at [23]-[24] (see also Sanderson
at 470-471 [54]-[58]):

23. … A liquidator is entitled to reasonable remuneration for his or her services
and the liquidator bears the onus of establishing that the amount of
remuneration they seek is fair and reasonable and, in determining a liquidator’s
reasonable remuneration, the Court will have regard to the factors specified in
s 473(10) of the Corporations Act, to which I refer further below. The Court
must bring an independent mind to bear on the question whether the
remuneration sought by a liquidator is fair and reasonable; the liquidator must
lead evidence in sufficient detail that the Court can determine that question;
and the Court will generally need to be provided with an account in itemised
form, setting out at least the details of the work done; the persons who did the
work; the time taken to perform the work; the remuneration claimed; and, to
the extent relevant, the expenses incurred by the liquidator … Proportionality
is an important matter in considering the question of whether remuneration is
reasonable, and the “value” of a liquidator’s work can include the benefit of
resolving the position of creditors and beneficiaries; the benefit to the
community of not permitting assets to remain unproductively in the hands of
a defunct company for a long period; and can include work that was required
to be done, although it did not result in a return to creditors …

24. Most decisions in both State Supreme Courts and in the Federal Court of
Australia have applied time costing as at least the starting point for a
calculation of remuneration, although those decisions also emphasise the need
for proportionality between the cost of the work done and the value of the
services provided … There has been a degree of concern as to time-based
remuneration, over a considerable period, although it must be accepted that
remuneration on that basis is now more common … Several recent decisions,
of which the previous decision of Brereton J in this case was one, have
emphasised the significance of the percentage that a liquidator’s remuneration
bears to the level of asset realisations achieved, and applied percentages of
recoveries where time-based calculations would have led to unreasonable
results
… A percentage of realisations can also be used as a test of whether
remuneration claims brought by a liquidator on a time costing basis are
reasonable …

(Citations omitted.)

11 That decision concerned the predecessor provision in s 473 of the Act, but the principles under
the IPSC are materially the same so that authorities about s 473 remain apposite: Re Custometal
Engineering Pty Ltd (in liquidation) [2018] VSC 726 at [18].

12 The First Plaintiffs submitted, correctly in my view, that the matters as summarised in Sakr
Nominees and Sanderson and prescribed by s 60-12 may be distilled into three categories:
(1) the necessary and proper connection between the work performed and the external
administration: ss 60-12(a)-(b);
(2) the proportionality between the complexity of the external administration and the costs
incurred: ss 60-12(c)-(i); and
(3) the reasonableness of the billing method of the administrator: s 60-12(j).

13 These principles apply in fixing remuneration for both administrators and liquidators:
Sanderson at 463 [12] per Bathurst CJ. It is accordingly necessary to assess the First Plaintiffs’
application for remuneration in respect of both the administration and the liquidation against
these three broad considerations prior to turning to creditors’ objections to the application.

The application for approval of the First Plaintiffs’ remuneration

The administration period

14 The First Plaintiffs recorded $766,962.50 of work done during the administration period, being between 21 December 2017 and 4 May 2018. However, by prayer 21(a) of the further
amended originating process they seek a remuneration determination in the amount of
$431,075.50 plus GST. Mr Sallway’s second affidavit explained that the discount is the result of an undertaking made in the settlement with Jadig.


Necessary and proper connection between the work performed and the administration

15 The First Plaintiffs submit that the expression ‘necessary and properly performed’ in s 60-12(a)
of the IPSC should be construed in such a way as to give the external administrators a ‘measure
of discretion’. They rely on Young J’s observation in Burns Philp Investment Pty Ltd v Dickens
(No 2) (1993) 31 NSWLR 280 at 285 that the Court must give liquidators ‘a fair degree of
latitude where they have incurred expense as a result of the exercise of their commercial
judgment even if there is a loss to the company by so doing’. Whilst that decision concerned
liquidator’s expenses, the First Plaintiffs submit that it is equally applicable to administrators
and that, accordingly, the phrase in s 60-12(a) ought not be read as requiring that the work
should have been absolutely necessary to the minimum discharge of an administrator’s
statutory duties. I accept that submission.

16 There were five broad categories of work performed by the First Plaintiffs during the
administration which were said to be necessary and proper for the discharge of the duties
imposed on them by the Act. These were:
(1) investigating Mossgreen’s business, property, affairs and financial circumstances
(required by s 438A of the Act) and convening meetings of the creditors (required by
s 439A);
(2) work done to preserve Mossgreen’s property;
(3) work relating to the sale of Mossgreen’s business or realisation of its assets;
(4) work relating to managing Mossgreen’s secured and secured creditors; and
(5) work relating to the distribution of property held by Mossgreen on consignment.
In that regard, Mr Sallway deposed to the poor state of Mossgreen’s inventory management
and the unreliability of its records which was said to have complicated those processes.

17 The First Plaintiffs then drew attention to two findings made in the Appeal Reasons: that the
taking of steps in respect of the systems for the management and return of consigned items was
within the scope of the administration (at [21]), and that a lien could arise in relation to costs
necessarily incurred by an administrator to identify, preserve and facilitate the return to the
owners of their property, even if a lien did not arise in the present case (at [22]). These findings
were said to demonstrate that my decision in White, in the matter of Mossgreen Pty Ltd
(Administrators Appointed) [2018] FCA 471; 125 ACSR 163 could not support a finding that
work done during the administration was not necessary or proper.

18 I am satisfied that the remuneration sought relates to work which was necessarily and properly
incurred as part of the administration of Mossgreen.

Proportionality of the work performed to the remuneration claimed

19 Of the total remuneration sought by the First Plaintiffs, 67% is attributable to the first five
months of the administration period, which was said to be due to the complexity of the work
which had to be performed during that time.

20 Mr Sallway deposed that a number of factors made the First Plaintiffs’ job in conducting the
administration particularly difficult. During the administration period, there were between
1000 and 1100 interested persons to be dealt with, comprising roughly 700 consignors and
between 300 and 400 consignor creditors. In addition, Mossgreen’s employees were made to take mandatory annual leave immediately after the First Plaintiffs’ appointment as
administrators, and their unavailability hampered the First Plaintiffs’ capacity to move through
the unreliable and often inaccurate company records. Finally, the number of diverse claims
being made against Mossgreen in administration, the need for directions from the Court in
respect of a number of issues, and difficulties encountered with the recovery of debts owed to Mossgreen—such as debtors living outside Australia and consigned goods either being missing or released prior to payment—were all said to complicate matters further.

21 Of the 1,679.25 labour hours recorded by the First Plaintiffs and their staff during the
administration period, 43.8% were said to have related to the unique issues arising from the
nature of Mossgreen’s business. I am satisfied that the idiosyncrasies of Mossgreen’s business
inflated and complicated the task which the First Plaintiffs faced and that, as a result, the
remuneration sought in respect of the administration period is not disproportionate.

22 The First Plaintiffs also submitted that the fact the administration resulted in the realisation and
recovery of $2.17 million in assets weighed towards the proportionality of the remuneration
being sought. I agree.
Reasonableness

23 The remuneration sought by the First Plaintiffs has been calculated on a time costing basis and
based on a schedule of rates broken down by staff member and annexed to Mr Sallway’s second
affidavit. The First Plaintiffs submitted that the delegation of work to particular staff members,
and their respective rates, were reasonable having regard to the skill and experience of each
staff member and the complexity of the administration. They further noted the 43.8% discount
to their fees arising out of the settlement with Jadig.
Mr Sallway also deposed that the rates
charged were generally comparable to or lower than other insolvency specialist firms in
Sydney.

24 Time costing has been found, ‘at least in some circumstances’, to be an appropriate starting
point for a calculation of remuneration. However, the assessment of proportionality will be
important in testing the reasonableness of time-based remuneration: Re NR Wolli Creek Pty
Ltd (recs & mgrs appointed) [2019] NSWSC 313 at [6] per Black J.

25 The amount of remuneration claimed in respect of the administration is not small. However,
having regard to the complexity of the administration and the skill of each of the First Plaintiffs’
staff members, and in light of my findings on proportionality above, I find that the rates applied
and the delegation of tasks were reasonable. Accordingly, I am satisfied that the remuneration
sought in respect of the administration period is fair and reasonable.

The liquidation period and estimate for the remainder of the liquidation

26 By prayer 21(b) of the further amended originating process, the First Plaintiffs seek $185,056
plus GST in remuneration in respect of the period 4 May 2018 to 26 May 2019, and by
prayer 22 they seek $30,000 plus GST for the period from 27 May 2019 onwards.

Necessary and proper connection between the liquidation and the work performed and yet to be performed

27 The First Plaintiffs submitted that all of the work performed by them during the liquidation to
date were necessary and proper in the discharge of their statutory duties. Mr Sallway deposed
that this included work relating to:

(1) convening meetings of and reporting to the company’s creditors (required by s 497 of
the Act), and preparing and filing statutory reports (required by s 533);
(2) the sale and realisation of Mossgreen’s assets;
(3) investigating unfair preference and other claims available to Mossgreen and for
recovery of Mossgreen’s property;
(4) the return of property held by Mossgreen; and
(5) the resolution of claims made against Mossgreen.

28 There were also several types of work which were said to be outstanding at the date of the
hearing, the remuneration for which was sought in prayer 22 of the further amended originating
process. The outstanding work includes bringing the present application in this Court and
attending to matters incidental to it, liaising with the Australian Securities and Investments
Commission, and investigating whether funding could be secured for claims against directors
and former directors of Mossgreen.

29 I am satisfied that both the work performed and yet to be performed is and would be necessary
and proper to bring the liquidation to an end.
Proportionality of the work performed to the remuneration claimed

30 The First Plaintiffs submitted that the work done during the liquidation was proportionate to
the remuneration claimed. The remuneration claimed in respect of the liquidation period
comprises approximately 33% of the total remuneration sought. Mr Sallway deposed in his
second affidavit that the liquidation was and remains attended by similar complexities to those
confronting the administration which are summarised above at [19]-[21]. In particular, the
First Plaintiffs endured considerable difficulties in dealing with equitable claims made by
aggrieved creditors, and there remain ongoing issues with various abandoned goods. In
addition, the First Plaintiffs submitted that they recovered $300,000 in resolving an unfair
preference claim, and realised a further $60,000 in assets during this period.

31 I am satisfied that the remuneration sought in respect of the liquidation is proportionate to the
work done having regard to the complexity of the liquidation and noting the First Plaintiffs’
additional recoveries.

Reasonableness

32 The remuneration sought by the First Plaintiffs for the liquidation period was also calculated
on a time costing basis. I am satisfied that the delegation of tasks and the rates applied were
reasonable having regard to the complexity of the liquidation and the skill of each staff member.

33 In respect of the work which remains to be performed, Mr Sallway deposed that the estimate
of $30,000 was appropriate having regard to the rates applied, the work performed during the
liquidation, and an estimate of outstanding work. Having regard to Mr Sallway’s experience
both in this liquidation and generally as a registered liquidator, I agree that Mr Sallway’s
estimate is a fair and reasonable one.

34 I also note the First Plaintiffs’ submission that, in any event, the $30,000 estimate would
represent a cap on the fees that the First Plaintiffs would be entitled to receive: IPSC s 60-
10(4). The result of this cap is such that creditors will not suffer any disadvantage were that
estimate to prove to be understated.

Objections to the First Plaintiffs’ remuneration

35 Having been satisfied that the First Plaintiffs have made a prima facie case that the
remuneration sought is reasonable, it is necessary then to consider the objections to the
application. There were two objections to the First Plaintiffs’ claim for remuneration. These
were contained in an affidavit of Serena Clair Kang affirmed 28 August 2019 and in a letter
sent to the First Plaintiffs by Bianca Korn on 20 August 2019.

36 Ms Kang objected to the remuneration application on three bases. First, the Full Court on
appeal had found that the First Plaintiffs were ‘intermeddling’ with consignors’ goods.

Secondly, the effect of the orders I made on 8 August 2019 prevented the First Plaintiffs from
recovering costs incurred prior to 5 May 2018. Thirdly, the difficulties encountered by the
First Plaintiffs during the administration were a result of Mossgreen’s business practices and
the processes the First Plaintiffs chose to employ, rather than through any fault of the creditors.

37 However, the Full Court did not make such a finding, and the orders I made on 8 August 2019
do not so prevent the First Plaintiffs from recovering costs incurred prior to 5 May 2018. To
the extent that the complexity of the administration was caused in whole or in part by
Mossgreen’s business practices, this is not a basis on which to refuse the remuneration sought.

The First Plaintiffs are not responsible for those practices. As I have said I am also satisfied
that the processes the First Plaintiffs employed were chosen in response to the difficulties
inherent in the administration and do not justify refusing the First Plaintiffs’ application.

38 Ms Korn raised two objections. First, she claimed that the First Plaintiffs had acted in their
own interests and not in the interests of the vendors or other creditors. Secondly, the First
Plaintiffs should not be remunerated for ‘using money that [was] not legally part of
[Mossgreen’s] assets.’

39 I can detect no basis for Ms Korn’s assertion that the First Plaintiffs acted in their own interests
to the detriment of vendors or other creditors. In addition, Ms Korn’s objection that the First
Plaintiffs should not be remunerated for ‘using money that is not legally part of [Mossgreen’s]
assets’ cannot be maintained in light of the judgment of this Court in Mossgreen (No 6).

40 I do not think that either of Ms Kang or Ms Korn’s objections should have any impact upon
the remuneration granted to the First Plaintiffs.

Conclusion on remuneration

41 Accordingly, I will grant the remuneration sought in prayers 21 and 22.

The application for costs

42 The Court has power to make orders in relation to the costs of any proceedings commenced by
an administrator or liquidator: IPSC ss 90-15(1), (3)(d). An external administrator is entitled
to an indemnity for such costs from the assets of the company if the costs were properly
incurred, that is, where the costs were reasonably and honestly incurred: Re Lonnex Pty Ltd (in
liq) (No 2) [2019] VSCA 62; 56 VR 238 at [11], [29].

43 I accept the First Plaintiffs’ submission that neither this Court nor the Full Court were critical
of the decision to bring the application concerning prayers 1 to 5 and 7 to 14 of the originating
process and that, if anything, the Full Court criticised the First Plaintiffs for not having brought
that application sooner: Appeal Reasons at [94]. With respect to the prayers of the further
amended originating process presently before the Court, I accept that it was reasonable and
honest for the First Plaintiffs to bring the application in circumstances where their remuneration
proposals to creditors and the committee of inspection were rejected.

44 I am therefore satisfied that the costs in the administration and liquidation were incurred in
respect of legal issues for which the First Plaintiffs reasonably sought directions from the Court.
The First Plaintiffs should be granted an indemnity for their costs from the assets of Mossgreen.

Conclusion
45 I make the orders sought in prayers 17, 20, 21 and 22 of the further amended originating process
filed on 30 August 2019.

I certify that the preceding forty-five
(45) numbered paragraphs are a true
copy of the Reasons for Judgment
herein of the Honourable Justice
Perram.
Associate:

Dated: 31 October 2019
.
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Re: Mossgreen Auctions Australia in Administration. Total KA

Post by Lakatoi 4 »

I happened to be looking through the Auctioneers and Valuers Association of Australia (AVAA) website today for another reason and happened to see point 11. in their Code of Ethics which states:

“11. Corporate and Sole Trader Auctioneer Members must maintain a Trust Account which is to be audited annually.”

After the Mossgreen debacle the AVAA has made it mandatory that all members are to have an audited trust account.

Perhaps philatelic and numismatic auction houses should join this association. They could then proudly proclaim that vendor monies are safe (well as safe as relatively legally possible) :idea:
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Re: Mossgreen Auctions Australia in Administration. Total KA

Post by Night Watchman »

And the Membership fee for the Association is around $1k a year, which is a reasonable rate for a professional body.
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Re: Mossgreen Auctions Australia in Administration. Total KA

Post by Monogram »

Email received today..............

Open Letter from Paul Sumner, Former CEO, Mossgreen.

I hope that you are managing through the current COVID-19 virus outbreak and that you are keeping safe.

I am writing to you to let you know that ASIC (the Australian Corporate Regulator) has completed its review of the administration and closure of the former Mossgreen business.

In their final conclusions, ASIC has confirmed there will be no action taken against me personally in my former role as the CEO of Mossgreen.

Whilst I always expected this outcome, it is nonetheless a welcome official confirmation that I did not act in any way that was not deemed appropriate.

This finally brings to a close, a very sad episode for many of us. I am particularly disappointed about the negative impact that it has had on all those affected.

My number one priority at all times has been to look after the best interests of our clients, staff and artists.

I was very disappointed to have been badly let down in this endeavour by a former business partner, whose actions ultimately were the most significant contribution to the demise of what was a well-respected company.

That said, I was the CEO, and as such I feel a great sense of responsibility for those that were caught up in this, but I want to assure everyone that I truly believe I did everything in my power to help the clients, staff and artists in the aftermath, with some degree of success.

Moving forward now, my focus is not to try to re-write the history of how this has been reported in the media (and within the community as a result of this coverage) but rather, to apply all my efforts through decisive and positive future action that benefits artists, collectors and society in general. You have my total commitment on that.

Kind regards,

Paul Sumne

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Re: Mossgreen Auctions Australia in Administration. Total KA

Post by Lakatoi 4 »

I note that nowhere in that email does he say he will sell some of his assets to cover any of the losses. Why am I not surprised :roll:

I also note that he says he “was let down by a former business partner”, them’s fightin words if I was that person :!:
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Re: Mossgreen Auctions Australia in Administration. Total KA

Post by gregbear61 »

Yes, he is the hero / victim of his own self-written story.

The single biggest contributing factor was obviously that they were losing money hand over fist. The former business partner eventually tired of bankrolling the losses, and the vendors / creditors of course didn't know they were then bank-rolling the losses.

It's a shame the biggest lesson to be learnt - holding vendor proceeds in a trust account, never came to pass.

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Re: Mossgreen Auctions Australia in Administration. Total KA

Post by Global Administrator »

Monogram wrote:
Whilst I always expected this outcome, it is nonetheless a welcome official confirmation that I did not act in any way that was not deemed appropriate.
Wasn't this waffle © ® copyright Cardinal George Pell © ® ??

Just because ASIC is as weak as water in most of these matters, does not mean he is ''innocent'' of anything. OR some of the Directors too for that matter, many feel.

The MILLIONS $$$ that innocent collectors lost, totally because of this mismanagement, is on all their heads.

Paul Sumner when still CEO, and on the board, was in media AFTER BDO was appointed, promising not ONE vendor would lose ONE penny.

NO Directors will be charged by ASIC, despite BDO stating they breached the law, no charges of any kind will be laid, and BDO waltz away with ~$715,000 in fees, inc GST.

''Justice'' Australia style.

And the band plays on - STILL no Trust accounts to protect vendors, who all blindly consign - and pray a lot, one presumes. :roll: :roll: :roll:

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Re: Mossgreen Auctions Australia in Administration. Total KA

Post by jojo »

"Moving forward now, my focus is not to try to re-write the history of how this has been reported in the media (and within the community as a result of this coverage) but rather, to apply all my efforts through decisive and positive future action that benefits artists, collectors and society in general. You have my total commitment on that.

Kind regards,

Paul Sumne"

(My italics)

I would hope any future action from him would involve nothing more than crawling under a rock and staying put - forever.

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Re: Mossgreen Auctions Australia in Administration. Total KA

Post by satsuma »

jojo wrote:"Moving forward now, my focus is not to try to re-write the history of how this has been reported in the media (and within the community as a result of this coverage) but rather, to apply all my efforts through decisive and positive future action that benefits artists, collectors and society in general. You have my total commitment on that.

Kind regards,

Paul Sumne"

(My italics)

I would hope any future action from him would involve nothing more than crawling under a rock and staying put - forever.
Alternatively, and even more positively, refunding some of the clients out of his own pocket :D

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Re: Mossgreen Auctions Australia in Administration. Total KA

Post by jojo »

satsuma wrote:
jojo wrote:"Moving forward now, my focus is not to try to re-write the history of how this has been reported in the media (and within the community as a result of this coverage) but rather, to apply all my efforts through decisive and positive future action that benefits artists, collectors and society in general. You have my total commitment on that.

Kind regards,

Paul Sumne"

(My italics)

I would hope any future action from him would involve nothing more than crawling under a rock and staying put - forever.
Alternatively, and even more positively, refunding some of the clients out of his own pocket :D
That's about as likely as a rocking-horse sh..ting

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Re: Mossgreen Auctions Australia in Administration. Total KA

Post by towradji »

I see Gabriella Coslovich, who also received the Sumner letter, didn’t miss him in a thoughtful article in today’s Financial Review.

She also is not complimentary either about his partner Amanda Swanson who BDO claim was a “defacto director” of Mossgreen.

ASIC did reveal that Sumner is an undischarged bankrupt so cant manage any corporation.

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Re: Mossgreen Auctions Australia in Administration. Total KA

Post by Global Administrator »

towradji wrote:I see Gabriella Coslovich, who also received the Sumner letter, didn’t miss him in a thoughtful article in today’s Financial Review.

She also is not complimentary either about his partner Amanda Swanson who BDO claim was a “defacto director” of Mossgreen.

ASIC did reveal that Sumner is an undischarged bankrupt so cant manage any corporation.
Here is a brilliant idea for you in future - post the actual article, with attribution, and not 2 tiny sections of it. :roll: :roll: :roll:

https://www.afr.com/life-and-luxury/arts-and-culture/the-ope ... 513-p54sh3

The 'open letter' that has the art world incredulous

Gabriella Coslovich, Saleroom writer

May 13, 2020 – 8.00pm

When a publicist sends you an “open letter” in which their client, a failed auctioneer, declares that he has been cleared of wrongdoing by Australia’s corporate watchdog, and you respond asking for proof and the publicist backpedals and says that their client “is not seeking any publicity at this time”, it’s like a red rag to a bull, really.

Forget the publicist for now, it’s the client who is of interest: Paul Sumner, 53, a former director and the chief executive officer of Mossgreen, the auction house that collapsed spectacularly in late 2017, with just $2.8 million in cash and receivables, leaving 500-odd unpaid vendors out of pocket to the tune of $10 million.

Most remain unpaid, including Sophie and Paul Chamberlain who are still owed $1.7 million from the sale of rare and historic books collected by Sophie’s father, the late Martin Copley.

Image
Paul Sumner ahead of opening the Sydney office of Mossgreen Auctions in April 2016. Louie Douvis


“To date we have not received one cent from the sale of the collection and this has caused us great sadness as the collection was amassed by Martin over a long time and was a source of great happiness to him,” Paul Chamberlain told Saleroom this week. “This business has left a sour taste in our mouths."

None of this has stopped Sumner from widely circulating his “open letter”, stating that the Australian Securities and Investments Commission would not be taking any action against him and describing this as “a welcome official confirmation that I did not act in any way that was not deemed appropriate”.

The letter has been met with incredulity in the art world, and a rather unkind photomontage circulated in response – of Sumner’s face merged with the bouffant of a certain president.

Sumner’s open letter (which Saleroom was sent last month) has a rather elastic approach to the truth. In fact, ASIC has declined to look into the affairs of Mossgreen, despite being recommended to do so by the company’s administrators BDO.

In short, ASIC hasn’t cleared anyone of anything in relation to Mossgreen – it simply isn’t taking action, which is baffling given the administrator’s preliminary report into the company identified several potential breaches of corporate law and director’s duties.

Delivered to creditors in April 2018, the report was scathing about Mossgreen’s operations, noting, among other things, that the company regularly dipped into a “client” bank account to cover its ongoing losses.

The company was essentially relying on the proceeds of future auctions to meet unpaid vendors from previous auctions in a process described by the administrators as a “Ponzi scheme”.

Image
Amanda Swanson was the director of Mossgreen gallery and cafe. Eliana Schoulal


Sumner is also alleged to have paid out certain preferred vendors in the weeks leading up to the appointment of administrators. The report noted too that Sumner’s partner, Amanda Swanson, was in effect a “defacto director” of Mossgreen and that another company controlled by Sumner and Swanson, called Ivanhoe Trading, would regularly buy items at Mossgreen without disclosing who the bidder was, conduct that was compared to “insider trading”.

In light of such allegations, Saleroom finds it strange that ASIC is not investigating further. We’re not alone.

"I think it is fair to say that we were very surprised that no further action was likely to be taken,” Paul Chamberlain says.

Saleroom understands that a couple of weeks ago ASIC told the liquidators they could sign off on the case. ASIC declined to comment on Sumner’s “open letter”, nor would it comment on any final report that it may or may not have received from Mossgreen’s administrators.

A spokesman for ASIC did reveal, however, that Sumner is an undischarged bankrupt and therefore automatically disqualified from managing any corporation.

Paul Sumner at the Mossgreen headquarters in Amadale, Melbourne, that Jack Gringlas bought for $5 million, then spent more than $1.7 million on its refurbishment. Gringlas later sold it for $10 million.

Documents obtained by Salerooom show that Sumner declared himself bankrupt in June 2018, with total personal debts of $8.87 million, including $8.4 million owed to his former financial backer, Jack Gringlas, who is also a former director of Mossgreen. Gringlas had funded the company’s operating losses, lending Mossgreen $6 million, before resigning as a director in June 2017, having had enough of bailing out the unprofitable company. In July 2017 he sold Sumner his company shares for $2.4 million. Both debts remain unpaid.

After more than 30 years in various executive roles in the auction world, Sumner’s worldly assets amounted to $1409.01 in bank savings, a “Vesper” (sic) motorcycle worth $1500, a “collection” of three bark paintings valued at $800, and clothing worth $1000.

Let’s hope that the clothing is smart enough for the ceaselessly energetic Sumner’s new job at the Artvisory Gallery where he works alongside Swanson at two outlets in the prime locations of Melbourne’s riverside South Yarra, and at Flinders on the Mornington Peninsula. The directors of Artvisory Pty Ltd are Amanda Swanson and a certain 77-year-old Robert Swanson. Artvisory also trades as Silk Road Asian Art and Paradou Decorator. Amanda Swanson was approached for comment.

Paul Chamberlain’s response to Sumner’s latest exploits was “no comment”. Instead, he offered advice to anyone considering selling through an auction house in Australia, and that was to make sure that all vendor funds were held in a separate trust account before consigning works.

When Saleroom called Sumner for a comment, his publicist was back in touch. The publicist confirmed via email that Sumner had been informed that no action would be taken by ASIC in relation to his former involvement with Mossgreen.

He added that Sumner’s bankruptcy had nothing to do with the business side of “Moss Green” (sic) and that it would be “incorrect” to link it to the demise of Mossgreen “in any way or refer to it, until you sit down and hear the ‘whole story’ from Paul and how this position actually eventuated”.

Once we can settle on a time and format, we’d be pleased to.


Gabriella Coslovich is an arts journalist with more than 20 years’ experience, including 15 at The Age, where she was a senior arts writer. Her book, Whiteley on Trial, on Australia’s most audacious case of alleged art fraud, won a Walkley in 2018.

© Copyright 2020 The Australian Financial Review

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Re: Mossgreen Auctions Australia in Administration. Total KA

Post by gavin-h »

If all he's got is a scooter, some clothes and 3 bark paintings, how does he afford to pay a "publicist"? :idea:

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Re: Mossgreen Auctions Australia in Administration. Total KA

Post by Lakatoi 4 »

gavin-h wrote:If all he's got is a scooter, some clothes and 3 bark paintings, how does he afford to pay a "publicist"? :idea:
Good point 8)

Probably being paid by Ms. Swanson. Which brings me to another matter of their house in South Yarra. If they still have it then I imagine it must have been in her name only otherwise no doubt 50% of it would have been included in his assets and so the house would have had to be sold.
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Re: Mossgreen Auctions Australia in Administration. Total KA

Post by BigSaint »

No doubt Mr Sumner would have had a web of companies & trusts, set up by lawyers & accountants, to hold assets to keep them out of the hands of creditors.

So he doesn't have the price of a pie to his name but can still dine out on lobster if he chooses.
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Re: Mossgreen Auctions Australia in Administration. Total KA

Post by Global Administrator »

Lakatoi 4 wrote:
gavin-h wrote:If all he's got is a scooter, some clothes and 3 bark paintings, how does he afford to pay a "publicist"? :idea:
Good point 8)

Probably being paid by Ms. Swanson. Which brings me to another matter of their house in South Yarra. If they still have it then I imagine it must have been in her name only otherwise no doubt 50% of it would have been included in his assets and so the house would have had to be sold.
If the Sumners are living in anything apart from a small calico tent on the mosquito infested banks of a river in rural Victoria, there is no justice in my view. :roll: :roll: :roll:

I hope ALL those who lost the near $9 million this pair have apparently kissed goodbye by a convenient bankruptcy, lobby ASIC to level some criminal charges.

The lega Administrators, BDO Australia strongly recommended they did, and likened the mossgreen saga to a Ponzi Scheme. And all but stated Amanda Swanson was acting like an insider trader in some cases.

Seems like business as usual in there for these 2 - Art Shop, publicists and "I am Innocent of anything" bluster. Sumner's Open Letter conveniently did not mention his recent Bankruptcy. :roll: :roll: :roll:
Australian Financial Review wrote:
Sumner’s open letter (which Saleroom was sent last month) has a rather elastic approach to the truth. In fact, ASIC has declined to look into the affairs of Mossgreen, despite being recommended to do so by the company’s administrators BDO.

In short, ASIC hasn’t cleared anyone of anything in relation to Mossgreen – it simply isn’t taking action, which is baffling given the administrator’s preliminary report into the company identified several potential breaches of corporate law and director’s duties.

Delivered to creditors in April 2018, the report was scathing about Mossgreen’s operations, noting, among other things, that the company regularly dipped into a “client” bank account to cover its ongoing losses.

The company was essentially relying on the proceeds of future auctions to meet unpaid vendors from previous auctions in a process described by the administrators as a “Ponzi scheme”.
Image
Amanda Swanson was the director of Mossgreen gallery and cafe. Eliana Schoulal
Sumner is also alleged to have paid out certain preferred vendors in the weeks leading up to the appointment of administrators.

The report noted too that Sumner’s partner, Amanda Swanson, was in effect a “defacto director” of Mossgreen and that another company controlled by Sumner and Swanson, called Ivanhoe Trading, would regularly buy items at Mossgreen without disclosing who the bidder was, conduct that was compared to “insider trading”.

In light of such allegations, Saleroom finds it strange that ASIC is not investigating further. We’re not alone.

"I think it is fair to say that we were very surprised that no further action was likely to be taken,” Paul Chamberlain says.

Saleroom understands that a couple of weeks ago ASIC told the liquidators they could sign off on the case. ASIC declined to comment on Sumner’s “open letter”, nor would it comment on any final report that it may or may not have received from Mossgreen’s administrators.

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Re: Mossgreen Auctions Australia in Administration. Total KA

Post by BigSaint »

And that Glen, is the difference between the "Law" & "Justice". :twisted:
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