McCoys Services Pty Ltd (In Liquidation) ACN 135 323 858 (the Company) Statutory Report by Liquidator 20 February 2018 Ferrier Hodgson is an affiliation of independent partnerships/entities Liability limited by a scheme approved under the Professional Standards Legislation Level 6, 81 Flinders Street Adelaide, South Australia GPO Box 2558 Adelaide, South Australia P. (08) 8100 7600 F. (08) 8232 4487 E. Adelaide@fh.com.au ferrierhodgson.com
Contents Section Page 1 Introduction 2 2 Current position 2 3 Investigation into the Company s affairs 4 4 Return to creditors 8 5 Liquidator s remuneration 8 6 Conclusion 8 Glossary 9 Annexures 10 A Receipts & Payments 11 B Proof of debt 12 1
1 Introduction I refer to my appointment as Liquidator of the Company on 22 November 2017 pursuant to an Order of the Federal Court of Australia. I now take this opportunity to report to you on the following matters relating to the liquidation of the Company: An update on the progress of the liquidation; The current position in relation to the realisation of assets; The results of my investigations into the Company's affairs; and The likelihood of a dividend being paid in the liquidation. This report should be read in conjunction with the information contained in my Initial Notice to Creditors dated 7 December 2017. I advise that the prospect of a return to any class of creditor is dependent on recoveries being made from my investigations into the affairs of the Company and the conduct of its Director (refer to Section 4 below). 2 Current position Matters addressed during the liquidation Since my appointment, I have attended to a number of matters including, but not limited to, the following: Statutory notifications following my appointment; Correspondence with Arthur J Gallagher insolvency insurance brokers in relation to ensuring any insurable risks were mitigated from the date of my appointment; Reviewing the originating process in the winding up of the Company as filed by the petitioning creditor, being the Australian Taxation Office (ATO); Liaising with financial institutions and seeking to identify any bank accounts held in the name of the Company; Communications with the Director of the Company, including collection and review of a Report as to Affairs (RATA) of the Company; Communications with creditors of the Company, including those creditors which held security interests registered on the Personal Property Securities Register; Liaising with the Commonwealth Bank of Australia to arrange the delivery of the Company s bank statements for my review; Conducting a review of the Company s bank statements, including identifying possible voidable transactions; Inspection of the Company s former business premises; Collection and review of the books and records of the Company; Investigations into the location of any assets of the Company, including but not limited to making enquiries of statutory bodies such as the Department of Planning, Transport and Infrastructure (DPTI); Preparation and distribution of my Initial Notice to Creditors; Tasks associated with the realisation of the assets of the Company, being plant & equipment and debtors, including the engagement of Mason Gray Strange (MGS) to value and auction the Company s plant and equipment; Correspondence with Nissan Financial Services Australia Pty Ltd (Nissan Finance) in relation to its security interest in the Company s motor vehicles; Preparation and delivery of demands for payment in respect of debtor amounts listed in the Company s books and records; Preparation and delivery of a demand for payment in respect of loan accounts outstanding from the Director to the Company; Conducted searches of the South Australian Integrated Land Information System to ascertain whether the Director is the owner of any real property in South Australia; Investigations into the recovery of potential unfair preference payments and other antecedent transactions; and 2
Attendance to statutory requirements including preparing this report and lodging of same with the Australian Securities and Investments Commission (ASIC). Liquidator s realisations to date Summary of receipts and payments A summary of the receipts and payments in the liquidation to date is attached as Annexure A. Creditors are advised that the Liquidator s account of receipts and payments can be inspected at the offices of Ferrier Hodgson, Level 6, 81 Flinders Street, Adelaide, South Australia, during business hours. Asset realisations I have set out below a summary of the RATA for the Company as submitted to me by the Director showing the Estimated Realisable Value (ERV) of assets, together with realisations to date applicable to those assets: Note RATA ERV $ Realisations to date $ Cash at Bank 2.2.2.1 Nil Nil Sundry debtors 2.2.2.2 Nil 1,369 Stock 2.2.2.3 500 Nil Plant and equipment 2.2.2.3 1,000 3,230 Total assets 1,500 4,599 I make the following comments in relation to my investigations in relation to the Company s assets: 2.2.2.1 Cash at bank The Company conducted one bank account with the Commonwealth Bank of Australia which was overdrawn at the date of my appointment. 2.2.2.2 Sundry debtors The RATA did not disclose any debtors outstanding to the Company, however my review of the Company s books and records indicated that some minor debtors may have remained outstanding to the Company. Accordingly, I wrote to these debtors and demanded payment in full. To date amounts totalling $1,369.50 have been recovered. Aside from the amount above, all other recorded debts have been disputed and subsequently confirmed to not be recoverable by my staff. Accordingly, I do not anticipate recovering any further trade debtor amounts. In addition to the Company s trade debtors, the Company s books and records indicate that the Company s Director is indebted to the Company in the amount of $807,364.91 in respect of two personal loan accounts. My initial review of the Company s bank statements indicates that this amount is likely to be higher. I have twice written to the Director demanding repayment of the amount outstanding, as well as attempted to contact him by telephone on numerous occasions, however I am yet to receive a response. Furthermore, I understand the Director is currently residing in the United Kingdom, where he holds citizenship, and it is unclear if or when he will return to Australia. I will continue to pursue the balance of the loan account, to the extent possible, and endeavour to obtain a better understanding of the Director s personal financial position in order to ascertain whether recovery action is commercially viable. 3
2.2.2.3 Stock and Plant and Equipment The RATA disclosed stock with an ERV of $500 and plant and equipment with an ERV of $1,000, which primarily related to the Company s office furniture (desk, office chairs and desk drawer) located at the premises formerly occupied by the Company. Upon my appointment, my staff inspected the Company s former premises for the existence of any assets, along with the assistance of MGS. While no saleable stock was located, plant and equipment was located at the premises which was ultimately auctioned for an amount of $3,230 (including GST and before realisation costs). One Company computer remains to be auctioned as the files located on the computer are subject to my investigations, however, I am advised by MGS that it holds little to no value. 2.2.2.4 Other asset enquiries Shortly following my appointment, I conducted a search of the database maintained by DPTI, which revealed that two 2016 Renault Vans were registered in the name of the Company. The Director s RATA confirmed that the Company owned two motor vehicles which were subject to specific security agreements, however did not disclose the current value of the motor vehicles, aside from indicating that they were originally leased for $35,000 each. My staff subsequently contacted Nissan Finance, the holder of the security interests registered over the two motor vehicles, which confirmed that the payout figures for the two vehicles were $34,855.69 and $34,855.71 respectively. My enquiries with MGS subsequently confirmed that the ERVs of the two vehicles were significantly lower than the amounts owing to Nissan Finance. Accordingly, the Company s interest in the two vehicles was disclaimed and Nissan Finance will now deal with the motor vehicles. In addition to the above, my initial investigations have revealed that there is approximately $4,948 of unpaid share capital outstanding to the Company from the Director, who is also the Company s sole shareholder. Given the quantum outstanding from the Director in respect of his unpaid loan accounts (which would be recovered in the first instance, if possible) (refer to Section 2.2.2.2 above), I consider it unlikely that this amount will be recovered. 3 Investigation into the Company s affairs My report pursuant to Section 533 of the Corporations Act 2001 (the Act) on the outcome of my investigation into the affairs of the Company and the conduct of its Director is currently in progress. The salient points from my investigation to date are summarised hereunder. Statutory information The Company was incorporated on 10 February 2009. ASIC records reveal the following statutory information in relation to the Company at the date of my appointment: Location Registered office Principal place of business Address Books of Steele, 14 St Patricks Street, Willunga SA 19 Hampton Road, Keswick SA Office held Name Date appointed Date ceased Director Graham Evans 10 February 2009 N/A Secretary Graham Evans 13 November 2014 N/A Secretary Christopher Pennington 10 February 2009 5 May 2010 Shareholder Class of shares No. of shares held Fully paid Graham Evans ORD 5000 No 4
History of the Company and reasons for its failure History of the Company The Company was incorporated on 10 February 2009 and commenced trading as an electrical contracting business. The Company s primary customer was SA Power Networks, however I understand that services were also provided to a number of smaller customers. The Director has advised that the Company historically employed a small number of staff, however subsequently moved to utilising subcontractors in an effort to reduce costs. The Company traded until approximately September 2017, shortly before the winding up of the Company, when I understand the Director relocated to the United Kingdom. Reasons for failure The Company was wound up on the application of the ATO filed on 10 October 2017. The ATO has submitted a Proof of Debt in the amount of $459,816.40, which comprises amounts due in respect of a running balance account, superannuation guarantee charge, income tax liabilities and costs incurred in winding up the Company. The Director has attributed the failure of the Company to the Company s inability to meet its taxation reporting obligations and liabilities, which the Director largely considers was caused by a previously employed bookkeeper. Furthermore, the Director has advised that he was required to travel overseas to the United Kingdom on several occasions in the recent years leading up to the Company s winding up. The purported reason for these overseas trips was to care for his ill parents whom had no alternate source of care. The Director has advised that during his time overseas the Company suffered financially without his management. The Director has listed a range of contributing factors which occurred as a result of these overseas trips, including loss of staff, loss of clients and financial losses sustained as a result of poor staff decisions (which took place without his management). Based on my initial investigations, I understand the Director utilised significant Company funds for personal use in the recent years leading up to the Company s winding up. Throughout this period, the Company s debt due to the ATO continued to escalate, which ultimately resulted in the Company s liquidation. Had it not been for this misappropriation of Company funds, I consider the Company would likely have been able to meet its obligations to the ATO, as well as other creditors. Having regard to the above, it would appear that the Company failed principally for the following reasons: High cash use; Poor financial management; Misappropriation of Company funds by the Director; and Failure to pay the Company s statutory creditor, being the ATO. Books and records Section 286 of the Act requires a company to keep written financial records that correctly record and explain the company s transactions, financial position and performance and would enable true and fair financial statements to be prepared. The financial records must be retained for a period of seven years after the transactions covered by the records are completed. The failure to maintain books and records in accordance with Section 286 provides a rebuttable presumption of insolvency which might be relied upon by a Liquidator in an application for compensation for insolvent trading. Based on my review of the books and records received, I am of the opinion that the Company s books and records were maintained in accordance with Section 286 of the Act until shortly prior to my appointment. 5
Deficiency statement Based on the RATA received from the Director and my investigations to date, the following is an indication of my current assessment as to the ERV of the assets and liabilities of the Company: Note RATA ERV $ Liquidator s ERV $ Assets Cash at Bank 2.2.2.1 Nil Nil Sundry debtors 2.2.2.2 Nil 1,369 Stock 2.2.2.3 500 Nil Plant and equipment 2.2.2.3 1,000 3,230 Total assets 1,500 4,599 Liabilities Priority creditors 3.4.2.1 Nil 3,131 Preferred creditors 3.4.2.2 Nil 118,163 Unsecured creditors 3.4.2.3 104,604 478,969 Total liabilities 104,604 600,263 Estimated deficiency 103,104 595,664 My comments are as follows: Assets Please refer to my comments at section 2.2.2 in relation to asset realisations. Liabilities 3.4.2.1 Priority creditors The costs incurred by the ATO in respect of the winding up proceedings are fixed in the amount of $3,131.00 and are payable in priority to other unsecured creditors of the Company in accordance with the provisions of Section 556 of the Act. 3.4.2.2 Preferred creditors I estimate preferred claims in the Liquidation to be $118,162.92, being the full amount of the ATO s claim for an unpaid Superannuation Guarantee Charge (SGC). SGC is afforded a statutory priority over unsecured creditors in accordance with Section 556 of the Act. 3.4.2.3 Unsecured creditors I estimate the Company s liability to unsecured creditors to be $478,969.38, comprising the unsecured portion of the debt due to the ATO, being $338,552.48, and a number of trade creditors. The principal component of the ATO s unsecured claim is a Running Balance Account deficit in respect of unpaid Business Activity Statement amounts. The Company s books and records disclosed $104,063.89 due to twenty-eight unsecured trade creditors. To date, nine of those trade creditors have submitted Proofs of Debt, totalling $79,168.11. I note that my estimate for unsecured creditors of the Company also includes the estimated shortfall to Nissan Finance upon realisation of the two Renault Vans previously leased by the Company, being $19,711.40, based on estimates provided to me by MGS. 6
Voidable transactions Unfair preferences Section 588FA of the Act gives the Liquidator the power to recover certain transactions that have had the effect of conferring a priority, preference or advantage to the creditor within six months of the commencement of the winding up (the relation back period). My investigations to date have identified a number of potential unfair preference payments made to creditors of the Company. My investigations into these payments, and any possible recoveries which may be able to be made under Section 588FA of the Act, are continuing. Uncommercial transactions Section 588FB of the Act requires the Liquidator to investigate transactions which may be deemed to be uncommercial, having regard to the detriment to the Company (if any) suffered as a consequence of the transaction in the two years prior to the commencement of the winding up. In addition, Section 588FDA of the Act refers to unreasonable director-related transactions and requires the Liquidator to investigate such transactions, having regard to the detriment to the Company (if any) suffered as a consequence of the transaction. Based on my review of the Company s books and records, including the Company s bank statements and MYOB data, I have identified a number of transactions which may constitute unreasonable director-related transactions. Based on my investigations to date, I understand that the majority of these transactions were allocated to two personal loan accounts (which would be recovered in the first instance, if possible) (refer to Section 2.2.2.2 above). Unfair loans Section 588FD of the Act requires investigations of transactions which may be deemed to be unfair loans to the Company. A loan to the Company is considered to be unfair if and only if, interest on the loan is extortionate, or the charges in relation to the loan were extortionate. From the information available to me I have not identified any transactions which would constitute unfair loans to the Company. Voidable transactions related parties Section 588FE(4) of the Act requires investigations of transactions which may be deemed to be insolvent transactions with a related party entered into within 4 years of the commencement of the winding up. Based on my review of the Company s books and records, including the Company s bank statements and MYOB data, I have identified a number of transactions which may constitute voidable related party transactions. Based on my investigations to date, I understand that these transactions were allocated to two personal loan accounts (which would be recovered in the first instance, if possible) (refer to Section 2.2.2.2 above). Insolvent trading Section 588G of the Act provides that directors are obliged to prevent a company from: Incurring a debt whilst insolvent; or Becoming insolvent by incurring a debt. If a contravention of Section 588G can be established, then Section 588M empowers a Liquidator (or a creditor under certain circumstances) to recover compensation from a director for any loss or damage suffered as a consequence of any such contravention. Any decision to commence an action against the Director for insolvent trading must have regard to the following: The costs of litigation and the unknown likelihood of success; The quantum of the claim; The fact that the liquidation is presently devoid of funds; and 7
The Director s capacity to meet a claim for compensation. My investigations into the whether the Director allowed the Company to trade whilst insolvent are continuing, however having regard to the quantum of the loan accounts outstanding from the Director to the Company (which would be recovered in the first instance, if possible) (refer to Section 2.2.2.2 above), I consider that there is unlikely to be any commercial merit in pursuing an insolvent trading claim against the Director. Should any creditor be willing to fund the costs and expenses to commence proceedings against the Director or wish to discuss further, would you please contact Jacob Versteegh of this office on (08) 8100 7600 or Jacob.Versteegh@fh.com.au. Should creditors have any further information that may assist my investigations into the conduct of the Company s affairs, they should communicate details in writing to my office within 7 days from the date of this report. 4 Return to creditors Subject to the recovery of the amounts outstanding from the Director (refer to Section 2.2.2.2 above) or recovery of the potential unfair preference claims identified (refer to Section 3.5.1 above), my investigations to date have concluded that there will be insufficient funds in the liquidation to permit the payment of a dividend to any class of creditor. Creditors who have not lodged a Formal Proof of Debt with the Liquidator are invited to prove their claims by completing the attached Form 535 Formal Proof of Debt (Annexure B) and returning same to my office at their convenience. 5 Liquidator s remuneration Creditors will recall from the Initial Notice to Creditors that I estimated my total remuneration for the liquidation to be $25,000 plus applicable GST. It should be noted that Liquidator s fees are only paid if there are sufficient recoveries in the liquidation to enable payment. As the recoveries in the liquidation to date have been insignificant, I will not be requesting approval of my remuneration from creditors at this time. An information sheet concerning approval of remuneration in external administrations can be obtained from the ASIC at www.asic.gov.au. 6 Conclusion I expect to have finalised this liquidation within six months from the date of this report. In the meantime, the following matters will continue to be progressed: Realising the Company s remaining assets (ie. the computer); Recovering any voidable transactions and the Director s loan account (if possible); Progressing my investigations into the Company s affairs; and Completing my reporting ASIC. I may write to you again with further information on the progress of the liquidation. Should you have any questions, please contact Jacob Versteegh of this office on (08) 8100 7600. Dated this 20 th day of February 2018 MD Lewis Liquidator 8
Glossary Abbreviation Description ACN Australian Company Number Act The Corporations Act 2001 ASIC Australian Securities and Investments Commission ATO Australian Taxation Office Company McCoys Services Pty Ltd (In Liquidation) DPTI Department of Planning, Transport and Infrastructure Director Graham Evans ERV Estimated Realisable Value Liquidator Martin David Lewis MGS Mason Gray Strange Auctioneers and Valuers Nissan Finance Nissan Financial Services Australia Pty Ltd RATA Report as to Affairs SGC Superannuation Guarantee Charge 9
Annexures 10
A Receipts & Payments Receipts Interest income 0.29 Pre-appointment debtors 1,369.50 Sale of plant and equipment 3,230.00 Total receipts 4,599.79 Payments Auctioneer s Charges 1,727.45 Total payments 1,727.45 Total $ Cash at bank at 20 February 2018 2,872.34 11
B Proof of debt Form 535 Formal Proof of Debt or Claim Form Corporations Act 2001, Regulation 5.6.49(2) Return to: Ferrier Hodgson, GPO Box 2558, Adelaide, SA 5001 Tel: (08) 8100 7600 Fax: (08) 8232 4487 Email: adelaide@fh.com.au Indebted Company: McCoys Services Pty Ltd (In Liquidation) ACN 135 323 858 (the Company) Date of Appointment: 22 November 2017 A. Name and Contact Details of Creditor 1 (the Creditor) (if in a personal capacity, given name and surname; if a corporate entity, full name of company, etc) 2 of (insert address) 3 Tel: 4 Email: Tick this box to elect to receive electronic notification of notices or documents, in accordance with Section 600G of the Corporations Act 2001, at the email address specified above. B. Details of Debt or Claim 1 Amount owing: (insert dollars and cents, inclusive of GST if applicable) 2 Nature of Debt or Claim: (insert description of debt and/or reference any supporting documentation) 3 Select one of the following options: The Creditor is an unsecured creditor of the indebted Company The Creditor is a secured creditor of the indebted Company The Creditor is an employee / former employee of the indebted Company The Creditor is a related party (please indicate: secured / unsecured) For all claims: 4 I have attached supporting documentation to substantiate the Creditor s claim (secured creditors must attach evidence of security) 5 To my knowledge or belief the creditor has not, nor has any person by the creditor's order had or received any satisfaction or security for the sum or any part of it except for the following: (insert details and value of security where relevant) C. Signature 1 Dated: 2 Signature: 3 Name / Capacity: 12
Creditor Assistance Sheet: Completing a Proof of Debt Form Section A Name and Contact Details of Creditor 1. Insert the full name of the employee, individual, sole trader, partnership or company that the debt is owed to. 2. Insert the address of the employee, individual, sole trader, partnership or company that the debt is owed to. 3. Insert the telephone number of the employee, individual, sole trader, partnership or company that the debt is owed to. 4. Insert the email address of the employee, individual, sole trader, partnership or company that the debt is owed to. Section B Details of Debt or Claim 1. The amount owing should only include debts or claims which arose prior to the date of appointment. 2. Insert the currency if not Australian dollars. 3. Type of creditor: tick one of the options only. 4. For all claims, ensure supporting documentation is attached, such as invoices, statements, agreements. 5. For secured creditors, insert particulars of all securities held. If the securities are on the property of the company, assess the value of those securities. If any bills or other negotiable securities are held, indicate refer attached above and show them in a schedule in the following form: Date Drawer Acceptor Amount ($) Due Date Section C Signature Instructions 1. Insert the date that the proof of debt form is being signed. 2. The form should be signed by one of the following persons: If the debt is owed to an employee/individual, then the individual that the debt is owed to; or If the debt is owed to a sole trader, then the sole trader that the debt is owed to; or If the debt is owed to a partnership, then one of the partners of the partnership; or If the debt is owed to a company, then a duly authorised office of the company (normally a director or secretary of the company). 3. Insert the name of the person signing the form, and note their capacity (that is, their role): If the debt is owed to a sole trader, note their capacity as proprietor, eg: [Full name], proprietor ; or If the debt is owed to a partnership, note their capacity as partner, eg: [Full name], partner of the firm named in Section A above ; or If the debt is owed to a company, note their capacity as director or secretary, eg: [Full name], director/secretary of the company named in Section A above ] 13