‘Tis a puzzlement!

A little time ago I was appointed liquidator to a labour hire company, not one of the more recent style of phoenix operations, but one that was operating in the mining industry.  It was part of a group of companies that had essentially been convinced by the mines to acquire a lot of underground mining equipment and to employ the necessary workforce to operate them around the clock and effectively hired back by the mines to operate part of the mine on an annual style of contract.

A great, and profitable, plan provided you could amortise all of the costs over a 10 to 20 year period.  To make things even worse, this contractor was not the only contractor that was employed by the particular mine in question.  Alas, after about three years the need for the services began to wane and the first impact was that three shifts became two.  Over time things got worse until the mine simply didn’t renew the contract at all.

At this time there was a company that had a lot of leased equipment and the other company, that I was to be appointed to, which had employed all of the staff and had the contract with the mine.  The directors and shareholders were hoping to sell the plant and equipment to pay out the leases so no appointment was to be made to that company.  Ultimately the assets sold for far less than the payouts thanks to a glut of available machinery.

At the time of my appointment the company had limited assets, the most significant of which was the debtors.  In terms of liabilities, the two major ones were the ATO, for relatively recent amounts, and employees (which were soon to be replaced by FEG) for all of the usual amounts outstanding when employment ceases abruptly.  Around this was a hand full of minor creditors, phones and the like, but most noticeably no bank debt whatsoever.  The process was simple: recover the debts, pay the fees incurred, and distribute the balance to the (now) two priority creditors and dissolve the company.

Disappointingly no, whilst the company itself had no bank debt it was cross secured with other companies that did owe money.  After my appointment I was summoned to the offices of one of the larger accounting firms to meet with the bank and their advisers.  This should not have been a real issue because that bank could not claim an interest in the debtors given the higher priority of FEG and the ATO.

Alas how wrong was I!  It was pointed out to me that the bank wanted to ensure that it had a proper overview of what was going on, and thus the adviser told me that the bank had a desire to appoint the adviser as a receiver.  I reaffirmed, one, that the company owed the bank nothing, and two, that it was not possible for the bank to recover anything from the debtors.  It was made clear that somehow I had misunderstood the point. I was then informed by the adviser that my misinterpretation was most likely because “I didn’t properly understand the bank’s approach and methodology.”   Whilst I substantively disagreed at the time, with recent revelations they may just as well have been right!

Consequently the advisers were appointed receivers; they stepped in, collected the debtors, paid all the legal’s associated with their appointment, paid some duplicated expenses that I had already incurred and paid, and took their fees.  At the end they then handed me a cheque for the balance of the funds.   Unable to claim anything from it I handed it back to them to distribute to FEG and the ATO.

The ultimate result simple, a reduction in the amount received by creditors; as usual. On the other hand though, no doubt someone achieved their monthly target.