MANNWAY COLLAPSE: Stuart Brown to fight claims he traded the failed carrier while amassing massive debts
By Brad Gardner | January 20, 2010
Mannway’s director, Stuart Brown, may face allegations of insolvent trading after an investigation revealed his company was drowning in debt and bleeding money.
As creditors meet in Melbourne today to vote on whether to liquidate the Mannway Group, a report by administrators Rodgers Reidy Chartered Accountants reveals a company close to collapse as far back as 2007.
The documents of the investigation, obtained by ATN, claim Mannway was insolvent from at least June 30, 2008 – more than one year before administrators were called in – and did not have enough assets to maintain its current liabilities from at least June 2007.
The report says the Mannway Group suffered losses of almost $34.5 million due to insolvent trading, while finance costs ballooned from $1.92 million in June 2007 to $5.14 million in 2009.
“…I consider that there are reasonably good prospects of establishing that the companies traded whilst insolvent,” the report’s author, Geoff Handberg, writes.
“Further investigations will need to be undertaken before forming a firmer opinion about the merits of commencing proceedings against him [Brown] for insolvent trading.”
Directors guilty of knowingly trading insolvent may face compensation claims, a maximum fine of $220,000, up to five years in jail and the prospect of being disqualified from running companies.
“Compensation payments are potentially unlimited and could lead to the personal bankruptcy of directors,” the Australian Securities and Investments Commission (ASIC) says.
However, Handberg says Brown (pictured) has advised he will defend any action taken against him on the basis he relied on the information of accountants, auditors and financiers regarding Mannway’s solvency.
“It would appear that there may be a potential claim for insolvent trading against Mr Brown but that he may have a valid defence to any such claim,” Handberg says.
According to the report, Mannway defaulted on various payment arrangements with creditors since at least September 2007 and Handberg says the operator’s failure to satisfy creditors forced major financiers to withdraw credit.
“The group appears to have exhausted all available financing alternatives,” Handberg writes.
According to financial statements provided to administrators, net profit fell from just over $2 million in June 2006 to -$5.5 million in June 2009.
Handberg has recommended creditors vote to send the Mannway Group into liquidation so investigations into the running of the company can continue.
“As liquidators, we have the power to continue investigations into preference payments, related party transactions and insolvent trading and any other transactions of the companies that we may become aware of,” Handberg says.
EMPLOYEES OWED $5.6 MILLION
Handberg’s report also claims Mannway’s more than 300 employees are owed more than $5.6 million dollars in unpaid wages, annual leave, long service leave, superannuation and redundancies.
But the money owed may exceed the figure in the report.
“My investigations reveal that in addition to these, a number of employees, who resigned or were terminated by the Group shortly prior to our appointment, may also have priority claims,” Handberg says.
Employees will be given priority from any money that is picked from the bones of Mannway before funds are made available to other creditors.
Some employees will be eligible to claim assistance under the Federal Government’s General Employee Entitlements and Redundancy Scheme (GEERS) for most unpaid entitlements except superannuation.
ASIC says any director who knowingly avoids paying employee entitlements faces a maximum penalty of $110,000 and up to 10 years in jail.
Handberg also expects landlords will make claims against Mannway for the early termination of property leases once the losses have been determined.
Mannway was founded in 1979 by Bill Mann before being taken over by Brown, a former Linfox executive.
The company went into administration on October 14 last year, but a buyer could not be found.
Family-owned business Costa Logistics was interested at one point, but it could not reach an agreement with administrators on a deal.
