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Supreme Court insight on Redstar liquidation process

Liquidators have remuneration and funds-handling application approved

 

New details have emerged on the complex company structure of Redstar Transport and its liquidation process, which has been ongoing since December 2018.

Liquidators Martin Francis Ford and Stephen Graham Longley recently applied to the Victorian Supreme Court under section 65-45 of the Insolvency Practice Schedule (IPS) of the Corporations Act to have their remuneration approved and bypass certain funds-handling compliance provisions to hasten Redstar’s wind-up.

Section 64-45 empowers the court to make directions regarding the payment, deposit or custody of money payable to, or held by, an external administrator of a company.

Court documents show the Redstar Group comprised seven companies operating as an integrated business structure under which each entity was dependent on at least one other entity for its operational needs and support services.

These included: Redstar Transport Pty Ltd, Redstar Transport Services Pty Ltd, Redstar Transport Operations Pty Ltd, Redstar Transport Linehaul Pty Ltd, Villacare Pty Ltd, Redstar Transport Trucks Pty Ltd.

Five of the seven companies within the Redstar Group had agreed, pursuant to a deed of cross-guarantee, to provide reciprocal guarantees for each other’s liabilities and fulfilment of obligations.

Redstar Operations was the main trading entity and managed the group’s operations and finances.

At the time of its collapse, the Redstar Group had 43 secured creditors, about 225 ordinary unsecured creditors (other than related third party creditors from within the Redstar Group), and approximately 365 employee creditors.


The liquidators’ assessment of Redstar’s collapse can be found here


The liquidators, appointed on December 20, 2018, were approved for $103,095.50 for more than 112 hours of work.

They also applied to have the balance of dividends payable relating to the intercompany loans and certain external unsecured creditors deducted, or ‘netted off’, and the net amount paid from Redstar Operations, to allow them to them to “wind up the Redstar Group entities more quickly and efficiently than undertaking individual dividend processes for each Redstar Group entity”.

The liquidators claimed that if the dividends were declared and paid in the usual way, “an unwieldy round robin” of payments between various Redstar Group entities would result with further costs and delay associated with declaring and paying multiple dividends.

The Supreme Court approved the application.

At the time of Redstar’s collapse, Ford and Longley told ATN Redstar had no cash available for the liquidation and the liquidators were “doing everything we can in the circumstances to manage the fallout”.

A nationwide asset sale via auction house Pickles followed in 2019.

One former Redstar director, Sean Williams, now lists himself as CEO of investment management firm Growth Farms, while another, John Dixon, was last year appointed to the board of AustralianSuper as a representative of employers’ organisation the Ai Group.

 

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