Liquidators Flag $778k in Questionable Transactions at Collapsed Mundella Foods Dairy

A report filed with Australia's corporate regulator has put the former director of a collapsed West Australian dairy business under scrutiny. Liquidators at Mackay Goodwin say they have found preliminary evidence of more than $2 million in potentially unreasonable director-related transactions and insolvent trading at Mundella Foods and its associated companies. Creditors are still owed $12.5 million.

The report identifies $778,000 in director-related transactions that may be unreasonable, among them what the liquidators call frequent cash withdrawals. They stress that more investigation is needed to establish whether the money went into running the business or was taken unreasonably. Separately, they say Mundella may have traded while insolvent from as early as July 1, 2024, with transactions totalling $1.3 million. The report makes no final findings, and the liquidators say further work would need additional funding.

The former director, Hayden Russell, denies making any improper transactions. He told the ABC he acted in good faith throughout. He says the cash withdrawals paid for operations and workers' wages, and that he put a few hundred thousand dollars of his own savings into the business. He says he "literally has nothing" left. Liquidators told creditors it is unlikely he has the financial capacity to meet any claims brought against him, and that pursuing him would not be possible without more creditor funding.

The money owed falls into three groups. Workers, who rank as priority creditors, are owed almost $940,000 in unpaid wages, superannuation and entitlements. Secured creditors are owed a further $3 million, and unsecured creditors $8.5 million. The report states plainly that it is unlikely any class of creditor will receive a dividend.

Liquidators are also examining the sale of Mundella and the Margaret River Dairy Company, known as MRDC, to dairy processor Artisanal Market. Last month Artisanal Market announced that a subsidiary had bought the brands, properties and assets. According to the report, the sale was agreed on July 17, just weeks before creditors voted to place the companies, by then largely hollowed out, into liquidation. The seller was Bowral Capital, a mortgagee and private lender. The liquidators are investigating whether the deal was uncommercial, meaning one a reasonable person in the company's position would not have agreed to.

The sale completed in October. Bowral received $5.85 million from it, and another secured lender, Bizcap, received almost $1 million. The liquidators note that this still falls short of repaying either lender in full. Bowral has been approached for comment on the investigation of the sale.

The companies went into liquidation in August after a rescue plan under a Deed of Company Arrangement failed. The report confirms they missed several obligations to creditors under that deal, including $40,000 owed to the Deed Fund. Bowral had taken over the properties and assets during the arrangement from the original lender, Oak Capital, which went into its own liquidation in May. The corporate watchdog, ASIC, is suing Oak Capital in the federal court over alleged unconscionable conduct and predatory lending. Oak Capital denies the claims.

Mr Russell argues the rescue plan would have worked had Bowral lent him more money. Bowral rejects that. In a statement it said it was not a party to the arrangement and that the deal placed no obligation on it to provide further funding. It said its responsibility was to manage the fund and protect its investors' interests.

What happens next depends on money. The investigations into the director-related transactions, possible insolvent trading and the property sale all need further funding from creditors, and the liquidators' own outlook offers little hope of a payout.