Two weeks’ ago the Rubicor administrators, FTI Consulting, released their sixth public circular to creditors.
FTI’s statutory report provides little comfort for the Group’s creditors, including many former employees.
It’s a brief insight into the clusterpuck that Rubicor became under the incompetence, self-serving hypocrisy, obfuscation, lying and withholding of material information of Angus Mason, David Hutchison and Sharad Loomba, the Rubicor directors when the company entered voluntary administration.
For me, the headline items from the report were as follows:
- The company was trading while insolvent for a period of at least 29 months. “From our investigations it is clear that the Group traded while insolvent and the Liquidators have significant claims against the Directors of the Group.” (page 8)
The key events the Directors failed to act on, in recognising the Group was unable to meet its debts (hence was insolvent), were:
- March 2018: payroll tax debts were deferred
- April 2018: the ATO rejected a payment plan from Rubicor Workforce and issued a garnishee notice for $2.1 million
- Mid-2018: the superannuation payments employee and on-hired employee were not paid as they fell due
- Late 2019 to mid-2019: Significant customer contracts were lost
Aside from the potential Insolvent Trading charges the Liquidators also state the potential of the directors having committed breaches of The Corporations Act (2001) under Care and Diligence (Section 180, 2001) and Good Faith (Section 181).
- The Liquidators are investigating the commercial merit of pursuing action against the individual directors for trading while insolvent. A successful claim could lead to the seizure and sale of the directors’ personal assets to meet such a claim.
The likelihood that the directors hold substantial assets in their own name is slim. An asset held in the name of a spouse, or other close relative, or an asset held in a family trust controlled by a directors’ family member would not be an asset accessible via such a claim, unless the asset was recently transferred to another party or entity.
However, given the substantial track record of stupidity and arrogance of the three Directors in question; Angus Mason, David Hutchison and Sharad Loomba, it’s possible that they each may have substantial assets in their own name.
The Liquidators have downplayed the likelihood of any joy for creditors in this area.
“Creditors should be aware that a successful claim for insolvent trading requires extensive analysis and would generally require legal action. Further, such proceedings may often to be drawn out and involve significant cost.” (page 8)
- There exists, potentially, $10.3 million worth of Unfair Preference payments to creditors. In other words, the Liquidators have grounds for believing that the directors authorised payments to creditors, in the six months prior to the company entering into voluntary administration, that’s tantamount to ‘queue jumping’.
If proven, these payments could be voided and the money repaid to the Rubicor administrators. In the Report’s Estimated Statement of Position (pages 11 and 12) the low-end estimate of the recoverable amount is just under $4.2 million.
- Former CEO and Director, David Hutchison (and entities associated with him) is being investigated for Uncommercial Transaction and Unreasonable Director-Related Transactions. There is a claimed entitlement by Hutchison for $695,000 that is under investigation.
“Further investigations are required to determine if there is a claim against David Hutchinson (sic) and his associated entity.”
- FTI Consulting has estimated $1.75 million in total Undrawn Administrators’ Remuneration and Disbursements for the eight companies in liquidation (pages 11 and 12).
Using an annual average salary ($165k) of an employee liquidator as the base for a markup of, say, 300% the charge out rate to creditors works out to be $276 per hour per person. This equates to 6,341 billable hours or 158 forty-hour weeks or just over three years of one administrator’s full time work (factoring in annual leave, public holidays and sick leave).
The $1.75 million is in addition to the fees charged by the Liquidators for the six months of work completed to date, since the company went into voluntary administration on 5 August 2019.
I’m sure the creditors are very keen for the Liquidators to claw back a reasonable chunk of those potential claims (outlined in points 4 and 5, above) to justify FTI Consulting’s multi-million dollar services.
- Almost all former Rubicor employees are likely to receive a very small amount of something, or nothing. The Liquidators estimate (page 14) a range of financial outcomes for the employees and unsecured creditors. The best placed former employees are those from Xpand who potentially could receive all their outstanding wages, superannuation, leave entitlements and redundancy pay.
Former Rubicor Government employees look to be in the worst position to receive anything but due to the way the Liquidators have provided a low and high range in each category of creditor entitlement it’s impossible to be definitive.
I would expect that the next FTI report will be produced on the back of any significant progress made in the areas of Unfair Preference Payments to Creditors and the decision to pursue, or not to pursue, action against Mason, Hutchison and/or Loomba for trading while insolvent.