BDO lose another Mossgreen administration Federal Court judgement

BDO lose another Mossgreen administration Federal Court judgement
BDO lose another Mossgreen administration Federal Court judgement

BDO has lost another judgement in the ongoing saga of its Mossgreen voluntary administration.

The Federal Court of Appeal knocked out it case this morning, with the reasons yet to be issued.

The return of art and antiques to their vendors/buyers is no sure thing, as the possibility of any unpaid rent could see the High Street, Armadale and Clayton landlords lock up the premises and hold the goods in the worst case scenario.

Click here to enlarge. 

BDO lose another Mossgreen administration Federal Court judgement

The matter related to BDO's administration of the Mossgreen goods and chattels, especially costs relating to their storage and insurance.

BDO had been seeking to charge clients of the collapsed auction house for the return of their goods.

Clients were furious at BDO's attempts to charge a fee – levied at $353 per lot – to have their own property returned, especially as some lots were going to cost more for their return that their actual value.

The initial judgement savaged the accountancy firm.

Federal Court judge Nye Perram ruled the administrators were "intermeddling" in other people's goods in circumstances "where they had not been invited to do so, were not performing their statuatory functions and had not been appointed receivers."

"Accordingly, they are not justified in requiring the consignors to pay a levy for the return of their goods," he ruled.

"In reaching this conclusion I have not disregarded what is sometimes referred to as the 'salvage' nature of the work done by external administrators or the concomitant need to ensure that persons are not deterred from doing such work in the future.

"But that well-founded policy consideration cannot provide cover for external administrators who decide to deal in assets of other persons for no reason relating to the administration of which they are seized," the judgement said.

"I conclude, therefore, that the alleged equitable lien does not arise.

"On the other hand, they are entitled to a lien for disposing of goods which ultimately turn out to be unclaimed and they should be entitled to realise those goods and, subject to any claim, apply the proceeds for the purposes of the administration."

The judge has noted the issue of the ongoing storage costs at the Armadale (pictured) and Clayton premises had become the centre of the unravelling legal embroglio.

His honour noted the issue was one of "spot fires' that had arisen during the voluntary administration.

BDO's James White urgently sought by way of interlocutory application a series of directions to protect the besieged accountancy firm in terms of storage rental and insurance costs going forward.

"The effect of my decision is that the administrators, to the extent that they have been conducting the process of looking after and attempting to return by means of orderly stocktake the consigned goods to the consignors, have acted outside the functions which are conferred on an administrator and, accordingly, they are not entitled to indemnity or remuneration in respect of that," Federal Court judge Nye Perram noted in another judgement.

"The consequence of that conclusion, so far as rent which has been paid in the past is concerned, is that the rent is the administrators’ cost," he noted.

There was a stocktake that cost more than $1 million which Federal Court judge Nye Perram noted could have been court approved if permission had been sought by BDO prior to its undertaking.

The auction house held 1000s of goods belonging to other people, consisting of:

(a)  goods delivered to it to be auctioned but which had not yet been auctioned at the time the administrators were appointed;

(b)  goods delivered for auction but which had failed to sell and which were awaiting collection by their owners; and

(c)  goods which, although successfully sold at auction, had not yet been collected by the successful bidder.

The initial case judge noted a number of persons whose goods were successfully sold at auction by Mossgreen now claim that the money received by it from their respective purchasers is held on trust for them and is not, therefore, available for general creditors.

The three-cornered contest between the administrators, the trust-asserting consignors and the secured creditor is to be determined by the court later this year.

The besieged administrator of collapsed auction house has yet to advise, today Thursday, when clients and buyers can collect the artwork and collectibles.

BDO administrator James White had previously said the levy was "not negotiable". 

ASIC has reportedly not yet raised any concerns in relation to the administrators' conduct, but is expected to once the legalities are all done.

The administrators meet quick initial resistance when they told the first meeting of creditors in January that were exploring court judgements on whether a constructive trust arrangement existed.

Minter Ellison lawyer Lindsay Powers, on behalf of art collector Michele Asprey, suggested "this was the clearest case of a trust relationship he has encountered." 

Michelle Asprey was among those who presented their argument regarding the $353 levy in the recent court case over the proposed BDO fee.

The administration came December 21 following failed fundraising attempts.

Sumner, who did not attend the first meeting, blamed the current circumstance on growing "a little bit fast."

There were 330 creditors initially identified at the meeting who were told no law required trust accounts for the auction proceeds.

There has yet been a second creditors meeting, given a court extension has been granted.

The names of the creditors are a who's who from across Australia, ranging from passionate collectors, socialites, low key business tycoons to deceased estates.The biggest unsecured creditor stemmed from the auction of a book collection.

Some $1.75 million is owed to the family of the late wealthy insurance underwriter Martin Copley who auctioned off the books in October.

His auction items included John Gould's monumental The Birds of Australia, a large folio in eight volumes with 681 hand-coloured lithographed plates, bound in dark green morocco by Riviere, an original subscriber's set, which sold at $446,400 including premium.

The second biggest client was another deceased estate, that of the late South Australian building industry icon Alan Hickinbotham and his late wife Margaret.

It was billed as the highest value collection ever to be sold in Adelaide when auctioned in May by Mossgreen's chief, Paul Sumner.

Sydney's society Coppleson family were listed as owed $465,000, the third highest-owed creditor.

It followed the sale of the contents of the Macleay Regis penthouse, home (pictured top) of the late esteemed gynaecologist Professor Malcolm Coppleson and his late wife, Patricia, who was Vogue Living’s editor-at-large.

The 172 lots included the sale of a $192,200 Ian Fairweather work which had an $80,000 to $120,000 price guidance. A Tim Maguire fetched $117,800.

Mossgreen's last auction on December 7 last year was the contents of the Sheehy family with just 274 of the 438 lots being sold. The family, who are owed $45,000, inquired at the meeting whether Sumner's passport would be surrendered.

Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of our authors. Jonathan has been writing about property since the early 1980s and is editor-at-large of Property Observer.

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