BDO says Mossgreen contents are now uninsured after copping a Federal Court shellacking

BDO says Mossgreen contents are now uninsured after copping a Federal Court shellacking
BDO says Mossgreen contents are now uninsured after copping a Federal Court shellacking

After another spray from the Federal Court, the Mossgreen administrators have thrown in the towel, telling the no-pushover owners of $5 million worth of art and antiques that their insurance coverage had lapsed.

The letter sent by the BDO administrators on Anzac Eve stunned clients, already angered at the way the administration had been undertaken ever since their appointment just prior to Christmas. 

BDO have advised the auction house clients to help themselves to their stored contents, though not to come through the besieged accountancy firm which had expended a $1 million stocktake that the Federal Court described as "intermeddling".

BDO sent an update today to consignors of Mossgreen. The second creditors' meeting has been decided as May 4. Secured creditors have been advised their payment is likely to be 2 cents in the dollar.

"The voluntary administrators are without funds to meet the ongoing expenses of preserving and facilitating the return of goods," James White, the admonished BDO administrator advised all Mossgreen clients by email on Thursday.

"Consequently, the voluntary administrators are no longer in a position to retain the company’s remaining two leasehold premises and have no alternative but to arrange for possession of those premises to be returned to their respective landlords, as of close of business, Monday, 23 April 2018.

Click here to enlarge.

BDO says Mossgreen contents are now uninsured after copping a Federal Court shellacking

"It will now be up to the landlords of those premises to co-ordinate the return of your consigned goods.

"Please contact the relevant landlord," the long suffering Mossgreen clients were told.

At the time of issuing the correspondence, the landlord for the Clayton warehouse indicated that he will seek to contact consignors directly in relation to the return of their consigned items.

BDO offered no indication of the return process of the former High Street headquarters.

"We remain in discussions with the landlords regarding how we might be able to assist them with the goods collection process, and to make available the work we have done to date to bring order to that process."

"However, you will appreciate that as we are without funds, we can no longer maintain insurance in respect of the consigned goods.

"We strongly recommend that you immediately ensure that you have your own insurance in place," White said.

One client indicated the "BDO's bloody-mindedness will tip the scales to ensuring state government's move to ensure in future that auction houses are covered by trust fund style regulations."

Mossgreen clients hope both landlords are disposed to readily assist in the return of the goods and chatels. Property Observer anticipated the landlords would become key stakeholders in our reportage last week.

BDO never provided "any satisfactory explanation" as to why they did not adopt a "common-sense approach" on an earlier quick return of the $5 million in art and antiques caught in the Mossgreen administration, the Federal Court of Appeal noted earlier this week.

The now published judgement that admonished BDO came after BDO was thrawted in its attempt to impose a hefty fee on all clients of the collapsed auction house, as they sought to recoup the $1 million in expenses undertaken without reference to the courts.

The fee often was more than the content's value.

The initial judgement by Federal Court judge Nye Perram ruled the BDO 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."

While not agreeing to the entirety of Justice Perram's ruling, the judgement, signed off by the Honourable Chief Justice Allsop and Justices Banks-Smith and Colvin, reiterated the error in BDO's administration.

The judges noted given that the BDO administrators only sought directions after the event, in effect to approve the course that they had already undertaken.

It was initially estimated that Mossgreen held in excess of 10,000 items on consignment, held across three premises in Victoria, their High Street, Armidale premises, a site in NSW on Queen Street, Woollahra and a third party warehouse in Clayton, Victoria.

The goods were classified into the following categories:

1.    Items sold at auction prior to our appointment and not yet collected by purchasers;

2.    Unsold items of recent auctions held on consignment on behalf of vendors;

3.    Items held on consignment for future auctions;

4.    Items abandoned by purchasers and vendors;

5.    Items stored at the Company’s warehouse awaiting collection by vendors; and

6.    Artwork consigned to the Company to hang in the gallery.

The stocktake identified that Mossgreen retained 6,935 lots (or 4,663 lots excluding stamps and coins) on behalf of in excess of 800 consignors (or in excess 600 consignors excluding stamps and coins).

After including abandoned items, and allowing for the prospect that owners of such items were unlikely to make claims, the judges noted it could be seen that the extent of claims by individual owners to the return of individual items was not as overwhelming a task as BDO advised.

The total cost of the stocktaking exercise was $1,048,072. It comprised the following: wages of $240,747 as of the company’s 36 employees, after 19 were terminated in January 2018, the remainder were kept on.

An amount of $180,075 had been included for rent. An amount of $54,000 was included for insurance and $45,849 was included for security.

There was $122,605 allocated for the costs of engaging the Tiger stocktake company to undertake a complete stocktake of all consigned goods. 

Some $72,500 had been included for legal costs for obtaining advice as to consignor Tasks and seeking directions from the court.

Fes for the administrators were put at $126,551 and disbursements of $11,033 to 31 January 2018.

Actual administrator’s costs from 1 February 2018 to 16 March 2018 have been $200,715.

All of the above were based on estimates to 31 March 2018. 

The names of the art and antique creditors are a who's who from across Australia, ranging from passionate collectors, socialites, low key business tycoons to deceased estates.

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

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.

Tags: 
Administration Mossgreen

Comments

Be the first one to comment on this article
What would you like to say about this project?