Liquidators probe what could be $2m-plus in potentially unreasonable transactions at collapsed WA dairy Mundella

In a statutory report filed to the corporate regulator, liquidators at Mackay Goodwin said they had uncovered $778,000 of potentially unreasonable director-related transactions, including frequent cash withdrawals. The liquidators also found Mundella may have traded insolvent from as early as July 1, 2024, with transactions totalling $1.3 million. The report did not make final findings and noted that further investigations would require additional funding.

Former director Hayden Russell denied making any unreasonable transactions, telling the ABC he acted "in good faith" at all times. He claims he used cash withdrawals to pay for operations and workers' wages and had spent a few hundred thousand dollars of personal savings on the business. "I literally have nothing now, because I put every single penny I had into there to try keep it afloat," he said.

The liquidators' report shows workers, who are priority creditors, are still owed almost $940,000 in unpaid wages, superannuation and entitlements. Secured and unsecured creditors are owed a further $3 million and $8.5 million respectively. Liquidators told creditors it was unlikely Mr Russell had the financial capacity to meet any claims brought against him, and further investigations would not be possible without further funding from creditors. "At this stage of the Liquidation, it is unlikely that there will be a dividend to any class of creditors," the report stated.

Liquidators are also investigating whether the multi-million-dollar sale of Mundella and the Margaret River Dairy Company (MRDC) to dairy processor Artisanal Market constitutes an "uncommercial" deal. The sale was agreed on July 17, weeks before creditors voted to put the companies into liquidation. The seller was mortgagee and private lender Bowral Capital. Bowral and another secured lender, Bizcap, received $5.85 million and almost $1 million respectively from the final sale in October. Liquidators said the sale proceeds were insufficient to repay Bowral and Bizcap in full and will not result in any recoveries for other creditors. An uncommercial transaction occurs when a company makes a deal that a reasonable person in its circumstances would not have agreed to.

The dairy companies were put into liquidation in August following a failed financial rescue plan set out in a Deed of Company Arrangement (DOCA). The liquidators' report confirmed the companies failed to meet several obligations to creditors under the agreement, including $40,000 of unpaid funds to the Deed Fund. Bowral acquired the properties and assets during the ongoing DOCA period from original lender Oak Capital, which went into its own liquidation in May this year. Oak Capital is being sued in the federal court by ASIC for alleged unconscionable conduct and predatory lending practices, which it denies. Mr Russell claims the DOCA would have succeeded if Bowral had lent him more money. In a statement, Bowral said the company was not a party to the DOCA, "nor did it impose any obligation on Bowral Capital to provide further funding". "Bowral Capital's responsibility was to manage the fund and protect the interests of its investors," the company said.