Mundella Foods liquidators flag $778k in director transactions as debts hit $12.5m

Liquidators at Mackay Goodwin have flagged $778,000 of potentially unreasonable director-related transactions at collapsed WA dairy company Mundella Foods, including what their statutory report to ASIC calls frequent cash withdrawals. They say further digging is needed to work out whether that money funded operations or was simply unreasonable. The report also found Mundella may have traded insolvent from as early as July 1, 2024, with $1.3 million in transactions during that window.

All up, former director Hayden Russell is facing scrutiny over what liquidators say could be more than $2 million in potentially unreasonable director-related and insolvent trading transactions. Russell told the ABC he has literally nothing left and denies doing anything improper, insisting he acted in good faith throughout. He says the cash withdrawals covered operations and workers' wages, and that he tipped a few hundred thousand dollars of his own savings into the business.

The damage is spread across the creditor pile. Workers, who rank as priority creditors, are still owed almost $940,000 in unpaid wages, superannuation and entitlements. Secured creditors are owed another $3 million and unsecured creditors $8.5 million, taking total outstanding debts to $12.5 million. Liquidators told creditors it's unlikely Russell has the financial capacity to meet any claims, and warned that further investigations won't happen without more funding. In their own words, a dividend to any class of creditors is unlikely.

The report also puts the multi-million-dollar sale of Mundella and the Margaret River Dairy Company to processor Artisanal Market under the microscope, testing whether it was an uncommercial deal. The sale was agreed on July 17, just weeks before creditors voted the companies into liquidation. Mortgagee and private lender Bowral Capital, which sold the assets, received $5.85 million from the final October sale, while fellow secured lender Bizcap pulled in almost $1 million. Liquidators say that still wasn't enough to repay Bowral and Bizcap in full, and their investigation into the property deal continues.

Russell reckons his rescue plan would have worked if Bowral had fronted more money. Bowral hit back in a statement, saying it wasn't a party to the Deed of Company Arrangement and had no obligation to provide further funding, adding its job was to manage the fund and protect its investors. The liquidation followed a failed DOCA, with the report confirming the companies missed several creditor obligations, including $40,000 unpaid into the Deed Fund. Bowral had picked up the properties and assets from original lender Oak Capital, which went into its own liquidation in May and is separately being sued by ASIC over alleged unconscionable conduct and predatory lending, claims it denies.