Liquidators will investigate possible trading while Mundella Foods was insolvent
Liquidators will investigate the activities of Hayden Russell, director of the Australian dairy processor Mundella Foods, following the liquidation of the company and its affiliates, Margaret River Dairy Company and The Cheeky Cow, in Western Australia. The administrators have preliminarily reported signs of possible trading while insolvent and hundreds of transactions that may be deemed unjustified director-related transactions.
According to ABC News Australia, all three companies were placed into liquidation on August 6 following the termination of a Deferred Out-of-Court Arrangement (DOCA) that Russell had proposed last August. The administrators reported that the agreement was terminated due to a breach of its terms. It is unclear exactly which breach led to this decision.
Under the rescue plan, unsecured creditors were promised a potential recovery of 68 cents on the dollar following the sale of the companies’ real estate portfolio and the subsequent leasing of the assets. At the same time, financial statements reviewed by ABC show that, during the term of the agreement, more than $620,000 was paid out from the administrative account to cover expenses, including administrators’ fees, operating costs, and payments to suppliers. At the time the agreement was terminated, just over $12,000 remained in the account, and there were likely no significant payments made to unsecured creditors.
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The companies’ property and remaining assets were transferred to the mortgagee, Bowral Capital Pty Ltd. Milk supplier Phil Hall told ABC that Mundella Foods owed him hundreds of thousands of dollars and that he does not expect to be repaid. According to him, this debt was one of the factors behind his family’s decision to sell their farms in Wokalupa and leave the dairy industry after six generations in the business.
Former Mundella Foods employee Meiri Wall reported that she is still owed about $10,000 in unpaid vacation pay and pension contributions. She had worked as a pasteurizer at the company’s facility in Mandijong, near Perth, since 2012.
In a report to the corporate regulator, the administrators cited weak financial controls, inadequate record-keeping, strategic management errors, and trading losses as among the reasons for the companies’ collapse. They identified approximately 235 transactions totaling more than $100,000 that could be considered unjustified transactions involving a director. The administrators also stated that they have sufficient preliminary grounds to believe that Mundella Foods may have been trading while insolvent since July 2024, and Margaret River Dairy Company since December 2023. According to their assessment, approximately $3.7 million in debt accrued during this period, and Russell may be personally liable for trading while insolvent.
