The administrator for debt-laden Picton Press says it is its preliminary view that the company was trading while insolvent for at least 17 months before it was issued with a winding up order by the ATO in May.
Presenting its findings at the second creditors' meeting, administrator Cor Cordis says it has referred the Picton directors Garry Kennedy and Dennis Hague to ASIC for possible investigation.
Cor Cordis says, “Our preliminary view is that the Company was insolvent from 1 December 2016 after it defaulted on a $200k payment due under a payment arrangement with the ATO at the end of November 2016. Furthermore, the ATO debt continued to accumulate significantly from that point onwards.
“There is a potential claim for insolvent trading with a range of between $nil to $1.22m. The range is reflective of any statutory defences that the directors may have against an insolvent trading claim which may be brought against them.”
Under the heading Offences by Directors in the report, Cor Cordis says, “We consider that breaches may have been committed with respect to Section 180 in respect of not taking due care and diligence to adequately manage and deal with the ATO debt; and Section 588G in respect of allowing the Company to trade whilst insolvent.
“The Administrators intend to lodge a Section 438D report with ASIC to report the potential breaches of directors' duties before the second meeting of creditors.”
Cor Cordis said it had “not found any evidence of unreasonable payments being made to the directors of the company”. It also said there was no evidence of payments or benefits being made to related parties.
The likelihood of ASIC prosecuting any case are thought to be slim, trading while insolvent is hard to prove, and ASIC has only rarely taken anyone to court, and only then in high profile cases. Creditors can take the case to court, but the costs are prohibitive. ASIC has copped a heap of criticism recently in the Royal Commission into Banking as toothless and ineffective.
Picton has continued trading since the administrators came in at the beginning of May, with 27 staff now on the books, down from 35 in May.
Cor Cordis says the company's troubles began when it bought a new $4m press in 2014, which coincided with a dramatic downturn in the WA economy due to the end of the mining boom.
The press was financed on the basis of an $11m turnover, but soon after it went in the WA economy went into freefall, as did Picton's sales, which plummeted from $12.5m in 2011 to $7m in 2017. Although it managed to make its monthly payments for the press, its growing debt to the ATO meant it could not gain any refinancing, despite numerous attempts to do so.
Picton was established 40 years ago, and then bought in 2005 by Dennis Hague, Garry Kennedy and Michael Paton, the latter of whom parted ways with the company two years later.
Print21 has reached out to Garry Kennedy and Dennis Hague for comment.