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Printers are up in arms over the liquidator of collapsed print business Sydney Allen, which is trying to claw back $644,000 worth of invoices paid to trade suppliers in the six months before the company crashed with debts of $7.6m three years ago.

Trade suppliers to Sydney Allen have been receiving a letter from liquidators Geoff Davies and John Morgan at BCR advising them that it is seeking the return of invoices worth more than $10,000 paid during that period. Suppliers contacting Print21 have vented their fury, saying the invoices paid were for legitimate work supplied, and calling it a 'scandal' and a 'con' that the liquidator can attempt to retrieve that money.

However under the Corporations Act 2001 section 588FF the liquidators are entitled to seek the return of paid invoices if they think monies were paid inappropriately in the six month period prior to a company's collapse. They are known as unfair preference claims. The scheme is ostensibly intended to stop directors who know the company is facing the wall paying their wives' or mates' companies, while leaving little for the ATO, other government agencies, or other creditors.

It is this attempt to claw back monies paid in the months prior to the company's collapse that has led to the court order requiring six former Sydney Allen identities, including directors John Mangos and Chris Wallace, and invester Bob McMillan, to attend the Supreme Court to be grilled by BCR under a rarely used order, 596A and 596B of the Act, over what they knew, as exclusively revealed by Print21 on Wednesday.

BCR Advisory's tactic is in conjunction with FEG, the government body created to ensure workers get their entitlements. FEG is funding the liquidator's move, through the Department of Jobs, in an attempt to recoup some of the $1.3m it paid out in to former staff. The liquidator itself – which has been sending out random demand letters to suppliers for the past three years – stands to gain around $182,000 if it does manage to claw back the money, for work which it says it has done but not yet been remunerated for.

Trade suppliers who were paid their invoices face a difficult choice, in that it may cost them more to defend their claim than to pay it. For instance if a company was paid a $10,000 invoice that BCR is trying to get its hands on, but it will cost $30,000 to defend the claim, that company may decide just to pay it.

If the liquidator does get the money back it will be divvied up among the creditors, which will include the original recipient of the invoice. Total unsecured creditor claims currently stand at $6.1m. Unsecured creditors will be at the end of a long line, which will be headed by the liquidator, then FEG which is claiming $1.3m, then the ATO which is also claiming $1.3m, then any other government bodies.

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