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Administrators for Australia’s largest specialty fashion group, Mosaic Brands, have issued a preliminary finding that the company may have been operating while insolvent, four years before the company’s collapse.
Mosaic Brands entered administration last year and owes a total of between $361 million to $392 million to creditors in Australia and overseas.

Insolvency is when a company can no longer pay its debts, and it is illegal to trade under these circumstances, according to the Corporations Act. There are serious penalties for allowing a company to trade while insolvent.

In the report dated 13 June, which was handed to creditors on Friday, FTI Consulting estimated that the potential liability for a successful insolvent trading claim in this case could total between $38 million and $77 million.
One leading insolvency expert contacted by SBS said that, if successful, such a claim would be among the biggest insolvency claims in Australian history.
The administrator noted that further investigations are required, including consideration of any defences the directors may have available.
Any legal case on insolvent trading could be brought against some or all of the directors personally, and any potential recovery from an insolvent claim could mean those directors will be personally liable for the funds.

According to the report, Mosaic Brands’ directors were all approached and asked how much money they personally have, and all refused to answer.

What are safe harbour protections, and how do they work?

The report also reveals Mosaic Brands’ directors sought to use safe harbour legal protections from March 2020.
Safe harbour refers to provisions under the Corporations Act introduced in 2017, which provide protections for company directors from being pursued for insolvent trading action in the event a company is placed into liquidation.
It is designed to provide directors with flexibility to implement a plan to restructure a company, with the objective of continuing the company’s operations and delivering an overall better outcome for creditors, without the need for the appointment of external administrators.
The report specifies that from 25 March 2020 to 31 March 2021, Mosaic Brands used special safe harbour measures provided during the COVID-19 pandemic.
From 1 April 2021 until they entered voluntary administration, they continued to rely on safe harbour from “time to time”.

If established, these protections could amount to a defence against any potential director liability for trading whilst insolvent.

Landmark case

Professor Jason Harris, an insolvency and safe harbour expert at the University of Sydney, told Dateline the case is a landmark in Australian history.
“This is a long time to be using these protocols,” Harris said.
“This will be the first and potentially the biggest test of this legislation.”
There are strict hurdles that need to be adhered to should directors seek to rely on a safe harbour defence.

In its report to creditors, FTI Consulting says it is not clear if Mosaic Brands’ directors met this criteria “at all times” and that further investigation is required.

More than 650 stores closed, thousands of jobs lost

Mosaic Brands entered voluntary administration in October 2024 and ceased all trading operations in late April this year, closing more than 650 stores across the country. They previously employed more than 4,000 employees across the country.
Led by CEO Scott Evans and CFO Luka Softa from 2014 to early 2024, the company acquired many of Australia’s mid-tier fashion companies, including Noni B, Pretty Girl Fashion Group, Specialty Fashion Group and later, Ezi-Buy, to become the largest specialty fashion retailer in Australia.

Evans and Softa resigned in April 2024 and June 2024 respectively, four months before the company entered administration.

The exterior of a Rivers store.

Rivers announced earlier this year that it would close all its remaining Australian stores. Source: AAP / Julian Smith

The current CEO, Erica Berchtold, was appointed in April 2024.

Documents lodged with the Australian Securities and Investments Commission on 31 May by FTI Consulting, in advance of issuing their 13 June report, noted “certain Directors have responded … refuting any allegations as well as cautioning the administrators on what they write in their report”.
The administrators said “they will be factual and will put forth their opinion to all creditors in the report”.
Unsecured creditors owed $385 million in Australia and overseas, including Bangladesh, China and India, will meet on 20 June to vote on the future of the companies in the Mosaic group. FTI recommends that creditors opt for liquidation.
There is not expected to be any funds available to pay unsecured creditors unless a liquidator is successful in pursuing recovery actions.
Dateline has contacted former and current directors of Mosaic Brands for a response, including Scott Evans, Richard Facioni and Erica Berchtold. Dateline has also contacted Mosaic Brands’ former CFO Luka Softa.
An authorised release issued on behalf of the Mosaic Brands board of directors last year, in response to previous reports that the company had been using safe harbour protections, said its directors take their duties seriously, and did seek advice on the applicability and compliance with the safe harbour provisions.

There will be more to come in Dateline’s two-part investigation into the collapse of Mosaic Brands, ‘The Cost of Doing Business’, coming soon to SBS TV and SBS On Demand.

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