NATIONAL: There is little goodwill left among burnt suppliers of fashion retailer Cactus Jam after financial records revealed the company may have continued trading whilst insolvent for at least 12 months.
The Melbourne-based retailer entered into voluntary administration late last year, citing sales declines in the face of the global financial crisis. However an investigation by administrator PPB revealed strong evidence it had been insolvent since at least September 2008, “if not earlier”.
In addition to suffering sustained losses since June 2007, the company also recorded both working capital and net asset deficiencies from at least June 2008. Administrators noted several other factors contributing to its likely insolvency, including unpaid superannuation contributions to employees and outstanding supplier debts.
“My preliminary opinion is that the director ought to have been aware that the company was in financial difficulty from at least September 2008,” administrator Nicholas Martin noted in his initial report to creditors. “Based upon the company being insolvent at September 2008, the debt incurred by the company since that time is in the order of $3 million.”
Directors found guilty of insolvent trading can face a range of penalties from civil actions to criminal prosecution, depending on whether he/she knowingly allowed the company to trade whilst insolvent. Martin advised creditors against pursuing an insolvent trading claim in court as it appeared “there may not be a material return”.
According to a creditors list lodged with the Australian Securities and Investments Commission (ASIC) – which declined to comment on whether it was investigating the insolvent trading claims – Cactus Jam owed around $2.6 million to companies including international and domestic fashion brands. Chloe International ($62,300), Matthew Williamson ($31,200) and Filippa K ($12,950) were among the global labels listed; while Maise ($25,070), Gail Sorronda ($9,590) and Manning Cartell ($17,800) were part of the Australian contingent.
The picture was bleaker still for local distributors operating one or more seasons in advance, with several confirming they had locked in future orders with overseas suppliers. Edward Imports and H&B Fashion Distributors were among the worst hit in Australia, owed a combined total of $302,200.
Womenswear designer Gail Sorronda said even small losses were difficult to bear for independent fashion labels.
“It’s affecting us definitely,” she said. “There’s actually a point you don’t want to speak out but it’s tough... we were owed money for two seasons and we haven’t received anything.”
Nicole Glavan, director of fashion agency Under The Wing and representative of Maise, said the denim brand was forced to halt American expansion plans after being burnt by the retailer in its first season.
“It happened with other brands we looked after as well – we were looking at over three months on 30-day accounts if [we received payments] at all.”
Glavan, who represented up to 10 designer labels in Australia, and Sorronda said they had no intention of supplying Cactus Jam under its new ownership. Several unsecured creditors listed in the report, which did not wish to be named, had also closed their order books to Cactus Jam.
The retailer was purchased out of administration for $330,000 by Oskar International, which also operated the Vanessa Bruno concept store in Hawthorn. The purchase included two retail stores, the Cactus Jam trading name and its remaining stock (valued at approximately $500,000). Administrators claimed a higher offer could not be found for the company.
Oskar International was initially set up by Cactus Jam founder Fiona Petty and former business partner Shaun Crosby. ASIC documents indicated Frock Office, owned by Petty’s current life partner Joseph Lutvey, and Noosa Beach Investments now had the majority shareholding. Petty retained a 10 per cent stake in the company, in addition to a senior executive position with the new Cactus Jam.
Petty refused to comment on any matters concerning unsecured creditors or her association with Oskar International but indicated the company was readying promotional material concerning “what’s new at Cactus Jam and what surprises our customers can expect this year”.
“This should be completed in the next few weeks and we would be happy to share this with you.”
Assia Benmedjdoub