It was the sort of crowd a luxury boutique would hope to attract in this ailing retail climate, only the masses assembled outside Scanlan & Theodore’s Melbourne store last month weren’t there to shop.
Backed with the support of textile, clothing and footwear unionists, workers from a local knitwear manufacturer marched from Melbourne Town Hall to the Little Collins Street boutique carrying signs demanding more than $500,000 in wages and entitlements. Blossom Road had liquidated a month prior to the June 20 protest, however according to the chants of union official Michelle O’Neil, the manufacturer was not only trading under a new name but continuing to supply the luxury womenswear brand. Scanlan & Theodore was condemned for dealing with an “unethical” supplier, a condemnation which later snowballed to include allegations it was directly and financially involved with Blossom Road.
Despite Scanlan & Theodore’s repeated refusals to comment on the matter, freshly released documents from a meeting of creditors have finally shed light on its ties with the 11 year old company. At the meeting, Blossom Road founder and managing director Bill Jadilebovski revealed the impact of supplier turmoil over 2011, claiming while his company had survived trading difficulties during the financial crisis, it was when seeking orders for the spring/summer season in February that matters really began to unravel.
“With the exception of one very good client, Scanlan & Theodore, the majority of customers had moved their manufacturing offshore,” the meeting’s minutes read. “Unfortunately the orders placed by Scanlan & Theodore were not enough to keep their workforce gainfully employed. As the weeks went past and orders were still not coming through March and April, all of the company’s cash reserves were rapidly drying up.”
Problems intensified when Jadilebovski travelled to the US during the same month, expecting $800,000 in orders to surface. Only $50,000 worth of interest was generated over that February trip which, if actually produced, would cause the company to lose money. The director claimed he sought external advice in late April/May.
Questioning by liquidator Gregory Stuart Andrews revealed that by the time of the creditors meeting on June 6, ownership of the plant and equipment had moved to the director’s son.
Scanlan & Theodore had also agreed to lease part of the premises, as well as some of the plant and equipment to maintain continuity of supply. Jadilebovski indicated that Scanlan & Theodore had paid staff and were negotiating for a long lease.
Representatives at the meeting questioned how those still employed at the factory could initiate General Employee Entitlements and Redundancy Scheme (GEERS) claims, a government payment scheme assisting workers who have lost employment due to liquidation or bankruptcy of their employer. Andrews explained that GEERS may view employees working at the factory now to be no more than an “old business being restructured”.
These revelations are the driving force behind the industry union’s campaign against the manufacturer, which it alleges is guilty of phoenix trading. Phoenix trading effectively transfers the business or assets of a company in financial distress to another company controlled by the same directors.
“This new company looks like it’s being run by the sole director of Blossom Road and members of his family,” O’Neil said at the time of the protest. Despite denials, the union also alleged the previous director was still managing the new business together with Scanlan & Theodore, asking some of the terminated employees to come back to work.
As a result of the collapse of Blossom Road, approximately 27 clothing workers were sacked, with over $500,000 in outstanding entitlements and superannuation. Minutes from the creditor’s meeting alse revealed the company owed the Australian Taxation Office around $140,000.
Scanlan & Theodore did not respond to questioning about its current involvement with the knitwear manufacturer when contacted by Ragtrader. The vertical retailer has select concessions in David Jones and sites in Paddington, Chatswood, Armadale, Melbourne, South Yarra, Fortitude Valley, Perth, and Adelaide and was founded in 1987.