The Federal Court of Australia has ordered the appointment of special purpose liquidators over the collapsed fashion retailer Mosaic Brands – former owner of Noni B, Millers, Katies, etc.
Andrew McCabe, Wenjie (Jessie) Wang and Joseph Hayes from Wexted Advisory will join the liquidation process, and are tasked to conduct investigations across several areas.
This includes investigating whether the directors or offices of Mosaic Brands had breached their statutory or fiduciary duties owed to all its subsidiaries, whether they breached s 588G of the Corporations Act 2001 (relating to insolvent trading), or any claims against Mosaic’s appointed law firm Hamilton Locke or appointed financial firm Deloitte.
The special purpose liquidators will be allowed to inspect books and records of Mosaic Brands, but this excludes any files and working papers of the main liquidators, being Kathryn Evans, David McGrath, Kate Warwick and Vaughan Strawbridge from FTI Consulting.
They can also take images of servers or any electronic files, including those maintained or otherwise held by the main liquidators, and call for statements from Mosaic Brands.
This all follows a court case launched by a former supplier to Mosaic Brands – Shaoxing Newtex Impt & Exp Co Ltd – to fully replace the main liquidators due to alleged conflicts of interest.
A representative of Shaoxing Newtex told the court that Strawbridge himself lacked independence and might be perceived as not likely to pursue “with appropriate rigour” claims potentially available to the Mosaic Group. This comes as Strawbridge was found to have worked with Mosaic previously, under his former role at Deloitte, in 2020.
The judge refused to replace the main liquidators, but was convinced to add special purpose liquidators to the case.
Preliminary investigations by FTI Consulting shows that Mosaic was potentially insolvent from December 31, 2020, and potentially earlier, up until the time of October 28, 2024 when administrators were appointed.
Possible recovery actions include a potential insolvent trading claim against the directors and potential claims against creditors who may have received unfair preference payments.
“We have also identified possible breaches of statutory duties under the Corporations Act 2001 (Cth),” FTI shared in a report shared to creditors.
“We have prepared and lodged a report with the Australian Securities and Investment Commission (ASIC) pursuant to section 533 of the Act.”
As reported by Ragtrader in November last year, Mosaic’s initial debts amounted to $249 million across 171 creditors. This grew to over $300 million as investigations continued. Over the last five financial years, the fashion group accumulated losses of around $346 million.
FY19 was the last year that Mosaic Brands generated sufficient profits to declare a dividend. But by FY25 year-to-date, the group’s accumulated losses on the balance sheet were around $346 million, with the group’s net asset position deteriorating from around $103 million in December 2019 to negative equity of around $170 million in October 2024 – a negative movement of around $272 million.
Alongside the profit slips, the group experienced a decline in revenue year-on-year, dropping from $713.58 million in FY20 to $424.83 million in FY24.
The drop in revenue was matched with a drop in expenses over the same period, falling from $450.22 million in FY20 to $248.27 million in FY24. The documents note that FY24 numbers are still in draft phase.
In FY25 year-to-date, sales hit just $107.51 million, which would have been impacted by the voluntary administration appointment, which commenced in late October 2024. Mosaic Brands’ net profit after tax (NPAT) in the current financial year is negative $34.47 million.
Media reports have also indicated the effect Mosaic’s collapse has had on suppliers, with the ABC reporting Bangladeshi garment suppliers were flagging mass lay-offs as the result of millions in unpaid orders.
The ABC added that, for the Bangladeshi suppliers in Mosaic's supply chain owed millions, about 40,000 workers are affected, according to a letter sent to the Bangladesh Garment Manufacturers and Exporters Association.
About 80 per cent of the country's 4.4 million garment sector workers are women.
During a creditors meeting in November last year, one supplier representative shared how Mosaic’s collapse had driven suppliers into financial ruin, with some media reports claiming a few suppliers were contemplating suicide.
The investigation continues.