Mosman couple Scott and Georgina (Georgie) McCorkell appeared separately in the Federal Court to be questioned about the failure of their North Sydney advertising agency in a transaction described as phoenixing.
The civil case brought by the liquidator of the agency is investigating whether the purchase price paid for the business, $29,000, in December 2022 was commercial. The McCorkells were the sole shareholders.
The court was told that dentsu in 2019 had offered $12 million to $14 million to buy McCorkell and Associates before the deal collapsed with management changes at the Japan-based global advertising agency.
The first day of an examination by the agency's liquidator looked at the salary paid to Georgina McCorkell, the candle business she ran from the agency offices, and the advice her husband received.
The court was also told the agency made a profit of about $680,000 in 2020, after receiving jobseeker payments during COVID. At the same time Georgina McCorkell was paid dividends of about $146,000.
The agency went into liquidation the week before Christmas 2022, putting 18 out of work without pay, redundancy or superannuation payments, and leaving a list of trade creditors.
The staff finally started to receive some money in May, paid via the Fair Entitlements Guarantee, a federal government backed scheme of last resort.
McCorkell Group, registered November 24 before the company went into administration, with Scott McCorkell its sole director, bought the business of McCorkell and Associates on December 14, 2022, for $29,129.61.
This new company, McCorkell Group, is still trading, using the same website, but with reduced staff.
According to documents lodged with ASIC, the first liquidator, Liam Bailey of insolvency firm O'Brien Palmer, introduced a valuer, Andrew Whittingham of Groves & Partners, to Scott McCorkell to establish a price for the agency.
Bailey was later deposed as liquidator in a narrow vote of creditors, which included the Australian Tax office and SAP Australia, a former client of McCorkell. This vote was instigated by Karen Powell, the former managing director.
Documents lodged with the court put the total value of creditors’ claims at $3,062,180.
Both the McCorkells are listed as creditors, collectively owed more than $1 million, including thousands of hours in annual leave, despite Georgina McCorkell telling the court she and her husband took their full entitlement every year.
In the Federal Court yesterday, Scott McCorkell said he had been “concerned” about advice to save the business.
McCorkell was questioned by David Stack, legal counsel representing Michael Hogan, the new liquidator of McCorkell and Associates.
Stack repeatedly asked McCorkell about the advice he received from Liam Bailey of insolvency firm O'Brien Palmer to save the business.
McCorkell said he was given three options:
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Continue trading and continue adding capital in the form of loans to the company
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Go into administration
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Or restructure the business by first valuing it and then forming a new company to buy the assets.
McCorkell went ahead with the third option and it is this which has been described to the court as having the hallmarks of phoenixing.
Phoenixing is where the assets of a company are moved to a clean shell of a company leaving behind debts and liabilities in the old business.
The Federal Court has issued a restraining order against McCorkell, preventing him from selling his interest in the family home at 57 Bay Street, Mosman. He also cannot sell the McCorkell Group.
McCorkell told the court he was “concerned” at the advice he was given and “hand on heart” said it was a huge decision to make after 32 years with the business he founded.
But what he aimed for was “a company that wasn’t going to go broke”.
He agreed, under questioning, that he had signed a backdated loan agreement to provide $500,000 to the company to pay wages. This was a loan from him to the company.
This was done to comply with requirements of the Personal Property Securities Register.
The liquidator is also questioning whether Georgina McCorkell was employed at the agency. The court was told she had a salary of $130,000.
The court was told she had a candle selling business, sometimes buying them and other times she made them herself.
This business was part of the MccCorkell and Associates. Candles were given to clients as gifts.
She also said she had an office at the agency and that she sometimes helped with events, looked after reception and bought furniture.
On questioning, she couldn't recall who paid her credit card, her husband or the company. Some of the transactions, listed under "Georgie expenses" included “Foxtel” and “glamorous pools”.
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