Phoenixing of companies is inspired by a mythical bird's legendary ability to return to life after self-immolation on a fiery altar.
Australia's corporate watchdog, ASIC, defines phoenixing as a move by company directors to avoid liability to creditors by winding-up a debt-ridden company and transferring assets to a new, related company continuing the same business.
In the recent liquidation of company Wollumbin Horizons in Qld Federal Court, two creditors, Gillian Norman and Ron Berry, filed a cross-claim alleging that phoenix action was in process, facilitated by Vincents' administrator Steven Staatz.
The proposed Federal Court class action involved fourteen aggrieved creditors of company director and sole shareholder Adrian Brennock, (Aka Andrew Brennon, AB).
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| Phoenixed property, 3222 Kyogle Rd, Mt Burrell |
Creditors claim co-proprietary rights to a 640 acre farm at 3222 Kyogle Rd, Mt Burrell, the sole asset of the company in liquidation.
In 2015, creditors had paid funds into the trust account of Mullumbimby lawyer Wrothwell Wall, in exchange for promises of co-ownership of land and a Residential Lot on the property purchased with their funds.
The marketing representations were not fulfilled and investors' trust funds disappeared without any accounting by lawyer Wrothwell Wall. Litigation in regard to this negligent "folly" is ongoing.
Judge Derrington, deciding that evidence of phoenixing a company to divest liability to creditors with the help of an official of the Court, would be too "scandalous" to be heard, summarily dismissed the cross-claim and imposed a suppression order on the proposed class action against liquidator Staatz.The Federal Court case, Staatz v Berry, was begun in 2018 by the liquidator, but judgement was not made until 2020, when Derrington J appointed Steven Staatz as receiver of the contested property, with a lien over the land. An application by Norman and Berry to appeal the decision was summarily refused in the Appeal Court.
From 2015-2021, Brennock used the property to leverage expansion of the venture and acquired extensive shareholdings.
With creditors claiming unpaid debts totalling over $2.6 million by 2017, Brennock then executed an unregistered mortgage over the property, overvalued the land by $1 million and signed an undated contract of sale with associate Phillip Dixon.
Disenfranchised creditors who paid purchase money for the Mt Burrell property in 2015 were promised by company director, Adrian Brennock that if they allowed his mortgage to provide him with "vendor finance" to buy the land back, some favoured creditors would receive full recompense by December 2017.
Gillian Norman and Ron Berry advised other creditors that they believed the proposed internal sale was intended as a phoenix move to wipe out company debts, while Brennock and Dixon continued to market interests in the company's land asset through insolvent trading. Brennock was bankrupted in 2018 and transferred his shareholdings in the venture to his wife. The $1 share by which he owned and controlled the property purchased with creditors' funds was transferred to Jason Bettles, a bankruptcy trustee at Worrels who has recently been implicated by ASIC in allegedly facilitating the phoenixing of multiple companies.
From 2017-2020, for four years the company liquidation languished, as bankrupt Brennock and associates continued profiting from trading with the insolvent company's land asset.
For the creditors, any remnant hope of restitution evaporated along with the funds haemorrhaging from bank accounts to cover exhorbitant legal costs.
In a promotional video published by Nightcap Realty, Brennock removes the "For Sale" sign from 3222 Kyogle Rd, as he boasts "We bought it back ourselves."
The property was ostensibly purchased by Brennock's Nightcap associate Derek Zillman, but payment was not made until six months later by Brennock's Nightcap associate, company director Cherie Stokes, under the name "Cherie Noble". Creditors were informed that the property had been purchased by the company NCV Enterprises (Night Cap Village Enterprises), whose shareholders are Derek Zillman, Mark McMurtrie and Kristy Brennock.
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| Derek Zillman- Nightcap finance manager |
"The entire community owns everything and we will have a primary coupling, which is the enterprise Yidaki Pty Ltd that will own all of those landholding entities - and they are the ones progressing the approval. And then people buy shares within that company."
By 2021 some creditors of Brennock's company Wollumbin Horizons were informed by Vincents liquidator, Steven Staatz, that they would not receive any restitution. Others still keep dreaming of a few cents in recompense, but it's more than evident now, after four years waiting, that creditors can expect to receive nothing.
By transfer of property from Wollumbin Horizons to a related company, in which AB's wife, Kristy Brennock is a shareholder, the phoenix move warned about by Gillian Norman and Ron Berry is now complete: NCV Enterprises has risen from the ashes of Wollumbin Horizons to evade liability to creditors while continuing the same business of selling promises of Residential Lots without development approval.
Receiver Steven Staatz has been asked three times in emails from creditors to respond to concerns about profit from insolvent trading and phoenixing. He has not responded.
The Creditors' Group with screen name Free Radical comprises the original investors who lost life savings in the venture. The Creditors' Group claims Certificate of Title is void due to alleged illegal phoenix activity, and contests the validity of any transfer of property ownership.
Phoenixing of property from Wollumbin Horizons to NCV Enterprises enables the promotors of the Nightcap land-share scheme to continue the same business of selling pre-DA dwelling sites, while divesting liability to creditors from 2014-2021.
