KordaMentha partner Mark Korda advised Octaviar’s directors before the firm collapsed. Photo: Louie DouvisOne of Australia’s best-known insolvency practitioners, KordaMentha partner Mark Korda, has been accused of giving substandard advice to failed investment group Octaviar in the run-up to its collapse in September 2008.
In a lawsuit filed with the Queensland Supreme Court, the liquidators of two companies in the Octaviar group accuse KordaMentha’s advisory arm, 333 Capital, of breach of duty and misleading or deceptive conduct.
The claim is based on advice given by Mr Korda to directors of Octaviar, formerly known as MFS, at a series of board meetings from late January 2008.
333 Capital has yet to file a defence but a spokesman said the claim was ”ludicrous and would be a waste of the liquidators’ and creditors’ time and resources if it proceeded”.
Directors of Octaviar pulled the plug on the debt-laden group on September 13, 2008, by appointing administrators.
Along with City Pacific, MFS rode the Gold Coast property boom in the mid-2000s, at its peak hitting a market value of $2.4 billion and boasting as chairman former Liberal Party leader Andrew Peacock.
However, its complex and highly leveraged structure, which included $2.5 billion in debt, could not survive the Global Financial Crisis.
The case against 333 Capital was lodged in January by Ferrier Hodgson, which is liquidating Octaviar Investment Notes and Octaviar Investment Bonds, two Octaviar companies that raised money for the group.
It is alleged 333 Capital started providing advice to Octaviar on January 22, when Mr Korda and fellow KordaMentha partner Mark Mentha met members of the board including chief financial officer David Anderson, Rolf Krecklenberg, who headed tourism arm Stella, and Craig White, who had replaced founder Michael King as chief executive.
This allegedly was followed immediately by a full board meeting where Mr Korda and Mr Mentha outlined a proposal to sell Stella and restructure Octaviar.
Ferrier Hodgson alleges that by this time Octaviar was already insolvent due to a cash-flow crisis and its failure to pay a $60 million tax bill.
It is alleged Mr Korda failed to tell the board the company was insolvent at 21 board meetings between January 22 and July 15.
In addition to attending board meetings, 333 Capital allegedly also ran a project called ”Cash is King”, which was supposed to monitor the cash flow of the group, help the company sell off assets, meet the corporate regulator and take part in a daily phone call with Octaviar’s lawyers, Freehills.
Ferrier Hodgson says that Octaviar would have gone into administration earlier but for 333 Capital’s advice, reducing the loss to investors in company notes and bonds. 333 Capital’s spokesman said the claim had been filed but not served, ”presumably in order to avoid the deadline under the statute of limitations”.
He said 333 Capital was helping Octaviar’s directors ”work through its issues”.
”To suggest that creditors would have been better off if the company was placed into administration is to stretch logic, common sense and statutory responsibilities beyond breaking point,” he said.
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