Apricity Finance has been placed in liquidation with managing director owing millions

Apricity Finance managing director Linden Toll owes millions to the company and used funds borrowed from it to pay for property and gambling expenses, the liquidator says.

Apricity Finance managing director Linden Toll.

Apricity Finance managing director Linden Toll owes almost $4.8m to the company and used funds borrowed from the company to help purchase two properties and pay for gambling expenses, the liquidator says, as the amount owed by the company approaches $55m.

The non-executive director of the Bowral-based invoice financing company, Andrew Meakin, has also said in documents lodged with the corporate regulator that he was “profoundly misled” about the state of the company, which appears to have never traded at a profit.

The two companies in the Apricity Finance group were placed in administration in early April, with Mr Meakin appointing Darren Vardy as administrator of the main entity, Apricity Finance Group when it became clear, according to documents, that the financial state of the business was starkly at odds to what he had been led to believe.

Apricity Finance Group has now been placed in liquidation, with Mr Vardy saying in a report to creditors that the company appears to have assets of at most $40,000 and debts of $54.5m.

Almost all of the money is owed to unsecured creditors, while employees are estimated to be owed $530,118.

The report to creditors says it appears Mr Toll had been using company funds for his own personal use, and borrowed millions of dollars from the company, which he has not paid back.

Mr Toll is not co-operating with the liquidator and The Australian has been unable to contact him by phone since the companies were placed in administration.

Mr Vardy’s report to creditors says “there appears to be a number of differing versions of financial reports in existence’’, and also that “It would appear that financial reports may have been created for the purpose of their intended recipient’’.

Mr Vardy says in the report that while “significant work” needs to be done to reconstruct the actual trading position of the company from the available files, he believes: “The company never operated at a profit in any financial year since inception’’.

Mr Vardy said Apricity appeared to have accumulated losses in the order of $41.6m, and had a net negative asset position in seven of its 10 operating years.

“The company’s historical financials contain a $25m security deposit as an other current

asset and as equity from the 2019 financial year onwards,’’ Mr Vardy says.

“I have not located any information which suggests that a security deposit exists. It is noted that the other side to this accounting entry is ‘convertible notes’ in the equity section of the balance sheet for the equivalent value.

“This entry has the effect or artificially inflating the company’s financial position.’’

Mr Vardy said it was evident, considering the company had never been profitable, that funds contributed from loan note holders “were primarily used to meet trading expenses’’.

The loan note holders are currently estimated to be owed $49.9m.

Mr Vardy also says related parties including Mr Toll owe the company almost $10m, with Mr Toll owing $4.8m, Apricity NZ Management $2.4m, and Shartru Capital $2.4m.

Mr Vardy said he had conducted a detailed review of Mr Toll’s loan account and found that there was no formal documentation in support of the loan.

“Between September 2019 and the date of my appointment, Mr Toll withdrew $6,132,003.08 from the company and appears to have repaid $1,342,955.33, leaving a balance of $4,789,047.75 owing to the company,’’ he says.

“The loan account appears to be used to meet Mr Toll’s personal American Express monthly repayment from September 2019 to the date of my appointment.

“Amounts withdrawn from the company’s bank account are mostly rounded sums and highly sporadic with near daily withdrawals.

“Similarly, repayments are infrequent, sporadic and do not reconcile to any specific withdrawal.’’

Mr Vardy also says $475,688 was withdrawn from the loan account in late 2019 to pay for a residential property in Bowral, and in March, 2021, $720,267 was withdrawn to pay for a property in Mittagong.

“The loan account appears to also be used to meet personal expenses such as subscriptions, utilities etc from time to time,’’ the report says.

“Mr Toll also withdraws funds from the company’s bank account from ATMs within licenced premises and transactions with registered gambling agencies.

“Based on the foregoing, it is clear that Mr Toll was experiencing personal financial issues

during his time as the company’s director.

“I understand that Mr Toll has submitted a bankruptcy form. Accordingly, the company

will be a creditor in the estate.

“I am unaware of what realisable assets exist, if any, in Mr Toll’s estate.’’

Mr Vardy says, in relation to the money owed by related entity Shartru Capital, “From January 2019 a number of sporadic withdrawals began to occur, not dissimilar to those identified in the loan account ledger of Mr Toll.

“There are some commonalities between the withdrawals on Mr Toll’s loan account ledger and the ... loan account ledger which infers that the withdrawals were made by Mr Toll.

Mr Vardy says his investigations “reveal that the company may never have been solvent’’.

“It was balance sheet insolvent at 30 June for 2015-18, 2021, 2022 and as at the date of

appointment,’’ he says.

“I note that the company is only balance sheet solvent in 2019 and 2020 as a result of the fictitious $25m “security deposit” as mentioned earlier in this report.’’

“My preliminary estimate is that the entirety of the company’s unpaid liabilities were incurred

at a time that the company was insolvent.

“Further, that these liabilities were incurred at minimum recklessly and potentially dishonestly.

“Based on the information currently known, I do not believe that Mr Toll has any defence

available to avoid personal liability from a potential insolvent trading claim.’’

Mr Vardy says in contrast, the board papers presented to Mr Meakin would have led him to believe that company was solvent.

Mr Vardy says Mr Toll may have breached the Corporations Act in several ways including failing to keep proper records, using the company’s bank account to pay for personal expenses, and by buying two properties with company funds “at significant detriment and no benefit to the company’’.

Mr Vardy said he has reported the matters to the corporate regulator ASIC, which has requested a supplementary report be compiled.

“Given that I am currently without funds in the administration, I intend to lodge an application

with ASIC for Assetless Administration Funding to prepare the supplementary report requested,’’ Mr Vardy says.

He says he is unable at this stage, to determine whether any return will be paid to creditors.