Max Donnelly will join the hunt for assets in Russell Moran’s $120m bankruptcy
A $6m loan to coal explorer Russell Moran in 2014 ballooned to more than $120m. Now administrator Max Donnelly has been called in to look at the books.
Feted company administrator Max Donnelly, who once led the chase for Christopher Skase’s missing millions, has been drafted in to examine the affairs of a bankrupt former mining executive, whose $6m loan has ballooned out to $120m.
A recent court judgment has relieved the trustees of the bankrupt estate of former Atrum Coal executive director Russell Moran, replacing them with Mr Donnelly.
Mr Moran was formerly the head of Atrum Coal, which was one of the best-performed stocks on the ASX in 2013, with its shares rocketing from 20c to almost $2, valuing the company at one stage at about $350m.
In 2014, a previous Supreme Court judgment says, Perth stockbroker Argonaut arranged for a syndicated $6m short-term loan to be extended to Mr Moran, secured against his shareholding in the company, and accruing interest at an eye-watering 5 per cent per month.
The 2020 judgment says that only $2.8m of the $6m loaned to Mr Moran was used in exercising rights to buy more Atrum shares.
Atrum’s shares began to slide after the loan was put in place, and by mid-2016, Mr Moran had defaulted on the loan, the 2020 judgment says, with Argonaut later exercising its power to sell its secured shares, raising $12m.
Another $6.1m remained outstanding however, and continued to accrue interest, capitalised monthly.
The Federal Court judgment handed down this month indicates that Mr Moran’s debt has now ballooned out to more than $120m, with $3.2m owing to the Australian Taxation Office and almost all of the remainder owed to Argonaut.
The bankruptcy trustees who petitioned the court to be removed said they had identified “negligible” assets in Mr Moran’s bankrupt estate, however a previously trustee had identified at least $226,000 withdrawn from a bank account which “was thought worthy of investigation’’.
“Argonaut had also requested specific investigations into how the funds it loaned to Mr Moran had been used, into movements in certain shares, and into the possibility that there had been transfers of assets with intent to defeat creditors.’’ the judgment says, referring to a report made to creditors.
“The report to creditors also contained a summary of Mr Moran’s dealings with a large number of related entities, although it is not clear from the summary whether any of those dealings are worthy of investigation or might lead to recovery of funds.’’
The judgment says the trustees told Argonaut late last year that they would need to review about 800 pages of bank statements to trace transactions and to identify potential lines of questioning for Mr Moran, “presumably in any public examination”.
“They reminded Argonaut that they were unfunded and said that consideration needed to be given to funding them,’’ the judgment says.
“They pointed out that other costs that would be incurred to ‘progress this matter more aggressively’ (apparently Argonaut’s phrase) would include solicitors’ costs, which would be ‘not insignificant’.
“They said that they did not have any obligation to incur further costs without creditor approval and prospects of getting paid and asked for clarification of Argonaut’s position in relation to funding.’’
Mr Donnelly signed a consent to take over as trustee of Mr Moran’s estate on December 19, and an application to do so was filed in February.
“There is an affidavit from Mr Donnelly saying that if he were to form the view that extensive investigations were necessary, including for example public examinations, he would discuss with creditors whether they were willing to indemnify him,’’ the judgment says.
“Mr Donnelly also says that he ‘will not charge … to get up to speed with what has been done to date’.’’
The judgment says that Mr Moran filed “lengthy written submissions in opposition to the application’’ to replace his bankruptcy trustees.
Justice Darren Jackson allowed the application to replace the existing trustees with Mr Donnelly, given the fact that the current trustees had identified matters worth investigating but lacked the funds to do so.
“The present applicants have identified matters worthy of further investigation, including a potentially expensive review of documents preparatory to public examinations,’’ Justice Jackson says.
“But they do not have the funding to undertake those investigations. It can be inferred that the only real possibility of obtaining that funding is to obtain it from Argonaut.
“The inference arises because there is no evidence that any other creditors would be interested in funding the applicants, and it is inherently unlikely that they would be, since approximately 97 per cent of any dividend paid out to nonpriority unsecured creditors will go to Argonaut.
“But Argonaut will only fund further investigations if Mr Donnelly is the trustee in bankruptcy who undertakes them.’’
The judge noted that there has not yet been a firm commitment from Argonaut to provide that funding, given that Mr Donnelly also had not yet been able to form an opinion as to whether it was viable to investigate further.
“But he has said that he will not charge creditors for his time in becoming acquainted with the affairs of the bankrupt estate, so there appears to be little downside to changing trustees at this point,’’ Justice Jackson says.
“That being so, I am satisfied that it is in the best interests of the bankruptcy, and in particular of the creditors of the bankruptcy, to make orders that allow at least for a real prospect that investigations will be conducted and legal proceedings will be brought in order to recover assets for the benefit of the creditors.
“That there is such a prospect can be inferred from the views expressed by the applicants to Argonaut about the specific matters that are worthy of further investigation, and from the fact that Argonaut has gone to the trouble and expense of funding the present application so that the applicants will be replaced with Mr Donnelly.
“It is unlikely that it would have taken that step if it had no real intention of funding further investigations.’’
Mr Donnelly was also previously administrator of the Parramatta Eels rugby league club before becoming its chairman — a role he stepped down from in 2018 — and has held numerous senior business roles.
He led the decade-long chase for assets tied to the collapse of Christopher Skase’s Qintex group in 1991 with debts of about $700m, however was unable to recover any material amount in that matter.
Skase died in Majorca in August 2001 after fleeing Australia.
Atrum Coal remains listed on the ASX. However its shares were suspended from trade last month because the ASX “has determined that Atrum’s level of operations do not warrant the continued quotation of its securities at the time’’, a release to the market says.
The company is focused on coal exploration and development in Canada.
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