A report by the liquidators investigating the collapse of the Biennale of Australia Art (BOAA) has put forward that the entity was possibly trading while insolvent, and may have made unfair preferences in payments to creditors.
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Worrells Solvency and Forensic Accountants has released a statutory report to creditors which has included several preliminary investigations, concluding 'that the Association likely traded whilst insolvent'.
BOAA's managing director Julie Collins denies the imputation, saying she had conversations with the liquidators at the time about placing the biennale into a halt and making arrangements to attempt to trade through.
Ms Collins told The Courier considerable pressure was being placed on her to make payments to certain creditors as cash came to hand.
Under section 588G of the federal Corporations Act 2001, there are strict penalties and outcomes for directors who allow a company or entity to continue to incur debts after that entity is known to have become insolvent; that is that the entity is unable to pay its debts as they fall due.
In his report, liquidator Hayden Montgomerie suggests BOAA was insolvent from 'at least November 2018' and a report on any possible offences committed by the officers of BOAA is required to be sent to Consumer Affairs Victoria as soon as possible.
The Biennale of Australian Art was promoted as the 'largest ever showcase of Australian artists' in its literature, and over 150 visual and other practitioners were featured during its six-week opening from September 2018.
It received funding and support from both the state government and the City of Ballarat totalling $400,000.
However financial insecurity dogged the venture from the outset, with projected ticket sales falling way below what was required for the biennale to turn a profit.
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This week's report, sent to artists and businesses owed money for services and goods, makes for bleak reading. There is not enough money left to pay the liquidators to pursue an insolvent trading claim, Montgomerie warns in the report, saying there is a 'substantial amount of work... required to satisfy the standard of proof in an insolvent trading claim'.
Another section of the Worralls report suggests at least two sets of payments were made in the six months before the winding up of BOAA which might be regarded as falling under the 'unfair preferences' section of the Corporations Act.
One payment to to unrelated parties was for $72,600, while an 'associated entity' of the directors of BOAA received $67,496.
The unfair preferences section of the Act provides for the recovery of those funds by the liquidator if they are proved to be 'preferential'; that the recipient was given more than might be expected if the debt was recovered from liquidation.
The named associated entity of BOAA was responsible for the 'managing, developing, marketing, providing artistic direction and delivering the BOAA 2018 event', and would have received 50 per cent of BOAA's total income.
Ms Collins says the money was paid to DJ Projects in return for goods supplied to BOAA, and no person was paid from the $67,000.
She says the amounts to unrelated parties were paid after legal and other pressures were applied.
"These payments will be proved to be reasonable under the Act," Ms Collins said.
"The liquidators have also made some errors in the amounts owed: some of them have been doubled up while other people are listed who have been paid."
BOAA's board resigned in October 2018 after the extent of debt became clear. In February 2019 BARBOAA opened in Lydiard Street in an attempt to wipe some of the debts associated with the biennale; it closed six weeks later.
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