Consignors of lots for upcoming sales or owners of unsold items have been told they must pay Aus$353.20 (around £200) per lot, regardless of their value, or face losing their possessions.
Up to 1000 people still had their items with Mossgreen or were owed money from previous sales when the firm folded in December. Administrator BDO says the charges are “to meet the reasonable and properly incurred costs of identifying, preserving, maintaining and facilitating the return of the consigned goods”.
BDO has given consignors a four-week period from February 12 to pay the levy and collect or the “goods may be deemed abandoned and may be dealt with as such”. In a large number of cases, the fees being charged far exceed the value of the goods concerned.
Antony Davies from Jembaicumbene in New South Wales is being asked to pay more than Aus$27,000 for the return of a collection of 78 lots of antique toys, which had a combined reserve price of Aus$17,000.
“There has been a very large and angry backlash,” he told ATG. “Many people, including myself, asked to collect their property in early January but none were allowed access. We asked whether fees would be payable and were told that none would be.”
BDO told ATG that in total 4322 lots were held by Mossgreen on consignment, meaning their total charges would add up to AUS$1.52m.
Unhappy vendors are set to appear at an upcoming Federal Court hearing in Melbourne where they will vigorously argue that the fees are unfair and question their legitimacy.
BDO says it has acted entirely within the law dealing with a complex case involving a large number of stakeholders.
"It’s not illegal," the firm stated. "A similar levy was applied by the administrator of International Art Holdings Pty Ltd. It is usual for administrators to seek court directions on key matters during their assignments."
No client account
BDO confirmed that Mossgreen collapsed with insufficient funds to pay outstanding monies owed to consignors and to fund the return of unsold lots.
It had debts of Aus$12.5m (£7m). The firm’s primary investor, businessman Jack Gringlas, is the biggest creditor with over Aus$5m owed to him.
BDO’s investigations have indicated that Mossgreen did not operate a client account (or ‘trust account’ as they are referred to in Australia). It is therefore doubtful that vendors of works sold at Mossgreen from September to December will receive full payment.
Mossgreen’s co-founder and chief executive Paul Sumner could not be reached for comment. He previously told ATG that he hoped “no vendors or artists will be out-of-pocket”.
About half of the 60 Mossgreen staff were retained until early January but almost all have now been dismissed.
ATG approached BDO with a series of questions and a request for further comment. In response, the administrators released the following statement:
"Mossgreen is in administration and is deeply insolvent. On the Administrators’ investigations to date, Mossgreen owes creditors in the region of $12.5million. It does not hold cash or own sufficient assets to repay anything close to that amount.
"There is no viable recapitalisation or sale proposal, and the Administrators expect a significant shortfall to Mossgreen’s creditors.
"On the Administrators’ investigations to date, Mossgreen did not separate the sale proceeds it received from the sale of consignor items from its general trading accounts. Currently, there are insufficient funds to pay outstanding monies to consignors and to fund the return of unsold Lots.
"At our appointment Mossgreen’s stock keeping systems were inadequate and significantly overstated Lots on consignment. In order to obtain an accurate understanding of the actual stock position, the Administrators had to undertake a comprehensive physical stocktake to identify the 4,322 Lots held by Mossgreen on consignment and to allocate those Lots to consignors. This was a complex exercise.
"The Administrators have incurred costs and expenses directly related to the identification, preservation, protection and allocation of the Lots. These costs include rent, security, utilities, legal fees, stock agent fees and Mossgreen staff costs. The only alternative would have been the abandonment of the goods by the Administrators, which would not have served the best interests of consignors and only worsened their position.
"The Administrators appreciate that the imposition of a levy is frustrating for consignors. The Administrators are only charging the levy to ensure the reasonably and properly incurred expenses of dealing with the goods in possession of Mossgreen for the benefit of all consignors are paid. The Administrators will reconcile the levies paid against the reasonable and properly incurred costs and expenses. Any leftover funds will be returned pro rata to those who have paid the levy.
"The Administrators will seek directions from the Federal Court in relation to the rights and entitlements of consignors and that this would extend to the Levy. The vast number of different stakeholders and claims to goods and funds held by Mossgreen has created a very complex situation. The Administrators are resolving that situation as quickly and cost effectively as possible in difficult circumstances.
"The Court will be asked to make directions and orders in relation to the rights and entitlements of creditors and other stakeholders in goods and funds held by Mossgreen. Directions will also be sought in respect of the levy that the Administrators have charged."