Poor management, plummeting sales and spiralling debts racked up by a failed venture into North Blackburn were behind the failure of the Sims IGA Plus Liquor supermarkets in Footscray and Werribee, according to a leaked report.
Investigations have also uncovered a number of potential breaches of duties by directors William Sims, Richard Sims and David Cotter.
Creditors owed more than $10 million have voted to liquidate the companies behind the failed stores.
About 160 staff still face an uncertain future as negotiations continue with potential buyers of the two operations.
Liquidator Shane Cremin of Rodgers Reidy said the terms of the complex business sales must still be ironed out before staff will learn their fate.
Star Weekly earlier this month revealed the companies had failed to pay rent or a number of suppliers for up to a year and had sunk more than $10 million into debt by the time they were placed under administration.
Mr Cremin earlier this month told creditors that the sales won’t even cover the $3.8 million debt to first ranking creditor Metcash, leaving nothing for the rest of the creditors including staff.
Staff left chasing $1.6 million in unpaid superannuation and leave entitlements may be entitled to claim their missing leave money under the federal government’s Fair Entitlements Guarantee, however the scheme does not cover unpaid superannuation.
The Australian Tax Office is owed $860,000, the landlord of the Footscray store almost $700,000 and ANZ almost $450,000.
A confidential report by Rodgers Reidy, obtained by Star Weekly, showed a $1.9 million decline in annual sales from $18.4 million to $16.6 million at the Footscray store over the last two years, alongside a $1.6 million drop from $18.5 million to $16.9 million at Werribee.
The companies also guaranteed significant loans to the Sims Blackburn store, which ceased operating in February this year – around the same time as the sudden death of company director David Cotter.
Investigations have uncovered a complex web of loans and debts as well as a number of potential breaches of duties by the directors.
These include insolvent trading, unfair preference payments, uncommercial transactions and numerous transactions between the companies and related parties.
Creditors have been told the companies appear to have been trading insolvent since at least December 2016.
The directors personally guaranteed a number of loan agreements and debts and investigations have found “there is likely to be a substantial debt owed by the directors personally”.
The liquidators are obliged to report any identified breaches to ASIC, which then decides whether to pursue any further action.
However creditors have been warned that despite the personal exposure of the directors, pursuing them through the courts would be an expensive exercise and the directors may not have sufficient resources under their names to pay out debts.
Liquidators have so far recovered a 2011 Land Rover owned by the companies from the widow of Mr Cotter.
Property searches reveal William Sims and David Cotter own no property under their names in Victoria, while Richard Sims owns one property which is subject to a mortgage.
