ABOUT US OUR PEOPLE Andrew Cummins

Meet Our People

Andrew Cummins

Andrew Cummins

Principal,

In the current economic environment, the voluntary administration regime represents a powerful and flexible tool for distressed corporate entities to deal with legacy issues. A proactive approach by directors in applying the regime early with an experienced insolvency practitioner maximises the opportunity to resolve financial problems and survive.

Andrew is a registered liquidator and principal of BRI Ferrier with over 25 years’ insolvency experience specialising in the property, construction, retail and mining sectors. He also has particular experience in insurance broking and recruitment.
Andrew’s focus in recent years has been advising financiers on their exposures, providing reconstruction services to both companies and financiers, and where required, accepting formal appointments.
Andrew is known for his skills in negotiating commercially practical solutions where other stakeholders involved have conflicting aims and desired outcomes. His approachability and straightforward nature are key attributes when executing the best available strategy for his clients.
Experience
  • Receiver and manager of LKM Capital Limited, dealing with property, loan and other assets in excess of $75 million.
  • Voluntary administrator and liquidator of the Wideform Group of Companies. The Wideform Group of Companies operated a large formwork and construction business with over 600 employees in New South Wales and Queensland.
  • Voluntary administrator and deed administrator of Strathfield Group Limited, an ASX-listed retailer of car audio, mobile phones and other electronic products with over 350 employees at 60 locations in New South Wales, Queensland, Victoria and South Australia.
Qualifications And Memberships
  • BEc (Economics) – The University of Sydney
  • Registered liquidator
  • Member, Chartered Accountants Australia and New Zealand
  • Member, Australian Restructuring Insolvency and Turnaround Association

TELEPHONE NUMBER

MOBILE NUMBER:

EMAIL ADDRESS:

Insights by Andrew Cummins
FTX – New World Technology – Old World Reasons For Failure
Fri Apr 14Industry Insights

FTX – New World Technology – Old World Reasons For Failure

FTX Group was established in 2019 and briefly operated in 250 countries. It “controlled” tens of billions of dollars’ worth of assets, had millions of customers, and processed millions of transactions a day. Prior to John J Ray III’s appointment as the FTX Group’s CEO, almost six months ago, it did not have a complete staff list, there was no central register of the approximately 1,000 bank accounts and it had approximately 80,000, yet to be identified, transactions in the QuickBooks “Ask my Accountant” general ledger account. On 9 April 2023 Ray issued his first report into the Group’s failure. The report provides sober reading for those already invested in the space and some guidance for those contemplating future investment. The FTX Group was controlled by three individuals with virtually no experience running a business of the size and scale of FTX. In particular Ray notes: “….while the FTX Group’s failure is novel in the unprecedented scale of harm it caused in a nascent industry, many of its root causes are familiar: hubris, incompetence, and greed.” Ray identified the reasons for the FTX Group’s failure as:

GOVERNANCE AND MANAGEMENT

The FTX Group suffered from the lack of an effective and independent Board of Directors. There appeared to be no separation of duties. Those that worked there and had authority did not have sufficient experience. It appears many staff were not allowed to operate with a desirable level of independence from the founders of the business. Ray notes: “…a handful of employees had, among them, virtually limitless power to direct transfers of fiat currency and crypto assets and to hire and fire employees, with no effective oversight or controls to act as checks on how they exercised those powers.” Most tellingly Ray concludes: “…the FTX Group lacked independent or experienced finance, accounting, human resources, information security, or cybersecurity personnel or leadership, and lacked any internal audit function whatsoever.”

FINANCIAL AND ACCOUNTING SYSTEMS

Whilst FTX Group operated in numerous jurisdictions and had hundreds of subsidiaries Ray notes it had virtually no senior finance, accounting or risk personnel. To the extent financial data was produced it was manually transferred from FTX Groups’ systems to QuickBooks accounting software. The Groups’ intercompany transactions were not properly recorded and one related party had virtually unlimited access to the FTG.com trading platform and was not subject to the controls normally imposed on customers. Ray’s comments in respect of the (lack of) financial and accounting systems suggests that the FTX Group did not (and probably could not) prepare statements of assets and liabilities and its financial data was largely incapable of being audited. The FTX Group from an accounting perspective was “flying blind” with no ability to accurately report its financial position.

ASSET MANAGEMENT, CONTROL AND SECURITY

Ray’s report confirms that the FTX Group did not employ sufficient experienced staff to ensure an appropriate level of digital asset management, information security and cyber security controls were in place. Cryptocurrency was largely not held in cold wallets (not accessible online) and was therefore more susceptible to loss from hacking. Indeed on the day of Ray’s appointment some $US430 million was lost to a hacker. Passwords and seed phrases for hot wallets were not maintained in a central register and many FTX Group employees had inappropriate levels of authority in respect of these access points.

BANKRUPTCY OF THE FTX GROUP

These reasons for failure have presented Ray (and his team) with a unique set of challenges as they seek to determine the financial position of the FTX Group and to locate, secure and protect its assets for the benefit of creditors and investors. The financial position will only be determined from a piecemeal forensic review of source documents and financial statements will need to be prepared effectively from the ground up. The cost of this exercise is, as you would expect, eye watering. Reported costs of Ray and his team for their involvement thus far are said to exceed $US38 million.

LESSONS

FTX will be studied by insolvency students in the years ahead as a textbook case of business failure. It exhibits all the usual reasons for business failure including:
  • Inadequate and inexperienced management.
  • Poor, inadequate or non-existent financial and accounting systems.
  • An inability to produce accurate and timely financial information.
  • Not subjecting founders and related parties to the systems and controls placed on third party trading clients.
  • Poor or non-existent controls over assets including those held in custody for third parties.
It almost defies belief that with these systemic issues the FTX Group morphed into a cryptocurrency powerhouse with revenue of more than $US1 billion per year. One can only wonder at the due diligence conducted by counter parties who now find themselves as creditors of the FTX Group. As Bitcoin passes $US30k and increasing government regulation likely it appears there are some interesting times ahead for the block chain industry.
The Lexicon of Web3 NFTs and Blockchain
Wed May 11Inside Edge

The Lexicon of Web3 NFTs and Blockchain

Welcome to the brave new world of web3, NFT’s and the metaverse. In discussions on these topics we often hear the phrase “…we are still early…” and that is certainly true. Fortunes will be made and lost but there is no doubt that developments currently underway will impact our lives in ways which we, as yet, do not understand or appreciate. As with any new technology, the NFT world is developing a lexicon which needs to be appreciated and understood prior to delving into any technical consideration of the matters at hand. A somewhat lighthearted glossary of NFT terms appears below: AGMI – Am I gunna make it? Phrase used when publicly disclosing NFT’s held for a particular project and seeking positive affirmation of your purchase from your Discord peers. Avatar – your image in web3. Usually the NFT that has made you the most eth. Beanie – divisive NFT personality. If you followed his recommendations over the last year you have made plenty of eth. Boomer investing (derogatory) – any investment not on web3. Burn – the destruction of an NFT usually done in exchange for a new NFT. Cold Wallet – a blockchain wallet not accessible online and therefore less likely to be hacked. If you got a Bored Ape (current floor 100 eth) at mint it is in your cold wallet which is now (or should be) stored in a safe deposit box. Discord – where NFTers and gamers communicate. Dox (ed) – your IRL identity particularly when it is available and known to the NFT community. Drop – NFT sent to your wallet usually (but not always) by a project you are already involved in. Be wary of unknown NFT’s dropped to your wallet; interacting with them could result in you being hacked. Eth – Ethereum. Crypto currency used by most NFT projects. Flip – selling an NFT shortly after mint. Ideally (but not always) for a profit. Floor (price) – the minimum you need to pay to purchase an NFT on Opensea. FUD – fear, uncertainty and doubt. What is spread by that annoying person on Discord who thinks your favorite NFT project is a rug. Gas – the cost of an NFT transaction; also the scourge of the NFT world. Usually cheap but can spike such that gas is more than the cost of the NFT purchased. Hack(ed) – when someone steals your NFTs. Usually the result of giving your seed phrase to the friend you just made on Discord or entering into a malicious contract. Hot wallet – a blockchain wallet accessible online. IRL – in real life. Lambo – (Lamborghini) – what all NFTers think they will driving when the project they just invested in makes them lots of eth. Meta – formerly known as Facebook. Sworn enemy of web3. Led by Zuckerberg, considered the devil incarnate by NFTers. Metaverse - concept of a persistent, online, 3D universe that combines multiple different virtual spaces. Mint – purchase NFT upon issue by a project. NFT – non fungible token. Bitcoin is a fungible token – each one is the same. NFT’s are (or can be) all different and unique. NFTer or degen(erate) – a purchaser or owner of NFTs. NFT girl – legendary NFT trader from Sydney. Often heard saying: “I need more eth….” NGMI – not gunna make it. What you tell the person who FUDs your favorite NFT project. Opensea – NFT marketplace. Sales of $US2billion for the month of January 2022. Rug – a failed NFT project. Usually accompanied by promotors disappearing (assuming they haven’t previously been doxed). Secondary – buy an NFT after mint, usually on Opensea from someone flipping. Seed Phrase – the key to your blockchain wallet. Should not be disclosed to anybody. If disclosed you will be hacked. Whitepaper / Litepaper / Road Map - written explanation of a project. Whitelist – mythical invitation to be the first to mint a new project and not have to participate in a gas war with the plebes. WAGMI – when am I gunna make it? When is this project that I just invested in going to make me lots of eth? Web3 - a new version of the World Wide Web based on blockchain and incorporating decentralisation and token-based economics (tokenomics). MORE TO COME……
When an expert witness is not required in an insolvent trading claim – the case of Treloar Constructions v Brian McMillan
Tue Oct 4Industry Insights

When an expert witness is not required in an insolvent trading claim – the case of Treloar Constructions v Brian McMillan

A number of issues may prohibit the prosecution, or defence, of insolvent trading claims in the courts. One is cost. It’s sometimes assumed, in such cases, that it’s mandatory to engage the services of a forensic accounting professional to produce a formal expert witness report. The expense of such reports can be high – in complex cases, in fact, they may amount to a seven-figure sum. This shouldn’t, however, prevent people in such situations from seeking expert guidance. They may find that a formal report is not always required in every instance. Consider the case of Treloar Constructions v Brian McMillan.
McMillan seeks our help Brian McMillan is a businessman who established a motor vehicle dealership, McMillan Prestige Pty Ltd, that engaged Treloar Constructions Pty Ltd in late 2005 to build a show room in the Sydney suburb of Five Dock. McMillan believed he had an agreement to represent Volkswagen on the site and that the latter would contribute to the show room construction costs. However, Volkswagen allegedly reneged on the arrangement and chose an alternative representative. This caused problems in McMillan’s business and he was eventually unable to pay Treloar. Many years after the demise of McMillan’s company, Treloar decided to sue McMillan for insolvent trading. Treloar claimed that McMillan knew his business couldn’t pay its debts when he engaged Treloar for the show room building project. That’s when McMillan approached BRI Ferrier.
Running out of time McMillan came to us only three weeks before the case was due to be heard. His solicitor had also withdrawn due to personal reasons. Treloar had engaged an expert witness to provide a forensic accounting report that supported their claim. This report argued that McMillan’s company was insolvent when it engaged Treloar, and that McMillan knew about it at the time. McMillan, therefore, asked BRI Ferrier if we could provide a report in reply. We responded by first recommending a legal firm, Somerset Ryckmans, to represent him in the case. We also indicated that there was not enough time to produce a report in response to the other side’s expert. In any case, the potential cost would undoubtedly have been prohibitive. However, we indicated that there were many issues with Treloar’s expert witness report, and that a competent barrister should be able to discredit it. Without producing a formal counter-report, we sent Somerset Ryckmans a list of the problems we saw in the report. This was enough to enable McMillan to win the case.
How McMillan won There were two main reasons the court judged in favour of McMillan. First, the creditor couldn’t prove there was a debt due for payment. Second, the court didn’t accept the expert’s report and therefore determined the plaintiff couldn’t prove McMillan’s company was insolvent at the time it incurred the debts alleged by Treloar. McMillan’s barrister did well in picking apart the report based on the comments BRI Ferrier had sent to Somerset Ryckmans. In fact, many of these comments were reflected in the court’s judgement.
The judgement The court determined that Treloar’s expert witness report was seriously flawed. Some of the assumptions the expert witness had made were incorrect, and some of the tables and figures upon which he rested his analysis were either wrong or unreliable. Treloar’s expert witness was brought entirely unstuck by the combination of a skilful cross-examination, glaring deficiencies in the material with which he was armed, and his occasional ventures into speculation. Despite the lack of contrary expert opinion, the court did not accept the expert witness’s flawed opinion nor his flawed report. In the words of the judgement, “even had he had the best will in the world, he lacked sufficient information to complete a proper cash flow test, and offered only rather ineffectual, and in many ways erroneous, analyses of a series of inconclusive indicia. The result is an unfortunate combination of speculation and omission.”
Why professional guidance is worthwhile This case suggests that, in a defence against an insolvent trading claim, it’s not always necessary to provide an expert’s report in reply. However, it’s still advisable to seek professional guidance from a forensic accounting expert. A reputable professional may be able to use their expertise to achieve a positive result without the cost of a formal report. At the very least, they’ll be able to provide a recommendation either way. You can only make the right decision if you approach the right expert and ask the relevant questions. Download this industry insight.
ATO flexing its new(ish) muscles
Wed Sep 11Industry Insights

ATO flexing its new(ish) muscles

The ATO has taken some time to reveal their new powers to recover debts under the new director penalty notice (DPN) regime. The new regime came into effect in June 2012. Initially it appeared that the ATO was reluctant to exercise its new powers. It now appears that the grace period has ended, and the ATO has begun to pump out penalty notices Previous regime Under the previous DPN regime, company directors could be personally liable for unpaid PAYG tax liability. However, the ATO could not commence recovery proceedings against the director for the company’s unremitted PAYG until it had served a DPN on the director. In order to avoid personal liability, directors had to take one of the following courses of action within 21 days of service of a DPN:
  • Payment of the liability;
  • Appointing an administrator to the company; or
  • Appointing a liquidator to the company.
New Regime Under the new DPN regime, the ATO will still be prevented from commencing recovery proceedings against the director until it has served a DPN. However, where PAYG and superannuation remain unreported and unpaid within 3 months after the due date for payment, then the director cannot avoid personal liability by placing the company into administration or liquidation. For example, Alex and Jess are directors of Fresh Nuts Co, which is required to pay amounts withheld under the PAYG withholding provisions to the ATO on a quarterly basis. During the March quarter, Fresh Nuts Co withholds $6,000 from payments made to its employees. Fresh Nuts Co fails to report and pay any of the withheld amounts to the ATO by the due date (i.e. 28 April). From that day the ATO is entitled to serve a DPN, making Alex and Jess personal liable to the penalty but can be avoided by either paying the liability, appointing an administrator, or appointing a liquidator. If Fresh Nuts Co fails to report and pay any of the withheld amounts to the ATO within three months after the due date (i.e. by 28 July), the ATO is entitled to serve a DPN, making them personally liable, but this time, the only way they can avoid personal liability is by causing the company to pay the amounts withheld. Subsequently reporting the debt (i.e. three months and one day after the debt became payable) will not have any effect. A new director can also become liable for unpaid ATO debts preceding their appointment. If a company has not paid or reported its PAYG or SGC liability to the ATO within three months after the payments became due, then the new director will become personally liable for those debts 30 days after their appointment Our view For the first year of operation of the new regime we observed an increasing number of DPNs being issued by the ATO for unpaid PAYG and SGC liability, even after the company was placed into liquidation. We also observed that some directors have not kept their registered addresses up-to-date on ASIC's record and a DPN delivered to an old address is valid. It is important to note that the 21 days notice is taken to be given to the director at the time the ATO “leaves or posts it” In some instances, the ATO has issued garnishee notices to third parties (e.g. a bank, or someone who owes money to the director’s company) requiring them to pay all or part of that money to the ATO. No debt is too small to attract the ATO’s attention. We expect the number of DPNs issued to continue to increase as the ATO ramps up training of its staff and automates the DPN process. Directors must be fully aware of the financial position of their company. This means taking all reasonable steps to take prompt action to avoid or mitigate personal liability and more importantly ensures that the company does not incur financial commitments that it cannot meet What should directors do? Here are our top tips to avoid personal liability:
  1. Report on time – even if the debts cannot be paid, it is prudent that the liabilities are reported on time. Directors need to ensure they report PAYG tax and SGC liability within three months of them becoming due. This reserves the rights and options available to directors to avoid personal liability.
  2. Consider a payment plan. If you cannot pay, then consider negotiating a realistic payment proposal with the ATO if the liabilities are unpaid and unreported beyond three months after the due date.
  3. Reconsider the priority of creditor payments. Directors need to ensure that PAYG and superannuation debts are paid as promptly as possible.
  4. Undertake due diligence to ascertain the PAYG and superannuation liability position before accepting appointment as director. New directors can be deemed liable for debts incurred before their appointment after 30 days.
  5. Ensure your company’s registered address details are up to date on ASIC's record. DPNs will be validly served if they are posted to the registered address as listed with ASIC, in some instances, to the accountant or tax agent’s address.
  6. Consult with an insolvency specialist. If the company has cash flow issues, then there are provisions in the Corporations Act which can be utilised to rescue your company by implementing arrangements with creditors. There are options other than liquidation
BRI Ferrier is a leading Australia-wide network of independent reconstruction, turnaround and insolvency firms. BRI Ferrier has extensive experience advising on matters relating to penalty notices. If you receive a DPN from the ATO, please contact us to discuss your options.