DIRECTORS of the collapsed Mowbray College may face legal action after it was revealed the private school may have traded while insolvent by incurring up to $12 million in debt.
In a letter seen by Fairfax, liquidator Jim Downey said his preliminary view was that Mowbray College may have been insolvent since 2007.
He said he and the school may have a claim against directors and officers for breaching their duty under the Corporations Act to prevent Mowbray from trading while insolvent.
Up to 1200 students and 200 staff were shocked to learn in June their school would close within days.
The prep to year 12 school received almost $15 million from the state and federal governments in 2010, according to the My School website.
Mr Downey said the directors may also face legal claims in relation to family deposits, prepaid school fees and expenditure on a joint venture with an international school in China.
The potential legal action comes as the federal and state governments have vowed to do more to prevent the closure of private schools, including minimum requirements for ongoing financial viability.
Mowbray College recorded losses every year from 2007 to 2011 apart from 2010, totalling almost $5 million.
Mr Downey said a number of facts and events indicated Mowbray traded while insolvent.
As early as March 2009, an internal email between directors said Mowbray was facing severe financial difficulties and would be insolvent within four months unless there was a “radical change”.
In June 2009, director John Wallace said in an email to director Steven Howard: “If we don’t get the savings . . . then sustaining the college financially will prove impossible without borrowing more money (a big ‘if’ given our current debt level and the NAB are aware our transport loses [sic] are one of the two elephants in the tent, the other being our total wage costs/teacher to student ratios)”.
During 2011-12, business manager Nicole Bradshaw consistently queried whether Mowbray was trading while insolvent. She was told not to worry.
— Jewel Topsfield, The Age
