E-store may have traded while insolvent: Administrator - News - Business

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This story was printed from ZDNet Australia.
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E-store may have traded while insolvent: Administrator

By Andrew Colley, 0
April 08, 2003
URL: http://www.zdnet.com.au/news/business/soa/E-store-may-have-traded-while-insolvent-Administrator/0,139023166,120273519,00.htm

Online retailer E-store has temporarily ceased trading on the advice of its administrator, which yesterday revealed the company may have been trading while insolvent and is likely to enter liquidation tomorrow.

Last month, after receiving a steady stream of complaints from E-store customers with outstanding orders, ZDNet Australia reported that the online store had not been meeting scheduled monthly repayments of AU$450,000 due since it entered administration in October 2001.

The NSW Department of Fair Trading also revealed in March it had been diverting complaints concerning E-store to one of the Internet trader's senior executives since early January.

At the time, E-store told NSW Fair Trading it had been struggling with a backlog of Christmas orders.

However, E-store ceased trading late last week, closing its Web site following advice from administrator, Star Dean-Willcocks' Ian Purchas. Purchas yesterday explained his advice to the company.

"There's a possibility that [E-store] has been trading while insolvent but I can't comment on that in too much detail until I've had an opportunity to investigate the affairs of the company," he said. "However the company has ceased to trade temporarily based on my recommendation that it consider doing so in recognition of its obligations to the directors not to trade while insolvent".

At this stage it is not known whether the Australian Securities and Investment Commission (ASIC) will investigate E-store's activities. Purchas said Star Dean-Willcocks had lodged a report on E-store with ASIC as required by law, but yesterday a spokesperson for the regulator declined to comment on whether it would be the basis for further investigation.

The situation has placed the NSW Department of Fair Trading in a difficult position over recent months. The regulator quietly began acting on consumer complaints concerning E-store in January, but some consumers have reported having their credit cards debited as late as February for thousands of dollars worth of goods the company was yet to deliver.

One customer who contacted ZDNet Australia placed two orders with the company around September last year, but secured a refund after waiting more than seven weeks for his order to be fulfilled.

Another angry customer wrote to Star Dean-Willcocks after he investigated the progress of his order with one of E-store's suppliers and discovered that the online trader was unable to pay the supplier for the goods he had paid for months earlier.

Most of the recent batch of complaints added no variation on the type that has chequered the online trader's history. However, provisions of the Fair Trading Act restrain NSW Fair Trading from naming companies publicly unless it can be proved that they have acted illegally.

Fair Trading was only able to advise disgruntled E-store customers to attempt to have their credit card transactions with the company reversed.

The situation could also rekindle controversy around ASIC and the administrators' decision to allow the company to attempt to trade its way out of debt. In 1998, ASIC had placed a ban on E-store's director Gerard Farley, stopping him from trading for four years.