Ally Fashion - Case Update

The Supreme Court of New South Wales has rejected an attempt by the sole shareholder of Ally Fashion to disrupt the company’s liquidation and instead have voluntary administrators appointed.

The Australian fast fashion brand was placed into liquidation on 28 February on application by landlord Ginninderra Properties. Jeffrey Marsden and Duncan Clubb of BDO were appointed liquidators.

Shortly thereafter, DDT Management Pty Ltd and David Dai brought an application seeking to have administrators appointed and to have the liquidation terminated if a DOCA was executed. David Dai is the sole director and shareholder of Ally Fashion, while DDT is a major unsecured creditor of the company, claiming a debt of over $46.1 million for unpaid invoices related to clothing supplied. DDT is owned by another member of the Dai family.

Mr Dai’s DOCA proposal involved upfront funding of $500,000 and longer-term contributions totalling $3.6 million tied to uncertain future trading, backed by security “to be provided by the company”. Significantly, the DOCA would return management control to Mr Dai after the initial $500,000 payment and restrict the administrators from pursuing recovery actions.

The Court rejected the application, finding that the liquidators had made a reasonable, commercially sound decision not to appoint administrators at this early stage (only three weeks into the liquidation). The Court emphasised that it was still open to the liquidators to appoint administrators in the future should the appropriate circumstances arise.

The Court also concluded that the proposed DOCA was too speculative and underdeveloped. There were significant doubts about the company’s capacity to fund the contributions, especially given its substantial debts, uncertain security, and Mr. Dai’s prior management history, which included possible breaches of directors’ duties.

Accordingly, the Court held it would be inappropriate to compel the liquidators to appoint administrators at this stage. The application was dismissed with costs awarded to the liquidators.

Read the decision here.

Professionals involved:

• John Anderson of Eight Selborne (instructed by Dentons) for the liquidators

• David Stack of PG Hely Chambers (instructed by Piper Alderman) for DDT Management and David Dai