The operator of a Sunshine Coast strawberry farming business that went into liquidation has been ordered to pay more than $1.1 million to a labour hire company.
In a Supreme Court decision delivered on December 12 after hearings in May and July, Judge John Muir found in favour of Star Recruitment Service Pty Ltd, which supplied workers to pick and pack strawberries on the farm near the Glass House Mountains.
Star entered into a service agreement with GG Group (QLD) Pty Ltd in February 2020 to provide workers to the farm but claimed more than $1.63 million in invoices went unpaid between August 2020 and November 2021, before the company went into liquidation in December 2021.
The proceedings concerned Star’s claim that GG Group, directed by Leonard Smith, had been trading while insolvent when the debts were incurred.
Mr Smith disputed both liability and the amount claimed on several grounds.
Court documents state that GG Group had been growing and supplying strawberries from about 2017 until the appointment of liquidators, and that Mr Smith had about 35 years’ experience in the industry.
The company did not own real property, instead leasing land from SS Group Pty Ltd, of which Mr Smith was also the sole director.
It operated its business by acquiring strawberry runners, which it planted, nurtured, picked and packed at the property, and purchased and leased vehicles and equipment through financing arrangements.
About two-thirds of the strawberry runners used by the company were funded through South Australian strawberry supplier Ceravolo Orchids Pty Ltd, which in return marketed and sold the harvested crop, mostly to Coles supermarkets.
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Judge Muir noted that strawberry harvesting in south-east Queensland runs from May to November and is highly labour-intensive, requiring a large seasonal workforce.
“The defendant (Mr Smith)’s evidence, which I accept, is that it is difficult to hire workers directly to pick and pack a strawberry crop across the season,” the ruling stated.
The court documents state that Star employs about 70 people, mainly young tourists on working holiday visas from diverse international backgrounds.
In November 2021 Star issued a formal demand for payment of outstanding invoices totalling $1,632,162.07, before the liquidator was appointed in December that year.
The liquidator was told that the company’s failure was due to rising labour costs during the pandemic, insufficient funding facilities and poor-quality strawberry runners not arriving on time.
The liquidator’s preliminary investigations concluded the company appeared to have been insolvent from at least July 2020 until its liquidation in December 2021, with liabilities exceeding assets by about $5.5 million.
The court found invoices totalling $523,720.36 were incurred during a “safe harbour” period during the pandemic in 2020 and were excluded from the insolvent trading claim. However, the remaining invoices, totalling $1,108,441.71, were incurred outside that period.
Judge Muir found that by the start of 2021, GG Group was unable to pay its debts as they fell due, noting that more than 60 per cent of liabilities were overdue by more than 90 days.
Mr Smith’s defence argued that he had reasonable grounds to expect the company was and would remain solvent.
But Judge Muir concluded that Mr Smith knew, or should have known, the company was insolvent when the remaining debts were incurred, and that text messages exchanged throughout 2021 demonstrated he was “acutely aware” of the company’s financial position.
The court also rejected arguments that Star caused losses through rejected strawberries, finding the company retained ultimate control over packing and quality decisions.
“The defendant accepts that he told the workers that they could put some substandard fruit into punnets and that there was some latitude in specifications, given the level of demand from supermarkets. This concession again demonstrates the extent of the control the company had over the packing process,” the ruling states.
Judge Muir awarded judgment to Star of $1,108,441.71 plus interest of $321,422.28 and costs.
