Employees, contractors in limbo as Scott’s transport group enters liquidation

Employees, contractors in limbo as Scott’s transport group enters liquidation

Scott’s Refrigerated Logistics is in liquidation following a vote at a meeting of creditors on Monday afternoon.

Key points:

  • Creditors have voted to liquidate Scott’s Refrigerated Logistics
  • Administrators found increasing reliance on contractors contributed to the group’s failure
  • The federal government will cover some employees’ unpaid wages, but contractors are not eligible for the same support

McGrath Nicol administrator Shaun Fraser said winding up all six of the intertwined companies that formed the Scott’s group was the only viable way forward.

“Really, the only option available to creditors is to vote to place the companies into liquidation,” he said.

Creditors heard the group was recording monthly losses of $8 million on average from 2021 onwards.

It recorded a loss of $36 million in the 2021–22 financial year, a loss of $87 million in 2022–23, and $62 million in the financial year to date. 

By January 2023, the balance sheet reported a deficiency of net assets of $92 million.

One former employee told the meeting he had been put into “severe financial hardship” by the group’s collapse.

Employees, contractors unpaid

The creditors’ meeting heard the total value of employee claims was estimated to be more than $35 million.

Scott’s group employees may apply to claim unpaid wages and leave entitlements through the Commonwealth’s Fair Entitlements Guarantee (FEG). 

McGrath Nicol has been appointed as liquidator and will verify the value of each employee’s FEG claim.

But it’s a different story for contractors, who are considered unsecured creditors.

The administrators explained any return on debts owed to contractors would be subject to asset recoveries.

Some contractors are owed debts of $200,000, according to the Transport Workers Union. 

“Some of them may not see a cent,” assistant national secretary Nick McIntosh said.

Scott’s Refrigerated Logistics employed about 1,500 people nationally with depots in regional towns, including Wodonga.(ABC Goulburn Murray: Callum Marshall)

Inflation pressures, intense competition

The administrators attributed the group’s failure in part due to its increased reliance on contractors and subcontractor labour, which was more expensive. 

McGrath Nicol also noted insufficient investment in the transport fleet, insufficient cash flow, and a reliance on external funding to support its operating losses. 

Intense market competition, substantial overheads, and an inability to pass on the costs of inflation to customers contributed to the pressures the companies faced, according to the administrators.

The receivers at Korda Mentha took control of the company and its assets with the intention of selling the businesses but were not able to find a buyer. 

They are now attempting to sell “sizeable packages of assets” from the group with any remaining assets to be consolidated and auctioned at locations nationally. 

Food safety concerns 

Mr McIntosh said there was concern that frozen produce was being transported unsafely in the wake of the collapse.

He said suppliers were “desperate” to offload the food.

“We are hearing some disturbing reports,” Mr McIntosh said.

“We’re not confident at this point in time that supply chains are acting in the way that they should in terms of making sure operators have got the proper equipment, the proper safety processes.”

Scott’s had left a gap in the market, he said, and it would take another major company “a lot of time and money” to fill it. 

Nick McIntosh says the whole transport industry is suffering because of “uncommercial, unsustainable contracts”.(Supplied: Transport Workers Union)

“How can you replace a company that has 1,500 employees and very specialised equipment — overnight, essentially — with a whole different series of operators?” Mr McIntosh said.

Calls to lift standards

The industry is being squeezed from two directions, according to the Transport Workers Union.

Mr McIntosh said those at the top of supply chains “dictated” commercial arrangements, while the gig economy was lowering the bar for pay and conditions even further.

The union was calling for an independent body to set minimum standards for the transport sector.

“The first thing it should do is mandate that all companies and owner drivers are able to receive payment for the work they do within at least 30 days,” Mr McIntosh said. 

“We desperately need reform to prevent this from happening in the future.”

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