Priceclub liquidator files legal action against directors

Priceclub Operators Limited liquidator Andrew Borg Cardona has filed legal proceedings against former company directors Victor Zammit, Chris Gauci and Wallace Fino and Priceclub Holdings Limited.

The liquidator has filed two actions against the former directors: one for a declaration that the directors were guilty of fraudulent trading, and another for a finding that they continued to trade when the company was insolvent.

In the fraudulent trading case, the liquidator is asking the court to find the directors unlimitedly liable for Priceclub Operators Limited's debts.

In the wrongful trading action he is requesting the court to order that the three persons make a contribution (to be determined by the court) to the amount payable to the creditors.

The claims are based on alleged breaches of the legal obligations of the directors.

Dr Borg Cardona claimed this became apparent after the way in which the company had been managed was revealed to the liquidator during his investigation into the company's affairs.

The liquidator claimed the company was under-capitalised from the outset and the directors failed to take this into account when pursuing their business objectives.

They also grossly mismanaged the business and made false and misleading representations to creditors, who, as a result, continued to give credit even after the company was effectively insolvent.

The liquidator has also filed two actions against the holding company of the Priceclub Group, that is Priceclub Holdings Limited.

In one of the actions, the liquidator is requesting the liquidation of Priceclub Holdings Limited on the ground of insolvency; in the other he is requesting the court to 'lift the veil' and to find that the whole group of companies was responsible for the insolvency of Priceclub Operators Limited.

The liquidator submitted that it was clear from the results of his investigation that the way the group was set up meant that the revenue-generating company (Priceclub Operators Limited) did not have any significant assets.

This meant that if the holding and associated companies were not liquidated, any residual value in the assets owned by them would not be applied to the benefit of the creditors, but would go to the shareholders of those companies.

The structure, it appeared, had been created with this effect in mind, Dr Borg Cardona claimed.

The holding company also owed Priceclub Operators Limited more than Lm1 million, which it was clearly unable to repay, therefore directly establishing a situation of insolvency in respect of this company, he claimed.

The liquidator also requested the court to appoint a provisional administrator for Priceclub Holdings Limited to ensure that such assets of the group that existed would not be dissipated.

The lawsuits were prepared and signed by Dr Henri Mizzi, Dr Donatienne Gatt and Dr John Vella.