In the matter of matter of Mosaic Brands Limited (admins apptd) (recs and mgrs apptd)

1. [1]

   By Originating Process filed on 12 June 2025, Mr Hardy and others in their capacity as joint and several receivers and managers (“Receivers”) of Mosaic Brands Ltd (admins apptd) (recs and mgrs apptd) (“Mosaic Brands”) and other companies within the Mosaic Group (“Mosaic Companies”) apply for declaratory or alternative relief. They seek declarations that, for the purposes of ss 433, 561 and 556 of the Corporations Act 2001 (Cth) (“Act”), Mosaic Brands or alternatively another company, Noni B Holdings Pty Ltd (admins apptd) (recs and mgrs apptd) (“Noni B”) is the employer of all of the employees (within the meaning of s 556(2) of the Act) (“Employees”) of the Mosaic Group. Alternatively, the Receivers seek a direction under s 424 of the Act that they are justified in treating Mosaic Brands or alternatively Noni B as the employer of the Employees. The Receivers also seek, to the extent necessary, an order granting leave from them to begin and proceed with this application.

2. [2]

   The Mosaic Companies are the First to Thirteenth Defendants to the proceedings and were previously under voluntary administration but have since transitioned into liquidation. They have filed, by their liquidators, a submitting appearance in the proceedings.

3. [3]

   The Fourteenth Defendant, HUK 137 Limited (“HUK”) is a company incorporated in the United Kingdom and is the senior secured creditor of the Mosaic Group. As at the date of the Receivers’ appointment on 28 October 2024, the principal debt owing to HUK (not including interest, costs, fees or other amounts) was approximately $36 million. HUK has also filed a submitting appearance.

4. [4]

   The Fifteenth Defendant, Melbourne Securities Corporation Ltd (“Melbourne Securities”) is the trustee of the Mosaic Brands Limited Trust (“Note Trust”), being a note trust for redeemable, secured convertible notes issued to noteholders of Mosaic Group. Melbourne Securities also holds security over the assets of the Mosaic Group (other than the those of the Thirteenth Defendant) but its security ranks behind that of HUK. Melbourne Securities has been served with the Originating Process (and has also been provided with the Court’s procedural directions allocating a hearing date) but has taken no steps in the proceeding.

5. [5]

   The Commonwealth of Australia, acting through the Department of Employment and Workplace Relations which administers the Fair Entitlements Guarantee (“FEG”) scheme, was granted leave under r 2.13 of the Supreme Court (Corporations) Rules 1999 (NSW) to be heard in the proceedings without being joined as a party. It supports the making of a declaration that Mosaic Brands is the true employer of the Employees.

6. [6]

   I have drawn on the helpful submissions of Mr Krochmalik, who appears for the Receivers, in this judgment.

Background facts and affidavit evidence

1. [7]

   By way of background, Mosaic Brands is the ultimate parent company of the Mosaic Companies. Mosaic Brands is a public company and its shares are publicly listed on the Australian Securities Exchange, although trading in the shares has been suspended since August 2024. The Mosaic Group previously owned and operated a fashion retail business predominantly focusing on women’s fashion and apparel with nine retail clothing brands and a network of 663 stores across Australia and New Zealand as well as e-commerce platforms (“Business”). The evidence led by the Receivers indicates, and I accept for the purposes of this application, that the management activities in respect of the affairs of the Mosaic Group, including directing the activities of the Employees, were conducted by, or at least overseen by, the board of Mosaic Brands.

2. [8]

   On 3 February 2025, following an unsuccessful attempt to sell the Business, the Receivers announced that all of the stores operated by the Business would be progressively closed. That process was completed on 10 April 2025 and the employment of most of the Employees ceased in consequence of the progressive cessation of the Business. The Receivers have, since their appointment, realised the assets of the Mosaic Group, principally in the form of inventory sold through the existing retail store network and online platforms. The net amount realised from sales of inventory during the receivership totalled about $205 million, and the Receivers have formed the view, based on the Mosaic Group’s books and records, that Mosaic Brands was the entity that owned all of the inventory. I refer to the relevant affidavit evidence below. The inventory realisations largely, if not exclusively, comprise realisations of circulating assets and the Receivers recognise that those realisations must be applied first to pay certain employee priority claims (at least if Employees are employed by Mosaic Brands) before they can be distributed to the secured creditors, namely HUK and noteholders, by reason of s 433(3)(c) of the Act.

3. [9]

   The Receivers’ estimate of the amount of employee entitlements owed to the Employees is $21,270,176.49. A substantial amount has already been paid by the Commonwealth under the FEG scheme, and the Commonwealth is now subrogated to the rights of those of the Employees whose entitlements it has paid. The Receivers note that not all of the Employees will be eligible to access the FEG scheme to pay their entitlements in full or at all.

4. [10]

   Mr Krochmalik helpfully summarises the issue which arises in these proceedings, consistent with the affidavit evidence led by the Receivers which I summarise below, as follows:

5. [11]

   The Receivers read the affidavit dated 12 June 2025 of Ms Coneyworth, who is one of the Receivers. Ms Coneyworth refers to the appointment of the receivers and managers to the assets and undertaking of each of the Mosaic Companies by HUK, after voluntary administrators were appointed to the Mosaic Companies. She describes the Mosaic Companies and the Business, which I have addressed above. She also refers to the Facility Agreement and General Security Deed between the Mosaic Companies and HUK and to a Convertible Note Trust Deed between Mosaic Brands and Melbourne Securities as trustee of the Note Trust. She also outlines the progress of the receivership and the administration and the steps which have been taken in respect of store closures, leases and the realisation of the Mosaic Group’s assets, including its inventory as noted above. Ms Coneyworth notes that nearly $205 million has been realised from the sale of inventory, although significant costs were incurred to achieve that result.

6. [12]

   Ms Coneyworth’s evidence (Coneyworth [37]) is that no separate financial accounts were prepared, or tax lodgements made, for individual companies within the Mosaic Group, and that management reporting was done by different brands without regard to the underlying legal entities conducting the business of each brand. She also notes that substantially all, or at least the majority of, the Mosaic Group’s trading, treasury and invoicing was undertaken by the parent entity, Mosaic Brands (Coneyworth [46]). She refers (Coneyworth [48]) to the Receivers’ best estimate of the amount of employee entitlements owed to Employees as in excess of approximately $21.3 million and notes the amount that had then been paid out by the Commonwealth under the FEG scheme, which has subsequently significantly increased.

7. [13]

   Ms Coneyworth also observes (Coneyworth [49]) that, as I also noted above:

8. [14]

   Ms Coneyworth also addresses (Coneyworth [51]ff) the formal employment arrangements in respect of Employees and notes that Noni B was the named employer of all of the Employees (other than two members of the executive teams which were employed by Mosaic Brands) following a restructuring of employment arrangements in mid-2022 which reduced the number of employing entities from four companies (including Noni B, which then already employed the majority of Employees) to Noni B. Ms Coneyworth also refers (Coneyworth [55]) to employment contracts and other documents such as superannuation standard choice forms which reflect that position. She also notes that the employment contracts were on the letterhead of Mosaic Brands but expressly stated that they were offers of employment with Noni B on specified terms and conditions.

9. [15]

   Ms Coneyworth also notes (Coneyworth [61]) that Mosaic Brands paid all employee related obligations (including wages, workers compensation premiums and superannuation) directly from a bank account held in its name but titled “Noni B” and that Noni B itself had no bank account and did not carry on any business activities other than its role of employer of record and as the lessee under certain real property leases for stores operated by the Mosaic Group. Ms Coneyworth also notes (Coneyworth [64]) that Noni B did not generate any revenue, including in respect of Employees undertaking work for other entities within the Mosaic Group; no inter-company liability was recorded and no recharge or payment by or to Noni B was made in respect of Employee related payments; and no management fee or other payment was made by other entities in the Mosaic Group on account of the employment services carried out by Noni B. Importantly, Ms Coneyworth recognises that:

10. [16]

    Ms Coneyworth also notes (Coneyworth [66]) that Noni B held relevant workers compensation policies with insurers in each State although all workers compensation premium payments were made by Mosaic Brands. She also observes (Coneyworth [77]ff) that Mosaic Brands had responsibility for all major decisions with regard to the Employees; remuneration was reviewed by the remuneration sub-committee of the Mosaic Brands board and approved by the Mosaic Brands board, in respect of remuneration of the executive leadership team; and other Employees’ remuneration was reviewed as part of the budget process approved by the Mosaic Brands board. Payslips recorded the relevant employer as Noni B, but were generated by a payroll system which was paid for by Mosaic Brands (Coneyworth [88]) and communications with Employees were either sent by Mosaic Brands or by a specific brand. Ms Coneyworth also refers to one occasion on which an employee brought proceedings against Mosaic Brands under the Fair Work Act 2009 (Cth) in the Federal Circuit and Family Court of Australia and Mosaic Brands there admitted that it was her employer, rather than contending that Noni B was the employing entity. Ms Coneyworth also addressed (Coneyworth [98]ff) several groupwide employment policies which were maintained by Mosaic Brands rather than by Noni B.

11. [17]

    In the light of these matters, Ms Coneyworth expresses the view (Coneyworth [104]) that:

12. [18]

    Ms Coneyworth also expresses the view (Coneyworth [105]), by reference to the facts outlined in her affidavit to which I have referred above, that:

13. [19]

    To that extent, the Receivers support an order that the Employees were in fact employed by Mosaic Brands, although they recognise the possibility that the Court could reach the contrary conclusion and (as I noted above) seek alternative orders to confirm the position that the Employees were employed either by Mosaic Brands or by Noni B.

14. [20]

    The Receivers also read other affidavits, largely directed to notice of the proceedings to affected parties. The Receivers also tender relevant documents, including a Convertible Note Trust Deed between Mosaic Brands and Melbourne Securities (Ex A1, 305). They tender examples of correspondence with Employees at the time that Noni B became the named employer in mid-June 2022 which, as I noted above, was sent on Mosaic Brands’ letterhead but expressly referred to Noni B as the employing entity (for example, Ex A1, 584). Importantly, that correspondence included a “Frequently asked question” as to “how will this change affect my employment?” to which the answer was:

15. [21]

    The Receivers also tender contracts of employment for different categories of staff, also on Mosaic Brands’ letterhead but referring to employment with Noni B (for example, Ex A1, 585); superannuation standard choice forms which referred to Noni B as the relevant employer (Ex A1, 655); workers compensation insurance policies in the name of Noni B (for example, Ex A1, 688); and the pleadings in the proceedings in which Mosaic Brands admitted that it was the employer of an Employee, as noted above (for example, Ex A1, 826) and relevant policies on the letterhead of Mosaic Brands (for example, Ex A1, 877).

16. [22]

    The Commonwealth reads the affidavit dated 18 July 2025 of Mr Carr, which refers to the claims made by Employees under the FEG scheme and the amounts paid out by the Commonwealth to date under that scheme and the prospect that further claims will be made.

Leave to commence and continue the proceedings

1. [23]

   The Receivers seek leave under s 500(2) of the Act to bring the proceeding against the Mosaic Companies where they are in liquidation. Mr Krochmalik submits, and I accept, the Mosaic Companies’ interests are affected by the relief sought and it is necessary that they be joined to the proceedings so as to be bound by the Court’s orders. He also submits, and I also accept, that such leave should be granted where the proceeding seeks declaratory relief and not a monetary judgment; the issues could not be resolved by the proof of debt procedure; a determination as to whether Mosaic Group or Noni B is the employer of the Employees will be of assistance to the Mosaic Group and the liquidators in the conduct of the winding up; and the grant of leave sought is not opposed by the liquidators. I accept that such leave can be granted nunc pro tunc and I grant that leave on that basis.

Applicable principles in determining the “true employer” of the Employees

1. [24]

   The case law establishes that whether the employer of the Employees was Mosaic Brands or Noni B, for the purposes of Pt 5.6 of the Act, is to be determined as a matter of substance and the totality of the relationship between the parties should be considered: Pitcher v Langford (1991) 23 NSWLR 142 at 161 (“Pitcher v Langford”); Golden Plains Fodder Australia Pty Ltd v Millard (2007) 99 SASR 461; [2007] SASC 391 at [33]; Sturesteps v McGrath [2010] NSWSC 169 at [14]–[19] (“Sturesteps”). A person may be an employee of a company even where he or she has an employment contract with a different company in the same corporate group. The Courts have also accepted that the true employer of an employee is not necessarily the company nominated as the employer in the written contract of employment.

2. [25]

   In Shaw v Bindaree Beef Pty Ltd [2007] NSWCA 125 (“Bindaree Beef”) at [59], Giles JA (with whom Spigelman CJ agreed) referred to Pitcher v Langford and observed that:

3. [26]

   In Sturesteps at [19], Brereton J held that, “taking into account all the indicia”, the true employer of an employee was the company that paid the remuneration and issued group certificates. In Gothard (recs & mgrs of AFG Pty Ltd) (in liq) v Davey (2010) 80 ACSR 56; [2010] FCA 1163 (“Gothard”) at [52], Edmonds J observed that in:

4. [27]

   In Re DH International Pty Ltd (in liq); Challis v Hoffmann (2017) 121 ACSR 585; [2017] NSWSC 870 at [79], Gleeson JA observed that:

5. [28]

   In Re Branded Media Holdings Pty Limited (in liquidation); Re Brand New Media Pty Ltd (subject to a Deed of Company Arrangement) [2020] NSWSC 557 (“Branded Media”), where the relevant employment contracts nominated a holding company as the employer and there was no evidence of any written contract with the another company, I held (at [31]) that “the documentation of the relationship [was] consistent with [the holding company] being an ‘employer of record’ and less significant in identifying the true employer than the fact that [the other company] incurred the costs of paying employees for entities across the group”.

6. [29]

   In Re Spitfire Corporation Ltd (in liq) and Aspirio Pty Ltd (in liq) (2022) 160 ACSR 394; [2022] NSWSC 340 (“Spitfire”) on which I have partly drawn for this summary, I accepted (at [70]) Counsel’s submission that, while cases turn on their own facts, matters that are relevant to assessing the identity of the true employer relevantly include which company paid the employees' remuneration; whether the employer of record had assets or revenue from which it could meet employees’ entitlements; whether the employer of record had any purpose other than to be an employer of record; and whether the employer of record exercised practical and legal control and direction over the employees, although this will be given limited weight where the putative employers are part of the same corporate group: Textile Footwear and Clothing Union of Australia v Bellechic Pty Ltd [1998] FCA 1465; Fair Work Ombudsman v Ramsey Food Processing Pty Ltd (2011) 198 FCR 174; [2011] FCA 1176 (“Ramsey”) at [79]; Sturesteps at [19]; Gothard at [60], [184], [200]; Bindaree Beef at [60(f)]; Branded Media at [31].

7. [30]

   I also have regard to the observation of Buchanan J in Ramsey at [78] that:

8. [31]

   I followed that approach in Branded Media at [26], where I noted that:

9. [32]

   Mr Krochmalik also refers to Resilient Investment Group Pty Ltd v Barnet and Hodgkinson as liquidators of Spitfire Corporation Limited (in liq) (2023) 111 NSWLR 446; [2023] NSWCA 118 at [158]–[172] (“Resilient”) (on appeal from my decision in Spitfire), where Gleeson JA (with whom White and Brereton JJA agreed) held that the recent High Court cases did not require a departure from the established principles as to the determination of the identity of the actual employer entity in an employer-employee relationship. His Honour there observed (at [166]ff) that there is no inconsistency between the application of orthodox contractual principles in determining the character of the parties’ relationship which is the subject of a written agreement and the application of the principles of agency to determine the parties to a contract, and recognised the potential application of the doctrine of undisclosed principal in this context: Keighley, Maxsted & Co v Durant [1901] AC 240 at 261; Maynegrain Pty Ltd v Compafina Bank [1982] 2 NSWLR 141 at 150–151; Siu Yin Kwan v Eastern Insurance Co Ltd [1994] 2 AC 199 at 207.

Submissions and determination

1. [33]

   Mr Krochmalik helpfully summarises the evidence which emerges from the affidavit evidence to which I have address above in submissions. To the best of the Receivers’ knowledge, Noni B was the “named employer” of almost all of the Employees in the employment agreements, following consolidation of employment arrangements under that company in mid-2022, which I noted above. The employment contract for each employee (other than two members of the executive leadership team who had employment contracts with Mosaic Brands) were on Mosaic Brands’ letterhead but referred to an offer of employment with Noni B. Standard superannuation forms also generally referred to Noni B as the employer entity of the Employees. Other employment related documents such as the pre-employment health forms and an employee handbook were also on the Mosaic Brands letterhead. Various employment related policies have been identified by the Receivers and all of them are on Mosaic Brands letterhead and refer to Mosaic Brands as the entity responsible for employment and associated decisions. As I noted above, with reference to Ms Coneyworth’s affidavit, payslips indicated that the employing entity of the Employees was Noni B, although these were generated by a system paid for by Mosaic Brands.

2. [34]

   As I also noted above, with reference to Ms Coneyworth’s affidavit, Noni B had no bank account and did not carry on any business activity except for being the nominated employer of the Employees and entering into leases in respect of certain retail stores; Noni B did not generate any revenue and there is no record of it having any intercompany loans with, or liabilities owing to, the other members of the Mosaic Group. Although Noni B was the holder of the relevant workers’ compensation insurance policy, Mosaic Brands paid all employee-related liabilities from a bank account held with the ANZ Bank (which was, as I noted above, titled ‘Noni B’ but was Mosaic Brands’ bank account). Mr Krochmalik also refers to Ms Coneyworth’s evidence, which I have noted above, as to the arrangements for hiring, disciplinary and other decisions concerning Employees and the admission made by Mosaic Brands in the Federal Circuit and Family Court of Australia that it was the employer of an Employee.

3. [35]

   In summary, Mr Krochmalik submits that:

4. [36]

   Mr Krochmalik submits, and I accept, that the evidence establishes that Mosaic Brands, and not Noni B, was the employer of the Employees. As he points out, the fact that the employment contracts (and pay slips) record Noni B as the relevant employer entity is the starting point for that question and is not determinative: Resilient at [174]. The employment related policies adopted by the Mosaic Group are on Mosaic Brands letterhead (as are the employment contracts) and refer to Mosaic Brands as the employer; relevant employment decisions and strategies were set by the directors and senior management personnel of Mosaic Brands. As Mr Krochmalik recognises, the most important factor here is that relevant financial obligations with respect to the Employees’ wages and other entitlements were met, and could only be met, by the Mosaic Group, where Noni B did not carry out any business activities other than as a formal employer of record and as party to store leases; did not receive any revenue and did not have a bank account; had no intercompany arrangements to allow it to meet its liabilities; did not change any fee to any other entity in the Mosaic Group; there was no labour hire arrangement between Noni B and Mosaic Brands; and all employee payments were at made directly by Mosaic Brands itself. Mr Krochmalik also points out that the employees of the Mosaic Group undertook work that was in substance for the benefit of Mosaic Brands as the operating and revenue-generating entity.

5. [37]

   Mr Krochmalik rightly submits that, in that situation:

6. [38]

   Mr Krochmalik also submits, and I accept, that in the language of the case law, there was no intelligible business purpose, or at least no proper rational purpose, for having an employer entity that was incapable of meeting its obligations: Ramsey at [78]; Branded Media at [31]; Resilient at [178]. That arrangement is more readily understood if here, as in Resilient, Noni B was contracting as agent and that the principal with liability for the obligations to the Employees was, at all relevant times, Mosaic Brands and, in the language of the earlier cases, Mosaic Brands was the true employer of the Employees. I accept that this is, as Mr Krochmalik points out, a clearer case than Resilient or Branded Media, where there was here no relevant inter-company ledger and no evidence of money being notionally lent to Noni B to enable it to meet its obligations to employees. I accept that these matters are sufficient to establish that Mosaic Brands and not Noni B was the “true” employer of the Employees.

7. [39]

   For completeness, Ms Whittaker, with whom Mr Heard appeared for the Commonwealth, outlined the role of the Commonwealth under the FEG scheme and the matters on which the Commonwealth relies to establish that it is subrogated to the claims of the Employees in respect of circulating assets in the receivership. Ms Whittaker also submitted, in support of the Receivers’ submissions, that:

8. [40]

   Ms Whittaker also refers to the scope of s 561 of the Act, which it is not necessary to address further where there is no controversy as to its application here. She also submits that:

9. [41]

   I also accept that, as Mr Krochmalik and Ms Whittaker submit, it is appropriate that the Court grant declaratory relief to quell the potential controversy and provide certainty to the Receivers, the Mosaic Group, the liquidators, the secured creditors, and the Commonwealth as to this matter. There is plainly a real controversy as to this matter, with a significant financial impact for the interested persons, and declaratory relief will assist the Receivers to comply with their obligation to ensure that circulating asset recoveries in the receivership of Mosaic Brands are paid in priority to the Employees (or the Commonwealth insofar as it stands in their shoes) for their claims under s 556(1)(e), (g) or (h) of the Act. The fact that the secured creditors and other parties have not opposed the relief does not prevent the grant of declaratory relief: Australian Securities and Investments Commission v Hobbs (2013) 93 ACSR 421 at [31]; [2013] NSWSC 106. It will not be necessary to give directions to the Receivers where declaratory relief is given.

10. [42]

    An order is also properly made that the Plaintiffs’ costs of the proceedings should be costs in the receiverships of the Mosaic Companies.

Orders

1. [43]

   I direct the Receivers to bring in short minutes of order to give effect to this judgment as soon as practicable.