Z-Tek trades on; liquidator frustrated

Z-Tek trades on; liquidator frustrated

Former directors of computer wholesaler Z-Tek, forced into liquidation last year, have opened up yet another series of phoenix businesses, leaving liquidator Andrew Dunner and Associates to consider giving up the fight to make the former directors accountable to their creditors.

Z-Tek Pty Ltd was forced into liquidation owing several millions of dollars to its suppliers just under 12 months ago. With little financial records available and stock removed from the Z-Tek warehouse prior to his appointment, Andrew Dunner has been attempting to prove in and out of court that the many businesses the group have since established should be considered part of the fallen entity.

These businesses include Z-Tek's branch offices in each state, which are now registered as standalone businesses, as well as a slew of retail outfits that come under the banner of "IT Warehouse". As previously reported in ARN, these retail outlets have been established in Melrose Park, Adelaide City, Port Adelaide and Noarlunga in SA, as well as Preston, Bendigo and Clayton in Victoria.

ARN has learned that one of IT Warehouse's major suppliers is a wholesaler named "OTC Computer". This wholesaler operates out of the Melbourne suburb of Mulgrave and the Sydney suburb of Silverwater.

OTC Computer is selling a white-box brand called "Olympic Technology", which resellers will recognise as the brand assembled by the Z-Tek Pty Ltd business. Its director is listed as one Hui Ping Huang, the sister of Li Ping Huang who was the director of both Z-Tek Pty Ltd and Z-Tek Computer NSW. Li Ping Huang is also the wife of "Nelson" Wei Zhou, one of two Z-Tek principles jailed for defrauding the Commonwealth Government of sales tax in 2000.

For the past few months, Dunner and former Z-Tek directors have been suing and counter-suing in the Federal Court of Victoria. Dunner attempted to sue the Z-Tek directors, accusing them of breaching their fiduciary duties. The directors had counter-sued, accusing him of selling seized stock. Last week, Dunner was forced to come to a settlement of the matter out of court.

In order to prove that the many Z-Tek businesses are related and for creditors to receive any return, Dunner believes he would need to fund a public examination of the directors, accountants and related parties to Z-Tek in the Federal Court. But without indemnification from his insurers, and a price tag of $50,000 to $100,000 for such proceedings, Dunner is unlikely to be able to meet this objective.

The administrator has been advised by his solicitors not to pursue the matter since there is very little documentation to support further legal action against the directors of Z-Tek Computer Pty Ltd. Further action could result in his own practice being billed for any costs.

"I am just a practitioner trying to do something with my hands behind my back," he said. "The barrister says I have gone further than I should, and that going any further is just putting my neck in a noose."

What Dunner can rely upon is the support of the IT channel. ARN has received numerous complaints from the reseller community, baffled that individuals imprisoned for corporate offences can once again be the driving force behind a multimillion-dollar, expanding business.

Within hours of Dunner's settlement with Z-Tek, Ian Butterworth, the secretariat of the Association of Computer Dealers in South Australia, called a crisis meeting of committee members to discuss the ramifications for the market.

"The association is very conscious of what is going on," said Butterworth. "We are aware that there is a cross-pollination of directors between Z-Tek Computer Pty Ltd and all of the phoenix businesses that have risen."

Butterworth describes the whole Z-Tek saga as "an incestuous mess", with directors moving to and fro between several companies. All he can do at present is brief the committee and recommend that members place pressure on the Australian Securities and Investment Commission (ASIC) to make further investigations.

"We need to take a leading role to protect the interests of our members," he said. "But we are all in a volatile position -- it is difficult to know how to proceed."

Meanwhile, Dunner has called a meeting to update the unfortunate creditors of Z-Tek Pty Ltd on the situation. He urges the reseller community to protect their own interests by making their own complaints to ASIC. "I'm told the commission has the scope to assist people who want to provide further information to ASIC," he said.

He is also upset that vendors continue to supply the various phoenix operations with stock.

But while Z-Tek has won the first round, Dunner does not expect to give up on his creditors completely. "I'm prepared to have a crack at anything," he said.

For a complete analysis on the Z-Tek saga, see this week's issue of ARN, out now.


In the article "Z-Tek trades on, defies authorities", which features in ARN, June 26, IT Warehouse is on page 8 mistakenly referred to as "IT Wholesale". IT Wholesale is a completely unrelated business to Z-Tek and ARN apologises for the error.

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