Spirits were high around the dining table at Beppi’s Italian restaurant in Darlinghurst in 2022 to celebrate the $42 million sale of the Stewart family’s industrial spray paint business MMP Industrial.
On hand to raise a toast to one of the industry’s biggest business deals were MMP’s wealthy long-time owner David Stewart, his sons, Nathanael and Bartholomew Stewart, and the man buying the company, Andrew King.
To mark the occasion, King gifted the family patriarch a $7400 bottle of Scotch, as well as a bottle of whisky and Penfolds Grange to his sons and fellow company directors.
The evening didn’t just cap off months of due diligence by King. It was to mark an auspicious start to King’s new business venture.
It didn’t pan out that way. Instead, it was the start of a nightmare in which King claims he discovered in the months that followed that the company he thought was a money-spinner was actually on the brink of collapse.
The claims are detailed in hundreds of pages of legal arguments already before the NSW Supreme Court ahead of an upcoming trial in which King is suing the Stewarts and a slew of Stewart family companies for damages over claims of misleading and deceptive conduct. The Stewarts have launched their own claim over the $3 million balance payable from the $42 million deal.
But amid the many claims and counterclaims, an interlocutory hearing has revealed far more serious allegations that involve an $8 million arson attack on MMP’s biggest competitor and a plot to murder its rival boss.
The plot thickens
David Stewart has been a force within the car spray paint industry since 2000, when he purchased the Motor Mates business and soon after renamed it MMP Industrial.
By 2006, the MMP business had started to lose tens of thousands of dollars in contracts to a rival company, Stalyce, run by Craig O’Sullivan, according to findings of a NSW Court of Criminal.
The relevance of that competition was raised in interlocutory proceedings given King’s claim that he was falsely told when he was negotiating to buy the MMP business that it had no significant competitors.
King’s claim is disputed by the Stewarts, but the judgment lays bare the extraordinary sequence of events that surrounded the inter-business rivalry from when MMP’s then manager, Brian Murphy, allegedly ordered one of his staff, Peter Gregory Lomax, to act as a middleman to arrange an arson attack to “wipe out” the rival factory and to “put a hit on the owner” O’Sullivan.
The $100,000 hit job was handed to a recently released prison inmate, Gavin Crosby, who orchestrated a fire that damaged some contents of the Stalyce factory, but didn’t destroy it.
When the deadline to kill O’Sullivan passed with no murder, Crosby was told to either do the job or refund the $50,000 advance.
The problem was Crosby had already spent the money, and the job of carrying out the murder was made all the harder when he kept being arrested by police on unrelated matters. It left Lomax with the task of unsuccessfully trying to find someone else to kill O’Sullivan.
Ultimately, O’Sullivan survived the plot unharmed, but a few weeks later the Stalyce factory was destroyed in a blaze that took four hours and 100 firefighters to get under control.
Reports of the inferno estimated the damage bill at more than $8 million, and no one has ever been charged despite investigators believing it was deliberately lit.
“As a result of the fire in November 2006, Stalyce’s business lost numerous supply contracts and was set back 10 years,” said King’s barrister Liam Kelly, KC.
The CCA judgment states that following police investigations and given the content of intercepted telephone calls, Lomax was arrested the following year.
Lomax initially admitted that Murphy had approached him to “wipe out” both the Stalyce business and O’Sullivan. He described passing on money from Murphy to Crosby to do the job.
Lomax and Murphy were both charged with solicitation to murder, and Lomax was given a reduced sentence, given his promise to help authorities by testifying against alleged mastermind Murphy.
But things changed between Lomax’s initial admissions and Murphy’s bail hearing.
At the committal hearing that followed Lomax reneged on his testimony against Murphy, claiming he could not remember who asked him to “set the fire”. The charges against Murphy were dropped.
In the NSW Court of Criminal Appeal hearing to review Lomax’s sentence in light of his lack of cooperation with the police, his sentence was extended to six years and 10 months.
In the years that followed, O’Sullivan managed to rebuild the Stalyce business and become a significant competitor to MMP, according to King’s barrister Liam Kelly, KC.
Murphy has remained a friend of the Stewart family over a long period of time. Kelly told the court that Murphy was an integral part of the business as recently as Christmas 2019, when he provided security for the factory because, as David Stewart emailed his sons, “we have recently taken sales from Stalyce”.
The court case
By 2021, when the sale of MMP was flagged with Andrew King, the company looked to be in a strong financial position. According to a financial review that followed, the books showed an annual revenue of about $50 million, an average annual profit of about $10 million and more than $13 million worth of stock.
Sweetening its appeal was what King said he was told was a “long and consistent history of excellent relationships with its customers”, a lack of any real competitors and, despite operating in a tightly controlled regulatory environment, no outstanding issues with the industry regulator.
As part of the sale contract, David Stewart would continue on at the company in a part-time capacity for the first year under King’s ownership.
But within days of that celebratory dinner at Beppi’s, Stewart allegedly said he wouldn’t be turning up to the office anymore.
“You don’t want me here,” Stewart is said to have told King. “Everyone is still looking at me like I am the boss. I’ll just get in your way, and you need to establish your own style. I will work from home.”
King has not seen or spoken with Stewart since.
A few weeks later, King noticed a high degree of staff absenteeism, only to be told the company had a long-standing practice of paying a $2000 cash bonus to staff who took no sick leave all year.
Soon after, King claims he discovered MMP staff had been illegally disposing of waste aerosol cans for years by using a spike and hammer in the warehouse.
Then a couple of SafeWork NSW inspectors turned up. In the meeting that followed, King was told that, unbeknownst to MMP’s management, the regulator had previously made an internal decision to close the business by cancelling its licence to operate as a major hazard facility given its long history of non-compliance and the 246 improvement and prohibition notices issued since 2006. That decision was wound back only after the regulator found out the business was under new ownership.
The revelation about the regulatory notices was news to King. As far as he was concerned, a disclosure letter in the business sale agreement stated that the Stewarts “have not received any order, direction or notice from any regulatory authority” nor are they “the subject of any investigation, prosecution or enforcement proceedings”.
Also news to King was a criminal prosecution by SafeWork NSW against the business following a serious hand injury in which a worker had three fingers on her right hand crushed that was described in the business sale agreement as a “self-inflicted” injury and a “workplace injury claim”.
By that time, a stock-take report indicated that the business’s ability to deliver products ordered by customers had deteriorated significantly, resulting in half the orders for its biggest customer, Supercheap Auto, being out of stock.
To that end, King claims that in the year leading up to the sale, the Stewarts had embarked on a strategy of deliberately running down existing stock and not purchasing raw materials to artificially inflate the apparent profitability of the business.
As far as King was concerned, it indicated that while the business looked to be generating monthly profits, it was substantially depleting stock levels.
Stewart denied King’s many allegations of misleading and deceptive conduct and claims about the illegal disposal of aerosol cans, a history of non-compliance with the industry regulator, and even suggestions that Stewart claimed the business had a history of high supply standards.
In his defence, Stewart claims he “was ready, willing and able” to work part-time for King, but was prevented from fulfilling his contractual obligations because he was asked not to do so.
In Stewart’s denials about stock levels being used to artificially inflate company profitability, he states that the management accounts have no correlation with the company’s inventory position, and any work absences in the months after King took over are in part attributed to flood events in the Hawkesbury region and “low morale following the change in leadership to Andrew King”.
Likewise, the allegation that MMP had a history of non-compliance with SafeWork NSW was dismissed as vague and ambiguous, and the prohibition and improvement notices denied as “orders” of a regulatory authority.
“The buyers made their own satisfactory inspection and investigation, and relied upon their own reasonable searches, enquiries and evaluations in respect of the business,” claimed Stewart.
By King’s first anniversary, his main customer, Supercheap Auto, had taken its business elsewhere, and with it about $12 million to $15 million of MMP’s annual revenue.
The legal proceedings have been making their way through the Supreme Court for the past three years, during which time the discovery process has unearthed more damaging claims, prompting dozens of pages of new allegations.
King has since rebranded MMP as Paragon Aerosol, and title records show there are plans to move the business out of the Stewart family-owned warehouse in Mulgrave to a recently purchased $15 million warehouse complex in Port Kembla.
Attempts to contact Stewart directly with detailed questions have been unsuccessful. He lives behind a high fence in Neutral Bay with no doorbell or front door access and has no mobile phone. There was “no comment” from the Stewarts’ lawyer.
The high-stakes trial is slated to start in November.
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