Dimmeys collapses following $3 million penalty

Iconic discount retailer Dimmeys has been placed in administration, following a $3 million penalty for breaching product safety laws late last year.

Yesterday, administrators Richard Cauchi, Peter Gountzos and Michael Carrafa were appointed from SV Partners.

In December 2013, Dimmeys copped the multi-million dollar penalty after an investigation by Consumer Affairs Victoria uncovered 14,000 unsafe items being sold by the retailer.

Distribution company Starite Distributors was also fined $600,000 and the director of both companies, Douglas Zappelli, was given a $120,000 penalty and banned from managing corporations for six years.

Administrator Richard Cauchi told SmartCompany the likely cause of Dimmeys voluntary administration was the high penalty.

“It’s safe to say it’s probably as a consequence of the fine… All the stores will continue to trade as normal and we intend to keep them under control for the time being,” he says.

“In essence, neither the stores nor the business had a large debt. The principal debt is really to the related parties for stock supplies. There are very few external creditors.”

Cauchi says he will look to sell the business.

“I will continue to trade the business with a view to assess its operations and then look to advertise for the sale of the business,” he says.

“I always hope to find a buyer, it’s always something we’d like to see come out in the wash, but we can’t control the advertising process and I can’t pre-empt whether or not we’ll find an interested party.”

For now, Dimmeys 500 employees are safe. However, as the business is assessed there may be redundancies.

“Until we assess the operations of the company as a whole, nothing will change,” Cauchi says.

Since Zappelli took over the running of Dimmeys in 1996, the business has been involved in four cases of selling hazardous products, or incorrectly labelled items.

Prior to the penalties being handed down by the Federal Court, Dimmeys was ordered in June 2013 to publically recall the unsafe items which included girls’ padded swimwear, baby bath toys, cosmetic sets and basketball rings.

The products had been sold between January 2011 and March 2012. Some toys were deemed to be choking hazards, while the girls’ swimwear did not have appropriate safety tags.

Dimmeys was also ordered to pay for the destruction of the unsafe goods.