Adelaide coffee pioneers forced into liquidation, owing millions

EXCLUSIVE: The company that led Adelaide’s specialty coffee movement has been forced into liquidation, leaving behind unpaid employees, debts totalling millions, and questions over whether director Ian Callahan – who now styles himself as a “hospitality, business and marketing consultant” – used any company funds for personal benefit.

Nov 28, 2019, updated Nov 28, 2019
Ian Callahan says he has always been “terrible” at the fiscal side of business.

Ian Callahan says he has always been “terrible” at the fiscal side of business.

In the early years, Bar 9 Pty Ltd experienced a meteoric rise.

After opening in 2008 at the hole-in-the-wall location of 91 Glen Osmond Road, Parkside, the pioneering speciality coffee café gained a strong following. In 2009, Bar 9 super-sized – moving into much larger premises across the road and expanding its offering to include a chef-prepared menu.

Ian Callahan, the sole director of Bar 9, was a visible face of the business. If not behind the coffee machine or front counter, he was appearing in the media. Press attention increased with the 2013 opening of second store Bar 9 Central in Rundle Mall and in 2016, when a third Bar 9 set up shop on Whitmore Square.

The image of success was dented when the Parkside location closed suddenly in January 2017 and the Whitmore store quickly followed suit, shutting down in April 2017. Callahan said the business was forced out of both premises because of unpaid rent.

For those inside Bar 9, signs of trouble came much earlier. Details of the company’s problematic history are revealed in a report to creditors authored by liquidators Sheahan Lock Partners (SLP) and dated October 16, 2019. SLP were appointed as liquidators of the business by the Federal Court on July 24, 2019.

The report lists a debt to the Australian Taxation Office (ATO) of $1.5 million that was declared by Callahan. SLP Senior Manager Oliver Sheahan says he has since received a proof of debt from the ATO placing the sum at more than $2 million. A portion of this total represents superannuation guarantees levied for the unpaid entitlements of Bar 9 Pty Ltd employees.

Five former employees have told InDaily they are owed superannuation and, in some cases, also owed wages, annual leave, or redundancy payouts. ATO documents show super requirements were not met as far back as 2013.

Several employees say that since investigation by the ATO they have received some superannuation repayments. All of these payments have ceased now Bar 9 is in liquidation.

“I was getting paid 1c increments every quarter,” said former employee Hamish McKenzie. “I think it’s a pretty safe assumption that any of us that are owed super are not going to get it… the older we get, the more precarious our life situation and finances become with super and pensions so I guess it could have long term impact.”

Callahan did not take responsibility for the 1c payments and said: “I’d be curious to check those as it simply wouldn’t make any sense for me to transfer that amount. I’d either forget entirely or pay what I could have.”

An ATO letter provided to InDaily by McKenzie records a 1c repayment and describes it as “…the quarterly superannuation contributions your employer makes on your behalf…”.

The creditors’ report from SLP also lists thousands of dollars owed to individuals and businesses.

Former Bar 9 chef Duane Tilka is personally owed more than $4000 in wages and entitlements. He said he still fields phone calls from suppliers chasing up invoices that remain unpaid by Bar 9 and date back more than two years – to a time when he still worked in the business’ kitchen and was responsible for placing orders.

Ben Spruzen, the Head of Operations at Planetware Pty Ltd, said debts like the more than $2500 owed to his compostable packaging business by Bar 9 can make business owners “more cynical”.

“The effect is we can’t do things with our business that we’d like to do… improving products or service, all of those things suffer,” said Spruzen.

During the accrual of these debts and as action was taken by the ATO and then by the Federal Court, Callahan has continued to play an active role in Adelaide’s hospitality industry.

He said he has always been “terrible” at the fiscal side of business. After the Parkside and Whitmore Square stores closed, he said he decided to continue operating the Bar 9 Central café in an attempt to keep up debt repayments.

“Ever since Parkside has closed I haven’t drawn a wage or anything like that from Bar 9 and have continued to work,” said Callahan.

“I guess, back when Parkside closed… the quote-unquote ‘smart’ thing to have done is to then close or liquidate and just wipe all the debt. I didn’t feel good about that at the time so I continued to do what I could in order to keep things trading so I could continue to pay what was owed.”

Callahan has also been involved with businesses outside of the Bar 9 umbrella. In 2015, he helped launch the Lindes Lane venue – in which he was a minor shareholder. That company went into voluntary liquidation in September 2019. Last year, Callahan made several media appearances spruiking Lo.Ki – an Unley Road venture in which he was, for a time, also a shareholder. Lo.Ki is now permanently closed.

Callahan also works offering advice to other business owners; his Instagram biography describes him as a “Hospitality, Business and Marketing Consultant”.

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“I actually think that we learn far more from our failures than we do from our successes,” he said when asked about whether it was appropriate for him to offer such advice.

“I’m definitely more than happy to pass on any of my lessons to anyone who wants to listen to it and … I take ownership on my stuff-ups and I’m very upfront about that with anyone that I deal with.”

Several former employees said they felt Callahan was not always upfront about his financial position.

Tilka points to a text message exchange from February this year in which Callahan said he hoped to repay some owed wages “next week sometime”, as an example. Tilka did not receive any money following the exchange.

SLP are continuing to investigate several elements of Bar 9 Pty Ltd’s history, including transactions shown on the company’s bank statement that the creditors report identified as “apparently for the personal benefit of the director (including for his recreational and gambling purposes and for his personal rent)”.

Callahan has acknowledged a “one-off bet” and characterised it as a “fuck-up” where he “basically had used, instead of using my personal credit card, I used the company credit card”. He said the bet had “a moderately positive result” and all the funds “went directly back into the same account they were drawn from”. He described the rental payments as being for “an external office that I was also residing in order to keep my expenses to a minimum”.

SLP is also looking into the creation of a new entity under Callahan’s directorship, Bar 9 Central Pty Ltd, on October 31, 2018 and the subsequent sale of the Rundle Mall café’s assets and employees, but no debts, to that entity.

“Our investigations at the moment are trying to determine whether it is an uncommercial transaction,” said Sheahan.

“You would have seen in our report it was transferred for a negligible sum, I think it was $5. So, if it is found it was worth more than that then there would arguably be a claim. That also involves considerations of whether the company was insolvent at the time of the transfer. Our investigations are ongoing and there is a lot we need to consider.”

Callahan said “nothing was being hidden” in this transaction.

“A large part of the reason for Bar 9 going into liquidation was that we didn’t have books that were, well, everything was so murky,” he said.

“For me, in my naivety or whatever, but basically in order to be the most fair to both our staff, our creditors, anyone that was owed anything, it made sense to sort of just draw a line in the sand. For me it was like, alright, well if I transfer the assets of the business into something new at least we have clean book work with which to operate.

“Everything was recorded, creditors were still being paid, there was no dodging of any of that side, it just meant I had clean books with which to report to the ATO and anyone else.”

The liquidator’s investigation is not complete, but early indicators have led SLP to report to ASIC “the likelihood that Mr Callahan may have committed various offences whilst a director of Bar 9”. Of course, whether any actual breaches have occurred is yet to be determined.

The full scope of the fallout is yet to be seen. For years, though, former employees and unpaid creditors have been feeling the effects of Bar 9’s demise.

“Whilst this has not necessarily impacted me greatly, that does not, by any means, mean that this has not had a huge impact,” said McKenzie.

“Hospitality employees are not highly paid, are generally casual staff and for those who make hospitality a long-term career, employers such as Ian are really doing a great disservice, not only to their employees, but to the industry in general.”

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