Salient Facts
12 The primary judge referred to SFG as a public listed company and the ultimate parent company of the corporate group known as the "Seafarms Group", of which PSD is a member: [10]. At all relevant times, the directors of the two companies were identical, except for a small number of immaterial exceptions: [10]. The overall business of the Seafarms Group involves the construction of prawn aquaculture facilities for the growing and harvesting of prawns, and the intended sale of the resulting produce in Australia and overseas: [11]. As indicated above, PSD is a special purpose vehicle which was incorporated to develop and operate the Project: [12]. The Project involves the development of prawn aquaculture facilities in five separate locations, comprising three in the Northern Territory and two in Western Australia: [13]. The only operational site at present is in Exmouth, Western Australia, where a founder stock facility has been established and PSD has employed a number of personnel: [13]. The other sites remain in various stages of development. The dispute between Canstruct and PSD concerns the construction of facilities at Legune Station, a large cattle station in the Northern Territory where PSD holds a sublease for which it pays rent of approximately $2 million per annum: [13].
13 PSD has had no income of its own with which to meet the costs that it has incurred, and also has had no substantial assets and no formal financial facilities on which to draw in order to meet those costs: [14]. Mr Dyer, a director of PSD and a director and the CEO of SFG, gave evidence that PSD was wholly reliant on SFG, as well as other entities in the Seafarms Group, for both financial and operational assistance but there has been no formal loan agreement in place by which SFG or any other company in the corporate group has assumed an obligation to provide funding: [14]. PSD was effectively funded by third party investment in SFG, which was procured by the issuing of new shares in SFG by way of a share placement in June 2021: [15]. SFG's announcements to the Australian Securities Exchange (ASX) made clear that the funds were to be directed specifically to the Project: [15].
14 The primary judge referred to Mr Dyer's evidence that PSD obtained funds from SFG to meet its debts by a particular process, as part of which it would "call" for SFG to transfer funds into its account to pay invoices and other obligations shortly before they fell due: [16]. Accounts staff would assemble the necessary supporting documents and would send them by email to certain persons within SFG with a request that they authorise the payments. The "approvers" with authority to authorise payments were Mr Dyer, Mr Whitcombe (another director of SFG), and Mr Leijer (the CFO of SFG). Payments generally required authorisation from any two of those persons, while transfers from SFG to PSD required authorisation from only one. Calls to transfer funds from SFG to PSD were made only if further funds were required to make certain payments. The process included a weekly "payment run" for invoices relating to PSD to be raised to SFG, a fortnightly payment of wages for Exmouth employees, the monthly payment of a salary to the manager of the Exmouth facility and the payment of payroll tax as well as PAYG tax and superannuation: [17]. The primary judge said that while the obligation to make these payments fell on PSD, SFG consistently put its subsidiary in funds by way of this established process in order to allow the necessary payments to be made: [17].
15 As a consequence of the implementation of this process, the amount of PSD's indebtedness to SFG steadily increased. The primary judge said that it was not in doubt that SFG was entitled to demand repayment of its debt at any time: [18]. However, the primary judge referred to Mr Dyer's assertion that such a demand would never be made, expressed as follows in his affidavit evidence (quoted at [18]):
Any amounts owed by PSD to SFG would technically be payable on demand but that demand will never be made. In my capacity as director of SFG I would never move to or cause the board to move to call up SFG's loans to PSD while the project was ongoing. It is commercially illogical and against commercial reality for SFG to do so because that would expose me to significant complaint and inevitably legal action by shareholders for breaching my duty as a director.
The sole use of the funds raised was to develop and operate PSD. The very purpose of raising the funds and the reason for investors to invest is that there would be a significant incremental value in their share value as the project was developed. That is the commercial reality regarding the use of the funds. It is simply not open to the directors of SFG to abandon the project and call up the loan funds in circumstances where the very purpose for which the funds were raised would fail. The commercial reality is that SFG could not call up the funds in circumstances whereby doing so the Project would immediately fail.
16 The primary judge then held that, ultimately, the only conclusion that can properly be drawn is that the funding of PSD continued entirely at the discretion of SFG, and the decision to advance funds was made only as and when the need for additional funding arose: [19].
17 At the time these proceedings were commenced, PSD had undertaken a great deal of preparatory work on the Project, including negotiating leases, entering into agreements with native title holders, securing environmental approvals and licences, producing feasibility studies, and establishing the founder stock facility at Exmouth: [20]. However, the primary judge said that it was not entirely clear how substantially the development at Legune Station specifically had progressed: [20].
18 Canstruct was engaged by PSD to carry out certain construction work at Legune Station pursuant to a "Framework Agreement", which was entered into on 10 May 2021. Pursuant to the Framework Agreement, "Work Orders" could be issued by PSD to Canstruct, after negotiations between them, which would then constitute separate and legally binding agreements for the carrying out of certain work: [21]. The Framework Agreement also required Canstruct to provide security for the performance of its obligations by way of an unconditional undertaking issued by an Australian bank in the amount of $12 million, which was given in the form of two $6 million bank guarantees: [21]. In September and October 2021, PSD issued three Work Orders, and Canstruct undertook a substantial amount of work pursuant to those Work Orders: [22].
19 Pursuant to the Framework Agreement, PSD was entitled unilaterally to suspend works at the site and was also entitled to terminate the three Work Orders for convenience: [23]. On 24 December 2021, PSD unilaterally suspended all works at the site: [24]. In about January 2022, a dispute arose between Canstruct and PSD in relation to the money owed following the suspension of the works. On 27 April 2022, PSD terminated each of the three Work Orders for convenience: [24]. On 15 September 2022, Canstruct submitted payment claims in relation to the Work Orders to both PSD and the Superintendent on the Project, seeking payment of approximately $27.83 million: [25]. On 30 September 2022, the Superintendent (on behalf of PSD) issued payment certificates to Canstruct in response to the payment claims, pursuant to which Canstruct was paid approximately $780,000 in connection with the first and third Work Orders. The Superintendent certified that the amount payable by PSD in respect of the second Work Order was a negative amount of approximately $270,000, but the primary judge said that this amount does not seem to have been paid by Canstruct: [25].
20 The primary judge found that the termination of the Work Orders was not the result of any disputation between PSD and Canstruct in connection with the work at Legune Station. Instead, it was the result of growing financial difficulties and internal corporate issues within the Seafarms Group: [27]. The primary judge referred to the statement in the Annual Report for SFG for the financial year ended 30 June 2022 that the year had been a "turbulent" one, and that two new directors had been appointed and three others had resigned in the first half of the year: [28]. There was also a change in the chairmanship of the board and the appointment of a new CEO and CFO: [28]. Although it was noted that construction on the Project had commenced early in the year, it was explained that in November 2021 the new board announced a review of PSD and that decisions taken during this time included the curtailment of all debt funding activity, and the termination of PSD contracts and most of the PSD construction team, effectively placing the majority of PSD on hold: [28]. In connection with these events, a major shareholder moved to have the then-new CEO removed, and the CEO subsequently resigned from his position and from the board, along with the Company Secretary. In late May 2022, Mr Dyer was appointed as CEO, Mr Leijer as CFO, and Mr Whitcombe as Company Secretary, and Mr Dyer and Mr Whitcombe were also appointed to the board: [29]. The Annual Report also referred to the termination of the construction contracts with Canstruct, and the placing of further work on hold at Bynoe and Kununurra, while progressing a reduced scope of work at the Exmouth facility: [20]. It was stated that work was continuing to be undertaken in order to maintain all permits and approvals: [30]. In the notes to the financial statements of SFG in the Annual Report, it was explained that:
The Group commenced construction of Project Sea Dragon in August 2021, which was suspended in December 2021 due to the wet season. In the same month, the Group terminated negotiations on debt funding, which were at an advanced stage, due to the cessation of negotiations by the previous management. In April 2022 the major construction contracts for the construction of ponds and other infrastructure at Legune Station were terminated to preserve cash as the future of the project is re-assessed…. [F]ollowing the termination of the construction contracts, the Group received a number of claims from the construction company and after assessment of the currently available information, recorded a provision for general contractual liabilities of $8,730,094.
21 The primary judge also referred to SFG's report for the half-year ended 31 December 2022, which included the following (quoted at [32]):
At 31 December 2022, the Group had net current assets of $18,796,286, including $20,426,850 cash and cash equivalents.
The Directors note material uncertainties relating to the decision to continue with Project Sea Dragon, if so whether adequate funding will be obtained to fund the continuance, if not whether the remaining Project Sea Dragon related expenses will be successfully reduced and ceased, as to the final amount payable to meet Project Sea Dragon contractual liabilities, and as to the future profitability and cash flow from improvements at Queensland Farms and the ability of these to cover corporate expenditure.
22 The primary judge referred to Mr Dyer confirming in his evidence that the statements made in the reports by SFG were accurate: [33]. The primary judge drew the conclusion that the Work Orders issued from PSD to Canstruct were terminated because the viability of the project had become less certain on account of financial concerns that were emerging at that time: [33].
23 On 7 November 2022, Canstruct filed four adjudication applications pursuant to the CCSA Act, three of which related to the work performed under each of the Work Orders: [34]. By those applications, Canstruct sought determinations that PSD was liable to pay to it the full amount of its payment claims. By its fourth application, Canstruct sought the return of one of its bank guarantees in the amount of $6 million, which had been provided by way of security under the Framework Agreement. On 3 February 2023, three determinations were made in favour of Canstruct in respect of the three Work Orders in an amount which was subsequently adjusted to $13,994,955.32, including GST and interest: [35]. In addition, the adjudicator made a fourth determination that the outstanding guarantee was to be returned to Canstruct: [35]. I will follow the primary judge in referring to the four determinations cumulatively as the "adjudicator's decision".
24 On 3 February 2023, SFG made an announcement to the ASX indicating that, whilst it had provisioned an amount of $8.7 million for a settlement of the dispute with Canstruct in its 2022 accounts, it was "extremely disappointed" with the adjudicator's decision and expressed the belief that the determination was excessive: [37]. On 8 February 2023, Herbert Smith Freehills (HSF), who were the solicitors for PSD at that time, wrote to Canstruct's solicitors, Thomson Geer, advising that PSD rejected the adjudicator's decision and asserted a number of jurisdictional errors, adding that PSD intended to commence proceedings in the Supreme Court of the Northern Territory to obtain relief in the nature of certiorari in respect of the adjudicator's decision: [38]. On 9 February 2023, HSF wrote to the adjudicator to inform him that PSD was considering the imminent commencement of proceedings: [39].
25 The primary judge referred to Mr Dyer's evidence that he was extremely disappointed with the adjudicator's decision, as were the other directors of PSD and SFG: [40]. Accordingly, the directors explored the legal options available to them at the time. The primary judge referred to Mr Dyer saying that they felt that there were jurisdictional errors affecting the decision, although Mr Dyer could not elaborate upon them: [40]. The primary judge referred to Mr Dyer's evidence that the directors had discussed the possibility of litigation to challenge the adjudicator's decision, but they did not get to the point of instructing HSF to commence proceedings: [40].
26 The primary judge then referred to Mr Dyer's evidence that he spoke to Mr Cox of Mills Oakley, the current solicitors for PSD and SFG, in connection with the same matters: [41]. Following that discussion, contact was made with Mr McKinnon of BDO Business Restructuring Pty Ltd (BDO) in order to determine whether he was prepared to act as voluntary administrator of PSD. The primary judge referred to the evidence of Mr McKinnon that the prospect of a voluntary administration was first raised with him in a telephone discussion with Mr Cox on or about 8 February 2023: [41].
27 The primary judge then referred to the evidence of Mr Dyer in cross-examination that the directors had considered whether the voluntary administration of PSD would be a preferable course for the Seafarms Group to take, as against the commencement of court proceedings: [42]. Mr Dyer's evidence was that, in doing so, they discuss several matters, including whether making payment to Canstruct in accordance with the adjudicator's decision would undermine the group's ability to pursue the Project, and whether it would result in the termination of employees, and they ultimately concluded that making the payment to Canstruct would compromise the business of the group: [42]. The directors also considered that, if they were to pursue the option of litigation, they would be required to pay the money into court, or to Canstruct, which would cause PSD to be "in trouble", and it was thought that the litigation might remain on foot for over two years: [42]. The primary judge said that, according to Mr Dyer, the directors understood at the same time that, if the option of voluntary administration was pursued, then Canstruct would be precluded from enforcing payment of the adjudicator's decision as soon as the process commenced: [42]. They also understood that, if a DOCA was approved by the creditors of PSD, then Canstruct's ability to recover the amount awarded to it by the adjudicators would be limited to whatever the DOCA provided for it to be paid, and the liability arising out of the adjudicator's decision could be discharged: [42].
28 The primary judge said that it emerged from Mr Dyer's cross-examination that, during their deliberations, the directors took into account the fact that a DOCA could only be adopted in the context of a voluntary administration if it was approved by a majority of creditors in both number and value: [43]. The directors discussed the fact that SFG would have to make a financial contribution under the DOCA in order to ensure that the creditors, or most of them, would do better under the deed than in a liquidation scenario: [43]. The primary judge said that the $3.5 million sum that was ultimately put up was apparently calculated by working out the allowance that would need to be made for:
(a) the fees of the administrator and the other costs of the administration to be paid;
(b) all of the unrelated creditors of PSD, other than Canstruct, to be paid 100 cents in the dollar; and
(c) Canstruct to receive a return on its adjudication debt of about 10 cents in the dollar.
Mr Dyer explained that the directors' decision to pay Canstruct about 10 cents in the dollar was made because the amount that Canstruct would stand to receive under the DOCA as a result was equivalent to the amount that the directors thought that it was properly owed: [44].
29 As for the unrelated creditors, the primary judge referred to Mr Dyer's evidence as follows at [45]-[46]. Mr Dyer initially asserted that the decision to pay them 100 cents in the dollar had not been made in order to encourage them to vote in favour of the DOCA. However, he conceded that the directors had discussed "how the voting might balance out"; that is, "the values and the numbers of all of the creditors and how that might fall out". The directors had recognised that the majority of the creditors by value were related entities, which would vote in favour of the DOCA. They had then discussed whether they could get a majority by number of creditors to approve the DOCA and, in doing so, discussed the likelihood that offering 100 cents in the dollar to the unrelated creditors would entice them to vote in favour of the deed. According to Mr Dyer, the discussion went no further. While it was acknowledged that offering the unrelated creditors a full return was "likely" to encourage them to vote for the DOCA, that was apparently not the reason that a full return was offered. There were approximately 50 unrelated creditors of PSD, other than Canstruct and the company's employees, which were owed about $420,000. The group of unrelated creditors affected by the DOCA excluded the landlords with whom PSD was engaged in respect of its various leases, whose entitlements remained unaffected. Mr Dyer's affidavit set out a list of trade creditors which had lodged proofs of debt at the second meeting of creditors of PSD and asserted that each of those creditors was a "critical supplier or provider to the operations" of PSD, and he was cross-examined in some detail on that assertion, particularly as it seemed to suggest that there was some basis for the different treatment of those creditors relative to Canstruct.
30 The primary judge said that the cross-examination on this topic revealed that many of the unrelated creditors who were to be paid in full under the DOCA had indeed provided services of some importance to PSD during the 16 months since April 2022 in which the Project had been on hold: [48]. These creditors supplied services that were necessary for the ongoing maintenance of the facilities established by PSD, and for the maintenance of the status quo on the Project more generally, given the prospect that it might recommence: [48]. However, not all of the creditors who were to be paid in full were providing ongoing services to PSD, and Mr Dyer accepted that the DOCA was not structured so as to tie payment in full to the ongoing provision of a service: [48]. The primary judge said that the cross-examination revealed that there were certain creditors of PSD who could not, on any reasonable view, be said to be critical suppliers or providers, such as PSD's former solicitors, HSF, and a supplier of indoor plants, thus belying Mr Dyer's justification for paying all of the arm's-length creditors in full, except for Canstruct: [49].
31 The primary judge then referred to Mr Dyer's cross-examination confirming that the directors of SFG well understood that, if SFG ceased to fund PSD, then the directors of PSD would place it into voluntary administration, and the administrators would continue the operations of the company with funds provided by SFG: [50]. Mr Dyer also confirmed that the directors' intention was that, once PSD was in administration, SFG would propose a DOCA for the purposes of which it would make a financial contribution in order to ensure that the deed offered the creditors a better return than they would receive in a liquidation: [50]. Mr Dyer agreed that the directors had discussed that the plan would be to structure the DOCA so that all of the unrelated creditors, apart from the landlord and Canstruct, would receive 100 cents in the dollar: [50]. Mr Dyer denied the directors had discussed whether this was likely to entice a vote in favour of the DOCA, but admitted that the amount paid to Canstruct was calculated to afford it a better return than it would receive in a liquidation, describing it as a "subjective amount": [50].
32 The primary judge referred to Mr Dyer acknowledging that the directors had discussed that, once the DOCA was executed, control of PSD would return to its directors and FSG would resume funding of PSD to continue its operations: [51]. Mr Dyer ultimately accepted that the only substantial difference in PSD before and after its administration was that it would be released from its liability to Canstruct in connection with the adjudication and would therefore retain the money that it would otherwise have been obliged to pay: [51]. Mr Dyer candidly acknowledged that the objects of the voluntary administration and DOCA process were to achieve a situation where the funds did not have to leave the Seafarms Group to go to Canstruct pursuant to the adjudicator's decision, and PSD would get a release from all liability to Canstruct through the deed: [51].
33 On 13 February 2023, the directors of SFG resolved to withdraw funding to PSD: [52]. A meeting of the board of directors of PSD was held on the same day, the minutes of which note (among other things) that:
4. the financial position of the Company is such that the Company does not, by itself, have the ability or the means to pay the Adjudicated Amount;
5. the Company has received notice from its ultimate holding [company, namely SFG] that SFG is withdrawing funding support to the Company and specifically that they will not pay the Adjudicated Amount;
6. further the Company cannot give any assurance to SFG that Canstruct will be capable of repaying the funds in the amount that it is ultimately determined that the Adjudicated Amount was not in fact due and payable;
7. the board has formed the view that without the financial support of SFG, the Company will likely become insolvent in the near future; and
8. Shaun McKinnon and Andrew Fielding of BDO Business Restructuring Pty Ltd should be appointed as Joint & Several Administrators of the Company pursuant to Section 436A of the Corporations Act 2001 (Cth).
On 14 February 2023, Mr McKinnon and Mr Fielding were appointed as joint and several administrators of PSD.
34 On 15 February 2023, SFG released an ASX announcement, which included the following statement:
As a result of the decision made by the adjudicator on 3 February 2023 regarding a construction dispute, the voluntary administration became a necessary step for Project Sea Dragon.
35 The primary judge referred to the fact that, on 17 February 2023, SFG entered into a "Funding Agreement" with the administrators, pursuant to which it agreed to provide a working capital facility of $1.65 million for the administrators' use: [55]. Those funds were intended to cover the administrators' fees and expenses, as well as all expenses involved in continuing to operate the business of PSD, including the cost of continuing to employ PSD's existing employees, paying all lease payments that fell due, and meeting supplier payments and other operational costs: [55].
36 On 23 February 2023, being the same date as the first meeting of the creditors of PSD, Canstruct lodged with the administrators a formal proof of debt in the amount of $13,994,955.30: [56]. The proof of debt form cited the three determinations of the adjudicator on 3 February 2023, relating to each of the Work Orders.
37 Mr McKinnon deposed that, on 13 February 2023, he attended a meeting with certain other representatives of BDO and some of the directors of PSD. The primary judge said that at that meeting, it was allegedly communicated by the directors that their intention was to keep the company and the project alive, and that they intended to propose a DOCA, although they had to confirm their position and consider financial models before doing so: [57]. On 13 March 2023, SFG proposed a DOCA to the administrators of PSD, the terms of which were in line with what is now known to have been the intention of the directors of SFG prior to the cessation of its funding of PSD: [58].
38 The primary judge said at [59] that the purpose of the proposed DOCA was identified in the following terms:
The proposed DOCA for the Company is intended to satisfy the objectives of Part 5.3A of the Act, including to maximise the chances of the Company, or as much as possible of its operations, continuing in existence, or to achieve better outcomes for the Company, compared to the expected outcome were the Company to be immediately wound up and assets liquidated.
The primary judge noted that this passage seems to have been intended to encapsulate or reflect the object identified in s 435A of the Act, but it contained a significant error: instead of the DOCA seeking to achieve "a better return for the company's creditors and members than would result from an immediate winding up of the company" (in the words of s 435A(b)), it apparently seeks to achieve "better outcomes for the Company, compared to the expected outcomes were the Company to be immediately wound up and assets liquidated": [60].
39 The primary judge described the key elements of the DOCA at [61] as being as follows:
(a) SFG would contribute $3.5 million (described as the "Seafarms Contribution") to a "Deed Fund", which would first be used to repay the working capital facility provided by SFG for the administrators' expenses, after which an amount of $1.9 million to $2.03 million would be available for creditors.
(b) The remainder of the Deed Fund would be distributed according to a priority arrangement so as to:
(i) meet the claims of employees and "Small Claim Creditors" (presenting claims of $300,000 or less) such that they received 100 cents in the dollar; and
(ii) thereafter, pay the "Balance Creditors" (ie Canstruct) an estimated amount of 10.11 cents to 11.11 cents in the dollar, equating to approximately $1.4 to $1.55 million.
(c) Other than the repayment of the interim funding, neither SFG nor any of the other related companies in the Seafarms Group would receive anything from the Deed Fund.
(d) Upon the effectuation of the DOCA, all claims against PSD would be released and extinguished in full, save for any claims by any landlord in respect of premises occupied by PSD.
40 On 14 March 2023, being the following day, the administrators sent to creditors of PSD a report pursuant to s 75-225 of the Insolvency Practice Rules (Corporations) 2016 (IPR) and s 439A of the Act (the 14 March 2023 Report), containing among other things information regarding the second meeting of creditors to be held on 21 March 2023: [62]. In the executive summary at the outset of the document, the administrators recommended that the company execute a DOCA, as the DOCA proposal before it would "result in a higher and more certain return to all unsecured creditors". In a later subsection of the executive summary, it was stated that the DOCA proposal "results in all classes of creditors receiving more than is estimated to be returned in a liquidation scenario": [62].
41 The primary judge then referred to the more detailed commentary appearing later in the 14 March 2023 Report in respect of the DOCA proposal, including the following points (quoted at [63]):
- The DOCA effectively repays all creditors in full, other than Canstruct Group Pty Ltd . Other than related party creditors, Canstruct is the largest creditor by a significant value. Canstruct is estimated to receive more under the DOCA proposal than they would in a Liquidation scenario.
- The DOCA proposal would result in:
The Company's operations to be continued;
The ongoing employment of all thirteen staff members, and the avoidance of the crystallisation of the associated employee entitlements, including termination entitlements;
These employee entitlements would be honoured by the Company post DOCA;
The avoidance of the crystallisation of various contractual and contractual related damages clauses for future lease payments and remediation works associated with leases and other agreements, that would be required to be completed at various sites;
A single upfront lump-sum payment and is therefore not subject to the uncertainty of recoveries associated with a Liquidation;
Under the DOCA related party creditors of circa. $65 m would not claim; and
A better financial return for all creditors than a liquidation.
42 The primary judge then referred to the next section of the 14 March 2023 Report, in which the administrators purported to estimate the return to creditors in two possible scenarios: [64]. It was suggested that, under the DOCA, all creditors would receive 100 cents in the dollar except for the one "Non-Small Claim Creditor", which was Canstruct. By contrast, it was suggested that, in a liquidation, all creditors would receive zero cents in the dollar. The primary judge referred to the administrators' statement that they had "not identified any potential claims that would provide any return to creditors of the Company in a liquidation scenario", and said that at least part of the basis for this conclusion seemed to be the following series of points (quoted at [65]):
- Based on our investigations, the Company was insolvent from 13 February 2023 being the date SFG resolved to no longer provide financial support.
- Prior to this date, the access to Capital and ongoing financial support of the parent allowed the Company to meet their debts as and when they fell due. Once the support was withdrawn, the Company became insolvent.
- A claim for insolvent trading is generally calculated by reference to the increase in liabilities in the period of insolvency. As the period in question is for the day prior to the Administrators [sic] appointment, we consider that this balance is nil.
43 The primary judge stated that it was an uncontroversial fact that, at the time that SFG proposed the DOCA, SFG had the ability to fund the payment of the debt owed by PSD to Canstruct: [67]. That was expressly stated by SFG in its ASX announcement of 3 February 2023, and was confirmed by Mr Dyer in the course of his evidence: [67]-[68]. Nevertheless, the primary judge said that SFG declined to fund the payment of that debt, giving the reason that it did not believe that the amount was properly due and owing: [69].
44 The second meeting of the creditors of PSD took place on 21 March 2023. The primary judge referred at [70] to the creditors of PSD as at that date as including:
(a) 13 employees, who were to be paid $11,133 if the DOCA was approved;
(b) 50 trade creditors (apart from Canstruct), which were owed approximately $420,000;
(c) Canstruct, which was owed approximately $14 million; and
(d) related party creditors, who were owed a total of approximately $64.85 million. Among those related party creditors, SFG was owed $62.36 million: [71].
In addition, PSD had continuing commitments under certain lease arrangements, although those liabilities were to be met by the administrators as part of the continuation of the business, and were not dealt with in the DOCA: [72].
45 The minutes of the second meeting of creditors recorded that 25 proofs of debt were received by the administrators, totalling approximately $128.15 million, of which approximately $80.37 million was admitted for voting purposes: [73]. Pursuant to s 75-115 of the IPR, for the DOCA to be passed by resolution at the meeting, there needed to be a vote in favour of the resolution by both a majority in number of the creditors voting and a majority in value of the creditors voting. When the resolution to enter into the DOCA was put, 19 creditors (including four related party creditors) voted in favour, and only Canstruct voted against: [75]. In terms of the value of the debts, those voting in favour had debts worth $65,364,096.15, of which $64,853,676.65 was attributable to related parties, and the only vote cast against the resolution was by Canstruct, whose debt was entered as $13,994,955.25: [75]. The resolution therefore attracted votes in favour by a majority in both number and value of the creditors voting. The DOCA was entered into on 23 March 2023, and in accordance with its terms, control of PSD was immediately returned to its directors: [76]. On 24 March 2023, SFG made an ASX announcement in which it stated, among other things, the following (quoted at [77]):
As a result of entry into the DOCA, control of Project Sea Dragon has now returned to the directors. As previously announced no jobs were lost and the operations at Exmouth continued successfully throughout the Administration period. The directors expect that SFG operations will now return to normal and they will continue to assess advancing Project Sea Dragon including interim funding. Further funding to advance the project is being sought from third party funders.
SFG has been advised that the DOCA discharges the claims against Project Sea Dragon by Canstruct (including the claim and claim amount announced by SFG on 3 February 2023).
46 On 5 April 2023, Canstruct commenced these proceedings. On 3 May 2023 orders were made restraining the administrators from finalising the DOCA, including distributing the Deed Fund to creditors, until the determination of the matter: Canstruct Pty Ltd v Project Sea Dragon Pty Ltd (Subject to a Deed of Company Arrangement) [2023] FCA 637. In any event, and despite the injunction against PSD, SFG paid the debts owed to nearly all of the arm's-length creditors of PSD, such that at the time of the final hearing the only unrelated creditors which had not been paid in full were Canstruct and HSF: [80]. The primary judge recorded that the entirety of Canstruct's debt remained unpaid: [81].