It’s not often that the courts agree to set aside a vote of creditors and terminate a deed of company arrangement but Federal Court judge Roger Derrington did just that yesterday, and the deed administrators punted as a result might think themselves lucky.
“In this case, the findings that the DOCA was an abuse of Pt 5.3A, that it was unfairly prejudicial to Canstruct, was entered into after false or misleading information was given to the creditors, and after relevant information was not given to them, show that the whole process was flawed.” Justice Roger Derrington.
In Canstruct Pty Ltd v Project Sea Dragon Pty Ltd (Subject to a Deed of Company Arrangement) (No 4) [2024] FCA 112 Justice Roger Derrington agreed with applicant creditor Canstruct Pty Ltd that the entry into the DoCa had been an abuse of process.
He ordered that the deed be terminated, that Project Sea Dragon Pty Ltd be wound up and KordaMentha’s Robert Hutson and David Johnstone be appointed liquidators.
But what he didn’t do was find that Shaun McKinnon and Andrew Fielding had deliberately misled creditors or knowingly engaged in an abuse of process when as voluntary administrators of Project Sea Dragon they recommended creditors accept the DoCA.
Nor, iNO understands, will Canstruct pursue the BDO pair personally for its costs and it is clear in the judgment that Canstruct did not seek to impugn the ousted deed administrators’ conduct, though the judge left the question open.
“It is necessary to record that the Court was informed that Canstruct had reached an agreement with the administrators to expressly say to the Court, “We do not submit there was any deliberate misleading by the administrators, or deliberate misrepresentation to the creditors.”
“Be that as it may, the administrators were parties to the action and were entitled to defend themselves as they saw fit, the judge added.
“Even if they did not fully participate in the hearing, they were entitled to make submissions about any issue. They chose not to participate in any manner.
“That leaves it open for the Court to make any findings against them as the evidence discloses. However, in light of Canstruct’s submission, there is no reason to determine whether the statements were deliberately misleading,” the judge concluded.
No personal costs order and no adverse findings as to conduct? That’s not a bullet dodged, it’s an asteroid.
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