Grant Thornton forced to update CRCG-Rimfire DIRRI

DIRRI update dogs CRCG-Rimfire VA Mike McCann

CRCG-Rimfire VA Mike McCann: hoping like hell his appointors deliver a DoCA.

Late last year we brought you a story that exemplified disruption in insolvency  – to wit the attempt by creditor activist group Subbies United to dislodge Grant Thornton’s Michael McCann and Said Jahani from their positions as joint voluntary administrators (VAs) of construction group CRCG-Rimfire.

Subbies United’s raison d’etre is that director’s picks are kryptonite. They can’t be trusted if the director selected them. Best install your own.

The problem with that approach is that it largely mirrors what Subbies United says is wrong with the director appointee model.

The only real difference is that instead of the debtor getting the right to appoint, it’s a specific creditor group. And in the case of Subbies United Menzies Advisory’s Michael Caspaney is its preferred pick.

Caspaney didn’t get up at the November 27, 2017 meeting because while the resolution had the backing in number, the dollar value was against replacing the Grant Thornton duo. McCann also declined to use his casting vote. But this matter is far from over.

As it turns out, McCann and Jahani were forced to upate their original DIRRI after learning that in 2016 their colleagues in Grant Thornton corporate finance had pocketed $25,000 to undertake high level due diligence on a development and joint venture proposal between Queensland builder Devcorp and their appointor, Chinese outfit China Railway Construction Group Co Limited (CRCG).

At the November 27 meeting Devcorp had submitted proofs of debt (PoDs) to the tune of $15.1 million under the names of its various projects, rather than under the name Devcorp which would’ve been picked up when McCann and Jahani undertook their pre-appointment conflict check.

McCann has trimmed the Devcorp PoDs via adjudication to $2.563 approximately. He told SiN yesterday he expected they would be back with more documentation to shore up the claims, which at present are largely contingent.

The DIRRI update however does nothing to dispel curiosity about the $300,000 indemnity, put up by CRCG in its capacity as CRCG-Rimfire’s major shareholder.

A deed of covenant entered into between CRCG and CRCG-Rimfire indicates that CRCG guarantees its subsidiary’s debts to the tune of almost $1.1 billion in the event of insolvency.

The deed of guarantee was an essential element of the measures CRCG-Rimfire had to implement to operate its Queensland Building and Construction Commission (QBCC) license.

McCann confirmed yesterday that he had called in the $300,000 indemnity and was awaiting a proposal from the Chinese for a deed of company arrangement (DoCA).

“They’re concerned at the extent of the claims by developers,” he said, adding that he believed the Chinese firm was having difficulty coming to grips with Australia’s insolvency regime.

The $1.1 billion dollar question revolves around whether McCann and Jahani would pursue their appointors for the $1.1 billion in the event no DoCA proposal is forthcoming?

McCannn wouldn’t be drawn on that yesterday, other than to indicate that it would be challenging to pursue CRCG in China’s courts. SiN will update progress once the deadline for delivery of any DoCA proposal expires.

Further reading:

McCann Fends Of CRCG-Rimfire VA Challenge

First Time Referrers And Mystery Mandarin Speakers

About the Author

Peter Gosnell
Insolvency News Online illuminates the practice of insolvency Australia-wide, highlighting the triumphs and travails of the nation’s registered practitioners and the accounting and legal professionals who work with them. INO is produced by Peter Gosnell, former business editor and senior business reporter at The Daily Telegraph newspaper. During a decade-long career, your correspondent reported on such notable corporate collapses as HIH, One.Tel, Westpoint and Fincorp as well as some of the nation's highest profile bankruptcies and the investigations and prosecutions arising from Australia's most notorious instances of white-collar crime.

7 Comments on "Grant Thornton forced to update CRCG-Rimfire DIRRI"

  1. Peter you said:
    “The only real difference is that instead of the debtor getting the right to appoint, it’s a specific creditor group. And in the case of Subbies United Menzies Advisory’s Michael Caspaney is its preferred pick”.

    We have offered a few to other liquidators, in one case the liquidator said to me “at a quick glance there is not enough money in it” and thereby hangs the tale.

    The specific creditor group you refer to is almost always the unsecured majority who, to a large degree in the past, have not had a say. We have also had the support of some very large national companies who have had enough of being abused.

    The whole idea is to have a thorough investigation and pursue crooked directors to the point where they are referred to the Queensland or Federal Police instead of the usual whitewash that we all know is so common in the construction industry. SubbiesUnited won’t rest until one or more of them have to start looking over their shoulder when they drop the soap in the shower.

    Watch this space for some very positive news on Cullen Group and Q1 Homes, you will be shocked at the positive results that in time will be made public. These results would not have happened if the status quo had remained.
    The liquidation industry are too comfortable raking in millions and doing SFA for it ,that has now changed and there will be a much higher expectation placed on the efforts of these lazy liquidators.

    There have been over 30 major builder liquidations in Qld in the past 12 months. Why haven’t the Liquidators accessed the Asset Less Administration fund to to properly investigate the directors of these companies, Bluestone being a prime example?

    It is no doubt the biggest “almost legal” fraud in this country.

    • Whilst there are many valid points on this discussion by and large the insolvency profession is one that conducts it affairs with impunity. ASIC only ever talks about independence because it does not want to know about the mid tier practices that have in house pre insolvency and lending to distressed SME’s largely due to the conduct of the very same IP!!

      Many “Hawks” now find themselves facing a new era, admirable as groups such as Subbie United are their impact is limited. There is however a serious disruptor that is beginning to show its teeth, one which many dare not speak of “DATA” and its reach is infinite?

      Rest assured “You ain’t seen nothing yet folks”

  2. Les Williams - Subcontractors Alliance | 7 February 2018 at 12:23 pm | Reply

    Queensland construction industry small business is struggling to come to grips with the Australian Insolvency regime also. It is flawed when a company director appoints and enters into a financial arrangement with that director whose business affairs the IP is charged with investigating and reporting about. And then there is ASIC. The fee approval model whereby uninformed creditors are expected to approve huge hourly hire fees is a joke.

  3. @John Goddard @Les Williams – Subcontractors Alliance

    You guys going to do anything about the cash jobs in your industry or nah?

  4. Interesting article by Mr Goddard about a preference he received which was not pursued by his pick as liquidator.

  5. Taxpayer lets worry about getting subbies paid first. It’s not our job to police how they are paid.

    The preference was pursued but became non commercial. Our strict instructions to the liquidator was no preferential treatment for me or anyone else involved with the changing of the liquidator and Caspaney followed it to the letter.. unfortunately.

  6. John Goddard:

    “The preference was pursued but became non commercial. Our strict instructions to the liquidator was no preferential treatment for me or anyone else involved with the changing of the liquidator and Caspaney followed it to the letter.. unfortunately.”

    As I understand it, you, the directors, or anybody else have no right or authority to provide any liquidators with any instructions on how to run their liquidation/administrations. Otherwise, a creditor-appointed liquidator will be no different from the common complaints by unsecured creditors who throw unfounded allegations about liquidators doing the bidding of the directors/shareholders who appointed them (as stated before in this article).

    Why was your ‘alleged’ preference paid to you in the Cullens case ‘uncommercial’ to be pursued by the liquidator? It would not be uncommercial if you (or your company) had done the right thing and paid back the liquidator the unfair preferential payments, so that the general pool of assets in that liquidation increases for the general body of creditors. Your resistance towards the liquidator’s clawback attempts is the reason for him to have to incur additional legal fees and his own timecosts, thus making it ‘uncommercial’ in the end to successfully pursue. So in essence, you have received payments in the last days of a dying company while other, equally hardworking supplier creditors, employees, etc all lose out on a potential dividend from the liquidation. How is this fair?

    I see plenty of allegations when liquidators receive director’s contributions and indemnities for taking on matters. Yet, when a liquidator requests the general body of creditors for funding to pursue matters, take a guess how often they receive a yes? So where does that leave us? A public liquidators system? Are creditors willing to pay higher taxes to fund this? A private insolvency firm is not a government department. It is a private practice doing important work to help close down or turnaround failing entities to maintain a healthy economy. Consequently Liquidators deserve to be appropriately remunerated for this service.

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