Grant Thornton’s Mike McCann and Said Jahani could be in for a wild ride as voluntary administrators (VAs) of failed construction outfit, CRCG-Rimfire Pty Limited after the pair on Monday survived an attempt by creditor activist group Subbies United to replace them with its preferred practitioner, Michael Caspaney of Menzies Advisory.
Last night McCann rejected claims from creditors who attended that he had told the first meeting that the only hope for a return was via a deed of company arrangement (DoCA).
In an email response McCann told SiN that his comments were made more in the general sense of cautioning creditors that construction industry insolvencies often involved debts and work-in-progress (WIP) that could be very difficult to recover.
He also refuted suggestions that a $300,000 indemnity paid to the VAs by CRCG-Rimfire’s majority shareholder, Chinese state-owned China Railway Constructions Group Co Ltd (CRCG), would influence his independence when it came to investigating avenues of recovery, which could include calling on a guarantee contained in a deed of covenant entered into between CRCG and its subsidiary.
Under that deed, which formed part of the financial arrangements necessary for CRCG-Rimfire to operate its Queensland Building and Construction Commission (QBCC) license, CRGC effectively guarantees its subsidiary’s debts to the tune of almost $1.1 billion in the event of insolvency. McCann said he was not aware of the existence of the deed until mid-way through the meeting.
“The Deed of Covenant was only made available to me during the meeting yesterday and it, together with any rights a liquidator may have remains the subject of further consideration and ultimately will require legal advice,” he said, before defending his acceptance of the CRGC indemnity and his handling of the resolution to replace him and Jahani.
“The availability of funding for the voluntary administration process through the indemnity which was available to me was only one factor as was the relative number and value of creditors voting against the motion to replace,” he said.
“Rights against CRCG under the Deed of Covenant had no impact on the resolution for replacement and would be available to which ever practitioner is appointed liquidator, should creditors subsequently determine to place the company in liquidation.
“I chose not to exercise a casting vote in relation to the hung motion to replace Said Jahani and I as voluntary administrators as it was my assessment it was in the best interests of creditors overall not to do so, taking into account several factors which were clearly conveyed at the meeting,” McCann said.
The chances of this settling down however appear to be nil. The deed of covenant has been widely circulated and SiN has obtained a copy of a letter that indicates McCaan and Jahani can look forward to political interference via a re-elected Queensland state Government, breathing down there necks on behalf of CRCG-Rimfire’s creditors, many of whom comprise a traditional Labor constituency.
The letter, from Queensland Government Minister for Housing, Public Works and Sport Mick de Brenni and dated November 24, 2017 is in response to queries about two other recent Queensland construction industry insolvencies – Cullen Group Australia and Queensland One Homes.
“A second-term Palaszczuk Government will support you in defending the subcontractors whose businesses and livelihoods are now at risk due to the collapses of Cullen and of One Homes,” the minister told the Subcontractors Alliance.
“A second-term Palaszczuk Government will provide funding for legal action to secure public examination, under the Corporations Act 2001 (Cth), of the persons of interest in these matters. These funds will be made available from the Queensland Building and Construction Commission.”
Of course, such a development could also represent an opportunity for McCann and Jahani to tap a new source of funding for insolvency practitioners appointed to construction firms and in all likelihood, the QBCC can probably expect a deluge of applications.
In the case of CRCG-Rimfire, that could potentially place an Australian Government in an adversarial stance with a Chinese state-owned corporation. Nothing to see here.