Project Sea Dragon Pty Ltd (Subject to a Deed of Company Arrangement) v Canstruct Pty Ltd [2024] FCAFC 141

FEDERAL COURT OF AUSTRALIA Project Sea Dragon Pty Ltd (Subject to a Deed of Company Arrangement) v Canstruct Pty Ltd [2024] FCAFC 141 Appeal from: Canstruct Pty Ltd v Project Sea Dragon Pty Ltd (Subject to a Deed of Company Arrangement) (No 4) [2024] FCA 112

File number: QUD 151 of 2024

Judgment of: O'CALLAGHAN, MCELWAINE AND JACKMAN JJ

Date of judgment: 1 November 2024

CORPORATIONS – standard of appellate review – where deed of company arrangement terminated – whether the Court's satisfaction that a ground for termination is established is governed by the correctness standard pursuant to Warren v Coombes or the standard applicable to discretionary decisions pursuant to House v R – correctness standard applied Catchwords: CORPORATIONS – voluntary administration – deed of company arrangement – appeal from decision of the primary judge to terminate the deed of company arrangement and administration pursuant to ss 445D(1) and 447A of the Corporations Act 2001 (Cth) – where company was put into administration for the purpose of avoiding having to pay an adjudicator's determination while paying all other arm's-length creditors in full and restarting operations in an almost identical position to the pre-DOCA state save for the existence of the particular unwanted debt – whether utilisation of the voluntary administration process and entry into the deed of company arrangement amounted to an abuse of the provisions of Pt 5.3A of the Corporations Act 2001 (Cth) – whether deed was unfairly prejudicial and unfairly discriminatory – whether effect could not be given to the deed without injustice – whether misleading information was provided to creditors voting on the deed – whether there were material omissions from the information given to those creditors – appeal dismissed CORPORATIONS – insolvency – whether company was insolvent from mid-2020 such that the deed of company arrangement had the effect of avoiding scrutiny into insolvent trading – where company had no income stream or substantial assets of its own – where company depended upon parent company for funding – where directors of the company were essentially the same as those of the parent company – where relevant liabilities were knowingly and voluntarily incurred by the company – where company actually paid all debts that fell due and payable – where no challenge to evidence that the parent company would never have made a demand for repayment of amounts advanced – whether primary judge erred by concluding that in order to reach the required level of assuredness of funding, there must be more than a mere discretion on the part of the external funder – held that company was solvent at all times up until 13 February 2023