Canstruct Pty Ltd v Project Sea Dragon Pty Ltd (Subject to a Deed of Company Arrangement) (No 5)

Canstruct Pty Ltd filed an appeal against Project Sea Dragon Pty Ltd, which is under a deed of company arrangement, and Seafarms Group Limited, seeking the termination of a deed of company arrangement and the winding up of Project Sea Dragon. The primary judge had ordered the termination of the deed of company arrangement, the end of the administration, and the winding up of Project Sea Dragon, with liquidators appointed. The appeal was heard by the court, which was required to decide whether the court had the power to order a stay of the winding up in insolvency and the termination of the deed of company arrangement. The court had to consider the principles relevant to ordering a stay, including the rational prospect of success, arguable points, and the balance of convenience. Additionally, the court had to consider whether security for costs should be ordered.

The court examined the appeal's grounds, including the characterisation of the deed of company arrangement process, the finding of insolvency, the matters considered when exercising the discretion to wind up Project Sea Dragon, and the findings that the deed of company arrangement should be terminated. The court also considered the arguments of both parties, including the Stay Applicants' submission that the balance of convenience favoured the grant of a further stay and Canstruct's argument that a stay order could not prevent the provisions of the Corporations Act from engaging upon the making of orders for winding up and the appointment of liquidators.

The court found that the deed of company arrangement process constituted an abuse of the provisions of the Corporations Act, and the primary judge's orders were justified. The court held that the Stay Applicants had failed to demonstrate that their appeal had arguable prospects of success, and the balance of convenience did not favour a stay. The court also held that the Stay Applicants had not provided sufficient security for costs.

The court granted the stay of execution of the primary judge's orders until the determination of the appeal, subject to conditions. The conditions included Project Sea Dragon incurring debts and liabilities only in the ordinary course of its business, Seafarms Group providing a guarantee or undertaking to pay Project Sea Dragon's debts, Seafarms Group providing security for Canstruct's costs, and Canstruct being released from its undertaking to retain a sum of $50,000 as damages. The court also held that the orders restraining the distribution of the deed fund should continue until the determination of the appeal. The costs of the hearings were reserved to the hearing of the appeal.