FEDERAL COURT OF AUSTRALIA
Shafston Avenue Construction Pty Ltd, in the matter of CRCG-Rimfire Pty Ltd (subject to deed of company arrangement) v McCann [2019] FCA 1426
Keep reading for free
Create a free CaseChat account to read Shafston Avenue Construction Pty Ltd v McCann and more:
- Read every judgment in full
- Ask AI and get answers linked to paragraphs
- See how each paragraph was cited in later cases
- Download judgments as PDF or Word
One click creates your free account or signs you in.
By continuing you agree to the Terms and Privacy Policy.
Details
- Case
- [2019] FCA 1426
- Decision Date
CaseChat Overview and Summary
Shafston Avenue Construction Pty Ltd v McCann involved an application by the plaintiffs to set aside a Deed of Company Arrangement (DOCA) under section 445D of the Corporations Act 2001 (Cth). The plaintiffs argued that the creditors of the company would be better off if the DOCA were terminated and the company placed into liquidation. The Administrators had previously concluded that the DOCA was in the best interests of the creditors. The primary legal issues before the court were whether the DOCA was unfairly prejudicial or contrary to the interests of creditors as a whole, or if it could be set aside for some other reason. The plaintiffs also sought discretionary termination of the DOCA.
The court examined the evidence and found that the plaintiffs failed to establish any of the grounds for termination prescribed under section 445D(1)(f) or (g) of the Act. The court concluded that the Administrators had conducted a thorough review of the company's financial position and had reasonably determined that the DOCA was in the creditors' best interests. The court found no basis to interfere with the Administrators' decision and dismissed the application. The court exercised its discretion not to terminate the DOCA, given the lack of evidence supporting the plaintiffs' case.
The final orders of the court required the parties to consult and submit a draft set of orders reflecting the reasons for the judgment by close of business on 6 September 2019. Entry of orders was to be dealt with in accordance with Rule 39.32 of the Federal Court Rules 2011.
The court examined the evidence and found that the plaintiffs failed to establish any of the grounds for termination prescribed under section 445D(1)(f) or (g) of the Act. The court concluded that the Administrators had conducted a thorough review of the company's financial position and had reasonably determined that the DOCA was in the creditors' best interests. The court found no basis to interfere with the Administrators' decision and dismissed the application. The court exercised its discretion not to terminate the DOCA, given the lack of evidence supporting the plaintiffs' case.
The final orders of the court required the parties to consult and submit a draft set of orders reflecting the reasons for the judgment by close of business on 6 September 2019. Entry of orders was to be dealt with in accordance with Rule 39.32 of the Federal Court Rules 2011.
Orders
Orders of the court
1. By close of business on 6 September 2019, the parties are to consult and submit to my chambers a draft set of orders to reflect the content of these reasons.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
In their Report to creditors dated 27 February 2018, the Administrators undertook a detailed insolvent trading review (pp 42–48). Their conclusions following that review, based on the Cash Flow Test of Insolvency, were as follows:•On the basis of our review of the [Joint Venture] Company’s ability to pay its debts as and when they fall due, it appears the [Joint Venture] Company may have been insolvent from or by 30 September 2017. This is based on the following key factors:–In September 2017, the [Joint Venture] Company had the largest disparity between cash and accounts payables including subcontractor’s debts of $5.1m.–Tax liabilities are outstanding since the September 2017 BAS reporting period and superannuation is outstanding from August 2017.–It was likely evident prior to 4 October 2017, when Mr Moore resigned as a director, that the dispute was not likely to be resolved in the near future and therefore funds may not be provided to the [Joint Venture] Company in the short term.•We have estimated that the quantum of the loss incurred after 30 September 2017 may be in the vicinity of c.$800k.•Further investigations will be undertaken should the [Joint Venture] Company be placed into liquidation.On the alternative Balance Sheet Test of Insolvency, the conclusions were as follows:•On the basis of our review of the [Joint Venture] Company’s books and records, financial position, liquidity ratios and financial performance, it appears the [Joint Venture] Company may have been insolvent from or by 30 September 2017 to 16 November 2017. This is based on the following key factors:–In September 2017 net assets decreased significantly as a result of a loss of c.$560k and continued to decline thereafter indicating that accessing working capital was becoming more and more difficult.–The [Joint Venture] Company incurred operating losses in September 2017, when it was likely foreseeable that discussions between shareholders in respect to the contribution of working capital would be unsuccessful.•Further investigations will be undertaken should the [Joint Venture] Company be placed into liquidation.Recovering a judgment against China Rail Mr McCann addressed this issue in some detail in his main affidavit filed in this proceeding. First, he recorded his understanding as to the assets China Rail held in Australia as follows:At the time of preparing the Report to Creditors, I did not understand that [China Rail] held any assets in Australia. It remains my understanding that [China Rail] holds no, or very few, assets in Australia. The only asset I am presently aware of is a shareholding of 10 ordinary shares in CRCG Australia Pty Ltd ACN 021 [sic – 621] 922 781. CRCG Australia Pty Ltd has capital of only $10 and, based on the following searches, has no substantial assets:(a)National Property Ownership Search - CRCG Australia Pty Ltd dated 23 November 2018 (appearing at page 14 of the Affidavit of Benjamin Rooks sworn on 28 November 2018 and filed in these proceedings);(b)Personal Property Security Register Search - no registrations exist with respect to CRCG Australia Pty Ltd.
Ratio Decidendi
Legal Principle Established
Full text does not contain this section.