Project Sea Dragon - Case Update

The Federal Court has granted an application to terminate a DOCA for Project Sea Dragon, finding that the DOCA was an abuse of Pt 5.3A, having been used to allow Project Sea Dragon to avoid its liability to a contractor in breach of the Corporations Act.

The company — a $2 billion Northern Territory prawn project owned by Seafarms Group — entered voluntary administration in February 2023 after it was ordered to pay $14 million to Canstruct, a contractor that managed works on the prawn grow-out facility at Legune station, north of Kununurra.

In March 2023, the company entered into a DOCA pursuant to which all arm’s-length creditors were to be paid in full, other than Canstruct, which was estimated to receive 10 to 11 cents in the dollar.

The Court found that the DOCA was unfairly prejudicial to Canstruct, was entered into after false or misleading information was given to the creditors and after relevant information was not given to them, showing that the whole process was flawed.

The Court stated that the setting aside of the DOCA is likely to lead to recovery actions against Seafarms Group and Project Sea Dragon and will prevent Seafarms Group from using insolvent companies to assume the risks of its business to the potential wider prejudice of future creditors.

Robert Hutson and David Johnstone of KordaMentha were appointed joint liquidators.

The decision, which can be accessed here, is subject to an interim stay to allow for an appeal.