The Federal Court has canned a major prawn farm proposal after finding the Seafarms Group subsidiary responsible for the project has been trading while insolvent.
The Federal Court has canned a major prawn farm proposal after finding the Seafarms Group subsidiary responsible for the project has been trading while insolvent.
Seafarms was developing Project Sea Dragon, a large-scale prawn aquaculture in northern Australia, to produce reliable black tiger prawns year round.
The project’s future became uncertain when the vehicle responsible for the project – Project Sea Dragon Pty Ltd – was placed in voluntary administration in February 2023.
The Federal Court of Australia today ordered Project Sea Dragon be wound up and for the deed of corporate arrangement be terminated.
Major creditor Canstruct started legal action against Project Sea Dragon Pty Ltd and Seafarms Group, seeking to wind-up the vehicle operating the prawn farm project.
In the judgment delivered today, Federal Court judge Roger Derrington found Seafarms Group stopped funding Project Sea Dragon and caused it to be insolvent.
Project Sea Dragon entered into a deed of company arrangement proposed by Seafarms Group, which was alleged to be a breach of the Corporations Act, the judgment said.
“On any view Project Sea Dragon was, and is, essentially, a stalking horse for undertaking high-risk business and one which presents a real risk to others who might deal with it,” Justice Derrington said.
“Were the court not to terminate the deed of company arrangement and wind it up, it would be allowed to continue to trade whilst insolvent, which is contrary to the public interest.”
Seafarms had previously announced it was unable to secure further funding when estimated project costs blew out an extra $80 million.
In February last year, a Royal Institution of Chartered Surveyors adjudicator determined Seafarms was liable to pay $13.9 million to Canstruct.
The determination came after Canstruct claimed money was owed because work on Project Sea Dragon was suspended in December 2021 and contracts were terminated in April 2022.
Seafarms Group previously said it was committed to reviving Project Sea Dragon after regaining control of the prawn farm in March 2023.
However, Justice Derrington today delivered the final blow to the project and the vehicle behind it, finding in favour of Canstruct.
“Save in the most extreme case, if any, courts should not permit insolvent companies to continue to engage in business,” he said in his judgment.
