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Project Sea Dragon, a $1.5 billion gigantic prawn aquaculture project planned in the NT and WA, will be placed into liquidation after an appeal from its ASX-listed parent company Seafarms Group (ASX: SFG) was dismissed by a Federal Court on Friday.
Seafarms was attempting to overturn a previous ruling preventing the group from entering into a Deed of Company Arrangement (DOCA) for the mega-project - a deal that would have alleviated its liability to pay $13.9 million to contractors from Canstruct for works at Legune Station in the NT.
Canstruct had alleged that the real and intended purpose of the DOCA was to circumvent the payment of the adjudicated amount it was owed, save for 10 cents in the dollar, whilst continuing with maintenance of the project.
In its annual report published in August, Seafarms claimed there had been "several positive developments" in bringing Project Sea Dragon to fruition over the year, including progress in a breeding program, but these had been "marred" by the dispute with Canstruct.
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In that same report, Seafarms noted the outcome of the appeal was one of three contingencies that would affect its ability to continue as a going concern, with the others being the ability to raise finance for the project itself, and the completion and receipt of cash flows relating to the sale of two aquaculture sites in Queensland for $13.5 million.
Friday's ruling from the Federal Court in Queensland mean that orders from Justice Derrington to put Project Sea Dragon Pty Ltd into liquidation now stand.
"Importantly though, the Full Court of the Federal Court found Derrington J erred in finding that Project Sea Dragon Pty Ltd was insolvent since 2020," Seafarms said in a statement to the ASX this morning.
"The Full Court of the Federal Court found that Project Sea Dragon Pty Ltd was solvent at all times prior to the appointment of the administrators on 13 February 2023. Canstruct were awarded costs of the proceedings but these have not yet been assessed.
"Seafarms Group Limited will now engage with the appointed liquidators and work through the implications of the findings. SFG remains solvent and further announcements on the company’s engagement with the liquidators will follow."
KordaMentha partners Robert Hutson and David Johnstone were appointed as liquidators of Project Sea Dragon.
SFG shares are down 33 per cent at the time of publication at $0.002, compared to a price of $0.09 in mid-2021.
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