55 Nevertheless, Canstruct also submitted that a second category...

55 Nevertheless, Canstruct also submitted that a second category of abuse might arise on the evidence. It was contended that Seafarms Group Limited could easily have put Project Sea Dragon into liquidation and proceeded with the project via another company. However, rather than pursuing that course, it paid $1.95 million to the administrators as part of the alternative strategy that it adopted. Whilst this choice might be explained on the basis that the process of administration would have caused less disruption to the enterprise then being conducted, Canstruct submitted that the inference remained open that Seafarms Group Limited was prepared to pay close to $2 million to avoid the scrutiny that might be applied by a liquidator to Project Sea Dragon’s conduct and finances. In particular, so it was said, the administration had the benefit of avoiding a liquidator examining the affairs of Project Sea Dragon in order to ascertain whether its directors and its parent company had caused it or allowed it to trade whilst insolvent.

56 Although it might appear that there is a degree of speculation in that submission, on closer analysis, the suggestion as to the potentialinsolvent trading can be seen to be of some substance. In particular, the evidence as to Project Sea Dragon’s financial status in the two years prior to its going into administration indicated a significantly worsening position. In the financial year ending 30 June 2020, it had an excess of liabilities over assets of $2.38 million. That rose to $67.39 million by the end of June 2022, and by the time of the administration it was $73.5 million. The intercompany indebtedness on the part of Project Sea Dragon had, by that point, increased to $64.85 million.

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