Spanish-owned contractor Duro Felguera Australia, which is involved in multiple legal disputes arising from its work on big resources projects, has been ordered to set aside $20 million because of concerns it would not be able to pay potential claims.
Spanish-owned contractor Duro Felguera Australia, which is involved in multiple legal disputes arising from its work on big resources projects, has been ordered to set aside $20 million because of concerns it would not be able to pay potential claims.
The Supreme Court granted the freezing order after an application by specialist transport company Trans Global Projects Pty Ltd, which claims Duro owes it $30.1 million for work on the Roy Hill iron ore project.
Duro, in turn, has claimed it is owed $26.4 million by Trans Global, which went into liquidation in September 2016.
Duro, which is represented by law firm Jones Day, is also involved in a much larger dispute with South Korean company Samsung, which was the head contractor on Roy Hill.
Its parent company, Duro SA, announced in March it had been paid $19.1 million by Samsung following a series of favourable court rulings.
Duro is claiming a further $310 million from Samsung, in a case being heard by the Arbitration Court of Singapore.
A final decision is expected from the Singapore court by the end of 2018 or early in 2019.
The Samsung case is proceeding at a time when Duro’s loss-making Spanish parent (Duro SA) is seeking new capital to support a refinancing deal with its banks.
In the Supreme Court ruling handed down yesterday, Justice Paul Tottle said there was a risk that a judgement against Duro, which has paid-up capital of $1, would not be paid.
“I am persuaded that there is a danger that a prospective judgment based on an arbitral award will be wholly or partly unsatisfied because the assets of the defendant will be removed from Australia or disposed of, dealt with or diminished in value,” he stated.
Justice Tottle said any money Duro won from Samsung was likely to go to Duro SA, to help the parent company deal with its financial difficulties.
“In those circumstances, I infer that Duro SA will exert its control over the defendant (Duro) to obtain the benefit of the latter's funds,” he said.
“To expect Duro SA to do otherwise would be quite unrealistic.”
The legal claim by Trans Global is being backed by its creditors, including English company Abnormal Load Engineering and a related company, ALE Heavy Lift (Australia) Pty Ltd.
Both companies have provided undertakings to Trans Global’s solicitors, HFW Australia (formerly Holman Fenwick Willan).
In addition, ALE Heavy Lift (Australia) is a shareholder in special purpose company ACN 609 289 170 Pty Ltd, which entered a litigation funding agreement in January this year with Trans Global and its liquidators, Brisbane firm Pilot Partners.
In agreeing to the freezing order, Justice Tottle said Trans Global had a good arguable case for its claims for $30.1 million.
He also accepted that Duro has cross-claims but did not accept this should be fully set off against Trans Global’s claims.
Duro’s legal and commercial manager, Victoria Strong, told the court that, in addition to the Trans Global and Samsung matters, her employer was engaged in two other sets of arbitral proceedings.
It was also managing contracts with about 50 subcontractors engaged on the Roy Hill project and dealing with disputes arising out of those sub-contracts.
In an affidavit, Ms Strong said Duro had no plans to leave Australia and had been tendering on engineering and construction projects.
She noted Duro has a 10 per cent shareholding in engineering company Ausenco, which was acquired in 2016 by private equity group Resource Capital Funds.
Ms Strong added that Duro’s financial statements for the year to June 2017 were currently being audited by KPMG.
Justice Tottle made two observations in regard to her evidence.
“First, the defendant's current plans may well be reviewed if the defendant receives substantial funds by way of an arbitral award,” Justice Tottle said.
“Second, the board and management of Duro SA are in a position to exert effective control over the affairs of the defendant and it is their plans that are most relevant and they are not matters about which Ms Strong has given evidence.”
Duro has two weeks from the judgement to lodge an appeal and is currently assessing that option.
Editor's note: While the Australian entity Trans Global Projects Pty Ltd is in liquidation, the international company trading as Trans Global Projects is in business and retains a Perth office.
