Construction giant China Railway Construction Group offered up to $1 billion if venture failed

A Chinese construction giant being chased for $40 million after the collapse of a Queensland building venture is refusing to abide by a deed that promised it would pay creditors $1 billion if it went bust.

A CHINESE construction giant being chased for $40 million after the collapse of a Queensland building venture had earlier agreed to pay up to $1 billion to creditors if the business went bust.

The Federal Court heard yesterday that China Railway Construction Group (CRCG) had signed a deed with the Queensland Building and Construction Commission (QBCC) in 2016 that ensured full payment up $1.09 billion to subcontractors and other unsecured creditors if a joint venture, CRCG-Rimfire, was liquidated.

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However, the court was told by lawyers acting for CRCG-Rimfire’s creditors that CRCG doesn’t now intend to abide by the deed even if there is a court judgment against it.

The case reflects growing concern about the business practices of Chinese state-owned companies investing in overseas markets.

CRCG-Rimfire, which had been involved in a number of high rise unit projects in Brisbane, is now in a form of corporate limbo meaning it has not been liquidated but continues to exist under a deed of company arrangement (DOCA) implemented last year.

Under a deal agreed under the DOCA, subcontractors and other creditors have been offered less than 60 cents in the dollar, or a total amount of $8 million.

Brisbane developer Murray Thornton, managing director of Devcorp. Picture: AAP image, John Gass

Barrister Mark Martin, who is acting for Brisbane developer Murray Thornton to have CRCG-Rimfire liquidated in order to enforce the deed, said China Railway Construction Group had told the Foreign Investment Review Board last year that it intended to abide by Australian laws and to “act ethically” in its dealings.

“They now contend they don’t intend to abide by any judgment in this country,” said Mr Martin. “We have received a letter from them saying they won’t pay.”

Mr Martin said China Railway Construction Group was a large company with significant assets. “From a commercial point of view, it would have to abide by any judgment if it wanted to continue to do business in this county,” he said.

Barrister Peter Franco, acting for China Railway Construction Group, said his client and the QBCC had been misled in relation to the deed by people related to its joint venture partners. The person who signed the deed did not have the company’s authority.

“My client is the victim rather than the villain in all of this,” said Mr Franco. “It would have made no commercial sense to execute the deed. There is no way it would have pledged a billion dollars for a company only earning about $60 million a year.”

He said China Railway Construction Group was told the deed was necessary to obtain a Queensland building licence, which was not correct.

Judgment has been reserved.