RCR Tomlinson class action may be dead unless it can talk a judge around on Friday

The class action against RCR Tomlinson (ASX:RCR) could be dead in the water unless it gets leave from the court to proceed.

The action, filed by litigation firm Quinn Emanuel Urquhart & Sullivan in November last year, alleged that RCR breached continuous disclosure laws as its senior management either was aware or should have been aware of its problems linked to solar farm projects before pulling away the veil at the end of August.

It wanted to know where the $100m raised in August went.

Quinn Emanuel partner Damian Scattini told Stockhead they are due in the Supreme Court of New South Wales on Friday to report “where things are at”.

“It shows we were on the money when we made allegations of misleading and deceptive conduct and not informing the market,” he said.

But unless they are allowed to apply for leave to proceed, the class action will go nowhere. This is because there are legal protections against lawsuits while a company is in liquidation in order to prevent distressed companies from being hit with expensive lawsuits when the liquidators are trying to realise any remaining value in the assets.

If a company trades while insolvent, the directors could be personally responsible for any debts incurred when the company itself is unable to pay those debts, “because one of the fundamental duties of a director of any company is to ensure that the company does not trade while it is insolvent” according to ASIC.

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RCR went into voluntary administration in November last year after the weight of cost blowouts at its solar projects became too heavy for the troubled company to carry any longer.

It came two days after a class action was launched by shareholders angry about a “catastrophic decline in their share value”.

Liquidators were appointed on March 26 after the administrators’ initial findings suggested RCR was trading insolvent for a month before calling them in. This means meaning RCR’s board directors could be personally liable for debts incurred.

Yesterday, the liquidators said they didn’t believe there would to be enough cash left after the fire sales to pay all of the company’s creditors, and definitely not enough to pay out shareholders.

Mr Scattini said the latest news was nothing he hadn’t expected.