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[2026] NSWSC 773
Supreme Court of NSW
2026-07-03
Black J
Original judgment source is linked above.
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: In the matter of Tahmoor Coal Pty Ltd (in liq) [2026] NSWSC 773
Hearing dates: 22 June 2026
Date of orders: 3 July 2026
Decision date: 03 July 2026
Jurisdiction: Equity - Corporations List
Before: Black J
Decision: Held that Royalty Deed is not an unprofitable contract; leave to disclaim Royalty Deed and direction sought as to exercise of liquidators’ powers not granted; parties to be heard as to whether liquidators will act in accordance with judgment without the need for injunctive relief
Catchwords: CORPORATIONS — conduct of liquidation — disclaimer — where a Royalty Deed contains certain consent and financial obligations affecting a sale process — whether the Royalty Deed is an “unprofitable contract” under s 568(1A) of the Corporations Act 2001 (Cth) — alternatively, whether the liquidators should be granted leave to disclaim the Royalty Deed under s 568(1A) of the Act — further and alternatively, whether the Court ought make a direction as to exercise of the liquidators’ powers under s 90-15 of the Insolvency Practice Schedule (Corporations)
EQUITY — equitable remedies — injunctions — whether an injunction should be ordered to enforce a negative covenant
Legislation Cited: - Corporations Act 2001 (Cth), ss 9, 477, 513AA, 543, 553, 568, 568D, pt 5.6
- Insolvency Practice Schedule (Corporations), s 90-15
- Supreme Court Act 1970 (NSW), s 66
Cases Cited: - Butterell v Docker Smith (1997) 41 NSWLR 129
- Cerilian Pty Ltd v Graham Fraser [2008] NSWSC 1016
- Cooper v GT Capital Partners Pty Ltd [2019] FCA 2174
- Dalgety Wine Estates Pty Ltd v Rizzon (1979) 141 CLR 552
- Dekala Pty Ltd (in liq) v Perth Land and Leisure Ltd (1987) 17 NSWLR 664
- Global Television Pty Ltd v Sportsvision Australia Pty Ltd (in liq) (2000) 35 ACSR 484; [2000] NSWSC 960
- JC Williamson Ltd v Lukey (1931) 45 CLR 282
- Linter Textiles Australia Ltd (in liq) v Commissioner of Taxation (2002) 20 ACLC 1708; [2002] FCA 1089
- Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181; [2001] HCA 70
- Old Style Confections Pty Ltd v Microbyte Investments Pty Ltd (in liq) [1995] 2 VR 457
- Re ACN 103 753 484 (in liq) formerly Blue Chip Development Corporation Pty Ltd [2012] 2 Qd R 504; [2011] QSC 064
- Re Blue Sennar Air Pty Ltd (in liq) [2016] NSWSC 772
- Re Farrow’s Bank [1921] 2 Ch 164
- Re Real Investments Pty Ltd [2000] 2 Qd R 555; [1999] QSC 089
- Re Tulloch Ltd (in liq) (1978) 3 ACLR 808
- SCL AUS Ltd v Kirkalocka Gold SPV Pty Ltd [2026] FCAFC 60
- Sims v TXU Electricity Ltd (2005) 53 ACSR 295; [2005] NSWCA 12
- The Owners – Strata Plan No 5290 v CGS & Co Pty Ltd (2011) 81 NSWLR 285; [2011] NSWCA 168
- Willmott Growers Group Inc v Willmott Forest Ltd (recs and mgrs apptd) (in liq) (2013) 251 CLR 592; [2013] HCA 51
Category: Principal judgment
Parties: Shaun Fraser and Jonathan Henry in their capacity as joint and several liquidators of Tahmoor Coal Pty Ltd (in liq) (First Plaintiff)
Shaun Fraser and Jonathan Henry in their capacity as joint and several liquidators of Bargo Collieries Pty Ltd (in liq) (Second Plaintiff)
Tahmoor Coal Pty Ltd (in liq) (Third Plaintiff)
Bargo Collieries Pty Ltd (in liq) (Fourth Plaintiff)
Glencore Coal Pty Limited (Defendant)
Representation: Counsel:
Mr R Scruby SC / Mr R May / Mr G Zhu (Plaintiffs)
Mr M Izzo SC / Mr J Burnett (Defendant)
Solicitors:
Ashurst Australia (Plaintiffs)
Mallesons (Defendant)
File Number(s): 2026/201247
By Originating Process filed on 15 May 2026, Messrs Fraser and Henry as joint and several liquidators (“Liquidators”) of Tahmoor Coal Pty Ltd (in liq) (“Tahmoor”) and Bargo Collieries Pty Ltd (in liq) (“Bargo”) (together, “Companies”) and the Companies seek several forms of relief in relation to a Royalty Deed dated 20 April 2018 between the Companies and Glencore Coal Pty Ltd (“Glencore”) (“Royalty Deed”). By Interlocutory Process filed on 1 June 2026, in the nature of a Cross-Claim, Glencore seeks an order that the Liquidators and the Companies be restrained from taking the steps prohibited by cl 5.1 of the Royalty Deed, without the transferee from the Companies agreeing to assume, be bound by and perform all of the relevant Companies’ obligations under the Royalty Deed.
The relevant facts here are in narrow compass and the application, although complex, can be determined relatively briefly. It will be convenient, first, to set out the background facts and affidavit evidence, then to turn to the several issues which it is common ground need to be determined in the application.
By way of background, Tahmoor holds land and mining leases and exploration authorities granted under the Mining Act 1992 (NSW) (“Mining Act”) and Bargo also holds a coal lease under the Mining Act. Tahmoor operates an underground coal mine in the Southern Highlands of New South Wales, although the operations of the mine are presently suspended and it has been under care and maintenance since at least May 2025.
The earlier sale process in respect of the mine involved the issue of a confidential information memorandum in May 2017 (Ex D1, 1245). An initial indicative offer dated 22 June 2017 made by Simec Investments 30 Pte Ltd (“Simec”), a company within the GFG Alliance group (Ex D1, 1312), proposed a substantial cash purchase price for shares in Tahmoor’s then parent company, Austral Coal Pty Ltd (“Austral”), which would transfer ownership of the mine. A subsequent offer dated 5 September 2017 made by Simec (Ex D1, 1318) offered a reduced “upfront consideration” on the basis of a royalty payable as follows:
“A royalty of USD$2.50 payable by Simec to Glencore on every tonne of saleable coal from the Tahmoor South Development (Royalty). The Royalty is payable once Tahmoor South reaches full production, and continues for the life of Mine. The Royalty is only payable if Tahmoor is cashflow positive.
Based on the production profile provided by Glencore, the Royalty has a value of USD$21.6 million.”
A Share Sale Agreement dated 22 December 2017 (Ex P1, 375) then provided for a subsidiary of Glencore and Austral’s immediate parent company, Helios Australia Pty Limited (“Helios”), to sell the shares in Austral to Simec (Australia) Mining Pty Ltd at a reduced purchase price which, I infer, at least partly reflected the Companies’ entry into the Royalty Deed. Clause 5.2 of that agreement in turn required the seller to deliver, at completion, a counterpart of the Royalty Deed executed by Glencore and the Companies. This clause plainly provided a mechanism by which the Royalty Deed would take effect.
On or about 20 April 2018, the Companies and Glencore entered into a Royalty Deed (Points of Claim (“POC”) [13]ff; Points of Defence (“POD”) [13]ff; Ex P1, 193) which provides, in cl 3.1, that Tahmoor will pay Glencore a royalty (“Royalty Obligation”) at a specified Royalty Rate, excluding the first 324,000 Royalty Tonnes (as defined) that it mined in respect of part of the mine. I recognise that the Royalty Deed was apparently signed by the Companies at a time when they remained under Glencore’s control, but nothing turns on that where the execution of the Royalty Deed reflected the contractual arrangements for the earlier sale of the mine.
Clause 5.1 of the Royalty Deed (“Consent Requirement”) provides that the Companies must not, without the prior written consent of Glencore, assign, novate, transfer, charge, encumber, create an interest in or over, or otherwise deal with their rights, title or interest in, or obligations with respect to, the Tenements or the Tahmoor Land (as defined). Clause 5.1(b) of the Royalty Deed provides that Glencore “will” give its consent in accordance with the Consent Requirement if:
“(i) The transferee from [either of the Companies] first agrees, in a form satisfactory to [Glencore] (acting reasonably), to assume, be bound by and perform all of the obligations of [Tahmoor or Bargo] (as applicable) under this deed; and
(ii) [Glencore] is satisfied (acting reasonably) that the transferee has the financial, technical and operational capacity to do so.”
Clause 7.1 of the Royalty Deed contains undertakings by each of the parties, the Companies on the one hand and Glencore on the other, to keep confidential the terms of the deed and information, data or documents supplied to or received by a party from the other party, with certain exceptions. That is not a trivial obligation where that information would include, for example, financial information made available by the Companies to Glencore to comply with audit obligations under the Royalty Deed and information which might be provided by the Companies to Glencore under cl 5.1 of the Royalty Deed to seek Glencore’s consent to a transfer of the mine. By cl 9 of the Royalty Deed, the parties each agree with the other to the determination of disputes by an expert and, by cl 10 of the Royalty Deed, the parties each agree with the other to a dispute resolution mechanism, involving, inter alia, senior management negotiations before Court proceedings are commenced. I will return to the significance of those reciprocal commitments below.
The Liquidators were appointed by the Court as joint and several liquidators of Tahmoor on 6 March 2026 (POC [3]; POD [3]) and they were then appointed as liquidators of Bargo on 10 April 2026 by resolution of its sole member, Tahmoor.
The Liquidators and their solicitors have been in correspondence with Glencore and its solicitors, at least since 11 March 2026, as to whether the Companies would be required to comply with the Royalty Deed and to the position in respect of caveats lodged by Glencore on the Tenements under the Mining Act. Importantly, by email dated 2 April 2026, Glencore asserted its rights in respect of any breach of the Royalty Deed not only against the Companies but also against the Liquidators.
By letter dated 1 May 2026, the Liquidators’ solicitors wrote to Glencore’s solicitors contending that Glencore did not have a legal or equitable interest in the Mining Leases or Consolidated Coal Leases (as defined) to support caveats lodged by Glencore and contended that the Royalty Deed was liable to be disclaimed as follows:
“The Liquidators also consider that the continuation of the Royalty Deed and the rights and obligations of the parties thereunder are contrary to the interests of the creditors of [the Companies]. The Liquidators consider that the Royalty Deed is liable to be disclaimed pursuant to s 568 of the [Act] by the Liquidators on the basis that it is an unprofitable contract or, alternatively, that it is just and equitable to do so.”
“Noting your clients’ concerns regarding the practical steps and timing of the sale process outlined in your letter of 8 May, including the time to satisfy the conditions in clause 5.1 of the Royalty Deed, Glencore is prepared to undertake best endeavours to facilitate the sale process in the timeframe set out in your letter. This assumes that any incoming purchaser of the asset accedes to the Royalty Deed, which is Glencore’s expectation.
To facilitate the expedition of the sale process, Glencore is prepared to:
(a) Provide its decision under clause 5.1(b) within five business days of being provided with basic information (limited to the categories of information described in sub-paragraph (b) below to approve any proposed purchaser put forward by the Liquidators; and
(b) Its diligence process under clause 5.1(b) to documents showing the identity and ownership structure of the purchaser, and audited financial statements of the purchaser and its ultimate shareholder, together with a statement outlining its technical and operational capacity to operate the asset and its proposed plan for the operation of the Mine.
Glencore remains open to considering any other proposals from the Liquidators to facilitate and support the sale process, assuming of course that any incoming purchaser of the asset accedes to the Royalty Deed.”
By letter dated 19 May 2026, the Liquidators’ solicitors responded to the substantive issues raised by Glencore in its 14 May 2026 letter as to whether the Royalty Deed was capable of being disclaimed under s 568 of the Corporations Act 2001 (Cth) (“Act”) and advanced the contentions which are now advanced by the Liquidators in these proceedings.
By a letter dated 20 May 2026, Glencore further modified the position in respect of the Consent Requirement, in response to matters raised in Mr Fraser’s affidavit dated 15 May 2026 in the proceedings. Glencore’s solicitors there referred to their earlier letter dated 14 May 2026 and observed that:
“[W]e already note that [the earlier 14 May 2026 letter] confirmed that Glencore was prepared to facilitate the expedition of the sale process, including by providing its decision to approve any proposed purchaser put forward by the Liquidators under clause 5.1(b) within five business days of being provided with basic information and limiting its due diligence process to documents showing the identity and ownership structure of the purchaser, and audited financial statements of the purchaser and its ultimate shareholder.
Relevantly, also, Glencore’s consent under clause 5.1(b) was always subject to an obligation to act reasonably. There is no basis for any suggestion that Glencore’s approach to the obligations in clause 5.1(b) would be anything other than reasonable and facilitative of the sale process, particularly where it is in Glencore’s interests to have a viable operator accede to the Royalty Deed.”
“In light of the Liquidators’ … position that the proposal in [the earlier 14 May 2026 letter] remains “unduly onerous”, and in the interests of further facilitating the sale process and providing the Liquidators with certainty that the sale process will not be delayed or otherwise impacted by Glencore’s rights under clause 5.1, we are instructed that Glencore gives pre-emptive consent under clause 5.1(b) of the Royalty Deed to any successful bidder selected by the Liquidators in the current sale process. In this regard, Glencore’s consent is given:
(a) On the basis the incoming purchaser of the asset accedes to the Royalty Deed in accordance with clause 5.1(a) of the Royalty Deed; and
(b) Without any admission or concession in relation to the assertions made in the [affidavit of Mr Fraser dated 15 May 2026] or the relief sought in the Application.
Notwithstanding the consent given in paragraph 6, Glencore’s expectation is that the Liquidators will engage with Glencore in a commercially responsible manner to facilitate the orderly accession of any incoming purchaser, including by notifying Glencore of the identity of that purchaser at the earliest practical opportunity to enable Glencore to engage with them in relation to the accession arrangements.”
The Liquidators and Companies read an affidavit dated 15 May 2026 of Mr Fraser, one of the Liquidators, although they recognise that parts of that affidavit are now of historical relevance only. Mr Fraser refers to his extensive experience, including in external administrations of mining companies and outlines the background to his appointment. He also addresses the complex financing and security arrangements affecting the Companies and identifies several secured creditors of Tahmoor, although he expresses the view that a security granted to an entity associated with the GFG Alliance group is susceptible to challenge as an unfair preference under s 588FA of the Act; an uncommercial transaction under s 588FB of the Act; or a circulating security interest created within six months before the relation-back day under s 588FG of the Act. Proceedings as to those matters have now been commenced, although it is not necessary to address any issue as to them to determine this application.
Mr Fraser also refers to the conduct of the liquidation, including funding obtained by the Liquidators for the purposes of the liquidation; the current care and maintenance arrangements in respect of the mine; and the sale process that had then been commenced in respect of the mine, which has subsequently resulted in execution of a sale agreement. Mr Fraser also there outlines his preliminary view as to the security position of priority claims, which has since advanced; and refers to the terms of the Royalty Deed and the correspondence with Glencore, which I have addressed above. Mr Fraser also there addresses the potential impact of the Consent Requirement in the Royalty Deed on the sale process, referring to the time pressure under which a sale was being conducted, which arose from the limited funding available to the Liquidators to, inter alia, preserve the mine on a care and maintenance basis. Mr Fraser also addresses the Liquidators’ calculation of the net present value of the royalty payable under the Royalty Deed and its impact on creditor recoveries. It is not necessary to address that or later calculations in detail, where it is plain enough that the present value of the royalties payable under the Royalty Deed is substantial, and the continuance of the Royalty Obligation will substantially reduce the amount payable by the purchaser to the Companies to acquire the mine and the return to unsecured creditors in the liquidation.
By a second affidavit dated 20 May 2026, Mr Fraser updates the position as to funding of the liquidation and the sale process for the mine. By a third affidavit dated 15 June 2026, Mr Fraser again updates the position as to funding, and developments in the liquidation and sale process; and refers to steps that had been taken by Glencore to remove caveats placed on the Tenements under the Mining Act. He also addresses the likely impact upon creditors of a reduction in the sale price of the mine, reflecting the obligations of a purchaser to pay the continuing royalty under the Royalty Deed. By a fourth affidavit dated 16 June 2026, Mr Fraser corrects an error in his earlier calculation of the return to creditors, as impacted by the Royalty Obligation.
By a fifth affidavit dated 18 June 2026, Mr Fraser addresses the execution of binding transaction documentation in relation to the sale of the mine, late on 17 June 2026. He also refers to a mechanism contained in that documentation by which the buyer must pay a replacement royalty on the same terms as the Royalty Obligation in favour of the Liquidators (acting on behalf of the Companies) or an entity established by the Liquidators for that purpose, if the Royalty Deed is terminated, repudiated or disclaimed by the sellers prior to completion of the sale transaction or the buyer is not obliged to assume, be bound by or perform the obligations under the Royalty Deed. Conversely, the Liquidators (and, by extension, the Companies’ creditors) do not obtain the benefit of that replacement royalty if the royalty continues to be payable to Glencore under the Royalty Deed. The sale documentation also contains a mechanism for the Companies to realise the value of a replacement royalty in the liquidation. Mr Fraser there calculates the impact on creditors of that position, which again demonstrates, unsurprisingly, that the return to unsecured creditors will be significantly reduced if the Royalty Deed remains on foot and the replacement royalty is not payable to the Liquidators for the benefit of creditors.
Glencore in turn reads the affidavit dated 4 June 2026 of its General Counsel, Mr Cregan, who refers to the terms on which an entity within the Glencore group previously sold the mine to Simec. It is plain enough from Mr Cregan’s evidence, and there is no real dispute in these proceedings, that the Royalty Obligation assumed by the Companies under the Royalty Deed was an intrinsic element of the earlier sale arrangement, and was associated with a reduction in the initial consideration payable by Simec to acquire the mine. There was no suggestion in these proceedings that that was not a legitimate commercial arrangement, at least in a commercial sense, or that the Glencore group had not given economic value to Simec for its rights under the Royalty Deed.
The Liquidators and the Companies here seek a declaration or alternatively an order under s 90-15 of the Insolvency Practice Schedule (Corporations) (“IPS”) that the Royalty Deed is an “unprofitable contract” within the meaning of s 568(1A) of the Act. The parties helpfully agreed the matters in issue and made detailed and subtle submissions in chief about them. I have also had regard to, although it has not been necessary to rehearse, the parties’ respective submissions in reply addressing the subtleties of the case law and their oral submissions also addressing these issues.
The first of those issues is whether the Royalty Deed is a contract which can be the subject of a disclaimer under s 568 of the Act. Glencore contends that it is not. Section 568(1)(f) of the Act permits a liquidator to disclaim, on behalf of a company, “property of the company that consists of a contract”. The term “property” is defined in s 9 of the Act to mean “any legal or equitable estate or interest (whether present or future and whether vested or contingent) in real or personal property of any description and includes a thing in action” and in Pt 5.6 has a meaning affected (but not relevantly for present purposes) by s 513AA of the Act. Section 568(1A) of the Act requires that the disclaimer of a contract relevantly requires either leave of the Court or that it be “unprofitable”, in which case no leave is required.
The scope of the concept of “property of the company that consists of a contract” in this section has been considered in the case law. In Willmott Growers Group Inc v Willmott Forest Ltd (recs and mgrs apptd) (in liq) (2013) 251 CLR 592; [2013] HCA 51 (“Willmott Growers”), French CJ, Hayne and Kiefel JJ observed (at [35]) that the reference to “property of the company” in s 568:
“must be read as directing attention to the legal relationship which exists between the company and the object (whether that object is land, shares, a contract, or some other property).”
Their Honours also observed (at [36]) that “no narrow meaning can be given to … the word ‘property’ whenever it is used in” s 568(1) and that it should be understood to refer to “any of a wide variety of legal rights against others”. Their Honours also noted (at [38]) that the reference in s 568(1)(f) to “‘a contract’ must be understood as identifying … the rights and duties which arise under the contract” and that “[t]he contract is the source of those rights and duties”.
“to enlarge in its relevant application the meaning of ‘property’, consistent with the express qualification to the statutory definition of property, ‘Unless the contrary intention appears’ [s 9]. The property of the company that consists of a contract able to be disclaimed therefore encompasses the totality of the executory rights and obligations the company has under that contract”.
“(a) The Royalty Deed is not property of the Company capable of being disclaimed under s 568. Relevantly, section 568(1)(f) of the [Act] only authorises the disclaimer of property, including “property of the company that consists of…a contract”. The disclaimer that is available is of property, not of liabilities.
(b) For a contract to be capable of disclaimer as property, the company must have contractual rights under it: Re Blue Sennar Air Pty Ltd (in liq) [2016] NSWSC 772, [6] [(“Blue Sennar”)]; Rothwells Ltd (in liq) v Spedley Securities Ltd (in liq) (1990) 20 NSWLR 417 at 422 [(“Rothwells”)].
(c) The Royalty Deed confers no material or valuable rights on the Company and, therefore, cannot be considered property of the Company or be capable of being disclaimed.”
The decision in Blue Sennar, on which Glencore relies, does not assist it where that case addresses the position where a company was not party to the contract sought to be disclaimed, where there was, obviously enough, no basis for a disclaimer in that situation. That is not the position here. The decision in Rothwells is of greater relevance, where the Court held that a contact under which there remained mutual rights and obligations could be disclaimed.
Mr Izzo, with whom Mr Burnett appears for Glencore, adopted substantially the same position in submissions. He submits that the Royalty Deed does not confer contractual rights on the Companies and the obligations contained under the Royalty Deed, which the Liquidators seek to disclaim, are not “property” of the Companies. Mr Izzo in turn advances subtle submissions as to the proper reading to be given to Willmott Growers, and also relies on Blue Sennar in that regard. He submits, inconsistently with the position previously taken by Glencore in correspondence with the Liquidators that:
“The Plaintiffs identify the Companies’ “rights” under the Royalty Deed as being the right to compel Glencore’s consent to a transfer to the Tenements or the Tahmoor Land pursuant to the Consent [Requirement]: [Plaintiffs’ submissions] [39]. Those provisions, however, do not confer any “right” on the Companies. The Plaintiffs’ submission ignores the legal and commercial effect of the Consent [Requirement]. The Royalty Deed operates as a prohibition on transfer, coupled with an exclusion (being the circumstance in which Glencore provides consent). This is the opposite of a “right”; the terms of the Royalty Deed identified by the Plaintiffs as conferring a “right” on the Companies are properly characterised as imposing a restriction on the Companies. The relevant right is that of Glencore.”
In response, Mr Scruby with whom Messrs May and Zhu appear for the Liquidators and the Companies, recognised that the Act does not define the concept of an “unprofitable contract” and referred to the history of that concept in insolvency legislation and the case law that has considered it, to which I will refer below. Mr Scruby submits that, on either the reasoning of Gageler J or the plurality in Willmott Growers, the totality of rights and obligations under a contract can be disclaimed, and neither the text of s 568 of the Act nor the reasoning in Willmot**t Growers requires that the company in liquidation have “material or valuable rights” under the contract. He submits that, in any case, the Companies have “rights” under the Royalty Deed, including to compel Glencore’s consent to a transfer of the Tenements or the Tahmoor Land under cl 5.1(a) in the circumstances provided by cl 5.1(b), and these rights may be of no material value or benefit to the Companies. He submits that such rights, with the obligations imposed on the Companies under the Royalty Deed, amount to a “totality of rights and obligations” under a contract or, in the words of the plurality, are part of the “rights and duties” that arise under a contract, and the Royalty Deed is therefore a contract which may be disclaimed.
It is not necessary to address the subtlety of Mr Izzo’s submissions here, where their factual basis is not established. The contention that cl 5.1(b) of the Royalty Deed is not an obligation assumed by Glencore in favour of the Companies which was enforceable by the Companies does not seem to me to be supported by the terms of the provision and, in any event, Glencore had previously accepted, by the terms of its solicitors’ letter dated 20 May 2026 that that clause did give rise to an obligation to act reasonably, implicitly owed to the Companies under the Royalty Deed. This clause, read in the way which Glencore there accepted that it should be read, or alternatively and additionally with the confidentiality, expert determination and dispute resolution provisions to which I have referred above, confer substantive rights upon the Companies under the Royalty Deed. The respective rights and obligations of the parties under the Royalty Deed have the result that it is a contract which can be the subject of a disclaimer under s 568 of the Act*.*
The next question is whether the Royalty Deed is an “unprofitable” contract for the purposes of that section. The Liquidators and the Companies contend (POC [29]) that compliance with the Consent Requirement by the Companies would not be practicable and would impose a significant burden on them realising the Companies’ property by the sale of the mine. Glencore denies the claim (POD [29]) and relies on the pre-emptive consent which it has given under cl 5.1(b) of the Royalty Deed to any successful bidder selected by the Liquidators in its sale process. The Liquidators and the Companies also point (POC [30]) to the effect of compliance with the Consent Requirement, namely that a purchaser of the Tenements and the Tahmoor Lots is required to assume the obligations under the Royalty Deed, with the result (which was always likely and has now eventuated) that the sale price for the Companies’ assets that the Liquidators would be paid, for the benefit of the Companies’ creditors, and any subsequent dividend to unsecured creditors would be reduced, likely by an amount reflecting the net present value of the Royalty Obligation assumed by a purchaser of the Tenements and the Tahmoor Lots. Glencore admits (POD [30]) that the effect of compliance with the Consent Obligations would be to require a purchaser of the Tenements and the Tahmoor Lots to assume the obligations under the Royalty Deed. Glencore does not admit the effect of this requirement upon the sale price achieved for the Tenements and the Tahmoor Lots, but that impact is now established as a matter of fact. I broadly accept the Liquidators’ and Companies’ claim as to the financial effect of the provisions but also note that the Royalty Obligation would not be performed or royalties paid by the Liquidators or the Companies, but by a purchaser which assumed that obligation under the Royalty Deed.
Turning now to the case law as to the concept of an “unprofitable” contract in the relevant sense. In Dekala Pty Ltd (in liq) v Perth Land and Leisure Ltd (1987) 17 NSWLR 664, Young J held (at 667) that an option agreement was an unprofitable contract where:
“fulfilment of that contract would involve the liquidator in at least eight months of work and in taking the chance that the purchaser would obtain finance on terms and conditions that were satisfactory to it …. which cannot be satisfactorily carried out by a liquidator whose interest is to realise the company’s property and pay a dividend to creditors at the earliest possible time.”
“What is important in that context is whether the contract could be satisfactorily carried by a liquidator or trustee in bankruptcy, compatibly with the liquidator’s duty to realise the company’s property and pay a dividend at the earliest possible time. Consistent with that approach a contract must be more than merely financially disadvantageous as Hayne J concluded in Old Style Confections Pty Ltd v Microbyte Investments Pty Ltd (in liq) [1995] 2 VR 457 at 466—7 [(“Old Style Confections”)]. Thus if a liquidator could perform a contract without prejudicing his obligation to realise the company’s property and pay a dividend to creditors at the earliest possible time, he could not turn around and disclaim that contract merely on the expedient ground that he substitute a more profitable one. Such a notion of comparative financial disadvantage is not the applicable test.”
“Clearly, for the liquidator to assume a continuing obligation till 2003 to make payments under a take or pay arrangement and for a service from Global which SportsCo evidently no longer requires, and can no longer use, must be incompatible with SportsCo’s beneficial winding-up and would delay any early dividend. Very obviously, the disclaimer provisions are intended to enable insolvency administrators to relieve themselves of ongoing liabilities which so prolong the administration and delay the dividend.”
In order to be an “unprofitable contract”, it is not sufficient that the company could have made, or could make, a better bargain; or that the contract is financially unprofitable, in the sense of having onerous financial terms; and it is also necessary that the contract is incompatible with the proper and expedient conduct of the liquidation: Old Style Confections at 466-467; Blue Sennar at [11]; Cooper v GT Capital Partners Pty Ltd [2019] FCA 2174 at [36], [40] (“Cooper”).
In Re Real Investments Pty Ltd [2000] 2 Qd R 555; [1999] QSC 089, an agreement that imposed obligations on a company in liquidation that continued for a long period, which it did not have the resources to perform, was held to be an unprofitable contract. Chesterman J summarised the applicable principles (at [21]) as follows:
“A contract is unprofitable for the purpose of s 568 if it imposes on the company continuing financial obligations which may be regarded as detrimental to the creditors, which presumably means that the contract confers no sufficient reciprocal benefit.
Before a contract may be unprofitable for the purposes of the section it must give rise to prospective liabilities.
Contracts which will delay the winding-up of the company’s affairs because they are to be performed over a substantial period of time and will involve expenditure that may not be recovered are unprofitable.
No case has decided that a contract is unprofitable merely because it is financially disadvantageous. The cases focus upon the nature and cause of the disadvantage.
A contract is not unprofitable merely because the company could have made or could make a better bargain.”
I should add that both the parties’ research and my research have not identified any case that considers whether a negative covenant or a restraint on dealing with property would generally be treated as an unprofitable contract.
Mr Scruby submits, first, that the Consent Requirement, or the continuing obligation to pay royalties under the Royalty Deed, makes it “unprofitable” because it subtracts from the revenues that would otherwise be derived from exercising the rights conferred by the Tenements. I do not accept that submission, where an obligation to make payments under a contract is not sufficient, in itself, to have the consequence that the arrangement is “unprofitable”, and the royalties will not be payable by the Companies while they are in liquidation and the mine is in care and maintenance, but only by the purchaser if it assumes the obligations under the Royalty Deed and recommences mining operations at the mine. I accept that, here, the commercial reality is that the Royalty Deed will reduce the price the Companies receive from a sale of the assets, and that is now clear from the terms of the ultimate sale of the mine, to which I have referred above.
Mr Izzo responds that:
First, it is said that the effect of compliance with the Consent [Requirement] may depress the purchase price payable by a bidder for the Tahmoor Mine, because the bidder would be required to assume obligations under the Royalty Deed.
This feature, however, does not make the Royalty Deed an “unprofitable contract”. Adopting the language used by Hayne J in [Old Style Confections], the Royalty Deed is not “unprofitable” simply because a better return could be achieved if the Tenements were sold without requiring compliance with the terms of the Royalty Deed. Whether a contract is “unprofitable” does not direct attention to comparative financial disadvantage; it requires consideration of whether the contract would impact on the expedient winding up of the Company.
Further, the Plaintiffs’ complaint is not that the terms of the Royalty Deed impose any onerous or unprofitable obligation on the Companies. The premise of the Plaintiffs’ argument is that it will be the successful bidder who will take on the obligations under the Royalty Deed.
It seems to me that, as Mr Scruby largely accepts, the case law indicates that the adverse effect on the sale price which the Companies will obtain on the sale of the mine, where the purchaser assumes the obligations under the Royalty Deed, is not sufficient to give rise to an “unprofitable” contract in the relevant sense.
Second, and more persuasively, Mr Scruby submits that the Consent Requirement imposed by cl 5.1(b) of the Royalty Deed is burdensome in the context of a winding up. Mr Scruby refers to Mr Fraser’s evidence in this respect and submits that:
“The restriction imposed by clause 5.1(b) is also burdensome in the context of a winding up. It requires a liquidator to deal with prospective purchasers on the basis that they themselves will need to satisfy Glencore as to their financial and technical capacities to operate the mine. To do this during a bidding process with multiple interested parties with tight time frame and limited funding is “onerous” or “burdensome” in the relevant sense. The difficulties in this regard are described at [Mr Fraser’s first affidavit dated 15 May 2026] [106]-[111].
It requires the Companies to consent to the lodgment of caveats over the Tenements in circumstances where Glencore has no caveatable interest in them.”
Mr Scruby also submits that issues as to the operation of the Royalty Deed and the Consent Requirement have, at times, caused difficulty in negotiations with potential purchasers of the mine. It seems to me that that matter does not, without more, have the result that the Royalty Deed is an unprofitable contract, where issues in relation to the operation of significant contracts are likely to arise in any negotiation of a complex transaction such as the sale of the mine and, second, as those issues were ultimately resolved in the sale process, by the mechanism I have noted above.
Unsurprisingly, Glencore relies on its pre-emptive consent to any bidder selected by the Liquidators, which agreed to assume and be bound by the obligations under the Royalty Deed, to submit that the Consent Requirement does not give rise to an unprofitable contract.
Mr Izzo responds that:
“Secondly, it is said that compliance with the Consent [Requirement], being the terms of the Royalty Deed which provide that the Tenements may not be transferred without Glencore’s consent, would not be practicable and would impose a significant burden on the Liquidators in realising the property of the Companies by a sale of Tahmoor Mine.
This contention cannot be accepted. Glencore has provided pre-emptive consent to any bidder selected by the Liquidators, provided that the bidder agrees to assume and be bound by the obligations under the Royalty Deed. Therefore, compliance with the Consent [Requirement] imposes no substantial obligation on the Companies or the Liquidators.
The Plaintiffs’ approach, which focuses on the legal obligations recorded in the contract, without reference to the context in which those obligations are to be performed (if at all), is an erroneous approach to considering whether a contract is “unprofitable”. … the question of whether a contract is “unprofitable” required consideration of the actual impact performance of the contract would have on the winding up of the company.”
“The Liquidators submit that Glencore cannot transform what is otherwise an unprofitable contract (and thereby improve its position vis-à-vis the Companies’ other unsecured creditors) by subsequently and selectively abandoning some of its rights under the Royalty Deed. To construe the legislation in this way would be to encourage precipitous disclaimers.”
I was initially attracted to this submission, where it seems odd, on one view, that a disclaimer of a contract that was otherwise onerous and plainly “unprofitable” in the relevant sense could be avoided by the counterparty abandoning all or most of its obligations. However, on reflection, I cannot accept this submission, consistent with the case law or as a matter of principle.
First, the case law has recognised that the operation of a disclaimer should be assessed in the relevant commercial circumstances. In Blue Sennar at [12], Brereton J observed that:
“The question whether a contract is unprofitable is one of fact. While it is necessary to identify from the contract the company’s contractual obligations and liabilities, and compare them with its contractual rights and entitlements, it is the detriments and benefits that in fact flow from those obligations and entitlements that govern whether or not the contract is in fact profitable. Thus, it is necessary to have regard to the actual operation of the contract and the results its operation in fact produces.”
It seems to me that the actual operation of the contract and the results its operation in fact produces will reflect any narrowing by the counterparty to a contract of the obligations under that contract, potentially extending to the substantial abandonment of those obligations.
Second, in principle, it seems to me that the statutory purpose is promoted, rather than undermined, by permitting a party to a contract that would otherwise be unprofitable to mitigate any onerous consequences that would otherwise arise from it, so as to avoid the need for a liquidator to rely upon a disclaimer of the contract. Such a counterparty should not be discouraged from doing so by then treating the contract as an unprofitable contract, contrary to the manner in which that counterparty would in fact operate.
For these reasons, I will not make the first declaration sought by the Liquidators and the Companies.
Second, the Liquidators and the Companies seek an order under s 568(1A) of the Act granting leave to disclaim the Royalty Deed, if (as I have held) it is not an “unprofitable contract” within the meaning of that section.
Counsel drew attention to earlier case law, summarised by Spigelman CJ (with whom Sheller JA and Brownie AJA agreed) in Sims v TXU Electricity Ltd (2005) 53 ACSR 295; [2005] NSWCA 12 at [16]ff (“Sims”) as follows:
The general legislative intent of Div 7A has been referred to in a number of authorities.
In Re Middle Harbour Investments Ltd (in liq) (No 2) [1977] 2 NSWLR 652 at 657; (1976) 2 ACLR 303 at 305 Bowen CJ in Eq said:
‘The purpose of providing for disclaimer by an official receiver or trustee in bankruptcy or by a liquidator in winding up seems clear enough. It is to enable him to rid himself or, in the case of liquidation, the company, of burdensome financial obligations which might otherwise continue to the detriment of those interested in the administration; it is given to enable the official receiver, or trustee, or the liquidator to advance the prompt, orderly and beneficial administration of the bankrupt estate or, in the case of a company, of the winding up of its affairs …’ [Citation omitted]
To similar general effect are the observations of Santow J in [Global Television] at [65]:
‘… the disclaimer provisions are intended to enable insolvency administrators to relieve themselves of ongoing liabilities which so prolong the administration and delay the dividend …’
…
Although the purpose of Div 7A is to facilitate the prompt and efficient liquidation of a company, the means chosen to achieve that objective are not at large. Section 568 is concerned to identify circumstances in which a liquidator is entitled to cease performing obligations in various contexts, including, the case of a “profitable” contract. The essential feature of the scheme of disclaimers is to achieve a release of the company in liquidation from its obligations.”
“The question of whether leave should be granted under s 568(1A) is informed by the overall purpose of the disclaimer provisions described in the passages set out above. Sims itself decided that the power under s 568(1B) did not extend to permit the liquidators in that case to disclaim some but not all of the relevant contractual provisions and so does not provide any direct assistance in the present circumstances.
Division 7A sits within Part 5.6 and the question of whether leave to disclaim should be granted is informed also by the other provisions of that Part. These include the statutory priority regime for unsecured creditors established by Subdivision D of Division 6 of Part 5.6, including what has been called the pari passu principle of distribution of assets amongst ordinary unsecured creditors mandated by s 555. (As already indicated, the Liquidators anticipate that employees will be paid in full regardless of the outcome of the present litigation).
Prior to the Corporate Law Reform Act 1992 (Cth), the power of a liquidator to disclaim contracts was limited to “unprofitable contracts”. Further, a liquidator’s power to disclaim property of any kind required the leave of the Court, or (at some points in the legislative history) the committee of inspection. On the question of disclaimer, the Harmer Reforms introduced reforms similar to those made to the Bankruptcy Act 1966 (Cth) in 1980. Relevantly, they removed the requirement of leave to disclaim except for unprofitable contracts and leases and made provision for leave to disclaim contracts other than unprofitable contracts. …”
“In the case where the continued accrual of debts and charges prejudices the unsecured creditors, there is considerable weight to be added to the case for making the order [for leave to disclaim]. Such prejudice, I think, must be weighed against the prejudice to be suffered by those who oppose the making of the order, bearing in mind the provisions of s 296(8) [the predecessor to s 568D(2)] and the amount of assets available for distribution.”
Mr Scruby also refers to Re ACN 103 753 484 (in liq) formerly Blue Chip Development Corporation Pty Ltd [2012] 2 Qd R 504; [2011] QSC 064, where the Court granted leave to disclaim an arbitration agreement under the present legislative regime. Boddice J there referred (at [18]) to the burden on the company to pay large sums of money to the detriment of the creditors in a winding up, under an international arbitration agreement where there was no apparent international trade involved. In Cooper, in dealing with the similar bankruptcy regime, Besanko J did not find a litigation funding agreement to be unprofitable, but granted leave to disclaim it where (at [52]–[54]) it tended to interfere with the trustee’s control of existing proceedings and the trustee’s duties; the terms of that agreement were extremely favourable to the funder and extremely disadvantageous to the trustee; and the financial prejudice to the funder by any disclaimer was limited by the fact that it was funding other litigants in the same proceedings.
Mr Scruby then submits that:
“What the above authorities reveal is that the principal consideration is the comparative prejudice between the effect of the contract on the company’s creditors on the one hand, and those affected by disclaimer on the other. The primacy of that consideration accords with the sole basis on which the court can set aside a disclaimer under ss 568B and 568E, namely that “the disclaimer would cause, to persons who have, or claim to have, interests in the property, prejudice that is grossly out of proportion to the prejudice that setting aside the disclaimer would cause to the company’s creditors”: s 568B(3) and, similarly, s 568E(5)(a).”
Mr Scruby also submits that, if leave to disclaim is granted, then the effect of the Royalty Deed will be that Glencore is taken, under s 568D(2) of the Act, to be a creditor to the extent of any loss suffered as a result of the disclaimer and may prove in the winding up of the Companies. Mr Scruby also submits, by reference to the decision of the Full Court of the Federal Court of Australia in SCL AUS Ltd v Kirkalocka Gold SPV Pty Ltd [2026] FCAFC 60 (“Kirkalocka”), that Glencore’s claims for the payment of royalties and the enforcement of the covenants under cl 5.1 of the Royalty Deed would together be taken to be a claim for the purposes of s 543 of the Act and the grant of leave to disclaim would bring about a result that is consistent with the priority regime under Pt 5.6 of the Act. I will assume, without deciding, the correctness of that submission. By contrast, Glencore would obtain the full value of performance of the Royalty Deed if a disclaimer is not permitted.
Mr Scruby also submits that a grant of leave would facilitate the exercise of the Liquidators’ power to sell the Companies’ property under s 477(2)(c) of the Act. I do not accept that submission, where it is plain enough that the Liquidators are able to, and have, sold the property without the need for such leave. Mr Scruby in turn points to Mr Fraser’s evidence that a disclaimer would significantly increase the return to unsecured creditors of the Companies, and that much is common ground in the proceedings.
Mr Izzo responds by pointing to the observations of Keane J in Willmott Growers (albeit in dissent) at [115] and [125] that:
“An understanding of the power to disclaim as primarily concerned with the renunciation of rights, rather than the repudiation of liabilities, is confirmed by the history of "disclaimer" as a concept in the law of insolvency. The disclaimer of property entered the law of insolvency in England to allow a trustee in bankruptcy to decline to accept, as part of the insolvent estate to be administered, property the realisation of which was likely to be more trouble than it was worth in terms of the due administration of the estate of the bankrupt. Disclaimer was not, and has never been, regarded as a device whereby a trustee in bankruptcy or liquidator may effect a unilateral discharge of the liabilities of the insolvent estate: that would have been antithetical to the due administration of the estate of the insolvent person. Rather, the scope of the power to disclaim, as distinct from the consequences of its exercise, was, and has remained, limited by its focus upon the rights of the insolvent company.
…
…First, the policy of prompt realisation of the company's assets is consistent with the view that what may be disclaimed is property of the company, whether real or personal, the continued enjoyment of which depends on meeting ongoing obligations. Secondly, the policy which informs s 568(1), as explained above, is to expedite the realisation of the money value of the company's assets in the course of the efficient administration of the insolvent estate. It is distinctly not to expand the pool of assets available to creditors by clawing back property previously disposed of by the company. Since the introduction of the statutory power of disclaimer in 1869, neither judicial exegesis nor academic commentary has attributed to the power of disclaimer the potential to enhance the value of the estate of a company in liquidation, much less to alter the position of those who have dealt with the insolvent by divesting them of rights vested in them.”
“The purpose of the provision is to facilitate the due administration of liquidations, not to enable the liquidator to increase the divisible property by clawing back property the company has previously disposed”.
“First, the contention that disclaimer would cause Glencore to be treated in the same way as other unsecured creditors is not a reason to grant leave to disclaim …. The purpose of disclaimer is to remove onerous obligations and facilitate an expeditious winding up. It is no part of the disclaimer process to re-write the Company’s contractual obligations.
…
… the Plaintiffs say that the effect of the disclaimer would be to increase returns to unsecured creditors … The simple answer to this, as identified above, is the purpose of the disclaimer power is not to increase the pool of assets available to unsecured creditors. The approach advanced by the Plaintiffs amounts to an impermissible attempt to use the disclaimer provisions in the [Act] for the purpose of re-writing the Companies’ contracts to increase the pool of assets to unsecured creditors.
Further, this submission proceeds from two erroneous starting positions. One is an assertion that Glencore will receive “100c in the dollar”. That is not correct. Glencore seeks that the Companies comply with the contractual stipulation contained in the Royalty Deed. The ultimate value of compliance with that stipulation by the Companies is unknown, and will depend on the extent to which any mining is subsequently undertaken at Tahmoor Mine and the financial capacity of the transferee of the Companies’ rights.
The second error is the premise that Glencore is receiving “the value of its claim” if the Royalty Deed is not disclaimed … That is not correct because, if the Royalty Deed is not disclaimed, the legal consequence will be that Glencore receives payment from a third party pursuant to a fresh obligation; that is not payment of a claim against the Companies.”
I bear in mind that the Royalty Deed should here be understood in the commercial context, that it formed part of the arrangements by which the Companies acquired the right to operate the mine. I also bear in mind that the Royalty Obligation would not be performed or royalties paid by the Liquidators or the Companies, but by a purchaser which assumes the obligation to do so under the Royalty Deed. I bear in mind that any adverse effect of the Consent Requirement was substantially or entirely avoided by the relaxation of that requirement by Glencore. The adverse effect of the Royalty Deed is therefore only to reduce the effective purchase price achievable by the Companies on a sale of the mine, by allowing the continuance of a commercial arrangement by which the Companies were bound from the point they acquired the mine, so as to require the purchaser to assume the obligations under the Royalty Deed. I recognise that, if the Royalty Deed was breached and not enforceable by an injunction, Glencore could likely prove in the Companies’ winding up as an unsecured creditor, but that does not seem to me to provide any basis in principle on which it should be left to that result.
It seems to me that the Court should not grant leave to the Liquidators to disclaim the Royalty Deed under s 568(1A) of the Act, where that would defeat the rights which Glencore obtained in a proper commercial transaction; potentially undermine commercial certainty in royalty arrangements generally; and, in substance, amount to a wealth transfer from Glencore to unsecured creditors.
Third, or alternatively, the Liquidators and the Companies seek an order under s 90-15 of the IPS that the Liquidators are justified in exercising their powers under ss 477(2)(c) and/or 477(2)(m) of the Act to sell or dispose of the Tenements and the Tahmoor Land without Glencore’s prior written consent. Mr Scruby refers to the Court’s broad power to give a direction to a liquidator under that section, which is not controversial here.
Mr Scruby submits that:
“The circumstances in which the question of whether to give a direction will arise for consideration in the present case are precisely those in which a direction is appropriate. It arises in circumstances where the Royalty Deed will remain on foot and bind the Companies, yet the Court will have decided either that it is not amenable to specific relief or that, in the exercise of discretion, no such relief ought be granted. The Liquidators would then be faced with a decision as to whether they ought to sell the Property without Glencore’s consent and hence cause the Companies to breach cl 5.1 of the Royalty Deed, with the result that Glencore is left to prove in the winding up. The Liquidators have expressly reserved their rights as to whether they will sell the Property without obtaining Glencore’s consent.
…
In circumstances where the Court refuses the injunction sought by Glencore, it would be undesirable for the Liquidators to then face any prospect of personal liability in selling the Property for the benefit of all unsecured creditors. They should, in that circumstance, be afforded the protection of a direction of s 90-15 of the IPS. The Court would accept, on the evidence that Mr Fraser has given, that the sale process itself has been undertaken properly and in an appropriate way to gain best advantage from the assets of the Companies[.]
The fact that the conduct sought to be the subject of a direction would inevitably give rise to a breach by the Companies of the Royalty Deed does not militate against its appropriateness. The direction will not absolve the Companies from a consequence of that breach: the Liquidators accept that Glencore can prove in the liquidations.”
“the Court ought not to grant the relief sought under s 90-15. The effect of declining the Plaintiffs’ relief in respect of disclaimer, is that Companies will be subject to binding obligations under the Royalty Deed. The Liquidators can complete the sale process by causing the Companies to comply with their obligations under the Royalty Deed. There is no suggestion that the Liquidators will face any criticism by causing the Companies to comply with binding obligations. In those circumstances, there is no justification for the Court giving its imprimatur to a breach of contract by the Companies.”
As I noted above, by its Interlocutory Process filed on 1 June 2026, in the nature of a Cross-Claim, Glencore seeks an order that the Liquidators and the Companies be restrained from taking the steps prohibited by cl 5.1 of the Royalty Deed, without the transferee from the Companies agreeing to assume, be bound by and perform all of the relevant Companies’ obligations under the Royalty Deed.
Mr Izzo submits, in summary, that Glencore is entitled to an injunction to enforce a negative stipulation unless there are good reasons to the contrary, and that there are no reasons to the contrary. He submits, and I do not understand Mr Scruby to contest, that, although the grant of relief remains discretionary, a court ought to grant an injunction to enforce a negative covenant unless there are good reasons to the contrary: JC Williamson Ltd v Lukey (1931) 45 CLR 282 at 299; Dalgety Wine Estates Pty Ltd v Rizzon (1979) 141 CLR 552 at 560, 576; Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181; [2001] HCA 70 at [76]; [102]–[103]. Mr Izzo acknowledges that the exercise of the Court’s discretion may be informed by whether an award of damages would adequately compensate the applicant, but points out that, where the relief sought is to restrain a breach of a negative covenant, “it will be a rare case in which relief will be declined on the basis that damages are a sufficient remedy”: Cerilian Pty Ltd v Graham Fraser [2008] NSWSC 1016 at [10].
The Liquidators and the Companies in turn plead (POC [22]), first, that the Royalty Deed does not give Glencore an equitable interest or a security interest in either the Tenements or the Tahmoor Land. I accept that, consistent with the similar treatment of negative covenants in respect of interest in land and with the decision of the Full Court of the Federal Court in Kirkalocka, Glencore likely does not have a legal or equitable interest in the Mining Leases or Consolidated Coal Leases. However, it is not necessary to reach a final conclusion as to that matter, given the conclusions that I reach on other grounds.
The Liquidators and the Companies also plead (POC [23]–[24]), second, that Glencore gave no consideration recognisable in equity for its rights under the Royalty Deed; and, third, that Glencore’s rights under the Royalty Deed are not such as to give it an entitlement to equitable relief of a kind that would compel performance of, or restrain a breach of, the Consent Requirement. Mr Scruby submits, by reference to authority, that:
“Equity will not assist a volunteer. An obligation given under seal replaces the necessity for consideration for enforcement of that obligation by a court at law …; but does not otherwise make good a want of consideration in equity …. Thus, equity will not specifically enforce a contract for which there is no consideration ...
In the present case, the promises by the Companies to pay royalties under cl 3.1 and not to transfer the [p]roperty without Glencore’s consent were wholly gratuitous. As mentioned above, the benefit of the entire Royalty Deed was unidirectional: it is not a situation where consideration by the promisee is given because of an exchange of mutual promises. Nor do the recitals to the Royalty Deed state that it was made for consideration. The instrument on its face is binding only as a result of having been executed as a deed. As noted, this is not sufficient to support a grant of equitable relief.”
“… the execution of the Royalty Deed occurred in the context of performance of a promise under the SSA by one of Glencore’s indirect subsidiaries (the seller, Helios) to deliver that instrument to the buyer ([Simec]) on completion. It is not apparent how this could amount to the giving of a benefit or incurring of a detriment by Glencore as a quid pro quo for Tahmoor’s and Bargo’s incurring of the obligations under the Royalty Deed.”
That proposition seems to me to be correct, but not to the point, for the reasons noted below.
Mr Izzo in turn submits that the Liquidators’ and Companies’ contention that injunctive relief would be refused because of an absence of consideration is no obstacle to the grant of relief where no consideration is required to enforce a negative stipulation in equity’s auxiliary jurisdiction. He also submits that, even if consideration is required, Glencore provided value in respect of the relevant transaction, and he relies on Glencore’s role in the earlier sale to Simec in that regard. He may have adopted this somewhat indirect approach because a straightforward reliance on the consideration given by Glencore under the Royalty Deed would have undermined Glencore’s first contention, that the Royalty Deed was not a contract capable of disclaimer. Mr Izzo also submits that the absence of consideration (if it is otherwise relevant), would not prevent the Court from granting an injunction in exercise of the distinct statutory jurisdiction conferred by s 66 of the Supreme Court Act 1970 (NSW).
It seems to me that the Liquidators’ and Companies’ contention that the Consent Requirement should not be enforced by injunction, because Glencore gave no consideration recognisable in equity for its rights under the Royalty Deed, fails on a straightforward basis, because its premise is not established. The obligations assumed by Glencore under the Royalty Deed in respect of the Consent Requirement, confidentiality and other matters, which supported the finding that the Royalty Deed is a contract and property within the scope of s 568 of the Act, are sufficient consideration in equity for Glencore’s rights under the Royalty Deed. This is sufficient to support the Court’s power to grant the injunction sought, subject to discretionary considerations. It is not necessary to determine the further question, as to which the case law is divided, whether a defendant’s insolvency is a matter that may make the remedy of damages inadequate and support the grant of an injunction.
The Liquidators and the Companies also plead (POC [25]), fourth, in support of a claim that the Court should withhold injunctive relief on discretionary grounds, that any claim that Glencore has in respect of the Consent Requirement and/or the Royalty Obligation is an unsecured “claim” for the purposes of s 553 of the Act and ranks pari passu with the claims of other unsecured creditors of the Companies. Mr Scruby submits that:
“To the extent that equitable relief is available, the Court should refuse it as a matter of discretion.
The present situation is not one where relief to enforce a negative covenant is sought against a solvent defendant. The relief that is sought is directed at restraining the exercise of the power conferred on the Liquidators under s 477(2)(c) to sell the property of insolvent companies “in any manner”. The statutory purpose and context of that power is thus an important discretionary consideration in determining whether relief should be granted … The statutory exceptions that permit the property of the Companies to be applied for the benefit of specific creditors do not apply. Kirkalocka establishes that Glencore has no proprietary interest in the Tenements or the Tahmoor Land and that its claims for future royalties and for injunctive relief are part of the same “claim” for the purposes of s 553. That claim ranks equally with the claims of other ordinary unsecured creditors by operation of s 555.
Thus, the grant of an injunction would restrain the exercise of a statutory power to deal “in any manner” with assets in which Glencore has no proprietary interest and bring about a result contrary to the purposes for which that power is conferred. The Liquidators submit that this weighs heavily against a grant of injunctive relief.
The same considerations would require relief to be refused as a matter of discretion when one has regard to equitable principles.
First, injunctive relief particularly and equitable relief generally can be refused or modified where it would cause prejudice to third parties.
…
Here, for reasons already given, the prejudice to third parties if relief is granted is plain: the dividend that will be payable to other ordinary unsecured creditors will be reduced significantly and their statutory entitlements to have their claimed treated on a pari passu basis with Glencore’s “claim” are defeated.
Secondly, Glencore is not in a position to establish that damages will be an inadequate remedy. The Full Court in Kirkalocka described the restraints in the royalty deed in that case corresponding to the restraints in clause 5.1(b) of the Royalty Deed as provisions intended to protect the performance of the royalty covenant …. A breach of them is therefore readily quantifiable in monetary terms and the Liquidators have performed such calculations. If the Liquidators are free to sell the Tenements and Tahmoor Land without ensuring compliance with clause 5.1(b), then, to the extent that Glencore is worse off financially because it has to prove for this amount in the liquidation of the Companies, it does not mean that damages are “inadequate” in the relevant sense. It is a consequence of the working out of a statutory regime dealing with the application of the property of insolvent companies.”
I do not accept Mr Scruby’s submissions here, which substantially overlap with submissions which I have not accepted above. As I have noted above, the restraint that is sought will not prevent the sale of the Companies or the mine, albeit the sale proceeds achieved will be less where the purchaser pays the royalty required under the Royalty Deed to Glencore rather than to the Liquidators or at their direction, for the benefit of creditors of the Companies. I also recognise that the liquidator’s power to deal with assets under s 477 of the Act is not an unconstrained power to deal with them free of the terms on which they were acquired, or in breach of a restraint or negative covenant that binds the company in liquidation: Re Farrow’s Bank [1921] 2 Ch 164 at 174; Butterell v Docker Smith (1997) 41 NSWLR 129 at 138; Linter Textiles Australia Ltd (in liq) v Commissioner of Taxation (2002) 20 ACLC 1708; [2002] FCA 1089 at [12]; The Owners – Strata Plan No 5290 v CGS & Co Pty Ltd (2011) 81 NSWLR 285; [2011] NSWCA 168 at [58]–[59], [64]. I have accepted above that a claim for breach of the Royalty Deed would likely be capable of proof in the liquidation, but not accepted that that provided reason for the disclaimer or by extension, reason to withhold an injunction (that would otherwise be available) on discretionary grounds, so as to improve the return to unsecured creditors at Glencore’s expense.
So far as Mr Scruby relies on hardship or a suggested prejudice to the Companies’ creditors arising from the grant of injunctive relief, Mr Izzo responds that:
“… hardship as a discretionary factor is of little weight in a case where the court enforces by injunction a negative stipulation on a final basis: the critical consideration is that the defendant voluntarily undertook to perform the obligation which the plaintiff is endeavouring to enforce ... Secondly, it is difficult to see why a reduced return to creditors is a hardship consideration at all. The creditors dealt with Companies which had existing obligations to Glencore; it can come as no surprise that the existence of those obligations will reduce the sale price the Companies can obtain for their assets. If anything, the creditors get an unexpected windfall if the injunction is not granted.”
There also seems to me to be no relevant prejudice to creditors here, where neither the Liquidators nor the Companies will pay any royalty that is payable by a purchaser on recommencing operation of the mine. All that occurs here is that the unsecured creditors do not obtain the windfall gain that would arise if the Companies could depart from the obligations assumed by the Companies as part of the GFG Alliance group’s acquisition of an interest in the mine.
I would not decline an injunction on discretionary grounds here, for the same reasons I would not grant leave to disclaim the Royalty Deed under s 568(1A) of the Act or the direction sought by the Liquidators and the Companies. However, it will not be necessary to order injunctive relief if, as I would expect, the Court-appointed Liquidators would act in accordance with the result reached in this judgment, unless it is set aside on appeal, without the need for that relief. I will hear the Liquidators in that regard and will hear the parties as to orders and as to costs.
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[2011] QSC 064
[1999] QSC 089
[2026] FCAFC 60
(1997) 41 NSWLR 129
(1979) 141 CLR 552
(1987) 17 NSWLR 664
(1931) 45 CLR 282
(2001) 210 CLR 181
(2011) 81 NSWLR 285
(2013) 251 CLR 592
(1990) 20 NSWLR 417