Parbery & Ors v QNI Metals Pty Ltd & Ors [2020] QSC 143

1. The plaintiffs' claims against the seventh defendant are dismissed.
2. It is declared that the fixed and floating charge executed by the second plaintiff in favour of the sixteenth defendant on 13 January 2016 (the China First charge) is voidable under s 588FE of the Corporations Act 2001 (the Act).
3. Pursuant to s 588FF of the Act it is declared that the China First charge is void ab initio against the second plaintiff.
4. The question of what, if any, relief should be ordered in respect of the finding that the share subscription argument between the second plaintiff and the sixteenth defendant executed on 13 January 2016 is an uncommercial transaction within the meaning of s 588FE of the Act is adjourned to a date to be fixed.
5. It is declared that the fixed and floating charge executed by the second plaintiff in favour of the fifteenth defendant on 13 January 2016 (the Waratah Coal charge) is voidable under s 588FE of the Act.
6. Pursuant to s 588FF of the Act, it is declared that the Waratah Coal charge is void ab initio against the second plaintiff.
7. It is declared that the security deed executed by the fifteenth defendant, the second plaintiff and the first and second defendants on 13 January 2016 (the security deed) pursuant to which the fifteenth defendant agreed to make its mining tenements EPC 1040 and EPC 1079 available as security for credit or facilities provided by creditors of the second plaintiff and the first and second defendants is voidable under s 588FE of the Act.
8. Pursuant to s 588FF of the Act, it is declared that the security deed is void ab initio against the second plaintiff.
9. The application for the declarations in paragraphs 522(b) and (c) of the third further amended consolidated statement of claim is refused.
10. The question of any further orders ancillary to the preceding orders or to give further effect to, or as a consequence of, these reasons and the question of costs of the proceeding are adjourned to a date to be fixed.

EQUITY - TRUSTS AND TRUSTEES - EXPRESS TRUSTS CONSTITUTED INTER VIVOS - CONTRACTS AND COVENANTS - where two companies which owned a nickel refinery entered into a joint venture agreement for the operation of the refinery - where the joint venturers appointed a manager to conduct the operations of the refinery - where the manager was a company wholly owned by the joint venturers and a party to the joint venture agreement - where the powers and responsibilities of the manager were extensively set out in the joint venture agreement - where a clause of the joint venture agreement specified that it should not be construed as constituting an association, corporation, trust, mining partnership or any other kind of partnership - whether the parties to the joint venture agreement manifested an intention to create an express trust of the joint venture property with the manager as the trustee and the joint venturers as beneficiaries

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - PARTIES - GENERAL PRINCIPLES - where two companies which owned a nickel refinery entered into a joint venture agreement for the operation of the refinery - where the joint venturers appointed a manager which was a subsidiary of both joint venturers to conduct the operations of the refinery as their agent - where the manager conducted bank accounts in its name for the purpose of the joint venture - where a related company to the joint venturers borrowed funds that were paid by the manager from the joint venture accounts - where under the joint venture agreement the funds in the accounts belonged to the joint venturers - whether the joint venturers or the manager was the lender to the related company

CORPORATIONS - WINDING UP - WINDING UP IN INSOLVENCY - WHAT CONSTITUTES INSOLVENCY - GENERALLY - EVIDENCE OF INSOLVENCY - where the company was the operator of a nickel refinery conducted as a joint venture by two related companies - where the falling nickel price meant the costs of production exceeded the revenue from sales of product - where the company was predicting a substantial cash shortfall for about nine months - where the company was unsuccessful in securing financial assistance from government, creditors and financiers - where no related party committed funds or realistic financial support - where debts to a major creditor were overdue, but the creditor had allowed a few weeks for payment of the debt and gave notice of its intention to suspend its services if payment were not made - whether the company was insolvent before the time nominated by the major creditor for suspension of services

CORPORATIONS - WINDING UP - CONDUCT AND INCIDENTS OF WINDING UP - EFFECT OF WINDING UP ON OTHER TRANSACTIONS - PREFERENCES AND VOIDABLE TRANSACTIONS - UNCOMMERCIAL TRANSACTIONS - where the company was on the verge of entering into voluntary administration - where the company entered into an agreement to purchase two billion shares for $135 million in a related private company that had rights under a mining right agreement to develop a coal mine where the project was in the pre-development stage - where the payment for the shares was deferred and secured by a fixed and floating charge - where there was independent expert evidence that at the time the transactions were entered into the project had a nil valuation - where the company also entered into a security deed with another related company that agreed to allow its mining exploration permits to be used as security for credit or facilities provided by creditors to the company - where the company entered into a fixed and floating charge to secure the prospective amount of security to be provided by the company holding the exploration permits - whether the transactions were uncommercial

CORPORATIONS - RECEIVERS, CONTROLLERS AND MANAGERS - DUTIES AND LIABILITIES - DUTIES - GENERALLY - where the appointed controller purported to act in that capacity - where order declaring appointment as a controller invalid was made by consent of the relevant parties - where controller gave an undertaking to the court not to further act under the appointment - where plaintiffs seek a declaration that the controller's actions breached duties of good faith and not to act so as to sacrifice the interests of the company - whether the definition of "controller" under the Corporations Act 2001 (Cth) extended to include those acting as controllers while invalidly appointed - whether there was utility in making the declaration sought by the plaintiffs

Corporations Act 2001 (Cth), s 95A, s 418, s 419, s 588FB, s 588FC, s 588FE, s 588FF, s 588FG, s 588FJ

In re Canadian Land Reclaiming and Colonizing Company (1880) 14 Ch D 660, considered

Chan & Ors v First Strategic Development Corporation Limited (in liq) & Anor [2015] QCA 28, considered

Corporate Affairs Commission v Drysdale (1978) 141 CLR 236; [1978] HCA 52, considered

Corumo Holding Pty Ltd v C Itoh Ltd (1991) 24 NSWLR 370, cited

Croton v The Queen (1967) 117 CLR 326; [1967] HCA 48, cited

Featherstone v Ashala Model Agency Pty Ltd (in liq) [2018] 3 Qd R 147; [2017] QCA 260, cited

Gibson v Barton (1875) LR 10 QBD 329, considered

In re Goldburg (No 2) [1912] 1 KB 606, cited

Hall v Poolman (2007) 65 ASCR 123; [2007] NSWSC 1330, considered

Herdegen v Federal Commissioner of Taxation (1988) 84 ALR 271; [1988] FCA 419, considered

Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; [1984] HCA 64, cited

Hussain v CSR Building Products Ltd (2016) 246 FCR 62; [2016] FCA 392, cited

Jessup v Queensland Housing Commission [2002] 2 Qd R 270; [2001] QCA 312, considered

Korda v Australian Executor Trustee (SA) Limited (2015) 255 CLR 62; [2015] HCA 6, considered

Lee Kong v Pilkington (Australia) Ltd (1997) 25 ACSR 103, cited

Lewis v Doran (2004) 50 ACSR 175; [2004] NSWSC 608, considered

Lewis v Doran (2005) 54 ACSR 410; [2005] NSWCA 243, considered

Montgomerie v United Kingdom Mutual Steam Ship Association Limited [1891] 1 QB 370, cited

Parbery v QNI Metals Pty Ltd [2019] QSC 207, related

QNI Resources Pty Ltd v Queensland Nickel Pty Ltd (in liq) [2017] QCA 167, considered

Queensland Nickel Pty Ltd (in liq) v Martino [2017] QSC 95, related

Queensland Nickel Pty Ltd (in liq) v Queensland Nickel Sales Pty Ltd [2018] 3 Qd R 133; [2017] QSC 305, cited

Sandell v Porter (1966) 115 CLR 666; [1966] HCA 28, considered

Sino Iron Pty Ltd v Palmer (No 3) [2015] 2 Qd R 574; [2015] QSC 94, considered

Southern Cross Interiors Pty Ltd v Deputy Commissioner of Taxation (2001) 53 NSWLR 213; [2001] NSWSC 621, considered

Tosich Construction Pty Ltd (in liq) v Tosich [1997] FCA 979; (1997) 78 FCR 363, cited

United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1; [1985] HCA 49, cited

Walker v Wimborne (1976) 137 CLR 1; [1976] HCA 7, cited

Williams v Peters [2010] 1 Qd R 475; [2009] QCA 180, considered

G J Gibson QC, S L Doyle QC, T Sullivan QC, J P Moore QC, C G Curtis, M J Doyle and N J Derrington for the second and third plaintiffs

C Ward SC, M Karam (on 22-24 July 2019) and T March for the first, second, seventh, fifteenth and sixteenth defendants

K S Byrne (to 30 July 2019) and E L Robinson (from 31 July 2019) for the twenty-second defendant

HWL Ebsworth Lawyers for the second and third plaintiffs

Jonathan Shaw for the first, second, seventh, fifteenth and sixteenth defendants

Robinson Nielsen Legal for the twenty-second defendant

[1] The third plaintiffs are the general purpose liquidators (GPLs) of the second plaintiff Queensland Nickel Pty Ltd (in liquidation) (QNI). The first plaintiff who was the special purpose liquidator (SPL) of QNI was also a party to this proceeding, but settled the claims he was pursuing on behalf of QNI with the defendants. That resulted in orders made on 5 August 2019 that had the effect of leaving the second and third plaintiffs and the first, second, seventh, fifteenth, sixteenth and twenty-second defendants as the active parties in the proceeding. The twenty-second defendant is Mr Martino. I will refer to the other active defendants as the corporate defendants.

[2] The final versions of the pleadings on which the trial was ultimately conducted were the third further amended consolidated statement of claim filed on 21 August 2019 (with one additional amendment that paragraph 181 was struck out), the defence filed on 28 August 2019 and the second further amended reply filed on 1 October 2019.

[3] The first defendant QNI Metals Pty Ltd (Metals) and the second defendant QNI Resources Pty Ltd (Resources) are joint venture companies which own the Yabulu nickel refinery and conduct the Queensland Nickel Joint Venture pursuant to a joint venture agreement under the deed dated 17 September 1992 (the JVA) (exhibit HAL.001.001.0547). QNI was also a party to the JVA and the general manager of the joint venture pursuant to the JVA and an administration agreement dated 17 September 1992 (HWL.004.001.0094). Metals owns 20 per cent of the shares in QNI and Resources owns 80 per cent of the shares in QNI. The shares in each of Metals and Resources are held by Nickel Consolidated Pty Ltd (49 per cent), Nickel Processing Pty Ltd (49 per cent) and Nickel House Pty Ltd (2 per cent). Each of those companies in turn is owned by the fourth defendant Mr Palmer. Mr Palmer purchased the joint venture companies in July 2009.

[4] On 18 January 2016 QNI entered voluntary administration due to insolvency. The third plaintiffs, together with Mr Stefan Dopking, were appointed as administrators and then on 22 April 2016 as the general purpose liquidators (GPLs). (Mr Stefan Dopking resigned as liquidator on 28 July 2017. Reference to the GPLs in these reasons in relation to events prior to that date includes Mr Dopking.)

[5] QNI continued to operate as general manager until 11 March 2016, after it was notified on 7 March 2016 by letter dated 6 March 2016 that Metals and Resources had on 3 March 2016 appointed a replacement manager, Queensland Nickel Sales Pty Ltd (QN Sales) (at Transcript 6-83).

(d) whether the China First and Waratah Coal transactions were uncommercial transactions.

The nature of QNI's relationship with Metals and Resources under the JVA

[12] The JVA is the replacement agreement for the former joint venture agreement that was under the deed dated 14 December 1988 identified in recital A to the JVA. When the JVA commenced, the joint venturers were Resources and Nickel Resources North Queensland Pty Limited for and on behalf of NRNQ a limited partnership (NRNQ). Apart from QNI, another company Ore Purchase and Shipping Pty Limited (OPS) was also a party to the JVA and had the role of ore purchase and shipping manager. The term "Manager" is used in the JVA to refer to either of QNI and OPS and their respective successors. It was apparent from the lack of reference to OPS as ore purchase and shipping manager in this proceeding that OPS was not performing that role and that QNI was doing so (and that is consistent with clause 5.2(d) of the JVA).

[13] The purposes of the joint venture are set out in clause 2.1. They include mining, developing and otherwise exploiting the joint venture area (as defined in the JVA) so as to produce lateritic ore, transporting such ore to, and processing such ore at the Yabulu treatment facility to produce nickel oxide and nickel and cobalt sulphide products for delivery to, or as directed by, each of the joint venturers, purchasing ore from third parties, processing ore supplied by or on behalf of the joint venturers at the treatment facilities to produce products for delivery to, or as directed by, each of the joint venturers (provided such supply of ore is in proportion to the respective participating interests of the joint venturers) and exercising the rights, titles, interests, claims and benefits comprised in the joint venture property (as defined in the JVA). Clause 2.2 specifies that the purposes are to be carried out by the joint venturers in conformity with the Queensland Nickel Agreement Act 1970 (Qld) (the Agreement Act) and the agreement that was entered into by the State of Queensland dated 17 December 1970 (as amended from time to time) with MEQ Nickel Pty Ltd and Greenvale Queensland Nickel Inc.

[14] Clause 3.1 of the JVA relevantly provides:

"All the Joint Venture Property shall at all times be made available for the purpose and duration of the Joint Venture and during such duration shall not be used for any other purpose. All the Joint Venture Property and, subject to Clause 3.3, all estate and interest in Products produced at the Treatment Facilities shall be beneficially owned by the Joint Venturers as tenants in common, and all liabilities of the Joint Venture shall be severally borne by such Joint Venturers, in the following percentages (such percentages being the parties' respective Participating interests as at the Effective Date):

[15] Metals acquired NRNQ's interest in the joint venture on 31 January 1995 (exhibit FTI.002.011.3508).

[16] The term "Joint Venture" is defined in clause 1.1 of the JVA to mean "the unincorporated joint venture constituted by the Former Joint Venture Agreement and confirmed and continued pursuant to this Deed". A comprehensive definition of "Joint Venture Property" is set out in clause 1.1 of the JVA. It includes specified mining leases and other rights and titles pursuant to the Agreement Act or the Mineral Resources Act 1989 (Qld), specified land, Yabulu treatment facilities, all technology and know-how developed or to be developed on behalf of the joint venture and all other rights, titles, interests or property of whatsoever kind held, constructed or acquired for the purpose of the joint venture.

[17] The definition of "Products" and "Subject Products" in clause 1.1 of the JVA are respectively:

" 'Products' means the nickel oxide and nickel and cobalt sulphide products (whether mixed or separated) produced or to be produced at the Treatment Facilities and any other products which may be produced from time to time at the Treatment Facilities;."

" 'Subject Products' means in relation to a Joint Venturer:

(a) all that Joint Venturer's right, title and interest, both present and future, as tenant in common in Products produced at the Treatment Facilities and not yet received in kind by any Joint Venturer; and

(b) all that Joint Venturer's right, title and interest, both present and future, in Products produced at the Treatment Facilities and received in kind by that Joint Venturer;"

[18] Clause 3.2 of the JVA deals with the holding of titles to the joint venture property in the manager's name as the nominee for both joint venturers:

"For purposes of convenience, title to any of the Joint Venture Property may be held at the request of the Joint Venturers solely in the name of either of the Managers as nominee for both Joint Venturers in proportion to their respective Participating Interests; provided, however, that all Real Property Titles and Mining Titles shall be held in the names of both Joint Venturers in accordance with their Participating interests. If at any time any of the Joint Venture Property is not vested at law in the names of the Joint Venturers in proportion to their Participating Interests, the Joint Venturer or Joint Venturers in who names such Joint Venture Property is vested shall hold such Joint Venturer Property for the use and benefit of the Joint Venturers in proportion to their Participating Interests and, if requested to do so by the Manager or the other Joint Venturer (as the case may be), but at the expense of the Joint Venture, shall take all such steps as may be necessary to vest the Joint Venture Property in question in the names of the Joint Venturers in proportion to their Participating Interests."

[19] The plaintiffs place significance on the reference in clause 3.1 of the JVA to the joint venture property being "beneficially owned" by the joint venturers as tenants in common as an acknowledgment that some of the joint venture property may be legally owned by another party (which was then contemplated by clause 3.2). It is equally arguable that the same reference in clause 3.1 is also consistent with an express trust not being created, as there is no reference in clauses 3.1 and 3.2 of the JVA to a trust being created by the joint venturers in respect of the joint venture property and clause 3.2, in fact, contemplates that one joint venturer may hold the legal title of some joint venture property for the benefit of all joint venturers. The provision that all liabilities of the joint venture will be "severally borne by such Joint Venturers" in proportion to their respective participating interests is inconsistent with the notion of a trustee holding the legal title to the property.

[20] Clause 3.3 of the JVA provides that "[e]ach of the Joint Venturers shall have the right to, and shall, receive in kind its Subject Products on production thereof at the Treatment Facilities and separately disposed of or market such share". Each joint venturer is then made solely responsible for the payment of any royalties on account of the marketing or disposal of its subject products.

[21] Clause 4 of the JVA sets out detailed provisions concerning the establishment, powers, membership and operation of the Joint Venture Owners Committee (JVOC) (made up of representatives of the joint venturers) which has the responsibility and authority for the conduct of the joint venture, including determining general policy and strategic matters for the joint venture. Clause 4.10 specifies the matters on which neither the JVOC nor the managers have power to make any decision about and, where a decision is required on those matters, it requires the approval of each joint venturer.

[22] The appointment of QNI as the general manager of the joint venture was confirmed in clause 5.1(a).

[23] Clause 5.2 sets out the responsibilities of the general manager in extensive detail. Clause 5.2(a) provides:

"The General Manager shall, subject to the directions of the JVOC, be in charge of and responsible for:

(i) the overall management, operation and administration of the Joint Venture;

(iii) maintaining the accounting records of the Joint Venture and, to the extent set out herein, the Joint Venturers;

(iv) in conjunction with the Ore Purchase and Shipping Manager, co-ordinating the supply of ore for the Joint Venture;

(v) conducting planning, engineering feasibility and project evaluation and managing design and construction for the Joint Venture and its Development Programmes;

(vi) medium and long term planning for the Joint Venture; and

(vii) the management and control of the Joint Venture Property and all operations hereunder as agent for, and for the account of, the Joint Venturers.

In the exercise of such rights and duties the General Manager shall act subject to and consistently with the provisions of this Deed. The General Manager shall be subject to the supervision of the Joint Venturers acting through the JVOC and shall carry out all directions and decisions of the JVOC. Subject to the provisions set out herein, the General Manager shall use its best endeavours to produce Products at the lowest possible unit cost and to keep working capital at the lowest possible level consistent with prudent management.

The General Manager shall also have such other duties and responsibilities as are set out in Clause 5.2(b) and (c), as well as the obligation to perform the 'Management Services' as described in the Administration Agreement."

[24] The detailed activities required of the general manager to be undertaken either itself or through independent contractors in connection with the operation of the joint venture are specified in clause 5.2(b). One of the activities under clause 5.2(b)(xiii) is the proper disbursing of all funds provided by the joint venturers to carry out the operation of the joint venture, including the paying of all sums payable by the general manager with respect to its acquisition of all services and supplies, materials, equipment and other property necessary or appropriate in connection with the operation of the joint venture. Clause 5.2(b)(xvi) contemplates that the general manager will, at the request of a joint venturer, pay on behalf of that joint venturer any costs or expenses payable by that joint venturer in relation to the joint venture.

[25] Under clause 5.2(b)(xvii), the general manager must undertake:

"the preparation and maintenance, in accordance with accounting principles generally accepted in Australia, of complete books and accounting records describing each Joint Venturer's financial involvement in the Joint Venture.

Such books and records shall be prepared so as to enable each Joint Venturer to meet its reporting, accounting, statutory and taxation requirements."

[26] Under clause 5.2(c) of the JVA, the general manager is required to act as the agent of the joint venturers in the purchase and shipping of nickel ore from overseas sources for processing at the Yabulu refinery. Under clause 5.2(g) of the JVA, it is specified that the duties and responsibilities of the general manager shall not include any activities relating to the sale or marketing of any Products.

[27] Under clause 5.3(a) of the JVA, the general manager is required to furnish to each joint venturer within 14 days at the end of each month a reasonably detailed financial and performance report concerning activities undertaken pursuant to the JVA and the administration agreement since the previous report. The requirements for the report are then set out:

"The report shall summarise Joint Venture operations during such month and shall include an unaudited statement reflecting in reasonable detail, but in summary form, all charges and credits incurred or accrued to the Joint Venture and showing the financial position of each Joint Venturer (with respect to its involvement in the Joint Venture), as well as a comparison thereof with the relevant programmes, budgets, estimates and schedules adopted by the JVOC."

[28] Paragraphs (h) to (j) of clause 5.3 of the JVA deal with the obligations of the general manager to keep the books, accounts and records of the operations and business of the joint venture and to arrange the audits of the accounts of the joint venture:

"(h) A Manager shall maintain, in accordance with accounting principles generally accepted in Australia, consistently applied, complete books, accounts and records of and relating to the operations and business of the Joint Venture (including all costs incurred pursuant to this Deed) and the Joint Venture Property. A Manager shall provide to each Joint Venturer from time to time such information from such books, accounts and records as the Joint Venturer reasonably requires in order to enable it to carry out the procedures, and file and otherwise distribute the information, as is necessary to meet the reporting, accounting and taxation requirements imposed on the Joint Venturer concerned. Each Joint Venturer shall have the right, at all reasonable times and after giving reasonable notice to the Manager, to inspect such books, accounts and records and all or any of the Joint Venture Property.

(i) The General Manager shall keep such other records and accounts in respect of the Joint Venture as any Joint Venturer may be reasonably require.

(j) The General Manager shall cause annual audits of the Joint Venture accounts to be carried out, at the cost of the Joint Venture, by the General Manager's auditor. If by reason of a particular Joint Venturer having a financial year which is different from that covered by the annual audit of the Joint Venture accounts, it is necessary for a supplementary audit of the Joint Venture accounts to be conducted, the General Manager shall cause the General Manager's auditor to carry out such supplementary audit at the cost of the Joint Venture. Copies of such audits shall be furnished by the General Manager to each of the Joint Venturers within 45 days of the end of the relevant financial year."

[29] Clause 5.5(b) of the JVA prohibits the general manager from carrying on, or being interested in, any other business or activity or other operation. Clause 5.5(i) precludes the general manager from mortgaging, pledging, charging, encumbering or creating any lien over or trust in respect of the Joint Venture Property (except for liens arising in the normal and ordinary course of business).

[30] Clause 5.6 of the JVA deals with the replacement of the general manager.

[31] Under clause 6.1 of the JVA, the general manager is responsible for the preparation of all financial reports and budgets relating to the joint venture.

[32] Clause 6.2 then sets out in detail the requirement imposed on the general manager to submit to the JVOC annually for review and approval as provided in clause 4.1 a proposed financial plan for the operations of the joint venture for the next cost year. Clause 6.2 also requires the general manager to prepare and submit to the joint venturers for their approval a new business plan for the forthcoming five year period. Clause 6.3 then imposes on the general manager an obligation to submit to the JVOC a proposed budget for development capital expenditures for any development programme approved by the JVOC pursuant to clause 4.1.

[33] Pursuant to clause 6.4(a) of the JVA, a manager which is entitled to make calls on the joint venturers for funds to meet joint venture expenses (being all costs, liabilities and expenses of the joint venture properly incurred including funds to meet financial plans approved under clause 6.2 and approved development budgets) which includes the general manager is referred to as the "Calling Manager". The timing of calls is dealt with in Clauses 6.4(b) to (e). Clause 6.4(f) of the JVA provides:

"The Calling Manager shall deposit Called Sums and other moneys received from or for the account of the Joint Venturers in a working capital bank account and shall not deposit any other moneys in such account. Such account shall be in the name of the Calling Manager but the moneys standing to the credit of the account shall belong to the Joint Venturers in proportion to the amounts respectively paid to such account by or on behalf of them and the Calling Manager shall keep sufficient records as will enable the respective entitlements of the Joint Venturers to such moneys (and to any interest or income accrued on those moneys) from time to time to be determined. Payments shall be made from such account to meet Joint Venture Expenses payable or accrued or to become payable or to be accrued in respect of the Joint Venturer concerned. Moneys standing to the credit of the account may be invested by the Calling Manager in a prudent manner for a term not exceeding one week (in the case of moneys paid pursuant to a weekly call and any interest thereon) or one month (in the case of moneys paid pursuant to a monthly call and any interest thereon). All bank interest and other income derived from the investment of the moneys paid by or attributable to a Joint Venturer shall be for the account of that Joint Venturer. Such moneys, bank interest and other income shall be applied promptly to meet Joint Venture Expenses to the intent that calls made under paragraphs (b) or (d) of this Clause 6.4 be reduced to the maximum extent possible."

[34] It is of note, where clause 6.4(f) applies to the moneys standing to the credit of a bank account conducted by the general manager for the joint venture, it expressly provides those moneys "shall belong to the Joint Venturers in proportion to the amounts respectively paid to such account by or on behalf of them" and refers to the manager keeping sufficient records "as will enable the respective entitlements of the Joint Venturers to such moneys". This is consistent with the moneys in the account belonging to the joint venturers rather than an expression of intention to create a trust in respect of the moneys. Under clause 6.4(g), a manager may make a call for funds other than in accordance with the timing schemes set out in clauses 6.4(b) and (d), provided the manager has the consent of each of the joint venturers.

[35] Under clause 6.5 of the JVA, the calling manager is given express authority to make unbudgeted operating expenditures on behalf of the joint venture in respect of rail freight charges, the purchase of imported ore for processing and the purchase of fuel oil (where the purchase of fuel oil remains subject to the requirement under clause 4.10(j) for the approval of each joint venturer to decisions specified in that paragraph). Those expenditures are for items that are critical to the operation of the refinery.

[36] Clause 13 of the JVA provides:

"The full extent of the joint venture between the Joint Venturers is set forth in this Deed and such other agreements relating to the Joint Venture as are executed and, where applicable, delivered on the date hereof or on the Effective Date. Nothing in this Deed shall be construed to constitute a Joint Venturer an agent or representative of the other Joint Venturer, and no Joint Venturer shall have any authority to act for or to assume any obligation, liability, indebtedness or responsibility on behalf of the other Joint Venturer except as set forth in this Deed. The rights, duties, obligations and liabilities of the Joint Venturers arising out of this Deed shall be several in proportion to their respective Participating Interests and not joint or collective, it being the expressed purpose and intention of the Joint Venturers that their ownership of their respective interests shall be as tenants in common and that this Deed shall not be construed as constituting an association, corporation, trust, mining partnership or any other kind of partnership."

[37] The original parties to the administration agreement were Resources, NRNQ and QNI. QNI is referred to as QNPL in the administration agreement. Clause 5 of the administration agreement requires the administration agreement to be construed subject to the terms and conditions of the JVA and, if there is any inconsistency between them, the JVA prevails to the extent of the inconsistency. Consistent with clause 13 of the JVA, recital A noted that the joint venturers under the JVA "have associated themselves in an unincorporated joint venture for the purpose of (inter alia) mining lateritic ore and processing such ore at the Treatment Facilities to produce Products for sale by each of them". The expression "Management Services" is defined in clause 1.1 of the administration agreement to mean the management services described in clause 3.

[38] Clause 3.1 and 3.2 of the administration agreement provide:

"3.1 QNPL is hereby severally appointed by the Joint Venturers to perform the Management Services for and on behalf of the Joint Venturers in relation to the participation and involvement of each of the Joint Venturers in the Joint Venture.

3.2 The Management Services which QNPL shall perform on behalf of the Joint Venturers are as follows:

(a) The management of all debtors of the Joint Venturers in relation to the sale of their Subject Products, including the:

(i) collection by payment to the credit of such bank account of the relevant Joint Venturer as that Joint Venturer may direct;

(b) The promotion of nickel and cobalt products in world markets on behalf of the Joint Venturers, including participation in the Nickel Development Institute and other similar bodies.

(c) The preparation of annual consolidated profit and loss and cashflow budgets for each Joint Venturer which shall include estimates of the following items:

(a) the costs and expenses payable by the Joint Venturer to Queensland Nickel Sales Pty. Ltd. ('QNS') acting in the capacity as the Sales Agent of the Joint Venturer;

(b) the costs and expenses payable by the Joint Venturer to QNPL:

(i) acting in its capacity as General Manager of the Joint Venture; and

(c) the costs and expenses payable by the Joint Venturer to OPS acting in its capacity as Ore Purchase and Shipping Manager of the Joint Venture;

(d) the capital expenditure and other Joint Venture expenses payable by the Joint Venturer;

(e) charges and/or interest payable in respect of any financing for the Joint Venturer's involvement in the Joint Venture, and drawdowns to be made by the Joint Venturer in relation to any such financing; and

(f) the proceeds of the sale of the Joint Venturer's Subject Products.

(d) In conjunction with QNS, the negotiation in consultation with and on behalf of the Joint Venturers of Sales Contracts for each Joint Venturer's Subject Products.

(e) The provision of treasury, tax planning and risk management advice and functions in connection with each Joint Venturer's involvement in the Joint Venture."

[39] Clause 4.2 of the administration agreement reinforces the restriction set out in clause 5.5(b) of the JVA and provides:

"Other than the performance of its role as the General Manager of the Joint Venture and the provision of Management Services as contemplated by this Agreement, QNPL shall not directly or indirectly carry on or be interested in any other business or activity or other operation."

[40] Neither the JVA nor the administration agreement provides for QNI to be paid for its services as general manager. That is not surprising, as from the commencement of the appointment of QNI as general manager under the JVA, it was wholly owned by the relevant joint venture companies, according to their respective interests in the joint venture (exhibit QNK.025.001.1042).

[41] The Yabulu refinery was operated by QNI by sourcing ore from overseas third parties to be used at the refinery. The ore was unloaded at QNI's material handling facility at the Port of Townsville and then delivered by rail to the refinery. The joint venture also sourced ore from its own mine in central Queensland. The domestic ore and coal were also transported by rail to the refinery. The ore was processed at the refinery where nickel was separated from cobalt and nickel products and cobalt produced by the refinery were transported by rail to Townsville or Brisbane for export. QNI operated the bank accounts in its name into which it deposited the revenues generated by the refinery business and met the liabilities incurred in operating the refinery business from the revenues deposited into its bank accounts. During the period from the acquisition of the refinery by the Palmer interests until 18 January 2016, it was common ground that QNI did not receive any income for the services it provided as general manager to the joint venture (at Transcript 8-34 and 18-15).

[42] The parties make very different submissions about the effect of the JVA (and the administration agreement) on the nature of the relationship between QNI on the one hand and Metals and Resources on the other. The issue arises in an unusual way of pleading, as a result of the settlement with the SPL. It was the SPL, and not the GPLs, who had originally alleged in the statement of claim that from the creation of the joint venture QNI by acting as the general manager of the joint venture for the benefit of the joint venturers acted as trustee of the joint venture property for the purpose of carrying on the joint venture with the joint venturers as the beneficiaries. It was alleged the trust was an express trust that was manifested by express terms of the JVA and the conduct of the joint venturers that was particularised. Those allegations that were in part K of the statement of claim were not part of the GPLs' claims made under part NA of the statement of claim and ultimately did not form part of the GPLs' claims made in the statement of claim. The corporate defendants plead in their defence that QNI managed and controlled the joint venture property and all operations under the JVA as agent for, and for the account of, the joint venturers and that the JVA did not create, and was not to be construed as creating, a trust. That gave the GPLs the opportunity to reinstate in the reply the allegations that had originally been made in part K of the statement of claim.

"The term 'joint venture' is not a technical one with a settled common law meaning. As a matter of ordinary language, it connotes an association of persons for the purposes of a particular trading, commercial, mining or other financial undertaking or endeavour with a view to mutual profit, with each participant usually (but not necessarily) contributing money, property or skill."

[47] Those members of the court then went on to observe at 10 that a joint venture will often be a partnership, but the term of joint venture is apposite "to refer to a joint undertaking or activity carried out through a medium other than a partnership: such as a company, a trust, an agency or joint ownership". It is a matter of construing the terms of a written joint venture agreement to determine the intention of the parties as to whether they intended their relationship to be one of the recognised legal relationships that may be used for the purpose of a joint venture.

[48] The plaintiffs' submissions endeavoured to deal with the fact that many of the provisions of the JVA are directed at the general manager being the agent of the joint venturers by submitting that the JVA and the administration agreement provided for a framework for the joint venture that was not tied to one particular legal concept, but instead provides different legal relationships to be used for different purposes. The plaintiffs seek to construe the JVA as creating a trust in respect of the joint venture property held in the name of QNI on behalf of the joint venturers and agency with respect to QNI's ability to manage the affairs of the joint venture. The plaintiffs recognise that the words "on trust" are not used in the JVA in relation to the joint venture property held in the name of QNI, but rely on construing the JVA, having regard to its text, context and purpose, to reveal the parties' intention to create a trust of the joint venture property. In this regard, the plaintiffs rely on the approach to the analysis of a commercial document to reveal whether or not a trust was intended by the parties undertaken by Jackson J in Sino Iron Pty Ltd v Palmer (No 3) [2015] QSC 94; [2015] 2 Qd R 574. In particular, the plaintiffs rely on the statement at [86] where Jackson J expressed the view that "the failure to expressly provide that there is a trust is the occasion for ascertaining whether an intention to create a trust is to be inferred, not a reason, per se, to reject the inference".

[49] The High Court reviewed the essential requirements for an express trust in ; That case was concerned with documents that set up a pine plantation investment scheme where funds had been raised from investors called covenantholders. The respondent was the trustee for the covenantholders under a trust deed between it and the company that carried on the business of managing the pine plantation investment scheme on land owned or leased by it (the manager). There was another deed, referred to as the tripartite deed between the respondent, the manager and the company that did the felling, milling and selling of the trees (the miller). Under the tripartite deed, the miller was to pay the balance of the proceeds of the sale of the timber (after deducting certain amounts) to the manager and the manager was then obliged to pay those proceeds (after deducting all expenses incurred by it) to the respondent for distribution amongst the covenantholders under the trust deed. The manager sold the land on which it had operated the plantations and the manager and the miller sold the trees under a tree sale agreement for an amount that was payable to the miller. The respondent sought declarations that the proceeds of the tree and land sales were held by the manager and the miller subject to an express trust in favour of the covenantholders. All members of the court in found the documents constituting the investment scheme, considered separately or together, did not indicate an intention that either the manager or the miller were to hold the timber and land sale proceeds on trust for the covenantholders.

"The author of the trust has meant to create a trust, and has used language which explicitly or impliedly expresses that intention, either orally or in writing. The fact that a trust was intended may even be deduced from the conduct of the parties concerned but if there is any uncertainty as to intention, there will be no trust." (footnote omitted)

French CJ at [7] noted that there are "three certainties necessary to an express trust" which are certainty of intention, certainty of subject matter and certainty of object (ie. beneficiaries) and that in the case of a written text an express trust depends upon the construction of the written instrument.

"... where parties to a contract have refrained from contractual use of the terminology of trust, an intention to create a trust will be imputed to them only if, and to the extent that, a trust is the legal mechanism which is appropriate to give legal effect to the relationship, between the parties or between a party and a third party, as established or acknowledged by the express or implied terms of the contract." (footnote omitted)

[52] In considering the textual considerations from the terms of the documents themselves, Keane J identified at [225] that a significant textual consideration was that no provision in any of the relevant documents required either the manager or the miller to create and maintain an account separate from its general funds to safeguard the timber proceeds from the vicissitudes of their business. Keane J found the approach to the construction of a funding agreement in Jessup v Queensland Housing Commission [2001] QCA 312; [2002] 2 Qd R 270 of assistance in relation to the significance of the obligation to keep accounting records to determine an entitlement (at [227]) and the omission of the reference to the imposition of a trust amongst other detailed obligations (at [228]).

[53] In Jessup, the Queensland Housing Commission (QHC) had made grants to an association pursuant to a detailed funding agreement for the purposes of assisting eligible persons in obtaining advice and services for home maintenance and repairs. The issue was whether the association was trustee for QHC of the money standing to the credit of the nominated account into which the funds had been paid. The funds were received from QHC to pay the wages of the association's employees and other administrative expenses in carrying out the purposes for which the grants were made. The association also paid into the nominated account funds from another entity for a different granting program. It was held by McPherson JA (with whom Davies JA and Philippides J agreed) at [9] that the extensive obligations in the funding agreement (some of which were characteristic of obligations imposed on trustees) "tell against rather than in favour of the existence of a trust", as if QHC had intended to create a trust, it could have said so, instead of descending to the detail it did in the agreement. It was held at [12] that, even though there was an obligation under the funding agreement to pay the funds into a nominated account, the fact there was not an obligation to keep the grant funds separate and not to mix them with money from other sources (which would be expected if there were a trust) was a strong indication that no trust was intended. It was also held at [12] that the requirement for an accounting system that identified the QHC funding was inconsistent with the funds being held on trust.

The basis on which QNI held the funds of the joint venture in its bank accounts

[61] Mr Wolfe was employed in various roles within the finance department of QNI for 26 years from 1989 until 11 March 2016. He had worked at the refinery since graduating with his Commerce degree in 1989 and held various accountant roles, before becoming senior management accountant, senior business analyst, group leader Business Analysis and Manager Finance. From July 2009 to March 2013, he was employed by QNI in various roles including Manager Finance and Finance Director. In these roles, he had oversight of payments and receipts, management of QN Group bank accounts and assisted with the preparation of audited financial statements of the QN Group. From March 2013 to 11 March 2016, Mr Wolfe was employed as the Chief Financial Officer of the QN Group. Both as Finance Director and Chief Financial Officer, Mr Wolfe had oversight of the corporate governance of the QN Group which included an average of 360,000 financial transactions per annum (or approximately 30,000 transactions per month).

[62] Apart from the relationship between QNI and each of Resources and Metals that is regulated by the terms of the JVA, it is necessary to have regard to how the joint venture operated. I have been greatly assisted by the evidence of Mr Daren Wolfe. Mr Wolfe is now a management consultant. He consults for entities controlled by Mr Palmer, but he also consults for other entities. The plaintiffs endeavoured to attack his credit during the cross-examination, but were unsuccessful in showing that his evidence generally should not be accepted. Notwithstanding Mr Wolfe's continuing relationship with Mr Palmer and that he had been an employee of QNI when Mr Palmer was its ultimate owner, his evidence was given in the context of his in-depth knowledge of the operations of the QN Group of companies comprising Resources, Metals, QNI and QN Sales (both before and after the QN Group was acquired by Mr Palmer) and his professional experience in accounting and finance and was consistent with the documents generated over many years in respect of the operations of the joint venture and the refinery.

[63] PricewaterhouseCoopers (PWC) were the tax accountants for the QN Group and Ernst & Young (EY) were the auditors from July 2009.

[64] Mr Wolfe explained the setup of the finance and accounting team based at the refinery as follows. Prior to January 2016, the finance department comprised 16.5 full time equivalent finance and accounting staff. QNI employed Mr Michael Fitzsimmons in the role of financial controller to facilitate preparation of the annual financial statements, including coordination of the audit process. In his role as CFO, Mr Wolfe would review the financial accounts of each company prior to their execution by the directors of the company and participated in audit review meetings with EY in relation to preparation and audit of accounts across the QN Group. QNI employed Mrs Alexandra Carlyle in the role of tax adviser to facilitate preparation of the annual income tax returns for Resources and Metals and managed all indirect taxation matters. Mrs Carlyle would liaise directly with PWC and the Australian Taxation Office on tax matters and reported directly to Mr Wolfe in his role as CFO.

"I'm suggesting that to be properly correct, you'd therefore have to [write] QN R80 per cent, QN M20 per cent. QNPL, in the way that the accounting team treated those entries, was split 80 per cent/20 per cent to the joint venture partners. That's the understanding."

[72] Without further testing that proposition, the plaintiffs' closing submissions submit that Mr Wolfe was "clearly mistaken" in saying the loan account could not correctly describe Resources and Metals, as if "QNPL" had been replaced with "QNR-80% & QNM-20%", the full loan account name for the loan with Mineralogy would have had 43 characters and there were other accounts in the SAP system that had up to 55 characters.

[73] First, if the plaintiffs wished to make such a submission by reference to the numbers of characters used in naming accounts in the SAP system, Mr Wolfe should have been cross-examined about it. Second, the submission is made on the basis that the plaintiffs interpreted Mr Wolfe's answer as relating only to the length of the account name for the loan with Mineralogy. It is not apparent that Mr Wolfe was giving his answer on that limited basis, when there were many loan accounts that would have been affected by substituting a reference to both Resources and Metals and their respective interests for QNPL. The plaintiffs needed to explore this topic further with Mr Wolfe, before they could submit that his evidence was "clearly mistaken".

[74] Mr Wolfe exhibited to his affidavit affirmed on 21 August 2017 (exhibit QNM.002.009.0001/exhibit 58) the audited accounts for each of Resources and Metals for the financial years ended 2011 to 2015 and the consolidated accounts for the QN Group for the financial years ended 2011 to 2015. Mr Wolfe also at paragraph 24 of that affidavit exhibited a table as exhibit DW-03 (exhibit QNM.002.009.0594) that analysed the consolidated accounts and showed that the beneficial ownership of all assets of the joint venture was disclosed in the accounts of Metals and Resources and that QNI had no net assets.

[75] As Metals and Resources were private companies and the directors were of the opinion that there were unlikely to be users who existed who were unable to command the preparation of reports to satisfy their information needs, the annual financial reports prepared by PWC in the relevant years were Special Purpose Financial Reports for distribution to the members of the companies. A statement to that effect is included in each of the Special Purpose Financial Reports in paragraph (b) of note 1. See p .9486 of exhibit QNK.002.008.9477 as an example.

[76] At the end of each financial year and at other times during the year, Mr Wolfe and members of his team would confer with PWC and EY in respect of transactions and the accounting treatment for transactions. One topic for discussion was the forgiveness of loans between the companies under Mr Palmer's common ownership.

"QNI Resources Pty Ltd and Mineralogy Pty Ltd, being under common ownership throughout the period from the time that the relevant debts were incurred until the time that the debts were forgiven, agree that QNI Resources Pty Ltd will forgo so much of the capital loss under Division 104 that would have arisen for the 2013 year of income in respect of the forgiveness of the debts due by Mineralogy Pty Ltd to QNI Resources Pty Ltd and which does not exceed the provisional net forgiven amounts and as stated below:

[81] Mr Sorensen explained that the forgiveness of debts was not shown in the tax returns filed on behalf of Metals and Resources as the debt forgiveness was credited directly to an equity account for each company called the reorganisation reserve. There was no requirement to make any adjustment in the tax return for any debt forgiveness amount, because the debt forgiveness was not reflected in the profit and loss of Metals or Resources. The section 245-90 agreements were retained with the tax returns. Mr Sorensen identified the reorganisation reserve at note 24 of the Special Purpose Finance Report for the year ended 30 June 2015 for Resources (exhibit QNK.002.008.9477).

[82] During cross-examination, Mr Sorensen confirmed (at Transcript 18-21) that where the section 245-90 agreement was entered into, the debt forgiveness was dollar for dollar which meant that each dollar that was received under the loan could be effectively kept, whereas if a dividend was paid, it would have to be grossed up by a minimum of 30 per cent and potentially 49 per cent to cover all income tax liabilities, because Resources and Metals could not pay any franked dividends. Mr Sorensen explained (at Transcript 18-22) that when the Palmer interests acquired Resources and Metals, those companies had an existing cost base for the assets that advantaged them and, further, it was sensible for the owner of a private company group for loans to be made, rather than dividends paid, and doing so was within the law.

[83] Mr Sorensen was shown the loan agreement dated 29 June 2011 between QNI and Mineralogy (exhibit QNK.014.001.0223) whereby QNI as lender promised to provide a loan of up to A$10m to Mineralogy as the borrower and said that he had not seen that document before (at Transcript 18-26). That would only be relevant, if it were an operative loan agreement.

[84] Mr Sorensen was cross-examined on the manner in which he and his team provided tax advice to the Palmer controlled companies. He was asked to look at one document on QN Group structural changes (exhibit QNK.013.022.1479) that appeared to have been prepared by the QN Group that included comments in respect of issues raised by PWC (exhibit QNK.013.022.1478). It was not a document that had been prepared by Mr Sorensen, but he accepted the proposition that was put to him (at Transcript 18-37) that PWC would receive instructions from the client, assume the instructions were correct and then provide advice based on those instructions. Mr Sorensen was then cross-examined on a bundle of documents that included deeds of debt forgiveness for the purpose of division 245 of the ITAA and settlement notices requiring completion of other transactions dated variously in July 2012 and a written sale agreement between Mr Palmer and QNI for a Cessna aircraft dated 6 July 2012 (exhibit QNM.001.002.6400) that was forwarded from one of Mr Sorensen's team on 28 October 2013 (exhibit QNM.001.002.6399) to Ms Carlyle on whether he would investigate whether each of the documents were actually executed on the date the document was dated. In respect of the sale of the Cessna, Mr Sorensen responded (at Transcript 18-38) that he did query that with Mr Palmer who asserted that was correct and Mr Sorensen confirmed with the auditors they were happy with the transactions as documented.

"The expression 'Joint Venture Property' is comprehensively defined in clause 1.1 of the JVA to include relevant real property and mining titles, relevant technology and know-how and 'all other rights, titles, interests, claims and benefits held or acquired from time to time, directly or indirectly, for the purposes of the Joint Venture'. Products produced at the nickel refinery were the property of the Joint Venturers according to their respective shares. They are not Joint Venture Property." (footnote omitted)

[90] That decision was an appeal against the primary judge's refusal to grant leave to proceed to Resources, Metals and Sales against QNI in administration and the GPLs in respect of their claim that the property held by the plaintiffs for the joint venture be delivered to Sales or the joint venture companies. It can be noted, however, that Gotterson JA was not interpreting the JVA to resolve an issue between the parties, but was merely summarising facts described in [7] of the judgment as uncontroversial by reference to the content of the relevant clauses of the JVA.

[91] The corporate defendants submit that it follows from the distinction in the JVA between "Joint Venture Property" and "estate and interests in Products produced" that the proceeds of the sale of the Products do not form Joint Venture Property, but such proceeds comprise part of the "estate and interests in Products produced".

[92] This submission does not sit well with the fact that the proceeds from the sale of products were deposited by QNI in its bank accounts and then used for the purpose of the joint venture. As the proceeds were paid into the bank accounts in lieu of the system of calls provided for in clause 6.4(a) of the JVA, the entitlement to the funds in the bank account is determined by applying clause 6.4(f) of the JVA rather than reliance on the exclusion of Products from the definition of Joint Venture Property.

[93] The plaintiffs submit that the obligations on QNI in relation to the funds in its bank accounts precluded the characterisation that it was holding the funds on a bare trust. Gummow J interpreted the expression "bare trustee" in s 5(5) of the Taxation (Unpaid Company Tax) Assessment Act 1982 (Cth) (the Recoupment Act) in Herdegen v Federal Commissioner of Taxation [1988] FCA 419; (1988) 84 ALR 271. Gummow J recorded the history of the use of the expression "bare trustee" at 281 and then set out its modern usage:

"Today the usually accepted meaning of 'bare' trust is a trust under which the trustee or trustees hold property without any interest therein, other than that existing by reason of the office and the legal title as trustee, and without any duty or further duty to perform, except to convey it upon demand to the beneficiary or beneficiaries or as directed by them, for example, on sale to a third party."

Gummow J at 182 construed "bare trustee" in the Recoupment Act as being used in the sense of the modern usage. That discussion was considered in Corumo Holding Pty Ltd v C Itoh Ltd (1991) 24 NSWLR 370, 398 where the expression "bare trustee" for the purpose of a provision of the Companies (New South Wales) Code that disregarded the relevant interest in a share if it were held by a trustee who was a bare trustee was construed. It was held to mean no more than "a nominee or cypher, in a commonsense commercial view" that would apply to a person who, in a practical sense, had no say in the utilisation of the powers attaching to the shares. See also the commentary in paragraph 3-15 in Jacobs' Law of Trusts in Australia, 8th ed (2016).

[94] As between the bank and QNI, QNI was the legal owner of the funds in the relevant bank account, but on a bare trust for Resources and Metals to which the funds belonged. As between QNI and Resources and Metals, QNI had no role to perform as bare trustee, as any action it took in relation to the funds in the bank account was pursuant to the JVA - either to pay joint venture expenses or to disburse the funds to Resources and Metals, as directed by them. I therefore accept as accurate the corporate defendants' analysis that the bare trust was collapsed when QNI disbursed the funds from its bank accounts whether it was for the purpose of making payments on account of the joint venture or for distributing to Metals and Resources at their request their respective shares of the funds to which they were entitled.

[95] The plaintiffs are now seeking to recover from Mineralogy a net amount of $102,884,346.26. This net sum comprises various payments made by QNI to Mineralogy totalling $35,285,474.44, amounts paid by QNI totalling $2,458,217.94 in professional legal fees and disbursements incurred by Mineralogy in litigation conducted by it, and payments totalling $79,983,837.52 made to Mr Palmer or third parties recorded in the books and records of QNI as debts owing by Mineralogy, less repayments made by Mineralogy that total $14,883,183.64. The corporate defendants do not dispute that these payments were recorded in the account referred to as the Mineralogy Loan Account in the SAP system.

[96] The plaintiffs allege that by loan agreement dated 21 June 2011 between QNI and Mineralogy (exhibit QNK.014.001.0223), QNI promised to lend up to $10m to Mineralogy and Mineralogy promised to repay the loan plus any outstanding interest upon written demand by QNI. In the alternative, the plaintiffs allege that from 7 March 2011 onwards there was an agreement between Mineralogy and QNI that amounts paid to QNI at the direction of Mr Palmer and Mr Mensink and recorded in the Mineralogy loan account in QNI's SAP system would be recoverable as loan amounts. In the alternative, QNI seeks to recover some of the moneys as either moneys lent or moneys paid.

[97] The corporate defendants say that no funds were advanced by QNI under the June 2011 loan agreement or any alternative loan agreement alleged by the plaintiffs, as the loans were not made by QNI to Mineralogy, but from the funds of Metals and Resources and at their direction and rely on a number of written agreements that were entered into in respect of each financial year from the year ended 30 June 2012 to the year ended 30 June 2015 whereby Resources forgave Mineralogy loans made by Resources and whereby Metals forgave Mineralogy loans made by Metals.

[98] A critical issue to be resolved is whether the recording of a loan by QNI to Mineralogy in the SAP system reflected a transaction that accorded with that description or whether that was a convenient way of recording loans that were in fact made by Metals and Resources, rather than QNI, to Mineralogy. The plaintiffs' claims cannot succeed unless they show that it was QNI that lent or paid the money to Mineralogy and not Metals and Resources.

[99] Ms Packer set out at paragraph 21 of her affidavit (exhibit SUP.015.011.0001) the findings of the investigations of the GPLs that were reported to creditors in April 2016. They were as follows. From early 2011 onwards, there was a practice of QNI transferring money from bank accounts held by QNI either directly to Mineralogy or other parties or by QNI paying an expense or liability of Mineralogy or other parties and those amounts being credited to loan account ledgers in the SAP system. Interest accrued on the loan account as recorded in the SAP system on a monthly basis for each month during June 2011 to May 2013, but that was reversed for the Mineralogy loan account in full on 5 July 2013 and thereafter no further interest was recorded. There were also records of repayments made in respect of the loan account ledgers, where QNI received an amount of cash and the loan balance was credited and there were also small credit amounts from other sources relating to payments, such as refunds from suppliers. Sometime after 30 June in each year, an entry was created which purported to "forgive" the loan balance, by posting a credit journal entry to the Mineralogy loan account which adjusted the loan account balance. The claim made in part NA of the statement of claim summarised the net amount of the payments to or on behalf of Mineralogy or recorded as debts owing by Mineralogy.

"The general ledger account 127600 labelled 'CARecv Loan-QNPL>Min' is a short form description for the balance sheet account classification Current Assets Loans Receivable from Mineralogy to QN Group. Accounting conventions and practice for the QN Group ensured that any such asset accounts were allocated to the JV partners, [Resources] and [Metals], in accordance with their ownership interests (80%/20% respectively)."

[102] At paragraphs 19 to 26 of his affidavit (exhibit 36), Mr Wolfe explained the process that he undertook to obtain from the SAP system for the financial years 2011 to 2015 the transactions for the identified related party loan accounts and the process that he underwent in order to eliminate transactions that collectively added to zero and then to relate the remaining data to the claims in the statement of claim. Mr Wolfe then analysed the related party loan transactions and produced the pivot table analysis that is set out at DW-53 to exhibit 36. He explained (at paragraph 27 of exhibit 36) that a pivot table is a feature of Excel and is a table of statistics that summarises more extensive data and (at paragraph 31 of exhibit 36) that the analysis had been undertaken "in 100% joint venture terms, i.e. at the QN Group level".

[103] In paragraphs 44 and following of exhibit 36, Mr Wolfe showed how the debt forgiveness in the audited financial statements for Resources and Metals for each of the relevant financial years can be reconciled with the related party receivables and payables in the same statements. The pivot table analysis undertaken by Mr Wolfe in relation to Mineralogy demonstrated that at 30 June 2015 there was alignment between the loan amounts entered in the SAP system and the annual financial accounts, as adjusted by the relevant loan forgiveness that occurred, and at 30 June 2015 the balance of the Mineralogy loan account in the SAP system was zero. Ms Packer was cross-examined on this analysis and did not dispute the conclusion that Mr Wolfe reached that the loan balance in the Mineralogy account was zero, as a result of how the transactions, including debt forgiveness, had been recorded in the annual financial statements (at Transcript 7-79), but asserted that was not reflected in the SAP system with a zero balance in the Mineralogy loan account at 30 June 2015 (at Transcript 8-15).

[104] Consistent with the primacy given by Ms Packer during the course of her cross-examination to the entries in the SAP system, the plaintiffs submitted that Mr Wolfe's pivot table analysis did not assist the defendants or the resolution of the issues in the proceeding, because the SAP system showed that the loan to Mineralogy was from QNI and those who were tasked with recording the transactions in the nature of the loans in the SAP system treated the loans as being between QNI and the respective related parties of Mr Palmer. Similarly, the plaintiffs also made a submission based on what they described as the "failure" on the part of the defendants to call any of the authors of the loan account entries in the SAP system and that should give rise to an inference that nothing they could have said would have assisted. The plaintiffs' submissions assume that an entry in the SAP system characterised the transaction for all times, as between QNI and the other party to the transaction. That would be surprising, when 30,000 transactions were being processed each month. It is also an assumption that is unwarranted in the light of Mr Wolfe's evidence about reconciliation of entries in the SAP system at each month's end and the shorthand way that the company code 5710QNPL was used to refer to the interest of the joint venture companies split 80/20. The authors of the loan account entries were not necessary witnesses and no inference is justified as submitted by the plaintiffs.

[106] Mr Wolfe exhibited to the affidavit affirmed on 20 April 2017 as DW-09 the Real Time Gross Settlement request forms authorising the transfer of funds from Mineralogy's bank account to QNI's bank account (exhibit QNM.002.029.0922).

[107] Mr Wolfe in his affidavit affirmed on 28 June 2019 (exhibit 36) dealt with the general ledger account 127640 in the SAP system that was named "CARecv Loan-QN & CFP" which he said at paragraph 68 reflected a loan balance payable to Mr Palmer, as at 30 June 2013, of $3,196. He then listed in paragraph 69 five payments totalling $33,855,101.76 made by Mr Palmer to QNI between 7 June 2013 and 3 December 2013 which included the three payments made on 4 and 28 October and 3 December 2013 that Mr Wolfe had previously attributed to Mineralogy.

[108] When this discrepancy between how Mr Wolfe dealt with those three payments in his 2019 affidavit and how he dealt with them in his 2017 affidavit was pointed out in cross-examination, Mr Wolfe accepted there was a discrepancy and explained (at Transcript 21-45) that he assisted Artemis Insolvency (of which Mr Dinoris was the principal) in providing information to them to prepare their report for this proceeding. As the material included in the 2019 affidavit included additional analysis, Mr Wolfe believed that it was Mr Palmer who should be given the credit for those three payments, rather than Mineralogy. Ms Packer at paragraph 29 of her affidavit (exhibit SUP.015.028.1013) had noted that the entry for those three payments were reversed within the books and records of QNI on 1 March 2014 with the payments then being recorded for the benefit of Mr Palmer which accorded with the view expressed by Mr Wolfe in his 2019 affidavit. When cross-examined as to why he had not corrected the discrepancy himself, Mr Wolfe explained that he was not aware that was required. Mr Wolfe is not a party to the proceeding. Even though he has provided assistance to the corporate defendants in the preparation for the trial of this proceeding, there was no obligation on Mr Wolfe to draw attention to the discrepancy in how he dealt with those three payments in the two affidavits. He was entitled to assume that the lawyers for the parties would see that for themselves, as the plaintiffs' lawyers did. It is not a matter which, in my view, is adverse to Mr Wolfe's credit.

[109] The corporate defendants also rely on exhibit QNM.001.002.6691 which is the Special Purpose Financial Report for the year ended 30 June 2013 of Mineralogy as showing that the loan was between the joint venturers and Mineralogy as it recorded the following notes to the financial statements:

"In July 2012, QNI Resources Pty Ltd and QNI Metals Pty Ltd (entities under the control of Professor Clive Palmer) forgave loans payable by the Company of $12,703,121."

"In June 2013, QNI Resources Pty Ltd, QNI Metals Pty Ltd and Palmer Leisure Australia Pty Ltd (entities under the control of Professor Clive Palmer) forgave loans payable by the Company of $59,607,292."

[110] The plaintiffs rely on a document executed on 30 October 2014 entitled "Acknowledgement of loan repayments" to which QNI, Mr Palmer and Mineralogy were parties (exhibit FTI.009.001.1534). It documented a round robin in respect of a payment of $20m and was signed by Mr Mensink on behalf of QNI and Mineralogy and Mr Palmer for himself. The acknowledgement provided:

"It acknowledged that, on 30 June 2014, Queensland Nickel Pty Ltd repaid A$20,000,000 of the loan owing by it to Clive Frederick Palmer. It is acknowledged that prior to this repayment Queensland Nickel Pty Ltd owed Clive Frederick Palmer a loan of A$20,048,101.76, and after this repayment Queensland Nickel Pty Ltd owed Clive Frederick Palmer a loan of A$48,101.76 as at the end of 30 June 2014.

It acknowledged that, on 30 June 2014, Clive Frederick Palmer directed Queensland Nickel Pty Ltd to make the above payment of A$20,000,000 to Mineralogy Pty Ltd on his behalf. It is acknowledged that this payment of A$20,000,000 was made on 30 June 2014 to Mineralogy Pty Ltd in partial repayment of the loan owing by Clive Frederick Palmer to Mineralogy Pty Ltd. It is acknowledged that prior to this repayment Clive Frederick Palmer owed Mineralogy Pty Ltd a loan of A$44,158,637.86, and after this repayment Clive Frederick Palmer owed Mineralogy Pty Ltd a loan of A$24,158,637.86.

It acknowledged that, on 30 June 2014, Mineralogy Pty Ltd directed Queensland Nickel Pty Ltd to apply this payment of A$20,000,000 in partial repayment of the loan owing by Mineralogy Pty Ltd to Queensland Nickel Pty Ltd, and that this payment was so applied. It is acknowledged that prior to this repayment Mineralogy Pty Ltd owed Queensland Nickel Pty Ltd a loan of A$28,558,272.91, and after this repayment Mineralogy Pty Ltd owed Queensland Nickel Pty Ltd a loan of A$8,558,272.91 as at the end of 30 June 2014."

[111] The plaintiffs relied on this acknowledgement of loan repayments to indicate an acceptance by QNI and Mineralogy that the parties to a loan agreement were QNI and Mineralogy. Mr Wolfe accepted (at Transcript 21-40) that the document purported to record an agreement between QNI, Mr Palmer and Mineralogy in that the last sentence referred to the general ledger account in the SAP system for the loan recorded as QNI to Mineralogy, but explained that the debt was owed to Resources and Metals, as QNI "was essentially the agent of Resources and Metals". The corporate defendants therefore submit that the acknowledgement was neutral, as it said nothing about the capacity in which QNI was a party to the transactions. This acknowledgement appears to relate to a letter of advice dated 30 October 2014 given by Mr Negus of PWC (who worked with Mr Sorensen) to Mineralogy (exhibit QNM.001.002.3732) about transactions that would reduce deemed dividends under Division 7A of the ITAA assessable to Mr Palmer in respect of loans for the year ended 30 June 2014. In fact, that letter did refer to the loan of $20,048,101.76 owed to Mr Palmer by QNI on behalf of Resources (80 per cent) and Metals (20 per cent) which is consistent with Mr Wolfe's evidence. Mr Sorensen was noted in that letter as a point of reference and was cross-examined on the letter (at Transcript 18-25), but not cross-examined on the acknowledgement of loan repayments. Particularly in the light of the content of the related letter of advice of 30 October 2014, I consider that the acknowledgment was concerned with Mr Palmer's position and not with addressing the issue of the capacity in which QNI was dealing with Mineralogy in respect of the loan of funds.

[112] The plaintiffs submit the objective circumstances of the payment of money by QNI to Mineralogy support the proposition that QNI was a party to the loan contract. Apart from relying on how the loan amounts were recorded in the SAP system as a loan by QNI to Mineralogy, the plaintiffs rely on the recording in the Mineralogy loan accounts of the same payment as a loan to Mineralogy from QNI (see exhibit QNK.020.001.0322 as an example). The plaintiffs emphasise there is no transactional document recording the making of loans by Resources and Minerals to Mineralogy.

[113] The corporate defendants' position is that, when the Special Purpose Financial Reports of Metals and Resources are considered with the SAP records and the subsequent treatment of the forgiveness of the loaned amounts in both the Special Purpose Financial Reports and the SAP records, the primary account material is probative of loans between Metals and Mineralogy and between Resources and Mineralogy.

"This financial report covers both QNI Resources Pty Ltd as an individual entity ("Company") and the consolidated entity comprising the Company and its controlled entities ("consolidated entity" or "Group"). The separate financial statements of QNI Resources Pty Ltd include its 80% interest in the Queensland Nickel Joint Venture and its 64% interest in the Styx Basin Joint Venture."

[116] Paragraph (b) of note 1 then explains the principles of consolidation, being that the consolidated financial statements incorporate the assets and liabilities of all subsidiaries controlled by Resources as at 30 June 2015 and refers to note 25 for details of the entities that form the Resources group. Note 25 then lists each of the controlled entities and the extent of the interest of Resources in each controlled entity. There are four companies listed which are each 100 per cent owned by Resources. They are QN South Africa Pty Ltd, Queensland Nickel Mining Pty Ltd, Palmer Aviation Pty Ltd and Asia Pacific Shipping Enterprises Pte Ltd. QNI was therefore not an entity that was treated as a subsidiary of Resources for the purpose of this report.

[117] The plaintiffs took some comfort from what they described as a concession made by Mr Wolfe (at Transcript 21-41) that in the 2015 Special Purpose Financial Report for Resources the reference to loans to related companies in the company column could reflect either a loan made from Resources or 80 per cent of a loan made by QNI. That evidence was given by Mr Wolfe in the context of his evidence that 80 per cent of the loan made by QNI was on behalf of Resources.

[118] What this Special Purpose Financial Report showed on its face consistent with Mr Wolfe's evidence and with Mr Sorensen's evidence is that the relevant loans to Mineralogy were made respectively by Resources and Metals and not by QNI.

[119] As Mr Sorensen's firm prepared the Special Purpose Financial Reports which were duly audited, I accept his evidence in respect of what those reports show which accords with the content of the report themselves.

[120] Chartered Accountant, Mr John Williams, was engaged by the SPL to prepare a report that identified the accounting policies adopted by the QN Group in the annual financial statements and to express an opinion on how the statements would be presented for QNI under four different scenarios. Mr Williams' report dated 10 April 2019 is exhibited to his affidavit (exhibit SUP.015.034.4393). Mr Sorensen was not cross-examined on the opinions expressed by Mr Williams. It was much more helpful hearing from the accountant responsible for the preparation of the QN Group's financial statements then receiving the conclusions of Mr Williams which were theoretical in the sense that they did not relate to the questions in issue between the plaintiffs and the relevant defendants in this proceeding. These observations are not intended to reflect adversely in any way on Mr Williams who did what he was instructed to do. The plaintiffs rely on Mr Williams' report as consistent with the assertion in their closing written submissions that the fact that loans were recorded as receivable from related parties in the Special Purpose Financial Reports for Metals says nothing about whether those loans were receivable by QNI, or Metals and Resources. That assertion is not borne out by Mr Williams' report which was directed at different questions, but the assertion is inconsistent with Mr Sorensen's evidence.

[123] Section 95A(1) of the Corporations Act 2001 (Cth) (the Act) provides:

"A person is solvent if, and only if, the person is able to pay all the person's debts, as and when they become due and payable."

[124] The classic statement of what amounts to insolvency is found in the judgment of Barwick CJ in Sandell v Porter (1966) 115 CLR 666 at 670-671:

"Insolvency is expressed in s. 95 as an inability to pay debts as they fall due out of the debtor's own money. But the debtor's own moneys are not limited to his cash resources immediately available. They extend to moneys which he can procure by realization by sale or by mortgage or pledge of his assets within a relatively short time - relative to the nature and amount of the debts and to the circumstances, including the nature of the business, of the debtor. The conclusion of insolvency ought to be clear from a consideration of the debtor's financial position in its entirety and generally speaking ought not to be drawn simply from evidence of a temporary lack of liquidity. It is the debtor's inability, utilizing such cash resources as he has or can command through the use of his assets, to meet his debts as they fall due which indicates insolvency. Whether that state of his affairs has arrived is a question for the Court and not one as to which expert evidence may be given in terms though no doubt experts may speak as to the likelihood of any of the debtor's assets or capacities yielding sufficient time to meet the debts as they fall due."

[125] It should be noted that the authorities prior to the enactment of s 95A of the Act were concerned with a definition of insolvency that included the words "from his own moneys" and that is no longer part of the test. This has not had a major effect on the question of insolvency, as was explained by Giles JA (with whom Hodgson and McColl JJA agreed) in Lewis v Doran [2005] NSWCA 243; (2005) 54 ACSR 410 at [109]- [110]:

"[109] Particularly when the limiting words are no longer part of the test, there is no compelling reason to exclude from consideration funds which can be gained from borrowings secured on assets of third parties, or even unsecured borrowings. If the company can borrow without security, it will have funds to pay its debts as they fall due and will be solvent, provided of course that the borrowing is on deferred payment terms or otherwise such that the lender itself is not a creditor whose debt can not be repaid as and when it becomes due and payable. It comes down to a question of fact, in which the key concept is ability to pay the company's debts as and when they become due and payable.

[110] Even before the wording of s 95A, in Re RHD Power Services Pty Ltd (1991) 3 ACSR 261; 9 ACLC 27 McPherson SPJ was prepared to pay regard to ability to borrow without security. Kearney J in Re Adnot Pty Ltd (1982) 7 ACLR 212; 1 ACLC 307 took into account that the company 'instead of having to resort to some outside lender, is in the fortunate position of having its fellow member of the group of companies to which it belongs, available in effect as banker to provide funds required to meet any shortfall': at ACLR 217; ACLC 311; the shortfall was until completion and sale of a shopping centre. In Re a Company [1986] BCLC 261 Nourse J declined to find that a company was unable to pay its debts as they fell due although it was being 'propped up by loans made to it by associated companies and possibly by others': at 262; his Lordship noted at 263 that he had evidence from a director to the effect that there was no question of the loans being withdrawn, the loans not being repayable for some 18 months."

[126] Giles JA in Lewis v Doran at [103] also made observations about what debts should be taken into account when the issue of insolvency has to be determined:

"Solvency or insolvency is a state on which directors and others act in current conduct, for example if the issue is trading while insolvent. Section 95A speaks of objective ability to pay debts as and when they become due and payable, but ability must be determined in the circumstances as they were known or ought to have been known at the relevant time, without intrusion of hindsight. There must of course be 'consideration ... given to the immediate future' (Bank of Australasia v Hall [1907] HCA 78; (1907) 4 CLR 1514 at [1907] HCA 78; 1528; 14 ALR 51 at 54-5 per Griffith CJ), and how far into the future will depend on the circumstances including the nature of the company's business and, if it is known, of the future liabilities."

[127] The question of the "degree of assuredness" that is required of financial support from a third party to enable a company to pay its debts was considered in Chan & Ors v First Strategic Development Corporation Limited (in liq) & Anor [2015] QCA 28. Morrison JA (with whom Gotterson JA and Boddice J agreed) referred with approval to the observations of the primary judge set out at [42] and then stated in [43]:

"They reflect the need, in cases where the financial support is from a source which cannot be compelled by legal arrangement, for there to be a degree of assuredness that the financial support will be forthcoming and at such a level that one could say the company was able to pay its debts as and when they fall due, rather than being possibly able to do so. Just as a conclusion that the relevant financial support does not have to be absolutely certain in order to be sufficient to meet the test in Lewis v Doran, Scholz and International Cat, equally the financial support does not have to be absolutely uncertain in order to be insufficient to qualify. Between the two extremes the factual circumstances of each case will provide a variety of points at which one might conclude that the financial support was of such a degree of commitment that it was likely to continue, and with the result that the company was able to pay its debts, and therefore that it has sufficient financial support to draw the conclusion of solvency."

[128] The New South Wales Court of Appeal in Lewis v Doran dismissed the appeal from the decision of Palmer J in Lewis v Doran [2004] NSWSC 608; (2004) 50 ACSR 175. Palmer J had observed at [106] in relation to the test of insolvency:

"I think that I must approach the application of s 95A CA with two considerations in mind. First, the words of s 95A must be construed as they stand, without addition or subtraction. Second, the law both before and after the enactment of s 95A is unequivocally and emphatically clear that insolvency is, first and last, a question of fact: ... to be ascertained from a consideration of the company's financial position taken as a whole. In considering the company's financial position as a whole, the Court must have regard to commercial realities. Commercial realities will be relevant in considering what resources are available to the company to meet its liabilities as they fall due, whether resources other than cash are realisable by sale or borrowing upon security, and when such realisations are achievable: Southern Cross Interiors Pty Ltd (in liq) v DCT [2001] NSWSC 621; (2001) 53 NSWLR 213 at 224 (citations of authority omitted); [2001] NSWSC 621; 188 ALR 114; 164 FLR 430; 39 ACSR 305 at 316."

[129] Southern Cross Interiors Pty Ltd v Deputy Commissioner of Taxation [2001] NSWSC 621; (2001) 53 NSWLR 213 is another decision of Palmer J in which his Honour helpfully set out at [54] a series of propositions that were drawn from the authorities. Propositions (iii), (iv) and (v) are relevant:

"(iii) in assessing whether a company's position as a whole reveals surmountable temporary illiquidity or insurmountable endemic illiquidity resulting in insolvency, it is proper to have regard to the commercial reality that, in normal circumstances, creditors will not always insist on payment strictly in accordance with their terms of trade but that does not result in the company thereby having a cash or credit resource which can be taken into account in determining solvency ...;

(iv) the commercial reality that creditors will normally allow some latitude in time for payment of their debts does not, in itself, warrant a conclusion that the debts are not payable at the times contractually stipulated and have become debts payable only upon demand ...;

(v) in assessing solvency, the Court acts upon the basis that a contract debt is payable at the time stipulated for payment in the contract unless there is evidence, proving to the Court's satisfaction, that:

• there has been an express or implied agreement between the company and the creditor for an extension of the time stipulated for payment; or

• there is a course of conduct between the company and the creditor sufficient to give rise to an estoppel preventing the creditor from relying upon the stipulated time for payment; or

• there has been a well established and recognised course of conduct in the industry in which the company operates, or as between the company and its creditors as a body, whereby debts are payable at a time other than that stipulated in the creditors' terms of trade or are payable only on demand ...;"

[130] Palmer J cited a number of authorities for proposition (iv) set out above in Southern Cross Interiors, including the decision of the Full Court of the Supreme Court of Western Australia in Lee Kong v Pilkington (Australia) Ltd (1997) 25 ACSR 103. Owen J (with whom Franklyn and Murray JJ agreed) held at 112 that, in the context of whether a company was trading whilst insolvent, whether or not a debt is due is to be determined by reference to the legally binding agreement between the parties and any reluctance by creditors to enforce legal rights was not relevant. That authority and others to similar effect were applied by Edelman J in Hussain v CSR Building Products Ltd [2016] FCA 392; (2016) 246 FCR 62 at [63]- [65].

[131] Palmer J had occasion in Hall v Poolman [2007] NSWSC 1330; (2007) 65 ACSR 123 to consider what would accord with commercial reality as the delay creditors would be prepared to accept before payment of their debts, while the debtor company sold assets. Palmer J stated at [187]:

"An asset cannot be taken into account in assessing solvency at a particular time without reference to the time it would realistically take to effect realisation and produce cash. It is no indication of solvency - indeed, it is the opposite - to point to property as available to meet debts falling due next month when, even with the utmost expedition, that property cannot be turned into cash for 6 months. Realisable property can only be taken into account in assessing solvency 'if that property is in such a position as to title and otherwise that it could be realised in time to meet the indebtedness as the claims mature': Bank of Australasia v Hall [1907] HCA 78; (1907) 4 CLR 1514 at [1907] HCA 78; 1543; 14 ALR 51 at 80; see, for example, Crema (Vic) Pty Ltd v Land Mark Property Developments (Vic) Pty Ltd (2006) 58 ACSR 631 ; [2006] VSC 338 at [141]-[144] per Dodds-Streeton J and Noxequin Pty Ltd v DCT [2007] NSWSC 87 at [14] and [15] per Barrett J."

"Where a company has assets which, if realised, will pay outstanding debts and will enable debts incurred during the period of realisation to be paid as they fall due, the critical question for solvency is: how soon will the proceeds of realisation be available: see the authorities cited at [187] above. Bearing in mind the commercial reality that creditors will usually prefer to wait a reasonable time to have their debts paid in full rather than insist on putting the company into insolvency if it fails to pay strictly on time, I think it can be said, as a very broad general rule, that a director would be justified in 'expecting solvency' if an asset could be realised to pay accrued and future creditors in full within about 90 days."

QNI's activities between mid-September 2015 and 18 January 2016

[133] The following summary of QNI's activities is drawn largely from the documents relied on by the parties for the purpose of the proceeding supplemented by the evidence of witnesses who have knowledge of the relevant events, meetings or correspondence, including the affidavits and evidence of Ms Trenfield, Mr Park, Mr Wright, Mr Prescott, Mr Wolfe and Mr Harris. The corporate defendants did not rely on any affidavits sworn by either Mr Palmer or Mr Mensink in the proceeding for the purpose of the resolution of the issues that remained to be decided in the proceeding after the settlement with the SPL. Where I refer to actions taken or statements made by either Mr Palmer or Mr Mensink, I have relied either on the documentary evidence or the evidence of the witnesses who were able to give evidence of those actions or statements.

[134] The short term outlook on nickel price forecasts was revised downward for the period September 2015 to June 2016 by Wood Mackenzie in its report issued at the end of August 2015 (exhibit QRM.001.001.0373). Wood Mackenzie is an analytics business that produced a monthly report on the global nickel outlook. QNI took its key nickel price forecasts from the reports prepared by Wood Mackenzie which it cross checked with other public forecasts and then input the figure for the nickel price forecast into its spreadsheet model for cash flow projections. The key drivers for the profitability of the refinery were the nickel price and the exchange rate between the Australian dollar and the US dollar.

[135] In mid-September 2015, QNI made approaches or presentations to various financiers that were unsuccessful. These included Deutsche Bank, BNP Paribas, Credit Suisse, Societe Generale, Sumitomo Mitsui Banking Corporation and Bank of Tokyo-Mitsubishi. The presentation showed that the nickel price was then at a six year low and set out the Wood Mackenzie prediction for an upturn in world nickel prices that would not happen until May 2016. QNI was seeking an overdraft facility for nine months from October 2015 to sustain QNI through the low point in the nickel price cycle (exhibit FTI.007.001.0928). QNI made a powerpoint presentation to the Commonwealth Bank and approached Westpac and Suncorp for financial facilities around September 2015, but was unsuccessful in obtaining the requested facilities.

[136] QNI also made a powerpoint presentation to the NAB on 16 September 2015. QNI's operational bank accounts were then held with NAB. Mr Wolfe had suggested to the NAB that an option for a short term facility for $10m would be to use QNI's motor vehicle fleet as collateral, as it comprised 94 vehicles with a value in excess of $15m. QNI was advised by Mr MacGinley, the Director-Natural Resources of NAB, that the credit area of NAB would not favour providing overdraft facilities to fund losses at QNI until the nickel price recovered (exhibit FTI.002.013.8988). Mr MacGinley suggested that an option to get around the uncertainty of the nickel price would be for Mr Palmer to provide "some form of liquid collateral that can be used to clear the debt on the overdraft facility in the future if prices don't recover for any reason". From Ms Trenfield's familiarity with QNI's books and records, she conceded (at Transcript 7-24) (what otherwise reflects the documentary evidence) that the NAB would have been prepared to make a loan to QNI, if a Queensland Government guarantee were available.

"11. I have taken advice from QN executives in relation to the cash flow forecasts and based on those forecasts and the current position of QN, I have formed the view as a director of QN, that unless QN receives $28 million by 4th December 2015. I will terminate all employees of QN.

1. I have been fully apprised on the discussions between Daren Wolfe and the financiers and others referred to in his affidavit and have formed the view that all reasonable enquiries have been made and that no other funding options are available for QN at this time.
2. I have formed the opinion that if QN receives $28 million, it will be able to continue to trade profitability during the period of the cash shortfall which is forecast to occur and will be a sustainable business as it has been for the last 30 years based on the current outlook.
3. The figure of $28 million is comprised of $25 million being the cash shortfall observed in the Graph (at DBW-12 of the Wolfe Affidavit) and an allowance of $3million being the estimated cost of any potential production outage that may occurring during the relevant period where the shortfall is observed.
4. As a director of Mineralogy, if this honourable court orders Sino Iron Pty Ltd and Korean Steel Pty Ltd to pay to Mineralogy the sum of $28 million to be issued for QN, I will cause Mineralogy to apply the monies to advance a loan to QN of $28 million on an interest free basis and will not seek repayment of funds until QN is in a positon to make repayment without affecting ongoing operations."

[149] Mr Mensink affirmed a supplementary affidavit on 19 November 2015 that was filed in the Western Australian proceeding (exhibit QNK.013.048.2295) in which he stated that, in addition to what he had said in paragraph 11 of his affidavit affirmed on 17 November 2015, if QNI did not receive $28m by 4 December 2015, he would place QNI into administration. Even though Mr Mensink did not give evidence in this proceeding, the two affidavits he affirmed on 17 and 19 November 2015 for the purpose of the Western Australian proceeding were admitted into evidence for all purposes, including the truth of their contents.

[150] Aurizon sent a letter to QNI on 20 November 2015 setting out its position (exhibit QNK.013.055.5632). Despite the fact that Aurizon had been giving serious consideration to the request made of it at the meeting on 12 October 2015 at least for a payment plan, its response to that request was the letter of 20 November 2015. Aurizon was prepared to offer a degree of short term support by way of a more lenient payment plan than was currently agreed in the relevant agreements for the current overdue amounts of $12,575,948.74. The proposal was specified as being conditional upon the terms set out in section 3 of the letter being met by QNI in full, as well as a return to full payment compliance as per the agreements for all future invoices presented. The proposed payment plan was for six instalments each of approximately $2.6m payable in each month between November 2015 and April 2016. The letter required the first payment to be paid in full on or before 27 November 2015 and acceptance of the proposed plan was required by 5pm on 25 November 2015. The proposed payment plan was also conditional on QNI agreeing to additional conditions that were in the nature of extensions of existing agreements, a new 10 year rail haulage agreement for coal transport, and exclusive dealings and haulage of all domestic nickel ore from the QNI mines operated at or near the Brolga Mine for three years from 22 January 2016. The proposed payment plan was not accepted by QNI by the date specified by Aurizon.

[151] By letter dated 26 November 2015 (exhibit QNK.011.028.6067), Mr Wolfe responded to Aurizon's letter dated 20 November 2015, advising that Mr Mensink was travelling overseas and that the earliest at which the letter could be brought to his attention was 30 November 2015. Mr Wolfe noted that the time period specified in the letter of 20 November 2015 was unrealistic and the best that Mr Wolfe could do was to prepare a paper for the board to consider on 1 December 2015. On 27 November 2015 Aurizon issued default notices to QNI for non-payment of its invoices. The notice in respect of the Import TSA was for a total amount of $7,829,166.29 of which $5,919,586.14 was then overdue and $1,909,580.15 was due on 13 December 2015 (exhibit QNK.010.002.5230). The notice in respect of the Domestic TSA (exhibit QNK.010.002.5228) was for a total amount of $4,094,865.51 of which $3,825,938.77 was then overdue and $268,926.74 was due on 10 December 2015. The default notices required immediate payment of the amounts outstanding which totalled $9,745,524.91 (which does not include the respective amounts for the payments due on 10 and 13 December 2015). Aurizon reserved its rights under the relevant agreements and drew attention to its rights to suspend transfer of product by notice, where failure to meet payment obligations persisted for 28 days from the date of the default notices. The default notices made it clear that the amount then outstanding of $9,745,524.91 was overdue and the fact that QNI had 28 days from the date of the default notices before Aurizon might exercise its right to suspend operations did not change the characterisation of the amounts as overdue payments.

"Banks are not prepared to loan money to resources companies in Queensland or to consider significant asset base as security for short term overdraft facility

Without short term support, the refinery will be forced to close."

[160] Email exchanges between Mr Moutafis and Mr Wolfe on 15 December 2015 showed that Mr Moutafis was keen to evaluate potential security that QNI may have available. By letter dated 15 December 2015 (exhibit QNK.013.055.5618), Mr Mensink on behalf of QNI indicated to Mr Moutafis that QNI was prepared to offer security detailed in that letter in return for Aurizon agreeing to QNI deferring payments for current outstanding amounts and future amounts yet to be invoiced until 30 May 2016. The security that was offered was a charge over the mining tenements for the Galilee Coal Project as set out in the Galilee Coal Project Overview (exhibit QNK.011.027.6130) provided to Aurizon earlier on 15 December 2015. The letter set out QNI's proposal for what Aurizon would be entitled to do, if QNI did not make payment by 30 May 2016. An extension of 21 days was also sought to the date for complying with the default notices dated 27 November 2015.

[161] Mr Moutafis responded to QNI's offer set out in the letter dated 15 December 2015 by a letter dated 16 December 2015 that was not sent until 17 December 2015 (exhibit QNK.011.027.6514). The response sought clarification of the security that was proposed in respect of the Galilee Coal Project. It specified that Aurizon would not accept security which would only entitle it to an equity stake in the Galilee Coal Project without rights to liquidate the underlying coal tenement in the event of default. The letter repeated the requirements previously stipulated by Aurizon (including that in the event of default the underlying asset can be readily liquidated) in relation to the nature of the security and that Aurizon would not consider an extension to any right available under the transportation agreements and any further relief to QNI, until security satisfactory to Aurizon was provided in respect to QNI's payment obligations.

[162] Mr Wolfe had sent to Mr Mensink by email on 17 December 2015 (exhibit QNK.011.027.6619) a draft of a security agreement between QNI and Waratah Coal (exhibit QNK.011.027.6620) that referred to the request by Aurizon that QNI arrange for a security to secure future payments by QNI to Aurizon and Waratah Coal had agreed to provide the tenement as security for the consideration of US$100m payable on or before 31 December 2016 or such time as agreed in writing between the parties, provided that if a termination event occurred, the consideration would become immediately due and payable by QNI to Waratah Coal. The definition of termination event had been left blank in the document.

"When Clive P decided to keep the jv partners out of va to protect the gas contract and only put QN in, this added a large level of complexity to the project."

[192] That email was admitted into evidence as an original document and not for the truth of the assertions made by Mr McIntosh. Mr McIntosh was not called as a witness and the statement made by him in that email is not proof of the truth of its contents. There is no doubt there was an expectation on those who were at the meeting on 13 January 2016 that it was likely that QNI would enter administration, but the email chain of 15 January 2016 is not proof that the decision had been made by Mr Mensink as the sole director on 13 January 2016. Mr Wolfe recalled (at Transcript 21-13) that at the meeting on 13 January 2016 the discussion was that it was likely that QNI and Palmer Aviation Pty Ltd would enter voluntary administration and that Mr Palmer said words to the effect that QNI would go into voluntary administration. Mr Wolfe's comments (at Transcript 21-12) on the statement made by Mr McIntosh in the email of 15 January 2016 gives some context to his evidence about the meeting. Mr Wolfe said:

"My recollection of the meeting was that Mr Palmer, as he often does in conversations, tended to lead the conversation. ... But that doesn't suggest to me, necessarily, that Mr Palmer made the decision."

[193] On 14 January 2016, Mr Wolfe emailed the Waratah Coal and China First documents that were executed on 13 January 2016 to Mr Schweizer. The charges over the assets of QNI, Metals and Resources in favour of Waratah Coal and China First were recorded in the Personal Property and Securities Register on 14 January 2016. Mr Wolfe also sent an email on that date to Mr Moutafis (exhibit QNK.011.028.2685) in which he referred to the deadline of 18 January 2016 that Aurizon had imposed to reach resolution with QNI and inquired about the availability of Mr Moutafis and Mr Wright to meet on 18 January 2016.

[194] The GPLs required securities from Metals and Resources, if they were not to be put into administration, as they would not have otherwise have access to the assets of those companies for the purpose of the administration, and also for the additional reason that Waratah Coal and China First had obtained charges over the assets of QNI.

[195] On 15 January 2016, QNI made 217 employees redundant and, as a result, became liable for a payment to those employees of $16.9m. According to Mr Wolfe (at Transcript 21-16), QNI did not have the cash to meet that liability when it was due the following week.

[196] The consents of Mr Park, Mr Dopking, Ms Trenfield and Mr Olde to act as administrators of QNI were received by Mr Mensink and Mr Wolfe by email on 16 January 2016.

[197] Because Resources and Metals were not going to enter voluntary administration and Mr Park was aware of the documents that comprised the China First and Waratah Coal transactions, the GPLs considered it prudent to obtain security and execute a priority deed with Waratah Coal, China First, Metals, Resources and QNI (paragraph 10 of exhibit SUP.015.009.0001). Mr Park explained further (at Transcript 8-61) that this was done to ensure security for the expenses, liabilities and costs of administering QNI for which the GPLs would be personally liable, in circumstances where there was a charge over all the assets of QNI.

[198] On 18 January 2016 the GPLs obtained a general security agreement from Metals and Resources) supported by a deed of guarantee and indemnity from Metals and Resources and executed a priority deed with Waratah Coal, China First, Metals, Resources and QNI (exhibit QNK.013.056.1750) which gave priority to the securities of the GPLs over the charge in favour of Waratah Coal and the China First charge. At the same time, two deeds of power of attorney and undertaking in favour of the GPLs to give the GPLs access to the assets of Metals and Resources were executed by Metals and Resources respectively (exhibits QNK.013.056.1517 and QNK.013.056.1529). The GPLs had not at that stage investigated, and did not accept, the validity of the Waratah Coal and China First charges (paragraph 12 of exhibit SUP.015.009.0001).

Expert evidence on whether QNI was insolvent on 13 January 2016

[202] Expert evidence was given by the SPL and Mr Gothard on behalf of the plaintiffs and by Ms McCallum on behalf of the corporate defendants. They are all chartered accountants and registered liquidators. Mr Gothard was the managing partner of Ferrier Hodgson in Sydney when the SPL joined that firm from PPB Advisory in July 2018. As managing partner, Mr Gothard was closely involved in the discussions with the SPL that resulted in his joining Ferrier Hodgson. Mr Gothard benefited personally therefore from the fees the SPL generated as SPL, after he joined Ferrier Hodgson.

[203] The SPL explained (at Transcript 23-17) that in the normal course he would have prepared an insolvency report, but there was such a vast amount of information to deal with, that it was decided after obtaining legal advice to have another accountant prepare the expert report. The SPL acknowledged that neither he nor Mr Gothard were independent of each other.

[204] Mr Gothard's report on the solvency of QNI was dated 5 November 2018 (exhibit SUP.015.005.4756). Mr Gothard had also prepared a further report dated 29 March 2019 (exhibit SUP.015.034.4311) (the reply report). In view of the narrowing of the issue in the proceeding to whether or not QNI was insolvent from and including 13 January 2016, Mr Gothard confirmed (at Transcript 22-7) that he held the opinion that QNI was insolvent as at 13 January 2016. Ms McCallum's report dated 24 September 2019 (exhibit 42) did not dissuade him from his opinion that QNI was insolvent as at that date.

[205] At paragraph 2.2.1 of the report, Mr Gothard expressed the opinion that QNI was insolvent on 9 October 2015 and at all times thereafter. This report had been prepared, when the date from which the plaintiffs alleged insolvency in the statement of claim was 9 October 2015. During cross-examination (at Transcript 22-21), Mr Gothard denied receiving a letter of instructions and resisted accepting that he had been advised of that date and asserted he had arrived at the date independently. That resulted in a call by the corporate defendants for production of the earlier drafts of Mr Gothard's report. When earlier drafts were produced, it appeared from the first draft (exhibit 44) that the instruction given to Mr Gothard in a letter of instructions was to prepare an expert report setting out, amongst other matters, whether QNI was insolvent as at 9 October 2015 and at all times thereafter. As it turned out, the affidavits of Ms Tatasciore (exhibits 65 and 66) established that a first draft of an insolvency report for the SPL had, in fact, been prepared by another partner of PPB Advisory, Mr Pascoe, and that no letter of instructions had been sent by the SPL's solicitors to either Mr Pascoe or Mr Gothard. Mr Pascoe could not continue as an expert, because of potential conflict of interest issues, when PPB Advisory merged with PWC in July 2018 and Mr Pascoe became a partner of PWC.

"(a) QNI incurred EBITDA losses from FY12 onwards totalling $306.9m;

(b) Deteriorating nickel prices negatively impacted QNI's profitability;

(c) QNI's cost of production exceeded the realised nickel price from February 2015 onwards;

(d) In HY16, actual monthly trading results were consistently below forecast and $106.0m below budget; and

(e) As at 31 December 2015, QNI was forecasting total FY16 EBITDA losses to be $59.1m."

[212] To illustrate the significant impact of the price of nickel on QNI's profitability at paragraph 5.4 of the report, Mr Gothard included figure 2 that graphed the realised nickel price with the costs of production for QNI between July 2010 and January 2016. The information for the graph was based on QNI's monthly reports. Mr Gothard noted at paragraph 5.4.4 that from February 2015 QNI's unit cost of production exceeded the realised nickel price.

[213] Mr Gothard did a cash flow analysis in section 6 of the report. He set out in table 5 the statement of cash flows for FY11 to FY15 that was taken from the audited accounts for those periods. It showed a dramatic reduction in cash from the end of FY11 of $163,728m to $8,631m at the end of FY15. Mr Gothard noted at paragraph 6.3.3 that in the three years to 30 June 2015, QNI generated no net cumulative cash flow from operations, but during this period QNI also made payments for property, plant and equipment and loans to related parties. Mr Gothard did note at paragraph 6.3.5(c) of the report that there were several term deposits held by QNI amounting to $14.1m as at 30 September 2015, but as each term deposit was held as security or guarantee of the performance for a supplier, it was not considered as cash available to QNI to meet trading liabilities. In paragraph 6.4 of the report, Mr Gothard had regard to QNI's cash flow forecasts, including the daily cash flow projections (that were prepared weekly), to consider QNI's ability to continue to meet its debts as they fell due. At paragraph 6.4.8 of the report, Mr Gothard referred to the update of the cash flow forecast for the week ending 11 September 2015 that was prepared by QNI on 15 September 2015 that forecast negative cash balances of up to $19.9m. Mr Gothard set out in figure 5 of the report QNI's FY16 cash flow forecasts prepared at various dates between August 2015 and December 2015. Mr Gothard set out his conclusion on the cash flow analysis at paragraph 6.5 of the report which included at paragraph 6.5.4 that from at least 15 September 2015 it was known by QNI that there were forecast cash deficiencies from October 2015 to May 2016.

[214] The corporate defendants were critical of Mr Gothard for failing to see that he had made an error in adjusting QNI's 9 October 2015 forecast of monthly available cash balances set out in figure 3 of the reply report. Despite conceding in cross-examination (at Transcript 22-36) that QNI's records showed that, as at 9 October 2015, QNI had a cash balance of $3.943m, figure 3 in the reply report adjusts the 9 October 2015 forecast for the exclusion of the $25m facility proposed to be obtained by QNI, but was not obtained. It was simplistic on Mr Gothard's part to adjust QNI's 9 October 2015 forecast by a gross amount of $25m, without having regard to the actual cash balance as at 9 October 2015 and the adjustments that had to be made to the proposed payments, if the $25m facility were not obtained, that had also been included in the cash forecast. The corporate defendants therefore submit that not being prepared to make the appropriate concession reflected very poorly on Mr Gothard. Mr Gothard could have been more forthcoming in acknowledging this error, but it remains relevant that QNI was seeking a facility of $25m in October 2015 to address the anticipated cash deficiency (that was, in fact, realised) and that requirement was confirmed by the affidavits of Mr Mensink and Mr Wolfe affirmed on 17 November 2015 for the Western Australian proceeding. Mr Gothard's error in how he charted the 9 October 2015 forecast of available cash balances (excluding the facility of $25m) did not affect the opinions that he otherwise expressed in paragraph 3.3.10 of the reply report or undermine the cash flow analysis that he did in section 6 of the report.

(a) the costs of production of nickel exceeding the realised price of nickel;

(c) declining revenues (which correlated with the declining nickel prices during this time);

[223] Ms McCallum's report also assessed the solvency of QNI, Metals and Resources (to which she referred as the QN Group) as a whole, as that allowed her to assess the solvency of QNI, either as an agent for the joint venturers or on the basis that QNI had an effective right of indemnity from the joint venturers.

[224] Ms McCallum concluded that at all times to 13 January 2016 the QN Group had a surplus of net assets and was able to pay all creditors, given a reasonable time frame and, on the premise that QNI had a right of indemnity from Resources and Metals, there were sufficient assets owned by Resources and Metals at 13 January 2016 to enable payment of all debts that were due and payable on that date.

[225] Ms McCallum set out a table in paragraph 2.2.1 of her report to show that as at 13 January 2016 the QN Group has sufficient working capital to pay all creditors that were due and payable at that time. On the basis that cash only was taken into account, Ms McCallum showed that there was cash of $5,810,349 as at 13 January 2016, there were no payroll liabilities and the only creditors due were for the total amount of $1,536,831, leaving a surplus of cash of $4,273,518.

[226] At section 5.4 of her report, Ms McCallum set out her observations from the financial statements and other documents. She did a comparative analysis of trading figures from the management accounts for the period 1 July 2012 to 31 December 2015. Ms McCallum noted at paragraph 5.4.7 that the trading losses during the half year ended 31 December 2015 were mainly funded by decrease in stock and fixed assets. In table 26 of her report, Ms McCallum summarised her assessment of working capital as at 13 January 2016. She reviewed the sundry receivables list, as at 31 December 2015, and noted that most of them were received by 13 January 2016. She was therefore of the opinion that sundry receivables would be realisable in the short term. She also considered that finished goods were realisable in the short term, due to the contractual arrangements with Glencore for the purchase of stock.

[227] For the purpose of his seventh affidavit, the SPL had his staff review the monthly reports of QNI from July 2014 to December 2015 to calculate the quick asset ratio which is an indicative measure of a company's ability to meet its short term financial commitments from available assets. A quick asset ratio of less than one may indicate that a company cannot meet its short term financial commitments from its available assets. The graphical representation of the quick asset ratio at paragraph 51 of the affidavit shows that QNI's quick asset ratio was below 1 during the entire period between July 2014 and December 2015. That suggested to the SPL that QNI was experiencing financial difficulty for the whole of this period. The SPL used cash, trade debtors and sundry receivables as the quick assets of QNI for this calculation. He conceded (at Transcript 23-49) that it was worth taking into account the inventory of finished product that was the subject of immediate sale to Glencore in calculating the quick asset ratio. It should be noted that, even though Ms McCallum did include finished goods in her adjusted quick ratio for each of the months from July to December 2015, it still resulted in a quick ratio of less than 1 for each month.

"QN Group was not dependent on the financial support of external financiers at 13 January 2016, and the absence of any such support on 13 January 2016 does not affect my opinion on the solvency of QN Group at that date."

I infer that Ms McCallum expressed the conclusions that she did at paragraphs 5.14.35, 5.14.36 and 5.15.35 on the basis that there remained a possibility of assistance from either related parties or external financiers after 13 January 2016, but that possibility was exhausted by 18 January 2016.

[243] I deal with the opportunity for external financing given by the China First and Waratah Coal transactions in the section of this judgment that deals with part U of the statement of claim. I note that Ms McCallum's reference to those transactions and related party support was not relevant to her conclusion of solvency as at 13 January 2016.

[244] Even though the expert evidence dealt directly with the question of whether QNI was insolvent on 13 January 2016, it is an issue of fact for me to decide. I have been assisted by the expert evidence in considering the significance of the manner in which QNI was conducting the refinery business and undertaking transactions in the period from September 2015 leading up to the appointment of the GPLs as voluntary administrators on 18 January 2016. QNI made no secret of the fact from September 2015 that the forecast fall in the nickel price was going to have an adverse effect on its liquidity. It took a number of steps to seek financial assistance from government, creditors and financiers, but also took steps to reduce its expenditure by changing from active to reactive maintenance at the refinery, looking at redundancies of employees and providing information through Mr Mensink and Mr Wolfe to support Mineralogy's quest for payment of royalties in the Western Australian proceeding that would have enabled Mineralogy to provide funds by way of loan to QNI.

[245] QNI as the agent for the joint venturers was entitled to pay for the expenses of the joint venture out of the bank accounts operated by QNI for the purpose of the joint venture. QNI was entitled under clause 6.4(g) of the JVA to call for funds from Resources and Metals to meet the liabilities it incurred for the joint venture, if the funds available in QNI's bank accounts were not sufficient to meet the liabilities. Even if the third parties contracting with QNI were aware that QNI was conducting the operations of the refinery on behalf of Resources and Metals, those third parties were entitled to hold QNI liable under the contracts entered into by QNI with the third parties, if that was the effect of the contracts: Montgomerie v United Kingdom Mutual Steam Ship Association Limited [1891] 1 QB 370, 371. By way of example, the Aurizon agreements were with QNI and Aurizon was pursuing QNI, as the party liable to pay the debts that were overdue under those agreements that were the subject of the notices of default issued on 27 November 2015.

[246] The primary reason for Ms McCallum's conclusion as to QNI's solvency on 13 January 2016 was that the Aurizon debt was not due until 18 January 2016. The reality for QNI was that Aurizon had deferred taking action in relation to the debt until 18 January 2016, but most of the debt was overdue by 27 November 2015 and the debt of $15.8m was well overdue as at 13 January 2016. Applying the authority of at 112, the Aurizon debt was a debt the payment of which had to be considered by QNI in determining its solvency on that date. To the extent that Aurizon's letter of 18 December 2015 (exhibit QNK.013.055.5614) advised QNI of what would happen if the outstanding payments were not made by 18 January 2016, the letter did not change the fact that payments were overdue, but it merely gave QNI the benefit of time until 18 January 2016 before Aurizon would take action to exercise its rights under the relevant agreements. The same comment applies to Aurizon's letter dated 6 January 2016 (exhibit QNK.011.028.0371) in which Aurizon was giving QNI an opportunity to put forward a security proposal suitable to Aurizon that would allow Aurizon to consider further any deferral of payments under the agreements, but Aurizon confirmed in the same letter that the amounts due and owing under the default notices remained due and owing and that if they were not paid on or before 18 January 2016, Aurizon reserved all its rights under the agreements either to suspend rail haulage or to take further action available to it without reference to QNI. In any case, it was conceded appropriately in submissions on behalf of the corporate defendants (at Transcript 27-47) that debts due five days ahead could be taken into account as relevantly due in the immediate future, when determining solvency at a particular date.

[250] Waratah Coal is the holder of two exploration permits EPC 1040 and EPC 1079 within the Galilee Basin. All the shares in Waratah Coal were purchased on or about 26 May 2009 by Mineralogy. Waratah Coal entered into an agreement dated 8 July 2009 with China First entitled "Mining Right Agreement" (exhibit QNK.017.011.0353) that provided for Waratah Coal to sublease to China First the part of the mining leases it expected to obtain as a result of holding the two exploration permits. That was described in the agreement as the mine area designated in the plan marked "A" in annexure 1 to the agreement. The project to be developed under the sublease was called the China First Coal Project.

[251] The parties to the mining right agreement acknowledged in clause 2.1 that the China First Coal Project was dependent upon Waratah Coal applying for and obtaining mining leases within the mine area. Clause 3.2 provided for the sublease to confer on China First the right to establish a mine within the mine area for mining coal, to conduct the mining operations to take a quantity of coal up to the annual extraction limit in any operating year, and to provide processing facilities. Clause 3.4 provided that, subject to any earlier termination of China First's mining right under the agreement, China First's mining right would continue in force until such time as China First had taken its total extraction limit (as defined by the agreement) from the mine area. Clause 6.1 conferred the ownership of all coal taken by China First pursuant to the exercise of the mining right under the agreement on China First. Clause 7.1 then provided for the payment by China First to Waratah Coal of a royalty in respect of that coal at the rate specified in the schedule. Clause 8.1 provided for China First to pay on behalf of Waratah Coal and itself all State Government royalty in respect of coal allocated to and mined by China First from the mine area. Clause 27 provided for early termination of the mining right. Under clause 27.3 Waratah Coal had the right to give notice of intention to terminate the mining right, if within five years after the date of the agreement, China First had not prepared a development plan and submitted it to Waratah Coal and the relevant government authorities for approval (as required). Under clause 27.4, Waratah Coal had the right to give notice of its intention to terminate the mining right, if within seven years after the date of the agreement, China First had not commenced development operations within the mine area following its approval as a mine participant.

"The combined calculated indicative range of $51.6 million to $246.8 million for resources and indicative value of $198.2 million for reserves needs to be considered together, when calculating indicative China First values. So the total Value of the Tenements and/or reserves and resources using the minimum for the resource calculation and the indicative value for China First reserves calculation was $51.6 million plus $198.2 million totalling $ 249.8 million."

[256] The logic of this calculation done by Mr Harris was in question, when he acknowledged (at Transcript 17-38) that, according to the JORC Code, "an ore reserve is the economically mineable part of a measure and/or indicated mineral resource".

[257] Mr Harris endeavoured to explain in paragraph 30 of his affidavit the rationale for the Waratah Coal and China First transactions:

"In early January 2016 Waratah was considering providing the tenements as security for borrowing by QN. If Waratah provided security of its tenements Waratah risk $249.8 million dollars of its assets based on the conclusions reached by BDO. Waratah was considering doing this and that is why I sought the opinion of BDO. If Waratah provided the tenements for QN to use as security for borrowings, then QN would be obliged to pay $135 Million dollar as a fee to Waratah when QN could afford to do so. This matter did not proceed, however it was proposed instead of Waratah receiving the $135 million dollars, Waratah's then wholly owned subsidiary China First would issue shares to QN as a subscription and not the fee that was being considered as a payment to Waratah. In this way Waratah would make the tenements available to lenders as security and QN would be the owners of shares they could use as security as well for no additional payment than if they paid the fee to Waratah."

[258] The proposal that Waratah Coal may make the tenements available for security for QNI for a fee is confirmed by the draft security agreement between QNI and Waratah Coal (exhibit QNK.011.027.6620) pursuant to which it was proposed that QNI would pay a fee of US$100m for Waratah Coal to provide security for Aurizon to secure payments by QNI. When Mr Harris was cross-examined (at Transcript 17-42) on the arrangement that shares would be issued in China First to QNI for the sum of $135m and Waratah Coal would then make its tenements available as security for lenders to QNI, Mr Harris responded "Well, that's the agreement that Clive Palmer had made".

[259] Mr Harris also exhibited to his affidavit (exhibit QNK.025.001.1072) an agreement and various letters dated between 22 July 2009 and 29 October 2010 relating to Chinese State-owned enterprises' involvement in the China First Coal Project. He also exhibited letters dated 31 May 2011 and 21 October 2011 from the Export-Import Bank of China (exhibit QNM.002.017.0084). The first letter gave in principle approval to fund 85 per cent of the construction contract for the China First Coal Project. That letter of intent specified that it was valid until 21 October 2011. The second letter in the exhibit extended the expiry date of the letter of intent to 21 April 2012. Mr Harris did not suggest that anything had happened to further that funding approval after the expiry of the letter of intent on the extended date.

[260] Mr Harris had also been a director of China First from 9 December 2011 to 12 January 2016. He described it "effectively a dormant company" from post 2012 to the present time (at Transcript 17-27).

[261] On 12 January 2016 Mr Palmer and the other two then current directors (Mr Zou and Mr Harris) resigned as directors of China First and Mr Palmer's wife, Mrs Anna Palmer, was appointed sole director and held that position on 13 January 2016. Mrs Palmer was also the sole director of Waratah Coal as at 13 January 2016, as the other directors of Waratah Coal had resigned. They were Mr Mensink who resigned as a director on 8 January 2016, Ms Emily Palmer who is Mr Palmer's daughter and was appointed a director on 9 January 2016 and resigned on 10 January 2016, and Mr Michael Palmer who resigned as a director on 10 January 2016.

[262] Two sets of transactions were entered into on 13 January 2016. The China First transaction involves a share subscription agreement (exhibit QNK.006.004.9819) and the China First charge (exhibit QNK.006.004.9838). QNI, Metals and Resources entered into the share subscription agreement with China First whereby QNI "on its behalf as part of the Queensland Nickel Joint Venture" agreed to subscribe for two billion shares (mistakenly referred to in the agreement as two million shares) in China First for $135m and Metals and Resources were jointly and severally liable with QNI for the payment of the subscription share price. The subscription share price was payable in one instalment of $67.5m on or before 31 December 2017 and a second instalment of the same amount payable on or before 31 December 2018. QNI acknowledged in clause 4.4(c) of the share subscription agreement that an investment in China First "is speculative and involves risk" and that QNI has considered such risk in deciding to acquire the shares. Under the China First charge, each of QNI, Resources and Metals is a chargor and each chargor charges its interest in all its property with repayment of the secured money. Under clause 8.1 and the definitions of "Secured Money" and "Obligations" of the China First charge, the secured money of $135m would become immediately payable at China First's option if an "Insolvency Event", as defined, occurred. The appointment of a voluntary administrator was within the definition of "Insolvency Event".

Would a reasonable person in QNI's circumstances have entered into the China First and Waratah Coal transactions?

[271] The plaintiffs seek a declaration that the Waratah Coal and China First transactions are voidable under s 588FE of the Act. The plaintiffs rely on the transactions falling within s 588FE(2) and s 588FE(3) of the Act. The question to be determined is whether the transaction was uncommercial which is defined in s 588FB(1) of the Act:

"A transaction of a company is an uncommercial transaction of the company if, and only if, it may be expected that a reasonable person in the company's circumstances would not have entered into the transaction, having regard to:

(a) the benefits (if any) to the company of entering into the transaction; and

(b) the detriment to the company of entering into the transaction; and

(c) the respective benefits to other parties to the transaction of entering into it; and

[272] Giles JA (with whom the other members of the Court of Appeal agreed) in Lewis v Doran discussed the meaning of an uncommercial transaction at [136]:

"Transactions at an undervalue were no doubt the primary target of the provisions, but the description of an uncommercial transaction in s 588FB(1) was not limited to such transactions. The description directed primary attention to a balancing of benefit and detriment, only in the broadest sense involving undervalue. A transaction could conceivably be one a reasonable person in the company's circumstances would not have entered into although for full value; or it could be one a reasonable person in the company's circumstances would have entered into although at an undervalue, for example a forced sale to overcome temporary illiquidity. For s 588FB(1), in addition to regard to benefits and detriments to the company, regard was to be had to the benefits to the other parties to the transaction. It appears to have been contemplated that a transaction detrimental to the company but beneficial to other parties to the transaction might not unreasonably be entered into. If, for example, there were no creditors and no prospect of creditors, it may be that the controller of the company could reasonably sacrifice its interests to the interests of other parties to the transaction."

[273] The Full Court of the Federal Court observed in Tosich Construction Pty Ltd (in liq) v Tosich [1997] FCA 979; (1997) 78 FCR 363, 367:

"What the Court must do is consider each of the matters to which reference is made in s 588FB(1) and, having regard to them, reach a conclusion as to whether a reasonable person in the company's circumstances would not have entered into the transaction. The company's circumstances must include the state of its knowledge, that is, of the knowledge of those who were relevantly its directing mind. Only if the Court can conclude that a reasonable person in the company's circumstances would not have entered into the transaction does the section make that transaction uncommercial."

See also Featherstone v Ashala Model Agency Pty Ltd (in liq) [2017] QCA 260; [2018] 3 Qd R 147 at [118]- [122]. The question of whether a transaction is uncommercial is therefore largely an objective test, as it is considered from the perspective of a reasonable person in the company's circumstances and with the state of knowledge of the directing mind of the company at the time of the transaction.

[274] On the basis that most cases show that s 588FB of the Act is engaged when the relevant company enters a transaction at an undervalue, the corporate defendants endeavoured to show that the China First and Waratah Coal transactions were not at an undervalue. As Giles JA explained in Lewis v Doran at [136] the description of an uncommercial transaction in s 588FB(1) is not limited to transactions at an undervalue, even if such transactions were the primary target of the provision. It may be a relevant consideration in some instances that the companies involved in the impugned transactions are related companies. If the transaction is entered into by the company when its financial position has deteriorated so that it is on the verge of insolvency, if not insolvent, at the time of the transaction, the relevance of the companies being related companies may be diminished or eliminated, as the directors of the company must then be mindful of the interests of any unsecured creditors: Walker v Wimborne [1976] HCA 7; (1976) 137 CLR 1, 7.

[275] With a view to proving that no reasonable person in QNI's circumstances would have entered into the China First and Waratah Coal transactions, the plaintiffs relied on an independent expert analysis of the China First Coal Project (exhibit 6) prepared by professional mining engineer Mr Marston of Golder Associates Pty Ltd in conjunction with geologist Mr Radonich and mining engineer Mr Hamilton who are other employees of Golder and contractors Mr Mathewson (who is an engineer engaged in coal preparation and minerals processing) and Mr Barton (who is a consulting mining engineer) engaged by Golder. Mr Marston conceded (at Transcript 3-27) that the Golder report took approximately nine months to prepare, as it was a document review and then an opinion on the documents reviewed which involved technical work in reviewing the inputs to the James F King model.

[276] Mr Marston provided an opinion on the market value of EPC 1040 and EPC 1079 and on the market value of the China First Coal Project as at 13 January 2016, having regard to publicly available information and the documentation contained in a "data room" on a USB that was made available to Mr Marston by the GPLs to whom the USB had been provided by Mr Harris on 14 March 2016 (exhibit QNK.017.002.0003). The data room included the 2016 King report and the WP concept study. For the purpose of doing the report, the experts applied the principles of the 2015 edition of the (VALMIN Code) (exhibit 4). Mr Marston acknowledged (at Transcript 3-35) that the Golder report was not a VALMIN public report, but emphasised (at Transcript 4-32) that the Golder report was an independent expert report which reviewed the materials provided and applied VALMIN principles. Mr Marston also acknowledged (at Transcript 3-84) that the 2015 edition of the VALMIN Code did not become binding until 1 July 2016, but explained that it was known to the members of the Australasian Institute of Mining and Metallurgy before it was first published on 13 January 2016 and before it became binding and it was best practice to apply its standards for the valuation as at 13 January 2016. I accept Mr Marston's reasons for applying the 2015 edition of the VALMIN Code, as there was no evidence to contradict his evidence of the availability of its standards before 13 January 2016 and I otherwise found Mr Marston's expertise in the valuation of coal projects to be apparent from the detailed content of exhibit 6 and the professional and rational manner in which he defended his opinions during cross-examination. In any case, Mr Marston explained (at Transcript 4-39) that generally the basic principles for the approach to market value in the 2005 VALMIN Code were the same as for the 2015 VALMIN Code.

"Market Value is the estimated amount (or the cash equivalent of some other consideration) for which the Mineral Asset should exchange on the date of Valuation between a willing buyer and a willing seller in an arm's length transaction after appropriate marketing where the parties had each acted knowledgeably, prudently and without compulsion."

Mr Marston set out at paragraph 38 of the report the three acceptable valuation approaches to determine the basis of value under the VALMIN Code (market-based, income-based and cost-based) and at paragraph 39 of the report the table in the VALMIN Code that assists in selecting the appropriate valuation approach by the project development stage.

[278] Mr Marston explained in section 3.4 of exhibit 6 the methodology that was used to provide the opinions expressed in the report. Mr Marston relied on the subsidiary reports included in exhibit 6 prepared by his associates and incorporated their opinions in reaching his conclusions. Mr Marston has nearly 40 years of experience in the mining and energy industries and has worked for coal companies, investors and financial institutions on projects worldwide and his expertise includes coal mine planning, coal pricing, mining feasibility and reserve and valuation studies. He explained at paragraph 34 of the report that the model developed by Mr Barton used the coal price forecasts that were developed by Mr Marston based on export thermal coal market and price forecasts that he generated in 2015 as part of his advisory and consulting work.

[279] Mr Marston expressed the opinion the market value of the exploration permits as at 13 January 2016 was at most $1 based on an analysis of contemporaneous transactions for non-producing coal properties (section 3.5.2 of exhibit 6), as Mr Marston was unable to find information on contemporaneous sales of other exploration permits in the Galilee Basin. At paragraph 56 of the report, Mr Marston described the actual contemporaneous transactions of non-operating coal resources as at the valuation date to be "purely speculative". He noted that in December 2015 Anglo American sold its 83.33 per cent interest in the closed Dartbrook mine to Australian Pacific coal for $25m in cash plus a future royalty payment, but the sale was not completed with the price being paid until May 2017. Dartbrook had 2.5 billion tonnes of mineral resources. That resulted in a multiple of $0.012 per tonne, but as at the valuation date the price had not been paid, so Mr Marston considered that this multiple was not valid. It was indicative of what a seller would accept for a fully equipped export thermal coal mine with established infrastructure as at the valuation date. Another transaction relied on by Mr Marston at paragraph 57 of his report was the purchase in August 2015 by Stanmore Coal of the "mothballed" Isaac Plains Mine in the Bowen Basin for $1 from Sumitomo Corp and Vale. Mr Marston was cross-examined (at Transcript 4-18) on the fact that at paragraph 58 of the report, he used a sale that was announced on 4 July 2016 as one of the contemporaneous transactions. It was of a non-operating coal mine at Blair Athol for $1 with an undertaking by the vendor to pay $80m for the mine's rehabilitation liability (exhibit QNK.033.001.0437), with the purchaser's announced intention of continuing the rehabilitation of the mined areas, while trying to bring the mine back into operation. He explained that there was a "lead up" to such a transaction and it would have been known by the market at the valuation date of 13 January 2016, but conceded that he did not know the quantity of coal that was still there to mine. At paragraph 60 of the report, Mr Marston noted that buyers for the non-operating properties were "junior mining companies offering very little to no value and purchasing these properties on a purely speculative basis".

"A court is not to make under section 588F an order materially prejudicing a right or interest of a person if the transaction is not an unfair loan to the company, or an unreasonable director-related transaction of the company, and it is proved that:

(a) the person became a party to the transaction in good faith; and

(b) at the time when the person became such a party:

(i) the person had no reasonable grounds for suspecting that the company was insolvent at that time or would become insolvent as mentioned in paragraph 588FC(b); and

(ii) a reasonable person in the person's circumstances would have had no such grounds for so suspecting; and

(c) the person has provided valuable consideration under the transaction or has changed his, her or its position in reliance on the transaction."

[308] The defence under s 588FG(2) required China First and Waratah Coal respectively to prove that each became a party to the transactions to which each company were parties in good faith and, as at 13 January 2016, each of China First and Waratah Coal had no reasonable grounds for suspecting that QNI was insolvent at that time and a reasonable person in the circumstances of each of China First and Waratah Coal would have had no such grounds for so suspecting. These were not matters on which any person with relevant knowledge gave evidence that would assist China First and Waratah Coal in discharging the onus each bears respectively in relation to the defence. See Williams v Peters [2009] QCA 180; [2010] 1 Qd R 475 at [55]- [57].

[309] The corporate defendants did not make any written or oral closing submissions on the application of s 588FG(2). There was no formal abandonment of the defence, but the failure to make any submissions was implicit acknowledgement, and I find, that China First and Waratah Coal could not discharge the onus each bore in relation to the defence.

[310] In the statement of claim, the plaintiffs sought to have all agreements entered into by QNI as part of the China First transaction declared void ab initio. In the written closing submissions, however, the plaintiffs did not seek that relief in respect of the share subscription agreement on the basis that, as a consequence of the settlement with the SPL, China First had released the claims it had against QNI. The plaintiff submitted this extended to QNI's obligation to pay the subscription fee due under the share subscription agreement. The submissions on the effect of the settlement with the SPL on QNI's liability under the share subscription agreement are found at paragraphs 881 to 883 of the plaintiffs' written closing submissions. This was not a matter that was referred to in oral submissions by either the plaintiffs or the corporate defendants. In fact, all that was referred to by senior counsel for the plaintiffs in the oral closing submissions was that the plaintiffs set out the relief sought in respect of the uncommercial transactions in that section of their written submissions (at Transcript 27-22) and the fact that the plaintiffs were no longer seeking an order to set aside the share subscription agreement was not highlighted.

[316] The conclusion that the China First charge was voidable and should be declared void ab initio against the second plaintiff means, on any view, Mr Martino had no authority whatsoever to act in the manner in which he did, upon being appointed pursuant to the China First charge. It is therefore not strictly necessary to deal with the claims in part W of the statement of claim, but as Mr Martino participated in the trial as a party to the end of the trial, I will address the submissions made by the parties in respect of the issues that remained outstanding between the plaintiffs and Mr Martino during the trial of the proceeding.

[317] Apart from the proceeding to set aside the China First and Waratah Coal transactions, QNI had commenced another proceeding in this court against Mineralogy seeking to recover about $105m from Mineralogy (which is also now incorporated into this proceeding).

[318] The transactions involving Mr Martino took place in early May 2017. On 3 May 2017 Mr Palmer on behalf of China First signed a deed appointing Mr Martino as the agent of QNI pursuant to the China First charge. Mr Martino accepted the appointment on 3 May 2017. Then on the same day Mr Martino on behalf of QNI entered into a deed dated 3 May 2017 with China First whereby, in consideration of the releases provided for in clause 11 of the deed, China First agreed to reduce the debt owed by QNI from $135m to $125m. Clause 11 provided:

"Upon this deed being duly executed by each of the required signatories and upon receipt by CF of notice that the proceeding has been formally discontinued, withdrawn or dismissed, QN and CF mutually release and discharge each other from all claims, actions, suits, causes of action, demands, complaints, damages and costs which each may have had, have now or may have in the future, concerning the proceeding and the carriage of the proceedings, but for the execution of this deed. Furthermore, the consideration of the matters set out herein QN releases all directors and related parties as defined under the Corporation Act 2001 (of CF) from all claims, actions, suits, causes of action, demands, complaints, damages and costs that have accrued to the date hereof."

[319] Although recital A to the deed referred to QNI's proceeding against Mineralogy, Mineralogy was not a party to the deed.

[320] On 4 May 2017 a substitute deed was prepared for signature by Mr Martino where Mineralogy was now also a party to the settlement deed, and clause 9 of the deed referred specifically to the agreement by QNI to discontinue the proceeding against Mineralogy and not make future claims against Mineralogy which have been the subject of the proceeding. Clause 11 was also amended so that the mutual releases involved QNI, China First and Mineralogy and QNI specifically released all directors and related parties of Mineralogy and China First as defined under the Act (of China First) from all claims, actions, suits, causes of action, demands, complaints, damages and costs that had accrued to the date of the deed.

[321] Mr Martino signed a notice of party acting in person on behalf of QNI and a notice of discontinuance in respect of QNI's proceeding against Mineralogy on 8 May 2017. The notice of discontinuance was signed on behalf of Mineralogy on 9 May 2017. Both documents were filed in the court on 9 May 2017. The GPLs on behalf of QNI immediately applied for an interim injunction restraining Mr Martino and China First from taking any steps pursuant to his appointment on 3 May 2017 as the controller of QNI or the China First charge. The interim injunction was granted by Bond J and an interlocutory injunction was granted first until 25 May 2017 and then until the trial or earlier order: Queensland Nickel Pty Ltd (in liq) v Martino [2017] QSC 95.

[322] The claims against Mr Martino were incorporated into this proceeding.

[323] Mr Martino was an active defendant in the proceeding and represented throughout the trial. When Mr Robinson of counsel was invited to open the case for Mr Martino on 21 August 2019, he indicated that Mr Martino would abide the court's decision in respect of the validity of his appointment as the controller of QNI.

[324] On 27 August 2019, the corporate defendants abandoned the defence based on the Mineralogy settlement deed which Mr Martino had entered into on 4 May 2017 and no longer sought to rely on evidence from Mr Martino (at Transcript 18-40). Mr Martino remained a defendant in the proceeding and continued to appear by counsel and solicitors.

"Our client hereby permanently undertakes not to - whether by his servants, agents or otherwise - take any step pursuant to his appointment or purported appointment on or about 3 May 2017 as agent and controller to property of Queensland Nickel Pty Ltd (in liquidation) (QNI) including (without limitation):

1. Filing any documents in court proceedings on behalf of QNI;

1. Purporting to dispose of or otherwise deal with any property of, or held in the name of, QNI; and
2. Executing or entering into any deed, agreement or other instrument purporting to bind QNI."

[326] Mr Martino's position changed in respect of the validity of his appointment by the time his written closing submissions were provided to the other parties. In the written submissions on his behalf, the position was advanced that, as Mr Martino was not a registered liquidator and his appointment was effectively as a receiver, his appointment was invalid, as pursuant to s 418(1)(d) of the Act a person who is not a registered liquidator is not qualified to be appointed as receiver of property of a corporation. Although the plaintiffs did not accede to that submission and asserted other reasons for the invalidity of Mr Martino's appointment, the plaintiffs' position was that, as long as a declaration was made about the invalidity of Mr Martino's appointment, the basis on which it was made did not need to be determined.

[327] During closing submissions on 17 October 2019, Mr Martino gave an undertaking to the court in the terms which had been proposed in the letter dated 10 October 2019. The plaintiffs did not oppose that aspect of their relief being dealt with by Mr Martino's undertaking to the court. In addition, an order was made with the concurrence of the parties in another proceeding in this court involving the plaintiffs, Mr Martino and China First (BS4902 of 2017) that disposed of a notice that Mr Martino had purported to issue to the GPLs under s 430 of the Act on 3 May 2017. A declaration was also made in that proceeding in terms that the purported appointment of Mr Martino as controller of QNI was invalid and of no effect. Costs were reserved.

[328] The issue that remains in relation to Mr Martino is whether, in light of the declaration made by consent that his appointment as controller of QNI was invalid and of no effect and his undertaking given to the court on 17 October 2019, any further relief that was sought by the plaintiffs against Mr Martino in paragraphs 522(b) and (c) of the statement of claim should be ordered.

[329] The relief sought in paragraph 522(b) was a declaration that the Mineralogy settlement deed and the two notices signed and filed by Mr Martino in proceeding BS3202 of 2017 were not legally effective to bind QNI or to discontinue the proceeding. There is no utility in making the declaration that is sought in paragraph 522(b) of the statement of claim after the corporate defendants abandoned reliance on the Mineralogy settlement deed and the undertakings given by Mr Martino to the court. The determination of this proceeding will bring to an end the interlocutory injunction ordered by Bond J on 18 May 2017 which in the meantime had restrained any action on the settlement deed and notices signed by Mr Martino. The making of the declaration that those documents were ineffective has been overtaken by the making of the declaration that Mr Martino was invalidly appointed. The application for the declaration in paragraph 522(b) of the statement of claim is therefore refused.

"It was admitted by the Appellants that these persons, as de facto directors, would be liable for any act of commission or any omission on their part in the same manner and to the same extent as if they had been de jure as well as de facto directors. They were, so to say, directors de son tort, and liable in that character, but not otherwise, and you must shew something that they did which resulted in loss to the company, and for which, if they had been duly appointed directors of the company, the company would have been entitled to a remedy against them."

[336] The admission was consistent with the provision of the relevant legislation that "all appointments of directors shall be deemed to be valid, notwithstanding any defect that may afterwards be discovered in their appointments or qualifications" and one of the articles of association of the company to similar effect that all acts done by any person acting as a director shall be valid, as if every such person had been duly appointed and was qualified to be a director. It was not shown that the de facto directors had done anything wrong in the course of acting as directors that caused loss to the company.

[337] In Corporate Affairs Commission v Drysdale [1978] HCA 52; (1978) 141 CLR 236, Mr Drysdale was appointed to fill the casual vacancy on the board of a company. The company's articles of association provided that a director appointed to fill a casual vacancy should hold office only until the next following annual general meeting and should then be eligible for re-election. Mr Drysdale was not re-elected and therefore ceased to hold office, but he continued to attend meetings of the board, to vote on resolutions and to participate in the management of the company as a director. He was later charged with failing to act honestly in the discharge of the duties of his office as a director and failing to use reasonable diligence in the discharge of the duties of that office in the period that post-dated the annual general meeting at which he was not re-elected and ended with his resignation as a director. He was convicted of both charges, but on a case stated to the New South Wales Court of Criminal Appeal, it was determined that he was not a director within the meaning of s 124 of the Companies Act 1961 (NSW). The High Court reversed that decision.

[338] Even though Mr Drysdale's case was not one of invalid appointment (as he continued acting as a director after his valid appointment was terminated), the court relied on authorities including Gibson and Canadian Land Reclaiming to hold that s 124 of the NSW Act applied to a de facto director. Mason J (which whom Gibbs J agreed) held at 243 that a de facto who holds over after his appointment as a director has terminated accords with the assumptions that s 124(1) makes, as he continues to occupy the office of director (although without lawful authority) and discharges the duties attached to that office. Murphy J agreed at 245 that a director may occupy an office, although wrongfully. Aickin J (with whom Gibbs J also agreed) observed at 252 in relation to that:

"Although that case deals only with 'managers' which is not an office recognized by the Act as a necessary part of the internal government of a company, as the office of director, it is clear that the majority thought that the reasoning applied to de facto directors."

Aickin J then analysed the decision in Canadian Land Reclaiming and noted at 253:

"That case cannot be regarded as a direct decision concerning the liability under a misfeasance summons of a de facto director, although the members of the Court appeared to agree with the concession made by counsel for the appellants."

Aickin J concluded at 255-256 that these and like authorities meant that it was too late to say that the word "director" in the relevant statutory provisions was confined to directors properly so called and duly appointed to such office.

[339] In contrast to the authorities that treat a de facto director as a director, an invalidly appointed receiver was treated as a trespasser: In re Goldburg (No 2) [1912] 1 KB 606, 611. That distinction is reflected by the current definitions in the Act respectively for "director" and "controller". The definition of "director" in s 9 of the Act expressly extends to a person who is not validly appointed as a director who acts in the position of a director or the directors of the company are accustomed to act in accordance with that person's instructions or wishes. No such extended definition applies to "controller" which is consistent with express provision being made in s 419(3) of the Act for dealing with the liability of a controller who was not properly appointed. The scheme for regulation of the conduct of controllers under the Act is arguably different to the scheme for the regulation of the conduct of directors (or like officers) of corporations.

[340] Where there is no real utility between the parties in making the declaration that is sought in paragraph 522(c), because of the undertaking given by Mr Martino to the court on the last day of the trial and the order to which he consented about the invalidity of his appointment, it is not necessary, and I am therefore not inclined, to decide the substantive issue pursued by the plaintiffs of whether Mr Martino was subject to the obligations that would have applied, if he were validly appointed, to the acts he purported to perform as controller of QNI. This is particularly so, when the authorities relied on by the plaintiff for imposing the obligation are not necessarily definitive of the issue. The question of costs of the proceeding as between the plaintiffs and Mr Martino is not going to be determined by whether or not a declaration is made that has no utility, as a result of the late concessions made by Mr Martino in relation to the invalidity of his appointment and the undertakings given by him to the court. The application for the declaration in paragraph 522(c) of the statement of claim is therefore refused.

[341] There are some orders that can be made on the publication of these reasons, as a result of the conclusions that I have reached in the course of these reasons. The dealings that were the subject of these proceedings were complex and it may be that the parties consider that further orders ancillary to those made or to give effect to, or as a consequence of, these reasons should be made. No doubt the parties will wish to make written submissions on the question of the costs of the proceeding and other outstanding related questions of costs, such as the costs reserved in respect of proceeding BS4902 of 2017. I therefore propose to make an order adjourning those questions to a date to be fixed. That course will accommodate the parties agreeing on a timetable for further submissions on the terms of any additional orders and costs and any further hearing that may be necessary to dispose of those questions. The orders that I will make in the meantime are set out at the commencement of these reasons.