Parbery & Ors v QNI Metals Pty Ltd & Ors

GREENWOOD J: 1 These reasons are concerned with the basis upon which orders were made by the Court on 5 August 2019 on the application of Mr Stephen James Parbery in his capacity as the Special Purpose Liquidator ("SPL") of Queensland Nickel Pty Ltd (in liquidation) ("QNI"). Due to the relationship between a proceeding commenced by Mr Parbery in his capacity as SPL in the Supreme Court of Queensland and other proceedings in that Court commenced by the General Purpose Liquidators ("GPLs") of QNI (all of which were consolidated and to be heard together as Supreme Court proceeding 6593/2017), Mr Parbery sought orders in the present Federal Court proceeding that reasons explaining the basis for the making of the orders in this Court not be published until the proceedings in the Supreme Court (or those parts of the proceedings remaining to be heard) had been heard and determined. 2 That request was made because much of the information relied upon in this Court was commercially sensitive and its disclosure may have had an impact upon the conduct and determination of issues in the remaining consolidated Supreme Court proceedings. 3 Aspects of the circumstances leading to the making of orders for non-disclosure of affidavit material (and the submissions of counsel) filed in support of the orders sought in this Court are discussed in Parbery (Liquidator), in the matter of Queensland Nickel Pty Ltd (in liquidation) [2019] FCA 1219 published on 5 August 2019. 4 Judgment in the Supreme Court proceedings was published on 3 June 2020: Parbery & Ors v QNI Metals Pty Ltd & Ors [2020] QSC 143. 5 On 5 August 2019, this Court ordered that the Special Purpose Liquidator was justified in entering into and performing a Settlement Deed, Exhibit SJP-20 to the affidavit of Mr Parbery sworn 5 August 2019. That document is described as the "QNI Settlement Deed" (the "Deed"). The Court also ordered that the Special Purpose Liquidator was justified in procuring QNI to enter into the Deed. 6 On 5 August 2019, the Court also ordered, pursuant to s 477(2A) and s 477(2B) of the Corporations Act 2001 (Cth) (the "Act"), that the Special Purpose Liquidator had the approval of the Court to compromise the claims of QNI in accordance with the Deed and to enter into the Deed notwithstanding that obligations under it might fall to be discharged by performance more than three months after entering into the Deed (executed by Mr Parbery on 3 August 2019). 7 The Court also ordered, pursuant to s 477(2A) of the Act, that Mr Parbery was approved nunc pro tunc to compromise the claims of QNI in accordance with a document described as the Aurizon Settlement Deed (the "AS Deed") dated 31 July 2019, SJP-18 to Mr Parbery's affidavit. 8 As earlier mentioned, the Court also ordered on 5 August 2019 that Mr Parbery's affidavit of 5 August 2019 and the written outline of submissions of counsel not be made available for inspection and not be filed electronically. The Court also ordered that until the delivery of judgment or the filing of a notice of discontinuance in Supreme Court proceeding 6593/2017 or further order (whichever is the earlier), the Court's reasons for judgment in the present proceeding not be published. The orders and judgment of the Supreme Court in the proceeding described at [4] of these reasons was the subject of appeal to the Court of Appeal. Judgment on appeal was delivered on 25 June 2021: Queensland Nickel Pty Ltd (in liq) v QNI Metal Ltd & Ors [2021] QCA 138 ("Appeal Decision"). The appeal was allowed and judgment was entered for QNI and the General Purpose Liquidators against Mineralogy Pty Ltd in an amount of $102,884,346.26 concerning payments out of QNI's "bank account to or for the benefit of Mineralogy": Appeal Decision [5]. 9 An application by Mineralogy Pty Ltd for special leave to appeal from the orders of the Court of Appeal has been filed in the High Court of Australia (together with a related matter). Both applications have been referred for oral argument. A hearing date has not yet been allocated. 10 Because judgment on the trial of the action before the Supreme Court has now been delivered and published, publication of short reasons explanatory of the making of the orders on 5 August 2019 cannot affect the conduct and determination of any questions of fact or law in those proceedings. 11 Accordingly, it is appropriate to now give short reasons for the making of the orders in this Court on 5 August 2019 rather than defer doing so any further until any date after the hearing of the special leave application or, for that matter, the determination of the appeal should leave be granted. 12 The relevant matters are these. 13 On 22 April 2016, the General Purpose Liquidators (Mr Park, Ms Trenfield, Mr Olde and Mr Dopking) were appointed as liquidators pursuant to a resolution of the creditors of QNI. On 18 May 2016, Mr Parbery was appointed as one of the Special Purpose Liquidators, together with Mr Ayres and Mr Owen, by order of this Court pursuant to ss 472(1) and 511 of the Act. On 27 February 2017, the Supreme Court of Queensland ordered, pursuant to s 459A of the Act, that Queensland Nickel Pty Ltd be wound up in insolvency and further ordered, pursuant to s 472(1) of the Act, that the General Purpose Liquidators and the Special Purpose Liquidators appointed to QNI immediately prior to the orders of 27 February 2017 be appointed to act as official liquidators of QNI (in liq). 14 On 10 March 2017, Mr Ayres resigned as one of the SPLs of QNI: although Mr Parbery refers to the date of resignation of Mr Ayres as 13 March 2017, the instrument of resignation is dated 10 March 2017. Subsequently, Mr Owen resigned as an SPL on 23 July 2018 with the result that at the time of the application to this Court, Mr Parbery was the sole SPL appointed to QNI. Mr Parbery was appointed on the application of the Commonwealth of Australia in its capacity as a creditor of QNI through the Commonwealth's Fair Entitlements Guarantee Scheme (the "FEG Scheme"). In support of the application to appoint Mr Parbery as an SPL, the Commonwealth agreed to fund both the appointment and activities to be conducted by the Special Purpose Liquidators. 15 Following Mr Parbery's appointment, he conducted a range of investigations as described in his affidavit of 5 August 2019. QNI's commercial activity involved operating a refinery at Yalubu in Queensland on behalf of two joint venturers, QNI Resources Pty Ltd and QNI Metals Pty Ltd (the "QN joint venturers" as parties to the "QNJV"). QNI was the General Manager of the QNJV from 1 September 1992 to 7 March 2016. It is not necessary to set out the detail of the QNI group structure although that detail is set out at para 18 of Mr Parbery's affidavit. 16 On 30 June 2017, the Special Purpose Liquidators commenced proceeding BS6593/17 in the Supreme Court of Queensland against an extensive range of defendants (the "SPL proceeding"). The defendants included QNI Metals Pty Ltd, QNI Resources Pty Ltd, Queensland Nickel Sales Pty Ltd, Mr Palmer, Mr Mensink, a range of entities associated with Mr Palmer, and a number of individuals. Apart from that proceeding, the General Purpose Liquidators had commenced three proceedings in the Supreme Court of Queensland. The first, BS6847/16 was commenced on 11 July 2016 which is characterised as the "voidable transactions proceeding". The second, BS3202/17 was commenced on 23 March 2017 characterised as the "Mineralogy proceeding". The third, BS4720/17 was commenced on 11 May 2017 characterised as the "Martino proceeding". On 9 November 2017, the Supreme Court made orders consolidating those three proceedings with the SPL proceeding. 17 The Supreme Court consolidated proceeding was listed for hearing commencing on 15 July 2019 with an estimated sitting period of 45 days. The trial commenced on 16 July 2019. The plaintiffs in the consolidated proceeding were Mr Parbery as SPL and the GPLs. 18 The claims made in the consolidated proceeding fell into five broad categories. The first, described as the "Schedule E claims", concerned claims by employees and trade creditors of QNI. In respect of those claims, QNI sought indemnity from the QN joint venturers. The second concerned various loan claims made by QNI against a number of entities associated with Mr Palmer. The third (in the main as alternatives to the loan claims) concerned a variety of claims made arising from payments made to third parties. The fourth concerned claims against the directors for loss attributable to claims that the directors had failed to perform their duties owed to QNI. The fifth concerned a variety of liquidator claims for insolvent trading and contended uncommercial transactions. 19 The Schedule E claims by creditors comprise sums due by QNI to its employees when it went into liquidation, plus sums claimed to be owed by QNI to various trade and other unsecured creditors. The quantum of these employee and creditor claims was largely admitted in the proceeding. The principal issue was whether some of the various claims were owed by the joint venturers rather than QNI. Schedule E setting out the various claims was prepared by Mr Parbery together with his staff and advice from solicitors. The process of identifying relevant claims and the quantum of their claims is described in Mr Parbery's affidavit (paras 36 to 45). 20 Mr Parbery also describes the position in relation to some other significant creditors of QNI. One significant creditor is GE Capital Pty Ltd which had lodged a proof of debt in an amount of US$18.640m. That debt was assigned to Vannin Capital Operations Limited ("Vannin") on 16 October 2018 and proceedings had been commenced in the Supreme Court seeking a determination that the QN joint venturers were liable as guarantors of the primary debt. Two other significant claims were made. One by Australian Eastern Railroad of $4.694m and a claim by a related entity Aurizon Operations Limited in an amount of $88.237m. Mr Parbery had taken advice about the extent to which some or all of those claims would be likely to be successful. 21 Apart from the claims already described as forming part of the "Schedule E claims", Mr Parbery identifies what he describes as the "Remaining Schedule E claim" in an amount of $10.814m. It is not necessary to describe the detail of those claims. 22 As to the employee creditor claims, the amount paid by the Commonwealth under the FEG Scheme was $66,862,313.99. 23 Mr Parbery conducted discussions which resulted in a Deed of Settlement being entered into between Mr Parbery and the defendants to the Supreme Court consolidated proceeding concerning claims made by the SPL as against those defendants. The proposed settlement would bring about the following results. 24 First, the Commonwealth would be repaid in full for all amounts advanced by it under the FEG Scheme. 25 Second, a payment would be made of $7,465,896.84 to QNI's former employees in full payment in respect of all amounts not covered by the FEG Scheme. 26 Third, a further payment would be made of $614,314.27 in respect of superannuation entitlements payable to the former employees of QNI. 27 Fourth, the substantial body of unsecured creditors would be paid in full with the exception of three creditor claims described in para 40 of Mr Parbery's affidavit which were the subject of continuing examination. 28 Fifth, the settlement would not include any aspect of the matters relating to the claim of Vannin in relation to the claim originally made by GE Capital Pty Ltd. 29 Sixth, an order would be made that the QN joint venturers pay the three claimants described at para 40 of Mr Parbery's affidavit and the Vannin claim upon judgment or other adjudication, which would have the effect in substance of providing an indemnity to QNI from the QN joint venturers. 30 Seventh, an agreement on the part of all of the defendants to defer any claims they may have against the QN joint venturers until those payments (as described) are made. 31 Eighth, the Commonwealth would forego its claim to costs. 32 The factors which caused Mr Parbery to enter into the Settlement Deed were these. Mr Parbery was concerned that it may take many years to prosecute the proceeding to judgment, successful appeal and recovery of the quantum of any claim. He was concerned about the considerable legal costs associated with doing so. Mr Parbery was also concerned that the realisation of any judgment as against the QN joint venturers might eventually be limited to the money that could be recovered from a sale of the Yalubu refinery. Mr Parbery discusses the elements of that concern including the value of the refinery and related matters. Mr Parbery was also concerned that any property against which recovery might be sought might be the subject of prior charges giving rise to issues as between the SPL and the GPLs. Mr Parbery was also concerned about the risk of environmental liability claims. 33 Mr Parbery took advice from counsel in relation to the various issues associated with prosecuting the claims of the SPL in the Supreme Court proceeding. The advice concerns the reasonableness of the proposed settlement. The advice identifies the risks associated with not settling the proceeding. Mr Parbery expresses the view which I accept that the settlement is very much in the best interests of the unsecured creditors of QNI because it achieves speedy payment of substantially all of their claims with appropriate arrangements for payment of the claims of other creditors when the amounts are determined, whilst preserving the rights of the GPLs to pursue other claims with the enhanced advantage of the Commonwealth releasing what would otherwise be its substantial priority claims. 34 Mr Parbery also obtained advice from counsel in relation to the conduct of the SPL proceedings in relation to the Aurizon claims. By a proposed Aurizon Settlement Deed, the Aurizon parties have agreed to compromise the Aurizon debt in exchange for payment by Mineralogy of $23m and, by operation of the Deed, those parties release QNI from any further claims. Entry into the Deed has the support of the committee of QNI's creditors. Mr Parbery considers that entry into the QNI Settlement Deed will best serve the interests of QNI's creditors as a whole and will best promote the orderly winding up of the affairs of QNI. 35 The application for an order that the Special Purpose Liquidator is justified in entering into and performing the QNI Settlement Deed was said to be supported by s 479(3) of the Act and s 90-15(1) of Schedule 2 to the Act. Section 479 of the Act was repealed by the Insolvency Law Reform Act 2016 (No. 11, 2016), with the repeal taking effect on and from 1 September 2017. That Act also repealed s 511 of the Act. Section 479(3) prior to the repeal of the section provided that a liquidator may apply to the Court "for directions in relation to any particular matter arising under the winding up". Section 90-15(1) of the Insolvency Practice Schedule (Corporations), Schedule 2 to the Act, provides that the Court "may make such orders as it thinks fit" in relation to the external administration of the company. An application may be made by an officer of the company: s 90-20(1), Schedule 2. Without limiting s 90-15(1), the orders that may be made include "an order determining any question arising in the external administration of the company" [emphasis added]: s 90-15(3)(a), Schedule 2. 36 In Walley, in the matter of Poles & Underground Pty Ltd (Administrators Appointed) [2017] FCA 486, Gleeson J made observations about the scope of the power arising under s 90-15 of Schedule 2 to the Act observing at [41] that the question of whether to exercise the power so conferred, "was to be answered by reference to the principles that applied to the exercise of the discretions previously contained in s 479(3) and s 511 of the Act". Because s 90-15 of Schedule 2 did not commence until 1 September 2017, the orders made by her Honour were made under s 479(3): see Re Walley, Addendum at [1]-[3]. Nevertheless, as to the scope of the power, her Honour made the observations as mentioned at [41]. 37 In Re Octaviar Administration Pty Ltd (in liq) [2017] NSWSC 1556, Black J at [5] expressed the view that the directions sought under s 479(3) and s 511 "could in any event be given under s 90-15" of Schedule 2 to the Act. In Re Courtenay House Capital Trading Group Pty Ltd (in liq) [2019] NSWSC 495, Black J expressed the view at [2] that the power conferred by s 90-15 of Schedule 2 "is at least as wide as, and likely wider than, the Court's power to give directions which previously existed under former ss 479 and 511 of the [Act], and the Court has had regard to similar principles in exercising that power". 38 I agree that the statutory conception of a power to make such order as the Court "thinks fit" (s 90-15(1)) including an order (without limiting s 90-15(1)) determining "any question arising" is a broader statutory conception than the power in s 479(3) (or for that matter s 511) to give directions in any matter arising. In Re Branded Media Holdings Pty Limited (in liq) [2020] NSWSC 557, Black J at [3] reasserted his view that the power conferred by s 90-15 "is the same as, or is likely wider than", the power previously conferred by s 479(3). It seems to me that the power is properly described as wider in its scope. That being so, I can see no reason as a matter of principle in the construction of the text, to limit the circumstances in which the power might be called in aid, and thus the amplitude of the power, to the four categories described in Sanderson v Classic Car Insurances Pty Ltd (1985) 10 ACLR 115 (see also Re One.Tel Ltd (2014) 99 ACSR 247 at [34]), as framed having regard to the text of s 511 of the Act and s 479(3) as they were prior to repeal. 39 Every application will necessarily turn on its own circumstances within the broad facilitative boundary of an order the Court thinks fit as a means of determining any question arising in the external administration of the company. The scope of the power begins and ends with the text. If the question arising falls outside the boundary of what has been traditionally thought to be the limits of the statutory jurisdiction arising under s 479(3) or s 511 of the Act (as they were), a view would need to be formed about whether the "question arising" in the external administration of the company falls within the power conferred to "determine" the question for the purposes of s 90-15 of the Act. 40 In these proceedings, one question arising in the external administration of the company is whether the SPL "is justified in entering into and performing" the QNI Settlement Deed. That question ought to be properly understood as one of whether the SPL is acting reasonably in compromising the claims of the SPL on the terms of the Deed. No question arises as to the power to enter into the Deed or any other procedural aspect of the matter. As to the question arising, Mr Parbery has taken into account the factors described at [32] to [34] of these reasons against the background of the advantages obtained by entering into the Deed and taking into account the counterfactual position the SPL (and thus the creditors) would find himself in should the Deed not be entered into. I am satisfied that for all the reasons identified by Mr Parbery, he is acting reasonably in entering into the QNI Settlement Deed. I am also satisfied that he is acting reasonably in entering into the Aurizon Settlement Deed. I so determine the question arising for the purposes of s 90-15 of Schedule 2 to the Act. 41 Section 477(2A) provides that except with the approval of the Court (or the committee of inspection or a resolution of the creditors), a liquidator of a company must not compromise a debt to the company if the amount claimed by the company is more than the prescribed amount, that is, $100,000.00. 42 Section 477(2B) provides (subject to the same exception in s 477(2A)) that a liquidator of a company must not enter into an agreement on the company's behalf if, relevantly, obligations of a party to the agreement may, according to the terms of the agreement, be discharged by performance more than three months after the agreement is entered into (even if the term may end or the obligations may be discharged within those three months). 43 Thus, Mr Parbery seeks the Court's approval under each section to compromise the claims of QNI in accordance with the QNI Settlement Deed (which exceed the prescribed amount), and approval to enter into the Settlement Deed containing obligations that may fall to be performed more than three months after the date of entry into the Deed. 44 Sections 477(2A) and (2B) contain prohibitions upon a liquidator acting in the way contemplated by each subsection unless the exception is engaged. To the extent that the exception is sought to be engaged by Court approval of the relevant conduct, the Statute contemplates the Court exercising oversight or judicial supervision of entry into the compromise or entry into an agreement containing obligations that may extend beyond the three month horizon. The power conferred on the Court is a power to approve a compromise or to approve entry into the relevant agreement containing the particular obligations. The purpose of the power of approval so conferred is to enable the Court to be satisfied that the conduct of the liquidator (as framed by each subsection) serves the proper administration of the company in liquidation either by the proper (that is to say reasonable) realisation of assets or by taking the contemplated steps so as to serve the best interests of the creditors, or both. The statutory power, and thus the role of the Court in serving the exercise of the power, is to grant or withhold approval, not to deconstruct the compromise (s 477(2A)) or the agreement containing the obligations that may go beyond the three month horizon (s 477(2B)) for the purpose of framing a new or varied proposal that might appeal to the Court as one it would approve or prefer. I agree with the following observations of Brereton J in Re One.Tel Ltd at [26], [29] and [30]: 26 In reviewing the liquidator's proposal, the court pays due regard to his or her commercial judgment and knowledge of all the circumstances of the liquidation, but satisfies itself that there is no error of law or ground for suspecting bad faith or impropriety, and evaluates whether the proposal is consistent with the expeditious and beneficial administration of the winding up. Importantly, the court's approval is not an endorsement of the proposed agreement, but merely permission for the liquidator to exercise his or her own commercial judgment in the matter. Thus the approval confers, or contemplates, the liquidator's power to enter into the transaction, but does not amount to the court approving the transaction itself. The distinction is material, because it means that … an approval under s 477(2A) or (2B) alone does not exonerate the liquidator from personal liability. 29 Thus while the court does not exhaustively or closely consider the commercial merits or otherwise of the transaction, which it largely entrusts to the liquidator, some examination of the merits of the compromise cannot be avoided. However, if the liquidator expresses the opinion that it is an appropriate commercial compromise, and there does not appear to be any such lack of good faith, error in law or principle, or real or substantial ground for doubting the reasonableness of the liquidator's view, the court will generally give its approval. 30 Section 477(2B), on the other hand, is concerned with [the] long-term agreements which might protract the liquidation, and has the effect that the liquidator cannot enter such agreements without the approval of the committee of inspection, the creditors or of the court. Its rationale is that the interests and wishes of those affected, particularly creditors, should be highly influential in determining whether the liquidator should assume a contractual obligation that could interfere with the expeditious completion of the winding up. Thus in considering giving approval under s 477(2B), the main consideration is the impact of the agreement on the duration of the liquidation, and whether that is, in all the circumstances, reasonable in the interests of the administration. [emphasis added; citations omitted] 45 As to these principles, I am satisfied that entry into the QNI Settlement Deed will best serve the interests of QNI's creditors as a whole and will best promote the orderly winding up of QNI. I accept that entry into the QNI Settlement Deed is reasonable and proper in all the circumstances. Those circumstances engage these matters. 46 First, the matters referred to at [24] to [31] of these reasons. Second, the factors described at [32] to [34] of these reasons. Third, the circumstance that the compromise will result in the complete payment of the Schedule E creditors (subject to the particular arrangements concerning the Vannin debt and the proposed consent order binding the QNI joint venturers). Fourth, the Aurizon debt has been separately compromised. Fifth, the compromise achieves a better result for what is described as the known "residual creditors" of QNI in respect of which no indemnity is sought in the consolidated proceedings. A proportion of those debts ($1.946m) will be paid and the remaining debts will be paid in full by the QNI joint venturers in the event that the claimants establish the validity of the debt. Sixth, as to releases, the QNI Settlement Deed provides for, in effect, a complete indemnity in respect of the Schedule E debts (on which those claims are based) and thus a release of the claims is reasonable. Seventh, as to the remaining SPL claims released by the compromise (described as the "non-Mineralogy loan claims", the "tracing and restitutionary claims" and the "breach of duty" claims), these claims have a number of features. First, the non-Mineralogy loan claims and the tracing and restitutionary claims are made, in any event, in the alternative. Second, each claim is "attended by a greater degree of risk" than other claims (the assessment provided to the Court by counsel advising Mr Parbery). Counsel has advised Mr Parbery that each of these three claims as earlier described are "unlikely to succeed" due to offsetting obligations owed by QNI or because the claims were otherwise forgiven at the end of each financial year. Other factors identified by counsel suggest difficulty in recovering the claims. 47 The written advice of counsel is that the release of these claims will not materially prejudice any of QNI's remaining creditors. I accept the expression of opinion and the basis for it addressed by counsel as to these matters. Counsel also expresses this view: In reality, the QNI Settlement Deed improves the prospects of full recovery by unsecured creditors (including Vannin and the Excluded Creditors, if they so elect). Very substantial priority creditors - namely the Commonwealth's costs and the Employee entitlements - of over $94M have been paid or released. Further, the claims of the vast majority of QNI's remaining unsecured creditors - i.e. the Trade Debts, the Aurizon debt and the Additional Creditors - totalling $106,080, 129.71 have also been removed from competition in the winding up. 48 I am satisfied that the orders sought by Mr Parbery are to be made. I am satisfied that there is no prejudice to the administration of the winding up to approve entry into the QNI Settlement Deed even though obligations under it may fall to be discharged by performance more than three months after entry into the Deed. Having regard to the earlier observations made in relation to the Aurizon Settlement Deed, I am satisfied that an order ought to be made approving Mr Parbery's entry into that agreement in his capacity as Special Purpose Liquidator. To the extent that these reasons disclose aspects of Mr Parbery's affidavit and some elements of the QNI Settlement Deed, I vary Orders 2 and 3 of the confidentiality orders made on 5 August 2019. Otherwise, those confidentiality orders remain in place unless and until an application is made for variation to the orders. I certify that the preceding forty-eight (48) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Greenwood.