CORPORATIONS – WINDING UP – CONDUCT AND INCIDENTS OF WINDING UP
– PROCEEDINGS BY OR AGAINST THE COMPANY –
LEAVE TO PROCEED –
GENERALLY – where the applicants are two joint venturers and the
Source
Original judgment source is linked above.
Catchwords
CORPORATIONS – WINDING UP – CONDUCT AND INCIDENTS OF WINDING UP– PROCEEDINGS BY OR AGAINST THE COMPANY –LEAVE TO PROCEED –GENERALLY – where the applicants are two joint venturers and thecurrent manager of the joint venture– where the fifth respondent(“Queensland Nickel”) is the former manager of the joint venture anda company inliquidation – where the applicants advance contractual andequitable claims against Queensland Nickel which rely on an unconditionedobligation to return joint venture property – where an essentialaspect of the applicants’ pleaded case is the negationof QueenslandNickel’s entitlement to an indemnity that may confer proprietary orbeneficial rights in the joint venture property– whether theapplicants’ pleaded case establishes a serious question to be tried inrespect of the claims advancedEQUITY – TRUSTS AND TRUSTEES – POWERS, DUTIES, RIGHTS ANDLIABILITIES OF TRUSTEES – INDEMNITY, LIEN AND REIMBURSEMENT
–
RELEVANT PRINCIPLES – where the applicants assert that Queensland Nickel
held joint venture property as “bare
trustee” for the joint
venturers – nature of the trustee’s right to indemnity in respect of
liabilities incurred
in the execution of the trust
EQUITY – EQUITABLE REMEDIES – GENERALLY – whether an
equitable lien will arise, even where assets are not held on
trust, where the
equity of the case demands it
EQUITY – EQUITABLE REMEDIES – ACCOUNTS AND INQUIRIES –
GENERALLY – where the applicants assert a claim for
an account –
where the applicants must do more than demonstrate that they might be owed some
money – where taking of
account is not appropriate unless the applicants
establish that there is, or likely to be, a surplus after the satisfaction of
the
obligation – where relevant consideration is whether applicants have
entered into any agreement, or have disclosed any capacity
to repay any
deficiency which might arise on the taking of the account – whether the
applicants’ pleaded case makes out
a serious question to be tried as to
the entitlement of an order for an account
EQUITY – GENERAL PRINCIPLES – RULES AND MAXIMS OF EQUITY
– WHOEVER SEEKS EQUITY MUST DO EQUITY – where the
applicants seek
the aid of a court in equity to enforce a claim – where applicants must do
justice as to the matters in respect
of which the assistance is
asked
Corporations Act 2001 (Cth), s 500
Queensland Nickel
Agreement Act 1970 (Qld)
Trusts Act 1973 (Qld), s 65, s 72
Batrouney v Forster
[2015] VSC 230, cited
Batthyany v Walford (1887) 36 Ch D 269,
cited
Bertrand v Davies [1862] EngR 968
(1862) 31 Beav 429, referred to
C2C
Developments Pty Ltd v Commonwealth Bank of Australia [2012] NSWSC 1162,
cited
Chief Commissioner of Stamp Duties (NSW) v Buckle [1998] HCA 4
(1998) 192 CLR
226, considered
Commonwealth of Australia v Davis Samuel Pty Ltd (No
5) (2008) 164 ACTR 1, considered
Hewett v Court [1983] HCA 7
(1983) 149 CLR
639, considered
Hill v Venning (1979) 4 ACLR 555, cited
Huang v
Wang [2015] NSWSC 510, cited
International Art Holdings Pty Ltd (admin
apptd) v Adams [2011] NSWSC 164
(2011) 85 ACSR 1, cited
Langman v Handover [1929] HCA 42
(1929)
43 CLR 334, cited
Lavin v Toppi [2015] HCA 4
(2015) 254 CLR 459,
cited
Mulherin v Quinn Villages Pty Ltd [2007] QSC 231,
cited
Quince v Varga [2008] QCA 376
[2009] 1 Qd R 359, cited
Re Gordon Grant
and Grant Pty Ltd [1983] 2 Qd R 314, cited
Stephenson Nominees Pty Ltd
v Official Receiver (1987) 16 FCR 536, cited
Stewart v Atco Controls
Pty Ltd (In Liq) [2014] HCA 15
(2014) 252 CLR 307, cited
Tsatsoulis v Trigamist Holdings Pty Ltd [2000] NSWSC 900,
considered
J D Heydon, M J Leeming and P G Turner, Meagher Gummow &
CORPORATIONS - WINDING UP - CONDUCT AND INCIDENTS OF WINDING UP - PROCEEDINGS BY OR AGAINST THE COMPANY - LEAVE TO PROCEED - GENERALLY - where the applicants are two joint venturers and the current manager of the joint venture - where the fifth respondent ("Queensland Nickel") is the former manager of the joint venture and a company in liquidation - where the applicants advance contractual and equitable claims against Queensland Nickel which rely on an unconditioned obligation to return joint venture property - where an essential aspect of the applicants' pleaded case is the negation of Queensland Nickel's entitlement to an indemnity that may confer proprietary or beneficial rights in the joint venture property - whether the applicants' pleaded case establishes a serious question to be tried in respect of the claims advanced
[2]
EQUITY - TRUSTS AND TRUSTEES - POWERS, DUTIES, RIGHTS AND LIABILITIES OF TRUSTEES - INDEMNITY, LIEN AND REIMBURSEMENT - RELEVANT PRINCIPLES - where the applicants assert that Queensland Nickel held joint venture property as "bare trustee" for the joint venturers - nature of the trustee's right to indemnity in respect of liabilities incurred in the execution of the trust
[3]
EQUITY - EQUITABLE REMEDIES - GENERALLY - whether an equitable lien will arise, even where assets are not held on trust, where the equity of the case demands it
[4]
EQUITY - EQUITABLE REMEDIES - ACCOUNTS AND INQUIRIES - GENERALLY - where the applicants assert a claim for an account - where the applicants must do more than demonstrate that they might be owed some money - where taking of account is not appropriate unless the applicants establish that there is, or likely to be, a surplus after the satisfaction of the obligation - where relevant consideration is whether applicants have entered into any agreement, or have disclosed any capacity to repay any deficiency which might arise on the taking of the account - whether the applicants' pleaded case makes out a serious question to be tried as to the entitlement of an order for an account
[5]
EQUITY - GENERAL PRINCIPLES - RULES AND MAXIMS OF EQUITY - WHOEVER SEEKS EQUITY MUST DO EQUITY - where the applicants seek the aid of a court in equity to enforce a claim - where applicants must do justice as to the matters in respect of which the assistance is asked
(together, "the applicants") leave to proceed against Queensland Nickel Pty Ltd ("Queensland Nickel"), which is a company in liquidation.
[30]
[2] A critical issue is whether the applicants have persuaded me that there is a serious question to be tried as to their entitlement to the relief they have sought in a proposed statement of claim.
[3] As will appear, the first two applicants were joint venturers in a nickel mining and refinery project. Queensland Nickel was their General Manager. The third applicant was Queensland Nickel's replacement as General Manager. Amongst other things, the applicants claim the unconditional return of all of the joint venture property held by Queensland Nickel, despite the fact that Queensland Nickel had, apparently, and to the knowledge of the joint venturers, properly incurred very significant liabilities and no provision had been made for their discharge.
[4] An essential aspect of the applicants' claims is the negation of the propositions that Queensland Nickel has any beneficial interest in the joint venture property or a right of indemnity out of that property in respect of the liabilities incurred by it. Although the applicants' pleaded case does assert that negation, I have concluded that the applicants have not persuaded me that there is a solid foundation for the assertion.
[5] Having regard to that conclusion, and to other considerations which are relevant to the exercise of my discretion, I have determined that the proper exercise of my discretion is to refuse the applicants leave to proceed in relation to the claims that they presently assert against Queensland Nickel.
[6] In order to explain how I reach that conclusion it is necessary first to identify the relevant factual background.
[31]
[7] In about 1971 a nickel mining and refining project was established in North Queensland pursuant to the Queensland Nickel Agreement Act1970 (Qld) and an agreement executed by the State of Queensland and others.
[32]
[8] By 17 September 1992, the project had become owned and operated by two joint venturing companies (together, "the Joint Venturers"), whose relationship inter se was governed by the terms of a deed bearing that date ("the Joint Venture Agreement"). That agreement also recorded the appointment of Queensland Nickel as the "General Manager" of the Joint Venture and expressed the parties' agreement on a number of matters concerning the role of the General Manager and its relationship with the Joint Venturers. The role of General Manager was Queensland Nickel's sole concern because it was obliged not to carry on or be interested in any other business or activity or other operation, whether directly or indirectly: cl 5.5(b).
[9] There was also an Administration Agreement bearing the same date, the function of which was to govern the way in which Queensland Nickel as the General Manager provided Management Services to the Joint Venturers, including management of the debtors of the Joint Venturers deriving from the sale of nickel products and the preparation of annual consolidated profit and loss statements and budgets.
[10] Interests in the Joint Venture changed hands from time to time, but as from 31 January 1995 the interests in the project had become held in the manner they now are, namely by QNI Resources and QNI Metals as the Joint Venturers holding as to 80% and 20% respectively. The Joint Venture Agreement continued to govern the relationship inter se of QNI Resources and QNI Metals as the Joint Venturers and also the role of Queensland Nickel as General Manager and its relationship with the Joint Venturers. Each of the Joint Venturers and Queensland Nickel was a party to the Joint Venture Agreement.
[11] The salient features of the Joint Venture Agreement included those set out in the following paragraphs.
[12] The Joint Venturers agreed to continue the Joint Venture which had been formed for the purposes of mining, developing and exploiting the nickel mine and related mining, processing, research and marketing activities: cl 2.1.
[13] Queensland Nickel as General Manager was in charge of and responsible for (amongst other things, emphasis added):
(a) the overall management, operation and administration of the Joint Venture: cl 5.2(a)(i);
[33]
All the Joint Venture Property shall at all times be made available for the purpose and duration of the Joint Ventureand during such duration shall not be used for any other purpose. ...
[34]
(b) "Joint Venture Property" was a term widely defined to cover -
(i) relevant real property and mining titles;
(ii) relevant technology and know-how;
(iii) "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"; and
(iv) "all other property of whatsoever kind and wheresoever situate (including, without limitation, transportation, port and other service facilities, raw materials, work in process, stores, insurance proceeds, choses in action and rights and benefits conferred by or pursuant to any agreement hereafter entered into at any time for the purposes of the Joint Venture) from time to time hereafter held, constructed or acquired for the purposes of the Joint Venture".
(c) I interpolate that, amongst other things, the term Joint Venture Property would necessarily encompass:
(i) the products produced by the nickel refinery;
(ii) monies received or receivable from the sale or other exploitation of those products;
(iii) the benefit of the various contracts, leases and licences which a working nickel refinery would generate; and
(iv) real and personal property held or used for Joint Venture purposes.
(d) All the "Joint Venture Property" was beneficially owned by the two Joint Venturers as tenants in common in proportion to their participating interest in the joint venture and all liabilities of the Joint Venture were to be severally borne by the two Joint Venturers in that proportion: cl 3.1.
(e) Notwithstanding the statement concerning beneficial ownership of Joint Venture Property, the Joint Venture Agreement expressly contemplated that (with the exception of real property and mining titles) legal title to any Joint Venture Property could, for purposes of convenience and at the request of the Joint Venturers, be held solely in the name of Queensland Nickel: cl 3.2. If that occurred, the Joint Venture Property would be held "for the use and benefit of the Joint Venturers in proportion to their Participating Interests". Thus the possibility that Queensland Nickel might hold Joint Venture Property on trust was obviously contemplated.
(f) The Joint Venture Agreement imposed restrictions on the ability of the Joint Venturers and a Joint Venture Owners Committee ("the JVOC", as to which see below) to create "Encumbrances" over Joint Venture Property, but in terms which contemplated that "Permitted Encumbrances" might be created. Thus:
[35]
The relationship between the Joint Venturers and Queensland Nickel
[36]
[21] Queensland Nickel was the General Manager of the project from 1992 until March 2016.
[22] Since at least 2009, the relationship between the Joint Venturers inter se and between them and Queensland Nickel, has not been an arms length relationship.
[23] In about 2009 entities controlled by Mr Clive Palmer acquired a 100% interest in QNI Resources and QNI Metals. QNI Resources and QNI Metals in turn owned Queensland Nickel, holding the shares in Queensland Nickel in the same proportions as they owned their interests in the project.
[24] Mr Clive Palmer-
(a) had been a director of QNI Metals for periods in 2013, 2014, and 2015[1];
(b) had been a director of QNI Resources for periods in 2013, 2014, and 2015[2];
(c) had been a director of Queensland Nickel during the period 2009 to 2012 and for periods in 2013, 2014, and 2015[3];
[25] Mr Clive Mensink-
(a) had been a director of QNI Metals for periods in 2013 and 2015[4];
(b) had been a director of QNI Resources for periods in 2013 and 2015[5];
(c) had been a director of Queensland Nickel for periods in 2012, 2013, 2014 and 2015[6];
(d) was, by the beginning of 2016, the sole director of QNI Resources, QNI Metals and Queensland Nickel[7].
[26] Since 2009, Mr Clive Palmer had also been chair of the JVOC, which I have explained was the committee which, on behalf of the two Joint Venturers, had the oversight role over the activities of Queensland Nickel as General Manager of the Joint Venture.
[27] It is part of the applicants' case before me that, in performing its role as General Manager of the Joint Venture at all material times up to January 2016, Queensland Nickel in fact acted in accordance with the directions of the JVOC chaired by Mr Clive Palmer, and the instructions provided by Mr Palmer to Queensland Nickel should be regarded as instructions provided to Queensland Nickel by the Joint Venturers.
[37]
Queensland Nickel is placed into administration and then liquidation
[38]
[28] Queensland Nickel was placed into voluntary administration on 18 January 2016.
[29] At that time, Mr Mensink provided the administrators with a report as to the affairs of Queensland Nickel which recorded the following:
(a) Queensland Nickel had no assets.
(b) Queensland Nickel had liabilities of at least $226,390,547 comprising:
[39]
Amounts owing for employees entitlements ($14,123,276 for current employees and $16,167,492 for separated employees)
[40]
Preferential creditor (China First Pty Ltd for share subscription agreement)
[41]
Partly secured creditor (Vale New Caledonia for coal and ore inventory)
[42]
[30] It is doubtful whether that statement was a correct statement of the pre-administration asset position of Queensland Nickel, not least because one of the allegations advanced by the Joint Venturers is that in fact Queensland Nickel may have had legal title to a significant proportion of Joint Venture Property. However, there does not appear to be any reason to think that the statement overstated Queensland Nickel's liability position.
[31] The evidence cast some further light on at least some of the component parts of the pre-administration debts, the great bulk of which were not discharged in the period of the administration and before Queensland Nickel was placed into liquidation:
(a) The $16,167,492 for separated employees represented total redundancy entitlements for 237 employees who had been made redundant on 15 January 2016, prior to the appointment of administrators.
(b) The $53,920,066 owed to unsecured creditors was an admitted amount and there was a further amount claimed by unsecured creditors of $6,819,580 which was disputed.
(c) One major pre-administration debt was the amount owed by Queensland Nickel to Aurizon Operation Limited for rail freight services. In November 2015, after negotiations for a revised payment plan failed, that company issued a notice of default for non-payment under a service contract for the amount of $11.9 million. Presumably the amount owed to Aurizon formed a large part of what Mr Mensink had recorded as the amount admitted to be due to unsecured creditors. In testimony which Mr Mensink gave in an interlocutory application before Burns J on 20 April 2016, Mr Mensink conceded that as at November 2015, the amount of $7.8 million was owed.
[32] It also appeared from Mr Mensink's testimony that, for an unspecified period before 18 January 2016, Queensland Nickel had not followed the procedure which the Joint Venture Agreement had contemplated in terms of preparing draft financial plans and budgets which would in turn be presented to the JVOC for approval and which would lead to Queensland Nickel obtaining funds from the Joint Venturers with which to meet its liabilities. Rather, it seems that the Joint Venturers expected Queensland Nickel would meet its liabilities when necessary from funds which it obtained by operating the nickel refinery, in other words, necessarily from funds which it obtained by the use of the assets which formed part of Joint Venture Property.
[43]
The proper approach to an application for leave to proceed
After the passing of the resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes.
[46]
[45] This and other cognate sections have been construed as conferring on the Court a supervisory jurisdiction. In deciding such applications the Court is concerned to protect companies in liquidation from being harassed by unnecessary litigation. The Court is also concerned to assist in the orderly administration of companies in liquidation by requiring claimants to adopt the ordinary procedure of lodging a proof of debt for their claims unless the claimants can demonstrate that there is some good reason why a departure from that procedure is justified in the case of the particular claims concerned. (See the discussion by Refshauge J in Commonwealth of Australia v Davis Samuel Pty Ltd (No 5)(2008) 164 ACTR 1 at [5] to [18].)
[46] The Court has a discretion, which, whilst absolute, must nevertheless be exercised with judicial detachment and fairness: Davis Samuel at [19].
[47] For present purposes, it suffices to make four points.
[48] First, the applicants must show that the case they wish to progress has sufficient merit to warrant the grant of leave. What is required here was discussed by Refshauge J in Davis Samuel at [21] to [29]. The applicants do not have to demonstrate a prima facie case in the technical sense of the term. However they must demonstrate a serious question to be tried as to their entitlement to the relief they claim. They need not prove every element of the claim they wish to make out, but mere assertion, which is not supported by a solid foundation, will not be sufficient.
[49] Second, the applicants should lodge a proof of debt and pursue their rights in this way, unless they can show some good reason to the contrary. Implications of this proposition include:
(a) the Court will normally grant leave as of right where applicants seeks to recover their own property from the company because such claims cannot be accommodated within the proof of debt regime (Davis Samuel at [34] to [35]); and
(b) there are many claims which can only be resolved by court proceedings, e.g. rectification, specific performance, injunction and rescission of a contract ( at [36]).
[47]
[52] On 15 April 2016, the Joint Venturers and Queensland Nickel Sales filed an originating application which sought relief against the administrators personally and, relevantly for present purposes, sought leave to proceed against Queensland Nickel (then a company in administration) to advance claims against Queensland Nickel.
[53] Relevantly, the claims which the Joint Venturers and Queensland Nickel Sales sought to pursue were claims for:
(a) a declaration that the call notices purportedly issued by Queensland Nickel were not notices validly issued in accordance with the Joint Venture Agreement;
(b) a declaration that any property held in the name of Queensland Nickel was Joint Venture Property within the meaning of the Joint Venture Agreement;
(c) a declaration that Queensland Nickel did not have any beneficial rights to or in Joint Venture Property; and
(d) an order that, in accordance with cl 5.6(d) of the Joint Venture Agreement, Queensland Nickel transfer any such property to Queensland Nickel Sales.
[48]
The Court requires a proposed statement of claim to be delivered
[49]
[54] By the originating application, the two Joint Venturers and Queensland Nickel Sales also sought injunctive relief. An application for such relief was heard before Burns J, but ultimately dismissed when, after the hearing but before judgment, the applicants decided not to proceed. It was during the hearing of that application that Mr Mensink gave the evidence to which I have referred at [31](c) and [32] above. Burns J did, however, direct that the two Joint Venturers and Queensland Nickel Sales prepare a proposed statement of claim which pleaded the claims in respect of which leave would be sought. That document was filed on 13 June 2016. It is that document which pleads the case in respect of which the application for leave to proceed is advanced.
[55] It is important to examine carefully the case which is pleaded and to form a view whether there is a serious question to be tried about that case. However before embarking on that task, it is appropriate to set out some legal principles which will assist in its performance.
[50]
Legal principles relevant to the evaluation of the proposed statement of claim
[51]
A trustee has a beneficial interest in trust assets to the extent of its right to indemnity
[52]
[56] The High Court examined the nature of the right which a trustee has to indemnity in respect of liabilities incurred in the execution of the trust in Chief Commissioner of Stamp Duties (NSW) v Buckle[1998] HCA 4; (1998) 192 CLR 226 per Brennan CJ, Toohey, Gaudron, McHugh and Gummow JJ at [47] to [51].
[57] Relevantly, the following propositions may be advanced:
(a) Where a trustee acting within its powers incurs a liability to a third person in the course of the administration of the trust, although the trustee is ordinarily personally liable to the third person, the trustee is entitled to indemnity out of the trust assets in respect of the liability: [47], [51].
(b) If the trustee has met the liability out of the trustee's own funds, the trustee is entitled to reimbursement. If the trustee has not met the liability, the trustee is entitled to exoneration, i.e. the trustee is entitled to apply the trust property in discharging the liability: [47].
(c) In aid of that right to reimbursement or exoneration, the trustee cannot be compelled to surrender the trust assets to the beneficiaries until the claim has been satisfied: [47], [49]. The trustee has an equitable charge or lien over the trust assets which may be enforced in the same way as any other equitable charge or lien: [50].
(d) The trustee's right to reimbursement or exoneration confers upon the trustee a proprietary or beneficial interest in the trust assets to the extent of its right to be indemnified out of those assets against personal liabilities incurred in the performance of the trust: [50], [51].
(e) Until the right to reimbursement or exoneration has been satisfied, it is impossible to say what the trust fund is: [48]. The entitlement of the beneficiaries is confined to so much of the trust assets as is available after the liabilities in question have been discharged or provision has been made for them: [48].
[58] A trustee's right of indemnity out of trust property for expenses reasonably incurred in or about the execution of the trusts or powers conferred under the trust is enshrined in statute in Queensland: see of the (Qld). Moreover, that express statement of the right to indemnity applies whether or not a contrary intention is expressed in the instrument (if any) creating the trust: see of the .
[53]
[59] A similar entitlement will arise in certain other circumstances, and even where assets are not held on trust, where the equity of the case demands it.
Equitable lien does not depend either upon contract or upon possession. It arises by operation of law, under a doctrine of equity "as part of a scheme of equitable adjustment of mutual rights and obligations"; those words of Isaacs J were used in Davies v Littlejohn, in relation to the doctrine of vendor's lien, but they have a general application. It would be difficult, if not impossible, to state a general principle which would cover the diversity of cases in which an equitable lien has been held to be created. ... At all events, the rule has been said to be founded on "solid and substantial justice" ... .
[55]
[61] Gibbs CJ referred (at 645 to 646) to the following exemplars of the diversity of cases in which an equitable lien had been held to be created:
(a) a vendor's lien for unpaid purchase money;
(b) a purchaser's lien for purchase money paid for a sale that has gone off;
(c) the lien which arises because of the relationship which exists between the parties, e.g. that of partnership, or trustee and beneficiary, or solicitor and client,
[56]
and then noted that the existence of such cases showed that the rules governing the circumstances in which equity had considered that justice required the recognition of the existence of a lien were not confined to one narrow category and that the list might not be a closed one.
[57]
[62] In the same case, Deane J also acknowledged that it was difficult to set down any definitive list of the circumstances in which an equitable lien would arise. His Honour did, however, essay an articulation of conditions which would be sufficient, albeit not necessarily essential in every case, in the following passage (at 668, citations omitted, emphasis and formatting added):
[58]
Apart from broad generalizations such as "the phrase equitable lien may not ... do much more than express the opinion of the court that the facts give a priority to the party said to have it" ... however, it is difficult, if not impossible, to formulate any satisfactory statement of the necessary or sufficient circumstances for the implication of an equitable lien which is applicable to any relationship at all (e.g. the trustee's lien over trust assets; the solicitor's lien over the proceeds of an action). I do not propose to essay that task here. It is adequate for present purposes that I identify what I consider to be the circumstances which are sufficient for the implication, independently of agreement, of an equitable lien between parties in a contractual relationship. Those circumstances have, to some extent, been indicated in what has been said above. They are:
[59]
(i) that there be an actual or potential indebtedness on the part of the party who is the owner of the property to the other party arising from a payment or promise of payment either of consideration in relation to the acquisition of the property or of an expense incurred in relation to it ...;
[60]
(ii) that that property (or arguably property including that property ...) be specifically identified and appropriated to the performance of the contract ...; and
[61]
(iii) that the relationship between the actual or potential indebtedness and the identified and appropriated property be such that the owner would be acting unconscientiously or unfairly if he were to dispose of the property (or, if it be appropriate, more than a particular portion thereof) to a stranger without the consent of the other party or without the actual or potential liability having been discharged.
[62]
It may be that the above circumstances or tests, particularly (i), would be unduly restrictive if propounded as a statement of exclusion. As has been said however, they are formulated as a statement of what is sufficient rather than of what is essential. Whether or not they exist or are satisfied in a particular case should, like most questions involved in the application of equitable doctrines, be determined by reference to the substance of the transaction rather than its form: "the general principle of disregarding, the letter for the substance" ...
[63]
[63] These observations by Gibbs CJ and Deane J were recently referred to with approval by the High Court in Stewart v Atco Controls Pty Ltd (In Liq)[2014] HCA 15; (2014) 252 CLR 307 per Crennan, Kiefel, Bell, Gageler and Keane JJ at 318 and 322.
[64] Like the trustee's right of indemnity, there is no doubt that the security given by an equitable lien or charge affords a proprietary remedy to the person who has the benefit of it. Thus in Stephenson Nominees Pty Ltd v Official Receiver(1987) 16 FCR 536, Gummow J (in a passage referred to with approval by Douglas J, with whom Holmes JA, Mackenzie AJA, agreed in Quince v Varga[2008] QCA 376; [2009] 1 Qd R 359 at [65]) observed (at 554, citations omitted, emphasis added):
[64]
Further, as I have earlier indicated, it will be apparent that the security given by an equitable lien or charge affords a proprietary remedy; it would be wrong to treat the constructive trust as the only proprietary remedy in this field: .... The equitable lien is not confined in its operation to cases where the parties are in contractual relations (as with vendor and purchaser). It has been described as an equitable remedy, created by the court, regardless of the intent of the parties, as a remedial device to protect a party against some inequitable loss: ... . The lien may attach to incorporeal as well as corporeal property: ... .
[65]
[65] It remains to mention another example of the categories of cases in which equitable liens have been recognized, which has some analogy to the present circumstances.
[66] In Bertrand v Davies[1862] EngR 968; (1862) 31 Beav 429 Sir John Romilly MR considered a lien claimed by the manager of a West Indian plantation for the costs of management. The manager had been appointed by agreement to which a secured creditor was party. The manager managed and cultivated the West Indian estates for some 8 years. Those entitled to the estates sought to have the estates returned to them, but the manager refused to do so unless he was first paid the balance due to him for the management of the estates. Sir John Romilly MR advanced three propositions, the first two of which might be thought to be presently apposite:
(a) First, a lien on the estate exists for the costs of management, where the management has been conducted by a person authorized to do so by the owner of the property.
(b) Second, though there be no express appointment of the manager, yet, if the persons interested in the estate know that he is performing the duties and do not interfere, then they must be presumed to have acquiesced in his continuance in that office, and they cannot dispute his claim to a lien on the estate, for the expenditure, which, by their tacit acquiescence, they have encouraged him to make.
(c) Third, where a receiver or manager is appointed by the Court, in a suit properly constituted, such manager is to be considered as appointed on behalf of all persons interested in the property, and he is entitled to his ordinary commission and allowance, and also to a lien on the estate, as against all persons interested in it, for the balance, whatever it may be, that shall be found to be due to him on taking his accounts.
[67]Bertrand v Davies and the first two general propositions were referred to with approval by Connolly J in at 557. has been consistently referred to with approval in other cases, usually in the context of supporting the justification of the assertion of a lien by a court appointed received and manager, on the basis that those taking the benefit of an administration should not escape bearing the burden of the proper cost of it: see, for example, ; per Ward J at [73] to [82].
[66]
The remedy of an order for the taking of an account
[67]
[68] As Robson J recently observed (in Batrouney v Forster[2015] VSC 230 at [1401]), a useful starting point in relation to the discussion of this remedy is Meagher Gummow & Lehane's Equity: Doctrines & Remedies[9], where the authors comment:
[68]
Where a plaintiff seeks a remedy of an account, the plaintiff must generally prove, inter alia, that the defendant has undertaken to be an accounting party, and that in performance of the defendant's accounting obligations the plaintiff is entitled to some sum from the defendant, although the plaintiff is uncertain what is the quantum of that sum. The plaintiff must do more than demonstrate that the plaintiff might be owed some money, or that the plaintiff wants, as it were, to have a kind of general discovery.
[69]
[69] The passage just quoted was also referred to with approval by Muir J (as his Honour then was) in Mulherin v Quinn Villages Pty Ltd[2007] QSC 231 at [18].
[70] Thus, before a Court will make an order for the taking of an account it is necessary for the applicant for such an order to demonstrate -
(a) the existence of an accounting relationship between the applicant and the alleged accounting party; and
(b) the applicant is entitled to some sum from the accounting party, although the applicant is uncertain what is the quantum of that sum.
[71] As to the former requirement, the relationship of mortgagee and mortgagor; trustee and beneficiary; fiduciary and principal; agent and principal are all examples of relationships which can be regarded as accounting relationships.
[72] As to the latter:
(a) If the accounting relationship is that of mortgagee and mortgagor, it would not be appropriate to order the taking of an account unless it first be established that there is, or is likely to be, a surplus after the satisfaction of the mortgage debt: Batthyany v Walford(1887) 36 Ch D 269 at 276 per Cotton LJ, with whom Bowen and Fry LLJ agreed; Tsatsoulis v Trigamist Holdings Pty Ltd[2000] NSWSC 900 per Master McLaughlin (as his Honour then was) at [45] to [46]; C2C Developments Pty Ltd v Commonwealth Bank of Australia[2012] NSWSC 1162 per Macready AJ at [24].
(b) By parity of reasoning, the same principle must also apply to other accounting relationships where the applicant's entitlement is such as would depend upon first discharging some obligation to the accounting party e.g. that of beneficiary of trust assets which are subject to a trustee's lien, or legal owner of assets subject to an equitable lien. In those cases it would not be appropriate to order the taking of an account unless it be established that there is, or is likely to be, a surplus after the satisfaction of the obligation.
[70]
[75] In Langman v Handover[1929] HCA 42; (1929) 43 CLR 334, Rich and Dixon JJ observed[10] (at 351 to 352, citations omitted and emphasis added):
[71]
The maxim, he who seeks equity must do equity, is not, according to Knight Bruce LJ, always easy to understand or apply..., but it does not substitute moral for legal standards in the determination of the conditions of relief. The true meaning of the maxim is that one who seeks the aid of a Court of equity to enforce a claim, must be prepared to submit in that suit to any directions which the known principles of a Court of equity may make it proper to give... . "The rule, certainly, does not go so far as to entitle the Court arbitrarily to impose terms upon a plaintiff, who may be driven to ask for its assistance. It is restricted in its operation, and the true meaning of it, as I apprehend, is this, that those who ask for the assistance of the Court must do justice as to the matters in respect of which the assistance is asked" ... .
[72]
[76] Compliance with this maxim is central to equitable claims. Meagher Gummow & Lehane's Equity: Doctrines & Remedies, (5th ed, 2015) observe (at [3-060], recently applied in Huang v Wang[2015] NSWSC 510 at [51]), that:
[73]
Again, a beneficiary will get no assistance from equity against the trustee in seeking to recover trust property unless the beneficiary is prepared to defray the trustee's legitimate expenses. Those who claim the benefit of a constructive trust of some other sort must be willing to do equity...
[74]
The claims pleaded in the proposed statement of claim
[75]
[77] The proposed statement of claim pleads claims against Queensland Nickel and also against the four natural persons who were the administrators of Queensland Nickel and are now the General Purpose Liquidators. I will refer to them as either "the Administrators" or the "General Purpose Liquidators".
[78] The case advanced in the proposed statement of claim may best be examined under the headings which it uses. I do so below.
[76]
[79] The pleading identifies and defines the relevant parties and other actors: see at [1] - [8].
[77]
[80] The pleading asserts the enactment of the Queensland Nickel Agreement Act1970 (Qld) and various other historical events leading to the creation of the Joint Venture; how different corporations participated in it from time to time; and what interests they held in it: see at [9] - [29].
[81] The pleading asserts the fact of the Joint Venture Agreement and the Administration Agreement and the events thereafter which involved changes to the interests held by relevant corporations leading up to the position which obtained as from about 31 July 2009 when Mr Clive Palmer acquired a 100% interest in the two Joint Venturers: see at [30] - [40].
[78]
[82] The pleading identifies the persons who were Joint Venturers under the Joint Venture Agreement as QNI Resources and QNI Metals and the fact that Queensland Nickel was a party and bound by the Joint Venture Agreement: see at [41] - [42].
[79]
Material terms of the Joint Venture Agreement and Administration Agreement
[80]
[83] The pleading identifies the relevant terms of the Joint Venture Agreement and the Administration Agreement: see at [43] - [52].
[84] At [53] the pleading asserts (emphasis added):
[81]
At all material times since July 2009, in accordance with the terms of the Joint Venture Agreement:
[82]
(a) all the Joint Venture Property as defined in the Joint Venture Agreement has been owned QNI Resources and QNI Metals;
[83]
(b) in particular, all estate and interest in the Products (as defined in the Joint Venture Agreement) produced at the Treatment Facilities (as defined) was and is beneficially owned by each of the Joint Venturers as tenants in common;
[84]
(c) Queensland Nickel neither owned, nor obtained any beneficial interest in, any part of such Joint Venture Property, including Products.
[85]
[85] I interpolate that the proposition advanced at [53](c) of the proposed statement of claim is a critical proposition. It is a conclusion of law or of mixed law of fact, stated to apply at all times over the almost 7 years since entities controlled by Mr Palmer acquired the Joint Venturers (and through them, Queensland Nickel), but which is not supported by any pleading of the material facts which might justify it.
[86] The pleading then pleads some matters of evidence, namely -
(a) the fact and content of annual accounts which were procured by Queensland Nickel for itself, QNI Resources and QNI Metals and for the Queensland Nickel Group which incorporated all three of those companies: see at [54] - [59]; and
(b) that the three companies have in every tax year discharged their taxation obligations in accordance with the accounts pleaded earlier: see at [60].
[87] This section concluded with an important plea which bears quoting in full (emphasis added):
At all material times and in particular in the period from July 2009 in accordance with the terms of the Joint Venture Agreement[:]
[86]
(a) The only role performed by Queensland Nickel in relation to the Joint Venture was the role of Manager of the Joint Venture pursuant to the terms of the Joint Venture Agreement;
[87]
(b) In performing that role up to January 2016 Queensland Nickel acted in accordance with the directions of the JVOC;
[88]
(c) As from 3 August 2009, the Chairman of the JVOC was Mr Clive Palmer;
[89]
(d) All instructions provided to Queensland Nickel by Mr Palmer were provided as representative of the JVOC and accordingly, were instructions provided by QNI Resources and QNI Metals to Queensland Nickel;
[90]
(e) All instructions provided by the JVOC were consistent with and in accordance with the terms of the Joint Venture Agreement and, in particular, at no time did the JVOC instruct Queensland Nickel to obtain any beneficial interest in any part of the Joint Venture Property as defined in the Joint Venture Agreement;
[91]
(f) Queensland Nickel did not own the Joint Venture or obtain beneficial ownership of any part of the property of the Joint Venture;
[92]
(g) Queensland Nickel did not own the Joint Venture as trustee either for QNI Resources and or QNI Metals or otherwise;
[93]
(h) Queensland Nickel has and had no right of indemnity as a trustee of the Joint Venture out of any of the property or assets of the Joint Venture in respect of any liabilities incurred by it.
[94]
[88] I interpolate that the proposition advanced at [61](f) of the proposed statement of claim is a repetition of the proposition advanced at [53](c) and is still plainly a conclusion of law or of mixed law and fact, not supported by any pleading of the material facts which might justify it.[11] The same is true of the negation of the existence of a right of indemnity out of any of the property or assets of the Joint Venture which is pleaded at [61](h).
[95]
Claim for delivery and transfer of Joint Venture Property
[96]
[89] The pleading then asserts the appointment of administrators and that Queensland Nickel's position as manager under the Joint Venture Agreement was necessarily terminated forthwith upon such appointment: see at [62] - [63].
[90] The pleading then asserts the fact of the appointment of Queensland Nickel Sales as the new General Manager on 3 March, notified by the Joint Venturers to Queensland Nickel and the administrators on 7 March: see at [64] - [65]. Queensland Nickel and the administrators accepted the validity and effectiveness of Queensland Nickel being removed as manager: see at [66].
[91] Critically the pleading then asserts at [67]:
[97]
In the circumstances and by virtue of cl 5.6(d) of the Joint Venture Agreement, as from 7 March 2016, Queensland Nickel was obliged to deliver all Joint Venture Property and all documents, books, accounts and records related to the Joint Venture which it was the responsibility of the outgoing Manager to maintain and to transfer promptly title to any Joint Venture Property held in Queensland Nickel's name to Queensland Nickel Sales.
[98]
[92] I interpolate that the introductory phrase makes clear the reliance on the propositions earlier pleaded (necessarily including the propositions at [53](c), [61](f) and [61](h) of the proposed statement of claim) that Queensland Nickel had obtained no beneficial interest in any part of the Joint Venture Property and no right of indemnity out of any property or assets of the Joint Venture. If either proposition is flawed, if, for example, there was a right of indemnity secured by a lien, then that would interfere with the pleaded proposition that there was an unconditional obligation to transfer the property. In other words the negatives pleaded at [53](c), [61](f) and [61](h) are, on the face of the pleading, essential ingredients to the existence of the obligation pleaded at [67]. And, as I have already observed, the pleaded negatives are flawed because of the failure to plead material facts which might justify them.
[93] The pleading then asserts that Queensland Nickel held property legally owned by QNI Resources and QNI Metals: see at [68]. The property comprised:
(a) cash in a number of bank accounts with National Australia Bank in the name of Queensland Nickel;
(b) cash in the form of several term deposits with National Australia Bank and Bank of Queensland;
(c) amounts receivable from customers in respect of products sold;
(d) products located at the nickel refinery awaiting sale and product in transit to customers where title had not yet passed to the customer;
(e) real property in the name of Queensland Nickel;
(f) personal property in the custody of Queensland Nickel including more than 40 motor vehicles; and
(g) the benefit of various contracts, leases and licences to which Queensland Nickel was party,
[99]
but the pleading does state that further particulars of the Joint Venture Property owned by the two Joint Venturers but held by Queensland Nickel will be provided after disclosure in the proceedings.
[100]
[94] An alternative plea is advanced personally against the Administrators by virtue of their status as administrators of Queensland Nickel dealing with Joint Venture Property: see at [69]. The case against the Administrators personally then rests on -
(a) the plea at [70] that they held or controlled the Joint Venture Property identified in the knowledge that it was owned by the Joint Venturers and required to be transferred back to the Joint Venturers as from 7 March 2016; and
(b) the proposition at [71] that despite demand both Queensland Nickel and the Administrators have failed to transfer or deliver that property as required.
[95] The relevant claims for relief in relation to the case pleaded under this section of the proposed statement of claim are pleaded at [72] and [73] and also in the claims for relief at the end of the pleading. They include claims for:
(a) a declaration that any property held by or in the name of Queensland Nickel is Joint Venture Property within the meaning of cl 1 of the Joint Venture Agreement: see relief paragraph (4);
(b) a declaration that Queensland Nickel does not have any beneficial rights to or in Joint Venture Property: see relief paragraph (17);
(c) a declaration that Queensland Nickel has no right of indemnity as trustee of the Joint Venture in respect of any of the Joint Venture property or assets of the Joint Venture: see relief paragraph (19);
(d) orders compelling Queensland Nickel and/or the Administrators to deliver and transfer all the property held by Queensland Nickel to Queensland Nickel Sales: see at [72] and also relief paragraph (5); and
(e) orders that an account be taken from Queensland Nickel and/or the Administrators for all property belonging to QNI Resources and QNI Metals received and disbursed as from 18 January 2016: see at [73] and also relief paragraphs (6) and (7).
[96] For the reasons already articulated, all of these claims (including the personal claims against the Administrators) turn on the applicants establishing the negatives pleaded at [53](c), [61](f) and [61](h) of the proposed statement of claim.
[101]
Trust claims against [Queensland Nickel] in respect of specific property
[102]
[97] Having just completed the pleas which asserted the relief sought on the hypothesis that the property pleaded at [68] was all property which was owned by the Joint Venturers, under this heading the pleading deals with the hypothesis that the legal title to that property might be with Queensland Nickel, in which case the Joint Venturers would have to be asserting a trust claim.
[98] The pleaded contention is that if Queensland Nickel held at any time as from 17 January 2016 the legal title to any Joint Venture Property it did so as "bare trustee" for the Joint Venturers: see at [74] - [75]. The property the subject of the allegation is the same property as was the subject of the assertion at [68], presumably because the applicants are unsure which of the property is held as trustee and which is not. Again the pleading asserts that further particulars will be provided after disclosure.
[99] I interpolate that the reference to "bare trustee" in the pleading at [75] and [76] is plainly intended as a phrase which carries with it the same negation of -
(a) the existence in Queensland Nickel of any beneficial interest of its own in those assets; and
(b) any right of indemnity as a trustee of the Joint Venture out of any of the property or assets of the Joint Venture in respect of any liabilities incurred by it,
[103]
as had been earlier pleaded. That must be so because otherwise the obligations to which I next refer concerning obligation to account for all of the property and it being a breach of trust not to return all the property could not make sense.
[104]
[100] The applicants then plead that -
(a) Queensland Nickel was obliged to account to the Joint Venturers for each item of property held in that way by virtue of cl 5.6(d) of the Joint Venture Agreement or because of the demands made as at 7 March 2016: see at [76].
(b) The retention by Queensland Nickel was retention in breach of trust and therefore the Joint Venturers were entitled to an order that Queensland Nickel as trustee account for such property or alternatively providing equitable compensation and an order for compound interest: see at [77].
[101] An alternative case is pleaded (at [78] and [79]) that claims equitable compensation for the detriment caused to the Joint Venturers by Queensland Nickel retaining and refusing to account for the trust property the subject of the allegation. No material facts are pleaded which establish the causation hypothesis on which the allegation turns. However the particulars to [78] make clear that it was the unjustified failure to return the property essential to the continuation of the Joint Venture which caused the Joint Venture to cease to operate and lose essential leases and contracts. It is said that the refusal to return or account causes the loss of the value of the assets which are said to be valued at $1.95 billion.
[102] As with previous obligations under this heading, the equitable compensation case can only be advanced in the terms pleaded if the negation of beneficial interest and right of indemnity out of assets is established. Absent that negation, the failure to return the property could hardly have been a wrong capable of giving rise to the alleged obligation to make equitable compensation. That is because, as I have already explained, the existence of a lien securing an indemnity right would justify the lien holder in refusing to return the property the subject of the lien until the underlying liabilities had either been discharged or provision made for them.
[103] In summary, the relevant claims for relief in relation to the case pleaded under this section of the proposed statement of claim are pleaded at [76] to [79] of the proposed statement of claim and also in the claims for relief at the end of the pleading. They include claims for:
(a) a declaration that any property held by or in the name of Queensland Nickel is Joint Venture Property within the meaning of cl 1 of the Joint Venture Agreement: see relief paragraph (4);
[105]
Claims against [the Administrators] as constructive trustees
[106]
[105] This section of the pleading starts with the plea that the Administrators were aware of the matters pleaded at [62] to [67] and [71] to [75] of the proposed statement of claim: see at [80]. Accordingly, it too relies on the alleged knowledge by the Administrators of the negatives pleaded at [53](c), [61](f) and [61](h) of the proposed statement of claim. Logically this makes sense when one comes to understand the nature of the pleaded case.
[106] The Administrators were alleged to have known that insofar as Queensland Nickel held legal title to the Joint Venture Property it did so as "bare trustee": see at [81]. I interpolate that in my view the assertion of holding as "bare trustee" was intended to have the meaning I have earlier attributed to it.
[107] The Administrators are then said to have refused to transfer the Joint Venture Property, and to procure that refusal, having that knowledge (at [82]), with the consequence (at [83]) that the Administrators were liable as constructive trustees to account for the property and alternatively to provide equitable compensation and compound interest.
[108] An alternative plea is advanced against the Administrators in identical terms to that advanced against Queensland Nickel contending that the retention of the Joint Venture Property caused detriment to the Joint Venturers and entitles them to an order for equitable compensation against the Administrators, together with compound interest: see at [84] and [85].
[109] In summary, the relevant claims for relief in relation to the case pleaded under this section of the proposed statement of claim are pleaded at [83] to [85] of the proposed statement of claim and also in the claims for relief at the end of the pleading. They include claims for:
(a) a declaration that any property held by or in the name of Queensland Nickel is Joint Venture Property within the meaning of cl 1 of the Joint Venture Agreement: see relief paragraph (4);
(b) a declaration that Queensland Nickel does not have any beneficial rights to or in Joint Venture Property: see relief paragraph (17);
(c) a declaration that Queensland Nickel has no right of indemnity as trustee of the Joint Venture in respect of any of the Joint Venture property or assets of the Joint Venture: see relief paragraph (19);
[107]
[111] This section of the pleading starts with a pleaded reliance on the matters pleaded at [62] to [68] of the statement of claim: see at [86]. Accordingly, it too relies on the negatives pleaded at [53](c), [61](f) and [61](h) of the proposed statement of claim. Logically this too makes sense when one comes to understand the nature of the pleaded case.
[112] The pleading then asserts breach by Queensland Nickel of its contractual obligation under the Joint Venture Agreement in failing to deliver all Joint Venture Property and all documents books accounts and records relating to the Joint Venture once demand had been made of it consequent upon its termination as General Manager and the appointment of Queensland Nickel Sales: see at [87].
[113] This breach is then said to give rise to an entitlement to what is effectively an order of specific performance of that contractual obligation (see at [88]) and to liability for damages for breach of contract to the Joint Venturers for the loss which they suffered in consequence of the breach: see at [89] and [90]. The damages plea is of the same detriment claimed in the earlier equitable compensation claims.
[114] In summary, the relevant claims for relief in relation to the case pleaded under this section of the proposed statement of claim are pleaded at [88] and [90] of the proposed statement of claim and also in the claims for relief at the end of the pleading. They include claims for:
(a) a declaration that Queensland Nickel does not have any beneficial rights to or in Joint Venture Property: see relief paragraph (17);
(b) a declaration that Queensland Nickel has no right of indemnity as trustee of the Joint Venture in respect of any of the Joint Venture property or assets of the Joint Venture: see relief paragraph (19);
(c) a declaration that any property held by or in the name of Queensland Nickel is Joint Venture Property within the meaning of cl 1 of the Joint Venture Agreement: see relief paragraph (4);
(d) orders compelling Queensland Nickel to deliver and transfer all the property held by Queensland Nickel to Queensland Nickel Sales or alternatively to the Joint Venturers: see at [88] and also relief paragraph (5); and
(e) damages for breach of contract as against Queensland Nickel: see at [90] and also relief paragraph (13).
[108]
[116] In this section of the proposed statement of claim, the applicants plead the fact of the events which happened in relation to the giving of the 3 call notices to which I have earlier referred and the steps which were taken by the Joint Venturers and the new General Manager in response: see at [91] to [96]. The pleading contends that each of the notices could not be regarded as a call notice in accordance with the Joint Venture Agreement or one which was payable under the provisions of the Agreement: see at [93], [94], [96] and [98].
[117] The relief claimed at paragraph (1) is a declaration that the notices purportedly issued were not call notices validly issued in accordance with the Joint Venture Agreement.
[109]
[118] At about the time that the administrators were appointed, the Joint Venturers executed certain Security Instruments: see at [99]. The pleading then asserts that steps were taken by the Administrators which relied on the proposition that monies which had been the subject of the calls fell within the definition of "Secured Moneys" under one of the Security Instruments; that various defaults must be taken to have occurred under the Security Instruments; and that those contentions were wrong and the Administrators had no entitlement to exercise any powers under the Security Instruments. The consequence is then said to be that the Administrators had no entitlement to enter into possession of or otherwise to deal with any part of the property of either or both of the Joint Venturers: see at [100] to [106]. The applicants claim declarations to that effect: see relief paragraphs (2) and (3).
[110]
[119] The issue before me is whether the Joint Venturers and Queensland Nickel Sales should be granted leave to proceed against Queensland Nickel pursuant to s 500(2) of the Corporations Act in respect of the claims which have been pleaded in the proposed statement of claim. The Special Purpose Liquidators had the conduct of the case on behalf of Queensland Nickel, although they relied on certain parts of submissions which had been prepared by the General Purpose Liquidators.
[111]
[120] The applicants' case was said by them to be straightforward. The requirement for leave is not directed to cases in which the claimant is seeking to recover its own property from the company in liquidation. The applicants submitted that was what they were seeking to do. Either Queensland Nickel held the Joint Venture Property which the Joint Venturers owned or Queensland Nickel held the Joint Venture Property as bare trustee for the Joint Venturers. Either way Queensland Nickel should return the Joint Venture Property. Claims of that type could not be dealt with by means of a proof of debt in the liquidation of Queensland Nickel. The applicants' case against the General Purpose Liquidators personally would proceed anyway and the nature of that case was such as would provide another reason for leave to be granted.
[121] Amongst other things, Queensland Nickel advanced these proposition in its written submissions:
(a) Queensland Nickel would have a lien for its reasonable costs and expenses incurred for the purposes of any trust and there was no serious question to be tried so far as the applicants alleged that Queensland Nickel held assets as a bare trustee without any indemnity right;
(b) the granting of leave without condition, in circumstances where Queensland Nickel is without funds to defend the current proceeding, would lead to the applicants obtaining an advantage over unsecured creditors;
(c) the Court should impose a condition on the grant of any leave to proceed, the effect of which was to allow Queensland Nickel to be funded for its costs of the litigation, either by -
(i) a form of order which allowed the applicants to put into Court a monetary fund which Queensland Nickel would be authorised to use to fund the defence of the proceeding in which leave is given; or
(ii) a form of order which authorised Queensland Nickel to use any of the assets the recovery of which is sought by the applicants to fund the defence of the litigation for which leave is provided.
(d) in respect of any non-proprietary claims for which leave to proceed was sought, it would be appropriate to impose the usual condition that the applicants would not, without leave of the Court, seek to enforce any judgment obtained against Queensland Nickel.
[112]
[124] At a directions hearing which took place on 4 August 2016, I advised the parties that I required further submissions on the question whether I should determine that the applicants had a serious question to be tried as to the relief they sought.
[125] Later that day I caused my associate to email the parties in these terms:
At the hearing this morning, his Honour indicated that he sought further submissions on the general topic of whether he should conclude that the [applicants] have a serious question to be tried as to the relief they seek (in the sense explained by Refshauge J in [Davis Samuel at [27] to [29]]).
His Honour would like to receive submissions on that topic in relation to the several causes of action and related relief as pleaded in the proposed statement of claim, including:
[t]he claims advanced by the 2 joint venturers qua beneficiaries as against Queensland Nickel qua trustee and the related claims for relief;
[t]he claim advanced by the 2 joint venturers qua legal owner or person entitled to possession and the related claims for relief;
[t]he claim founded on alleged breach of contract and the related claim for relief that property be delivered up.
His Honour would like to have the following matters addressed in that context.
Bearing in mind the evidence of Mr Mensink and the other evidence addressing the fact and nature of the liabilities which Queensland Nickel incurred qua General Manager (not the least in relation to the employees) why should his Honour form the view that there is a serious question to be tried as to the claimed entitlement to relief which is not conditioned in any way with reference to those liabilities, or any part of them?
Bearing in mind -
the matters referred to in the previous question;
the evidence which suggests that Queensland Nickel and the Joint Venturers were not at arms length (namely the evidence as to the ownership of Queensland Nickel by the Joint Venturers; the ownership of the Joint Venturers; the common directors, including Mr Mensink and Mr Palmer);
[113]
why wouldn't His Honour assume that the way in which the business was being conducted by Queensland Nickel, including with reference to the absence of budget and financial plan must have been satisfactory to the JVOC and, therefore, to the joint Venturers? And if that were so, how is it arguable that the 2 joint Venturers wouldn't be contractually liable for their respective proportions of the liabilities incurred by Queensland Nickel (or at least a significant part of them, eg, in relation to employees at least)? If that were so, how is there a serious question to be tried as to the claimed entitlement to relief not conditioned in any way with reference to those liabilities, or any part of them?
[114]
What, if any, role do the equitable doctrines of the need to have clean hands, and he who wants equity must do equity, have to play in relation to the questions of whether there [is] a serious question to be tried as to the claimed entitlements to unconditioned relief?
What, if any, significance to the question of whether there [is] a serious question to be tried as to the claimed entitlements to unconditioned relief is the view which his Honour might take as to the adequacy of the foundation for such relief pleaded in the proposed statement of claim?
[115]
[126] On that day I made directions for the delivery of written submissions in response to those questions and set down 24 August 2016 as the date on which I would hear further oral submissions in relation to the application for leave to proceed.
[116]
[127] Thereafter Queensland Nickel withdrew its concession made orally on the occasion of the first hearing concerning the existence of a serious question to be tried. In particular it rejected the applicants' contention that the applicants did not have to anticipate any potential defence concerning Queensland Nickel's entitlement to an indemnity right and submitted that that contention misunderstood the centrality to equitable claims of the requirement that he who seeks equity must do equity. It submitted that the applicants had not met the requisite test in respect of the unconditional relief which they sought, with the consequence that leave should be refused. Queensland Nickel maintained the submission that if leave was to be granted, then it should be on the conditions previously sought.
[128] On the morning of the second hearing, the applicants made an application for an adjournment to permit them to adduce further evidence. For reasons which I expressed in an ex tempore judgment on that day, I refused that application and required the argument to proceed. Amongst other things, I made these points:
(a) the discretion I had to exercise was a discretion that could not be bound by any concessions made by a respondent;
(b) the applicants had been on notice of the concerns I had in relation to the exercise of the discretion for of the order of 20 days;
(c) the application for adjournment to permit the identification of further evidence was not supported by any affidavit material indicating the nature of the further evidence; and
(d) I thought the applicants had had more than enough opportunity to develop any further evidentiary response to the issues, and to seek leave to rely on it or to reopen their case or take a like course.
[129] In their written and oral submissions, the applicants sought to persuade me that they had established a serious question to be tried. They repeated points made in the first hearing and, as to the matters on which I had caused enquiry to be made, the essence of the applicants' position was set out in the synopsis to their further written submissions:
[117]
In essence, the matters raised by the Court relate to the question whether there is a serious question to be tried in connection with a claim for relief by QNI Resources and QNI Metals unconditioned in relation to liabilities incurred by Queensland Nickel.
[118]
The Applicants submit that the claims for relief are appropriately framed and that there is, at the very least, a serious question to be tried in relation to such claims. The primary claims are claims by QNI Resources and QNI Metals seeking their own property from the person who had been the Manager of their Joint Venture. The owner of property is entitled to claim that property. The matters raised in the Court's questions are not matters which have been asserted by Queensland Nickel and may never be asserted. It is for Queensland Nickel to identify their case and the matters on which it relies to resist the Applicants' claims. Absent any pleaded defence, it is neither possible nor appropriate to anticipate those matters or their possible effect on the Applicants' claims to relief.
[119]
Reference has been made to liabilities incurred by Queensland Nickel. However, no proceedings in relation to such liabilities have been commenced by Queensland Nickel over the five month period since Queensland Nickel was replaced as Manager. If a demand were made, it would be assessed and either accepted or resisted depending upon the basis for the claim. The Applicants are entitled to proceed with their claims, absent any such proceedings by Queensland Nickel. Even if Queensland Nickel were to commence and establish a claim in relation to liabilities, the Applicants would still be entitled to the relief they claim, albeit subject to deduction to the extent of any claims established by Queensland Nickel in relation to liabilities.
[120]
The applicants have not shown a case of sufficient merit to warrant the grant of leave
[121]
[130] On the material presently before me, the applicants' case seems to involve the Court accepting the following propositions:
(a) the Joint Venturers could place a General Manager in charge of the management, operation and administration of their Joint Venture and of the management and control of the Joint Venture Property, which they had agreed to make available to the General Manager for the purpose and duration of the Joint Venture (and solely for that purpose);
(b) the Joint Venturers could knowingly allow their General Manager to incur tens of millions of dollars of liability in relation to Joint Venture Expenses for matters as apparently proper and fundamental to the conduct of the Joint Venture business by the General Manager as its employees, its freight handler and its ore supplier;
(c) the Joint Venturers could knowingly allow their General Manager not to follow the formal mechanisms for financial reporting and budgeting set out in the Joint Venture Agreement as the means by which they could be required to provide funds to the General Manager, expecting that the General Manager would be able to generate sufficient funds to meet the Joint Venture Expenses by the use of Joint Venture Property to conduct the Joint Venture business; and
(d) by the simple expedient of terminating the relationship and appointing a new General Manager, the Joint Venturers could, without making any provision for the discharge of the former General Manager's liabilities for Joint Venture Expenses properly incurred, establish an entitlement to compel the former General Manager to transfer all the Joint Venture Property to the new General Manager, but to keep all of the liability.
[131] Acceptance of such a case would be a startling affront to justice.
[132] I have already mentioned there are a number of well-recognized legal principles, the application of which would enable the law to avoid such an affront. Thus it could be concluded that the General Manager had a right of indemnity which would be regarded as secured by a lien over the Joint Venture Property[12] because -
(a) (by application of the legal principles discussed at [56] to [58] above) to the extent that the Joint Venturers had permitted the General Manager to hold legal title to the Joint Venture Property such that the General Manager must be regarded as holding it as trustee for the Joint Venturers, the General Manager would have a trustee's right to indemnity in respect of such liabilities, which right would be regarded as secured by an equitable charge or lien over the Joint Venture Property; and
[122]
Bearing in mind the matters referred to, the evidence that they are not at arms' length, the provisions of the agreement, the pleaded case, why wouldn't I assume that the way in which the business was conducted must have been satisfactory to the JVOC and therefore to the joint venturers, and if that was so, how is it arguable that the joint venturers wouldn't be contractually liable for their respective proportions of the liabilities incurred by Queensland Nickel or at least a significant part of them, example, in relation to employees, at least?
[123]
[138] I received no answer, other than a change of subject to focus on a trustee's right of indemnity.
[139] And so far as a trustee's right of indemnity was concerned, the closest I got to an answer was the acknowledgment that if there was a specific item of Joint Venture Property of which Queensland Nickel held legal title (e.g. a truck or a garden fork), and specific expenses were incurred in respect of that truck or garden fork, then there would be a trustee's right of indemnity in respect of those expenses and in respect of that truck or garden fork. But, so the argument went, it would be wrong to regard there as being any more general right of indemnity over all the Joint Venture Property. I was left in the dark as to why that might be so, and why that proposition could be arguable in light of the evidence to which I have referred and the specific appropriation of all Joint Venture Property to the management and control by Queensland Nickel for the use by Queensland Nickel solely for "the purpose and duration of the Joint Venture".
[140] If there is some analysis of fact or law capable of persuading a Court that there is a serious question to be tried as to the non-existence of Queensland Nickel's entitlement to right of indemnity of such a nature as would also confer proprietary or beneficial rights in the Joint Venture Property, the applicants have not presented it.
[141] I reject the applicants' contention that taking this approach is to require the applicants to anticipate Queensland Nickel's defence. A proper analysis of their proposed statement of claim reveals that the applicants correctly recognized that to justify their claims for unconditioned relief they would have to negate any indemnity right which was of such a nature as would also confer proprietary or beneficial rights in the Joint Venture Property. Those propositions were essential to the claims for relief which they made, which were unconditioned in any way, let alone by reference to recognition to any right of indemnity which Queensland Nickel might have.
[142] Subject to one caveat, to which I will next return, the result is that the applicants have not persuaded me that there is a serious question to be tried as to their entitlement to the relief they seek against Queensland Nickel.
[124]
[143] The conclusion expressed under the previous heading justifies the rejection of the application. It would have been otherwise had I not reached that conclusion. Many of the claims the applicants plead would, if there had been a serious question to be tried, have been claims which could not be appropriately dealt with by the proof of debt procedure. Many of the considerations identified at [50] above, would have favoured the grant of leave. But in light of my conclusion, this concern falls away.
[144] The question which remains is whether the fact of the applicants' claims for -
(a) declaratory relief against Queensland Nickel in relation to the 3 call notices; and
(b) declaratory relief against the Administrators, concerning their entitlement of the Administrators to take steps under the Security Instruments,
[125]
is a sufficient basis to justify a decision in the exercise of my supervisory jurisdiction to permit the applicants to proceed with the edifice of the litigation which they have erected on a hypothesis which they have not demonstrated to have a solid foundation.
[126]
[145] I have not been persuaded that it is.
[146] Absent a properly founded case negating the indemnity right, I am not convinced that a Court should grant leave in relation to the declaratory proceedings concerning the 3 call notices.
[147] And, although the applicants did argue that the fact that claims were made against the Administrators personally which would continue was a discretionary factor in favour of the grant of leave, as I understood it, that argument was directed to claims which would inevitably mean that the question of the full extent of Queensland Nickel's indemnity right would be litigated. A consequence of my reasoning is that such claims against the Administrators personally will not be able to proceed as they are currently framed because they depend upon pleaded conclusions in respect of which no adequate foundation of pleaded material fact has been laid. The fact that a claim for declaratory relief might proceed concerning the alleged notices of default does not seem to me to have the same significance.
[148] I acknowledge that there is a real possibility that, if the Special Purpose Liquidators obtain sufficient funding so to do, proceedings may eventually be commenced against the Joint Venturers which might mean that they do end up advancing contentions in those proceedings which are related to the ones they presently advance. But the fact of that possibility is not sufficient to persuade me to permit the litigation as currently formulated to proceed. I observe, in any event, that the rules of pleading in such litigation, if it occurred, would not permit conclusions to be pleaded without a proper foundation of material fact being established.
[149] In light of the conclusions I have expressed, it is not necessary to consider Queensland Nickel's argument that leave to proceed could be given, but subject to the conditions which it identified.
[127]
[150] The application for leave to proceed should be dismissed. I will hear the parties on costs.
[128]
[1] Report by Administrators dated 11 April 2016, annexure 10 "Table 35: Directorships of Mr Palmer" (exhibit TLM-16 to the affidavit of T L Miley affirmed 15 April 2016).
[129]
[2] Report by Administrators dated 11 April, annexure 10 "Table 35: Directorships of Mr Palmer".
[130]
[3] Report by Administrators dated 11 April, section 5.3 "Table 10: Current and Former Directors and Officers".
[131]
[4] Report by Administrators dated 11 April, annexure 9 "Table 34: Directorships of Mr Mensink".
[132]
[5] Report by Administrators dated 11 April, annexure 9 "Table 34: Directorships of Mr Mensink".
[133]
[6] Report by Administrators dated 11 April, section 5.3 "Table 10: Current and Former Directors and Officers".
[134]
[7] Report by Administrators dated 11 April, section 4.2 "Table 4: Summary of Indemnities and Securities" and section 5.3 "Table 10: Current and Former Directors and Officers".
[135]
[8] There was no evidence before me as to whether that had in fact happened.
[136]
[9] J D Heydon, M J Leeming and P G Turner, Meagher Gummow & Lehane's Equity: Doctrines & Remedies (LexisNexis Butterworths, 5th ed, 2015) at 916 [26-085].
[137]
[10] The passage was recently cited with approval by the High Court: see Lavin v Toppi[2015] HCA 4; (2015) 254 CLR 459 per French CJ, Kiefel, Bell, Gageler and Keane JJ at [54].
[138]
[11] That the JVOC did not instruct Queensland Nickel to obtain a beneficial interest is of no moment. No such instruction would be necessary for indemnity rights of the nature of those previously discussed to arise.
[139]
[12] It is notable that the terms of the Joint Venture Agreement are not antithetical to liens which arise consequent upon steps taken in the ordinary course of business: see the terms referred to at [14](f) and [14](g) above.
Parties
Applicant/Plaintiff:
# QNI Resources Pty Ltd & Ors
Respondent/Defendant:
Park & Ors \[2016\] QSC 222
Legislation Cited (1)
Nickel Agreement Act 1970
Cases Cited (6)
(1998) 192 CLR 226
(1983) 149 CLR 639
(1929) 43 CLR 334
(2015) 254 CLR 459
(1987) 16 FCR 536
(2014) 252 CLR 307
(b) managing the funds of the Joint Venture: cl 5.2(a)(ii);
(c) maintaining the accounting records of the Joint Venture: cl 5.2(a)(iii);
(d) preparing and maintaining complete books and accounting records describing each Joint Venturer's financial involvement in the Joint Venture: cll 5.2(a)(iii) and 5.2(b)(xvii);
(e) the management and control of the Joint Venture Property (a term which was defined, to which I will shortly turn) and all operations under the Joint Venture Agreement as agent for and for the account of the Joint Venturers: cl 5.2(a)(vii); and
(f) the doing of all other acts and things as may be necessary or advisable for efficient and economic operation of the Joint Venture: cl 5.2(b)(xxiv).
[14] As to the Joint Venture Property (the management and control of which was the responsibility of Queensland Nickel as just recorded):
(a) Clause 3.1 of the Joint Venture Agreement recorded the agreement of the Joint Venturers (and Queensland Nickel) that (emphasis added)-
(i) "Encumbrance" was defined in cl 1.1 to mean mortgage, hypothecation, pledge lien or charge or anything analogous to any of those things;
(ii) "Permitted Encumbrance" was defined in cl 1.1 to include various liens arising in the ordinary course of business, including -
any mechanics' workmen's or other like lien arising in the ordinary course of business securing obligations which are not yet overdue or which are being contested or litigated in good faith; and
any Encumbrance in respect of deposits of money or property by way of security for the performance of any contractual or statutory obligations arising in the ordinary course of business other than obligations for borrowed moneys or the deferred purchase price of goods or services;
(iii) other than a Permitted Encumbrance, the creation of any Encumbrance over all or any part of the Joint Venture Property was regarded as a decision required to be made by the approval of each Joint Venturer: cl 4.10; and
(iv) without the prior consent of the other Joint Venturer, no Joint Venturer could create or suffer to subsist any Encumbrance of its interest except a Permitted Encumbrance.
(g) Queensland Nickel was constrained (except for liens arising in the normal and ordinary course of business) against creating any mortgage, pledge, charge, encumbrance, lien over, or trust in respect of Joint Venture Property or any of it: cl 5.5(i).
[15] In performing its role, Queensland Nickel was subject to the directions of the JVOC: cl 5.2(a) and (b). The JVOC was to be set up to consider and determine general policy and strategic matters for the Joint Venture so as to achieve the aims and objectives of the Joint Venture: cl 4.1. Amongst other things, the JVOC was to provide Queensland Nickel with directions in respect of its duties and responsibilities and to monitor the performance of those duties and responsibilities in accordance with directions given: cl 4.1(a).
[16] The Joint Venture Agreement contemplated that Queensland Nickel could incur personal liabilities to third parties consequent upon performing the various joint venture activities, which Queensland Nickel would pay by disbursing funds provided to it by the Joint Venturers to carry out the operation of the Joint Venture: cl 5.2(b). But it also contemplated that Queensland Nickel might itself pay joint venture liabilities which might be directly payable by the Joint Venturers: cl 5.2(b)(xiv) and (xvi).
[17] The Joint Venture Agreement contemplated that the Joint Venturers would share in the benefits and assume the obligations arising out of the actions taken by Queensland Nickel in the performance of its duties and responsibilities in the proportions in which they held their respective Participating Interests: cl 5.5(s).
[18] The Joint Venture Agreement contained provisions which set out mechanisms for Queensland Nickel to prepare budgets and financial plans in relation to the Joint Venture: cll 6.1 and 6.2. Related provisions enabled Queensland Nickel to make "calls" on the Joint Venturers to meet "Joint Venture Expenses", namely "all costs, liabilities and expenses of the Joint Venture properly incurred", and obliged the Joint Venturers to contribute its share of the required funds once the call was made: cl 6.4. Provision was also made for Queensland Nickel to make certain unbudgeted operating expenditures not exceeding 5% of the total amount of such expenditures provided for in the annual financial plan: cl 6.5. Queensland Nickel was authorized to make unbudgeted operating expenses not subject to that constraint for rail freight charges, purchase of ore for processing, and purchase of fuel oil: cl 6.5.
[19] Queensland Nickel's appointment as General Manager would continue until terminated: cl 5.6(a). Appointment was terminable in a number of specified ways including forthwith upon notice being given by each of the Joint Venturers (cl 5.6(a)(ii)) and forthwith upon an order being made for Queensland Nickel's winding up (cl. 5.6(a)(iii)). Provision was made for the appointment of a successor in the event of termination: cl 5.6(b) and (c). In the event that Queensland Nickel's appointment as General Manager ceased, it would become obliged to deliver all Joint Venture Property to the successor and, if any Joint Venture Property was held in its name, it was obliged transfer the title to the successor: cl 5.6(d).
[20] The Joint Venture Agreement was governed by the law of Queensland: cl 20.
[33] I interpolate two observations.
(a) First, bearing in mind the relationship between the Joint Venturers inter se and between them and their General Manager, Queensland Nickel, since at least 2009, the obvious inference is that the circumstances described in the previous paragraph must have been known to and accepted by the Joint Venturers. That conclusion is confirmed by the fact referred to at [27] above, which bears repeating, namely that it is part of the applicants' case before me that at all material times up to January 2016, Queensland Nickel in fact acted in accordance with instructions provided to Queensland Nickel by the Joint Venturers.
(b) Second, to put it another way - and in terms which, it will appear, are material to the resolution of this application - on the case as presently framed and given the evidence presently before me, there does not appear to be a serious question to be tried that the manner of Queensland Nickel's relevant performance of its role under the Joint Venture Agreement (including its failure to obtain approved budgets from the Joint Venturers) at all material times up to January 2016 was otherwise than in accordance with instructions provided to it by the Joint Venturers and, it would follow, satisfactory to them.
[34] Appointment of administrators became necessary when Queensland Nickel essentially ran short of funds and efforts to explore the possibility of obtaining a loan for which the Joint Venturers may have provided security over Joint Venture Property, proved unsuccessful. Amongst other contributing factors was a fall in the price of nickel.
[35] After their appointment, the administrators issued calls which purported to be a calls under cl 6.4 of the Joint Venture Agreement calling upon the Joint Venturers to pay monies to Queensland Nickel as follows:
(a) on 24 February 2016, requiring payment of $16,441,186 on or before 4 March 2016;
(b) on 30 March 2016, requiring payment of $73,903,271 or before 5 April 2016; and
(c) on 6 April 2016, requiring payment of $116,181,175.46 on or before 12 April 2016.
[36] However, in between the first and the second of those calls the following events happened:
(a) On 3 March 2016, Mr Mensink wrote to the administrators and asserted "[t]here is no budget that has been approved by the Joint Venture and the Joint Venture does not recognize the liability".
(b) On 3 March 2016, the JVOC met and resolved to remove Queensland Nickel as Manager and General Manager for the Joint Venture; to appoint Queensland Nickel Sales as manager for the Joint Venture; and to withdraw all calls made by Queensland Nickel in its former role as manager.
(c) On about 7 March 2016, the Joint Venturers notified Queensland Nickel (by the administrators) of its termination as Manager and General Manager and the appointment of Queensland Nickel Sales. Demand was made that all Joint Venture Property and all documents, books, accounts and records of the Joint Venture be provided to Queensland Nickel Sales and title to any Joint Venture Property held in Queensland Nickel's name be transferred to Queensland Nickel Sales.
[37] The positions of, on the one hand, Queensland Nickel, and, on the other hand, the Joint Venturers and Queensland Nickel Sales were then crystallized in correspondence and in the administrators' report to creditors dated 11 April 2016.
[38] For their part, the Joint Venturers and Queensland Nickel Sales contended that -
(a) after 7 March 2016, Queensland Nickel was obliged to comply with the demand which had been given to it to return all Joint Venture Property (including any cash at bank) but it had wrongly refused so to do;
(b) Queensland Nickel was not entitled to use any part of the Joint Venture Property to discharge any of the debts which it had incurred whilst General Manager of the Joint Venture; and
(c) the Joint Venturers had no liability to Queensland Nickel in relation to the debts which Queensland Nickel had incurred whilst General Manager of the Joint Venture.
[39] The administrators refused to comply with the demand to return Joint Venture Property and continued to press their contention that the Joint Venturers ought to pay monies to Queensland Nickel as requested.
[40] The administrators' report to creditors made on 11 April 2016 recommended that Queensland Nickel be wound-up. The administrators indicated that if that occurred, further investigations could be undertaken to determine the potential of any recoveries in respect of voidable transactions and insolvent trading.
[41] At the second meeting of creditors on 22 April 2016, the creditors resolved that Queensland Nickel should be wound up. Ultimately, the administrators were appointed as liquidators ("the General Purpose Liquidators").
[42] It remains to note that the Commonwealth of Australia had paid out significant sums to employees of Queensland Nickel for unpaid employee entitlements under a scheme known as the Fair Entitlements Guarantee. The Commonwealth applied to the Federal Court of Australia to have "special purpose liquidators" appointed to pursue claims against the Joint Venturers and other companies ultimately owned by Mr Clive Palmer to recover those amounts.
[43] On 18 May 2016 orders were made in the Federal Court appointing three additional liquidators, Messrs Parberry, Ayres and Owen (of the firm PPB Advisory) as special purpose liquidators to Queensland Nickel ("the Special Purpose Liquidators"). By those orders:
(a) the scope of the Special Purpose Liquidators duties' were, for present purposes, limited to investigating:
(i) all dealings or transactions between Queensland Nickel, the Joint Venturers and their directors and officers;
(ii) all potential claims arising against the Joint Venturers and their directors and officers; and
(iii) any potential insolvent trading claims;
(b) the Special Purpose Liquidators were entitled to -
(i) pursue any claim that may be available to Queensland Nickel in relation to the above matters; and
(ii) take any steps to preserve or protect the assets of Queensland Nickel, whether or not in the possession of Queensland Nickel;
(c) the General Purpose Liquidators were restrained from doing any of the above matters, other than with the prior written consent of the Special Purpose Liquidators or further order of the Court; and
(d) the Special Purpose Liquidators were granted leave to enter into a funding agreement and funding participation deed on their own behalf and on behalf of Queensland Nickel[8].
Davis Samuel
[50]Third, although the relevant considerations cannot be exhaustively stated (per McPherson J in Re Gordon Grant and Grant Pty Ltd[1983] 2 Qd R 314 at 317, cited with approval in Davis Samuel at [20]), some guidance may be obtained from past cases. Some considerations are identified in Davis Samuel at [30] to [32] and in the cases there cited. They include:
(a) the amount and seriousness of the claim, the degree of complexity of the legal and factual issues involved, and the stage to which the proceedings, if already commenced, may have progressed;
(b) whether there will be any procedural or substantive prejudice to the creditors resulting from the proceedings;
(c) whether the liquidator is likely to reject any proof of debt lodged by the applicant so that an appeal to the court will be necessary;
(d) the fact that the applicant has claims against others raising substantially the same issues in which case there is a real question of the inconvenience of the applicant having to follow different procedures in respect of all its claims;
(e) whether the existence of pretrial procedures, such as discovery and interrogatories, are likely to be required or beneficial;
(f) the amount and seriousness of the claim together with the degree of complexity of the legal question involved; and
(g) where there would be multiple proceedings were leave not granted, this would be a powerful factor favouring the grant of leave, thus, where one of a number of claims is permissible, leave may be granted for a weaker, associated claim.
[51] Fourth, it is explicit on the face of the section that the Court may grant leave on terms. It is common, for example, that if leave is granted to proceed with a proceeding which seeks to recover damages from a company in liquidation, the grant of leave is subject to a condition that the applicant would not seek to enforce any judgment it obtained without first obtaining the leave of the Court.
(c) One underlying justification for taking this approach must be the avoidance of circumstances in which an accounting party could be involved in futile litigation because the result could have no effect upon the legal rights of the parties: cf Tsatsoulis v Trigamist Holdings Pty Ltd at [47] to [50].
[73] It remains to note that, the remedy being a discretionary one, an applicant must establish that it would be an appropriate exercise of discretion by the Court to make such an order. Thus a relevant consideration to the granting of discretionary relief in such circumstances would be whether the applicants have made any offer, have entered into any agreement, or have disclosed any capacity to repay any deficiency which might arise on the taking of the account. That was recognized in Tsatsoulis v Trigamist Holdings Pty Ltd at [53] to [61].
[74] The latter proposition is a reflection of the general proposition applicable to any party seeking equitable relief. It is appropriate briefly to turn to this proposition.
(b) a declaration that Queensland Nickel does not have any beneficial rights to or in Joint Venture Property: see relief paragraph (17);
(c) a declaration that Queensland Nickel has no right of indemnity as trustee of the Joint Venture in respect of any of the Joint Venture property or assets of the Joint Venture: see relief paragraph (19);
(d) an order that the property referred to at [75] was and is held on trust by Queensland Nickel or the Administrators for the Joint Venturers: see relief paragraph (6);
(e) an order that Queensland Nickel or the Administrators account for such property or provide equitable compensation together with compound interest: see at [76], [77] and also relief paragraphs (9) and (10); and
(f) equitable compensation for the detriment caused by the retention of the property and the refusal to account for it, together with compound interest: see at [78], [79] and also relief paragraphs (11) and (12).
[104] For the reasons already articulated, all of these claims turn on the applicants establishing the negatives pleaded at [53](c), [61](f) and [61](h) of the proposed statement of claim.
(d) (because the Administrators are to be regarded as constructive trustees of the property referred to at [75]), an order that the Administrators account for such property or provide equitable compensation together with compound interest: see at [83] and also relief paragraphs (9) and (10); and
(e) equitable compensation for the detriment caused by the retention of the property and the refusal to account for it, together with compound interest: see at [84] and [85] and also relief paragraphs (11) and (12).
[110] For the reasons already articulated, all of these claims turn on the applicants establishing the negatives pleaded at [53](c), [61](f) and [61](h) of the proposed statement of claim.
[115] For the reasons already articulated, all of these claims turn on the applicants establishing the negatives pleaded at [53](c), [61](f) and [61](h) of the proposed statement of claim.
[122] In its oral submissions, Queensland Nickel conceded the existence of a serious question to be tried but maintained the submission that the proper exercise of the Court's discretion was to grant leave to proceed on the conditions which had been proposed.
[123] For their part the applicants resisted the imposition of any conditions beyond the usual condition regarding enforcement of any non-proprietary claims without leave of the Court. They contended that -
(a) the major issue in the winding up was whether Queensland Nickel held any interest in Joint Venture Property as bare trustee or whether it held the property, at various times, subject to a lien in respect of liabilities incurred by it as a trustee;
(b) the existence of an indemnity is a disputed matter which Queensland Nickel will have to make good at trial;
(c) given the need to resolve that dispute, the resolution of it and other non-proprietary claims in court would promote the orderly administration of the winding up;
(d) if as appears inevitable, monetary claims are to be made by Queensland Nickel against the Joint Ventures under the Joint Venture Agreement, the Joint Venturers must be entitled to raise their claims against Queensland Nickel by way of set-off, with the result that their claims were inevitably going to be litigated in any event; and
(e) a relevant consideration was that the claims would proceed as against the Administrators in any event. As the claims against Queensland Nickel and the Administrators were interrelated and Queensland Nickel was a proper party to those claims, leave ought be granted so that the proceedings were properly constituted.
the provisions of the Joint Venture Agreement as to the responsibility of the JVOC (cl 4.1(a));
the pleaded case at [61] regarding Mr Palmer and the JVOC that all instructions by the JVOC were consistent with and in accordance with the terms of the Joint Venture Agreement,
(b) (by application of the legal principles discussed at [59] to [67] above) to the extent that the General Manager held Joint Venture Property but legal title to the Joint Venture Property remained in the Joint Venturers, the General Manager would have an indemnity in respect of the Joint Venture Expenses properly incurred, which right would be regarded as secured by an equitable lien over the Joint Venture Property, such a lien being created by the court, regardless of the intent of the parties, as a remedial device to protect the General Manager against inequitable loss.
[133] Either way, the implications would then include:
(a) Queensland Nickel would be regarded as having a proprietary or beneficial interest in the Joint Venture Property to the extent of its right to be indemnified for Joint Venture Expenses properly incurred;
(b) Queensland Nickel could not be compelled to surrender the Joint Venture Property to the Joint Venturers until its indemnity claim had been satisfied or provision made for its satisfaction; and
(c) the entitlement of Joint Venturers to the Joint Venture Property would be confined to so much of the Joint Venture Property as was available after the liabilities in question had been discharged or provision had been made for them. Until that occurred, it would be impossible to say what the Joint Venturers' entitlement was.
[134] If Queensland Nickel did acquire a beneficial interest in the Joint Venture Property in one of those ways described at [132] with the result referred to at [133], then it would follow that:
(a) the contractual and equitable claims against Queensland Nickel and the Administrators which rely on Queensland Nickel having an unconditioned obligation to return the Joint Venture Property would all fail because Queensland Nickel's rights would have justified retention of the property in the circumstances;
(b) the failure to offer to do equity would be an insurmountable obstacle to equitable remedies and to any legal remedy which turned on an exercise of discretion;
(c) as to the claims for an account:
(i) it would be clear enough that Queensland Nickel would be an accounting party;
(ii) but the applicants would have made no attempt to demonstrate that there was, or was likely to be, a surplus after the Queensland Nickel's right to be indemnified in respect of Joint Venture Expenses properly incurred is met;
(iii) the applicants would have not made any attempt to explain why it was that their failure to make any offer, to enter into any agreement, or to disclose any capacity to repay any deficiency, was not fatal to the proposition that a court would exercise a discretion in their favour; and
(iv) absent some seriously arguable answer to these matters, there could not be thought to be a serious question to be tried as to the entitlement of an order for an account.
[135] Of course this application is not a trial. I make no finding that Queensland Nickel has the rights of indemnity or of lien which I have discussed or that the implications I have discussed must arise in this case. Obviously those implications would not arise if the proper analysis of the mutual rights and obligations which existed between the Joint Venturers and the General Manager of their Joint Venture did not involve the apparent affront to justice identified at [130] above . That might occur if the events which actually happened had occurred in such a way as justified the conclusions that Queensland Nickel had no beneficial interest in the Joint Venture Property and no right of indemnity out of that property in respect of very substantial liabilities incurred by it. The applicants' proposed statement of claim asserts these conclusions, but the problem for the applicants is that mere assertion of conclusions does not establish a serious question to be tried that as to the truth of the assertion.
[136] In my view the negation of the existence of Queensland Nickel's entitlement to an indemnity of such a nature as would also confer proprietary or beneficial rights in the Joint Venture Property is an essential aspect of the applicants' claims against Queensland Nickel. The applicants' case as currently framed asserts conclusions which suit their case but does not establish a solid foundation for them. In a technical pleading sense, the pleading is flawed because of failure to plead the material facts which justify the pleaded conclusions. However, although that failure is significant, the point is more fundamental, especially in light of the evidence I have received. Absent a solid foundation for the pleaded negations, there can be no solid foundation to (and no point in the Court embarking on a consideration of) the applicants' claims for relief against Queensland Nickel.
[137] I have mentioned the specific questions which I caused my associate to raise with the parties. During argument at the second hearing I specifically asked Senior Counsel for the applicants this question during argument at the second hearing: