QNI Resources Pty Ltd v Queensland Nickel Pty Ltd

CORPORATIONS - WINDING UP - CONDUCT AND INCIDENTS OF WINDING UP - PROCEEDINGS BY OR AGAINST THE COMPANY - LEAVE TO PROCEED - GENERALLY - where the appellants are two joint venturers and the current manager of the joint venture - where the respondent is the former manager of the joint venture and a company in liquidation - where the appellants brought legal and equitable claims against the respondent which rely on an unconditioned obligation under the Joint Venture Agreement to return joint venture property - where the learned primary judge found the appellants' pleadings claimed unconditional relief for which it would be necessary for them to negate the respondent's entitlement to an indemnity conferring proprietary or beneficial rights in the joint venture property - where the learned primary judge found the appellants' pleadings failed to establish a solid foundation for the pleaded negations - where leave to proceed against the respondent under s 500(2) of the Corporations Act 2001 (Cth) was therefore refused because the appellants failed to establish that there was a serious question to be tried - whether the learned primary judge erred in his approach - whether the learned primary judge failed to assess whether the appellants had a reasonable prospect of proving the negations in the absence of any pleadings of relevant factual matters - whether the learned primary judge erred in exercising his discretion under s 500(2) of the Corporations Act 2001 (Cth)

Corporations Act 2001 (Cth), s 500(2)

Apostolou v VA Corporation of Aust Pty Ltd (2010) 77 ACSR 84; [2010] FCA 64, cited

Commonwealth of Australia v Davis Samuel Pty Ltd (No 5) (2008) 164 ACTR 1; [2008] ACTSC 124, cited

QNI Resources Pty Ltd & Ors v Park & Ors (2016) 116 ACSR 321; [2016] QSC 222, related

Re Gordon Grant and Grant Pty Ltd [1983] 2 Qd R 314, cited

D F Jackson QC, with L T Livingstone, for the appellants

T P Sullivan QC, with A C Stumer, for the respondent

[1] GOTTERSON JA: On 15 April 2016, three companies, QNI Resources Pty Ltd ("QNI Resources"), QNI Metals Pty Ltd ("QNI Metals") and Queensland Nickel Sales Pty Ltd ("Queensland Nickel Sales") filed an originating application in the Supreme Court of Queensland. The respondents to the application were four individuals, Mr John Park, Mr Stefan Dopking, Ms Kelly-Anne Trenfield and Mr Quentin Olde, registered liquidators, who at the time when the originating application was filed, were the administrators of the fifth respondent, Queensland Nickel Pty Ltd (Administrators Appointed). On 22 April 2016, that company entered into creditors' voluntary liquidation, becoming Queensland Nickel Pty Ltd (in liquidation) ("Queensland Nickel"). Those who had been its administrators, were appointed to be its liquidators.

[2] The originating application was twice amended by leave. The operative version is the Further Amended Originating Application filed on 4 May 2016.[1] The interlocutory and final relief claimed in it is wide-ranging. It includes an order that the applicants have leave to proceed against Queensland Nickel pursuant to s 500(2) of the Corporations Act 2001.[2]

[3] On 2 June 2016, a judge of the Trial Division ordered by consent that the application for leave be set down for hearing in early August 2016. He also ordered that a draft statement of claim setting out the applicants' proposed claim against Queensland Nickel be delivered by 27 June 2016.[3] Such a document was delivered and filed in the Supreme Court on 13 June 2016.[4]

[4] The application was heard on 2 and 24 August 2016. On 29 September 2016, the application was dismissed.[5] The applicants filed a notice of appeal on 20 October 2016.[6] When it is appropriate in these reasons to refer to them collectively, I shall refer to them as "the appellants". Queensland Nickel filed a notice of contention on 4 November 2016.

The relationships between the corporate parties

[5] QNI Resources and QNI Metals were Joint Venturers in a nickel mining and refining project pursuant to the terms of the Queensland Nickel Joint Venture Agreement dated 17 September 1992.[8] Queensland Nickel, also a party to the agreement, was by clause 5.1 thereof appointed General Manager of the Joint Venture. It was, by definition, also a Manager of it.

[6] The relationship between the Joint Venturers and Queensland Nickel inter se was governed by the Joint Venture Agreement ("JVA"). How Queensland Nickel was to provide management services to the Joint Venturers was regulated by an Administration Agreement also dated 17 September 1992.[9] Its sole function was to act in this management role.

[7] The following facts which are uncontroversial are recorded in the reasons for judgment of the learned primary judge.

[8] From 31 January 1995, the interests in the Joint Venture have been held as to 80 per cent by QNI Resources and as to 20 per cent by QNI Metals.[10] Under clause 3.1 of the JVA all "Joint Venture Property" is beneficially owned by the Joint Venturers as tenants in common in proportion to their participating interests in the Joint Venture.[11] As General Manager, Queensland Nickel was, pursuant to clause 5.2(a)(vii), responsible for, inter alia, the management and control of the Joint Venture Property as agent for, and for the account of, the Joint Venturers.[12]

[9] The expression "Joint Venture Property" is comprehensively defined in clause 1.1 of the JVA to include relevant real property and mining titles, relevant technology and know-how and "all other rights, titles, interests, claims and benefits held or acquired from time to time, directly or indirectly, for the purposes of the Joint Venture". Products produced at the nickel refinery were the property of the Joint Venturers according to their respective shares. They are not Joint Venture Property.[13]

[10] Clause 3.2, however, states that with the exception of "Real Property Titles" 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. If that occurred, the Joint Venture Property concerned would be held "for the use and benefit of the Joint Venturers in proportion to their Participating Interests". Clause 5.5(i) provided that, as a Manager, Queensland Nickel shall not have any right or power (except for liens arising in the normal and ordinary course of business) to mortgage, pledge, charge, encumber or create any lien over, or trust in respect of, the Joint Venture Property.

Events preceding the termination of Queensland Nickel's appointments

[14] The learned primary judge found, and it is not challenged on appeal, that at the time Queensland Nickel was placed in voluntary administration, a director, Mr C T Mensink, provided the administrators with a report which recorded that Queensland Nickel had no assets but had liabilities of at least $226,390,547, made up of $30,291,768 for employee entitlements, $135,000,000 owed to a preferential creditor, $7,178,713 owed to a partly secured creditor and $53,920,066 owed to unsecured creditors.[21]

[15] His Honour noted that Mr Mensink was cross-examined before a judge of the Trial Division on 20 April 2016.[22] At that point, the appellants, as applicants, were seeking interlocutory injunctive relief within the proceeding commenced by the filing of the originating application.[23] His Honour drew the following from Mr Mensink's testimony:

"[32] ... [F]or 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."

[16] After their appointment, the administrators made calls purportedly pursuant to clause 6.4 of the Joint Venture Agreement upon the Joint Venturers to make the following payments to Queensland Nickel, namely:

• (a) a call on 24 February 2016 to pay $16,441,186 on or before 4 March 2016;
• (b) a call on 30 March 2016 to pay $73,903,271 on or before 5 April 2016; and
• (c) a call on 6 April 2016 to pay $116,181,175.46 on or before 12 April 2016.[24]

As noted, Queensland Nickel Sales was appointed General Manager and Manager of the Joint Venture on 3 March 2016 in place of Queensland Nickel. None of the calls was thereafter met.

[17] The parties named in the draft Statement of Claim are the appellants as the First to Third Plaintiffs and the respondents to the Originating Application as the First to Fifth Defendants respectively. The relief pleaded included:

• (a) declarations that any property held by or in the name of Queensland Nickel is Joint Venture Property within the meaning of clause 1 of the Joint Venture Agreement;[25] that Queensland Nickel does not have any beneficial right to, or in, the Joint Venture Property;[26] that Queensland Nickel has not acted at any time as trustee of the Joint Venture;[27] and 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;[28]
• (b) an order that, in accordance with clause 5.6(d) of the JVA, Queensland Nickel transfer or deliver the Joint Venture Property to Queensland Nickel Sales or, alternatively to the Joint Venturers;[29]
• (c) an order that an account be taken of all property belonging to the Joint Venturers received and distributed from 18 January 2016 by Queensland Nickel as General Manager and that Queensland Nickel deliver to the Joint Venturers the property found due on taking such an account;[30]
• (d) an order that Queensland Nickel account to the Joint Venturers for the property held on bare trust by it for them;[31]
• (e) alternatively, equitable compensation or damages for breach of contract.[32]

[18] As might be expected, the draft statement of claim was a detailed pleading of some length. It contained allegations central to the relief claimed which may be summarised as follows:

• (a) at all material times since July 2009, all of the Joint Venture Property had been owned by the Joint Venturers;[33] that Queensland Nickel neither owned, nor obtained any beneficial interest in, any part of the Joint Venture Property;[34] and that it had no right of indemnity as a trustee of the Joint Venture out of the property or assets of the Joint Venture in respect of any liabilities incurred by it.

"53. At all material times since July 2009, in accordance with the terms of the Joint Venture Agreement:

(a) all the Joint Venture Property as defined in the Joint Venture Agreement has been owned by QNI Resources and QNI Metals;

(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;

(c) Queensland Nickel neither owned, nor obtained any beneficial interest in, any part of such Joint Venture Property, including Products.

1. At all material times, and in particular in the period from July 2009, in accordance with the terms of the Joint Venture Agreement,

(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;

(b) In performing that role up to January 2016, Queensland Nickel acted in accordance with the directions of the JVOC;

(c) As from 3 August 2009, the Chairman of the JVOC was Mr Clive Palmer;

(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;

(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;

(f) Queensland Nickel did not own the Joint Venture or obtain beneficial ownership of any part of the property of the Joint Venture;

(g) Queensland Nickel did not own the Joint Venture as trustee, either for QNI Resources and/or QNI Metals or otherwise;

(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.

1. 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 relating to the Joint Venture which 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."

[20] At the hearing on 2 August 2016, Queensland Nickel indicated that it was opposing a grant of leave only to the extent that the appellants sought to pursue "non-proprietary claims".[44] It proposed conditions for the grant of leave to pursue proprietary claims which were debated before his Honour.

[21] At a directions hearing on 4 August 2016 for a number of related proceedings, his Honour advised the parties that, in relation to this proceeding, he required further submissions on the topic of whether he should conclude that the appellants had a serious question to be tried as to the relief they sought. Later that day, his Honour communicated with the parties via his associate in the following terms:[45]

"2. 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:

1. [t]he claims advanced by the 2 joint venturers qua beneficiaries as against Queensland Nickel qua trustee and the related claims for relief;
2. [t]he claim advanced by the 2 joint venturers qua legal owner or person entitled to possession and the related claims for relief;

1. [t]he claim founded on alleged breach of contract and the related claim for relief that property be delivered up.

1. His Honour would like to have the following matters addressed in that context.
2. 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?
3. Bearing in mind -

1. the matters referred to in the previous question; 2. the evidence which suggests that Queensland Nickel and the Joint Venturers were not at [arm's] 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);

1. the provisions of the Joint Venture Agreement as to the responsibility of the JVOC (cl 4.1(a));

1. 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,

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 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?

1. 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?
2. 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?"

[22] Written submissions were duly filed.[46] In its submissions, Queensland Nickel withdrew any prior concession it may have made concerning the existence of a serious question to be tried.[47]

[23] The application was further argued on 24 August 2016. Early in the hearing, his Honour rejected an application by the appellants for an adjournment for a week to allow them to adduce further, but unspecified, evidence.[48] The appellants have not appealed against the refusal of the adjournment.

[24] By way of introduction to his reasons for judgment, the learned primary judge observed that the relief claimed in the draft statement of claim included the "unconditional" return of all of the Joint Venture Property held by Queensland Nickel and that that claim was made "despite the fact that [it] had, apparently, and to the knowledge of the joint venturers, properly incurred very significant liabilities and no provision had been made for their discharge".[49] His Honour continued:

"[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."

[25] His Honour then embarked upon an explanation of his reasoning to that conclusion. After detailing provisions of the JVA and recounting the circumstances in which Queensland Nickel was placed into administration and then liquidation, his Honour set out the terms in which s 500(2) of the Corporations Act is enacted, namely:

"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."

[26] His Honour then drew upon the decisions in Commonwealth of Australia v Davis Samuel Pty Ltd (No 5)[50] and Re Gordon Grant and Grant Pty Ltd[51] for propositions concerning the exercise of the discretion conferred by the section.[52] In so doing, he made this point:

"[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."

[27] Next in his reasons, the learned primary judge essayed legal principles that he considered relevant to the evaluation of the draft statement of claim. The principles related to the nature of the right that a trustee has to indemnity in respect of liabilities incurred in execution of the trust of which it is trustee and the commensurate beneficial interest in the trust assets that the trustee acquires;[53] the similar entitlement by way of equitable lien that arises in certain other circumstances even where assets are not held on trust;[54] the remedy of an order for the taking of an account;[55] and the doctrine that he who seeks equity must do equity.[56]

[28] His Honour then turned to the draft statement of claim. He set out paragraphs 53 and 61[57] and noted that paragraph 61(f) was a repetition of paragraph 53(c).[58] Of the proposition advanced in both that Queensland Nickel had not obtained a beneficial interest in any of the Joint Venture Property, he observed that it was "plainly a conclusion of law or of mixed law and fact, not supported by any pleading of the material facts which might justify it". He added that "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)".[59]

[29] With regard to paragraph 67, his Honour stated that the introductory phrase to it made it clear that the asserted obligation to deliver all Joint Venture Property was reliant upon the propositions advanced in paragraphs 53(c), 61(f) and 61(h) that Queensland Nickel had not obtained any beneficial interest in the Joint Venture Property and had no right of indemnity out of any property or assets of the Joint Venture.[60] As to those propositions, his Honour then observed:

" ... 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."

[30] The learned primary judge observed that the relief claimed in Prayers 4, 5, 6, 17 and 19 which I have listed, all turned upon the appellants' establishing the negatives pleaded in paragraphs 53(c), 61(f) and 61(h) of the draft Statement of Claim.[61] That was so in respect of trust claims against Queensland Nickel relating to specific property,[62] claims made against the Administrators as constructive trustees,[63] and the claim against Queensland Nickel for breach of contract.[64]

[31] His Honour then reasoned to a conclusion that a case of sufficient merit to warrant the grant of the leave had not been shown. He did so as follows:

"[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[65] 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

(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;

(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 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:

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, [for] example, in relation to employees, at least?

[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 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."

[32] That conclusion, his Honour considered, justified refusal of the application. It displaced the consideration favouring a grant of leave that many of the claims made were such that they could not have been appropriately dealt with by the proof of debt procedure.[66] His Honour found it unnecessary to consider suitable conditions for a grant of leave.[67]

The grounds of appeal and the notice of contention

[33] The appellants rely on the following grounds of appeal:[68]

"1. The primary judge erred at [136] to [142] in concluding that, to establish a serious question to be tried as to their claim for "unconditioned" relief, it was necessary for the applicants to demonstrate a solid foundation for the "pleaded negations", being that "the respondent neither owned, nor obtained any beneficial interest in, any part of the Joint Venture Property" and that "the respondent 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". In particular:

1. contrary to his Honour's reasoning at [141], there was no requirement for the appellants to plead their claim for relief in a way which was conditioned or not conditioned on claims which other parties might make; and
2. in circumstances where no defence or cross claim had been propounded, questions concerning the nature and extent of liabilities incurred by the respondent and their potential effect on the claims pleaded by the appellants were not matters which fell for consideration, or were not entitled to substantial weight in the particular circumstances, for the purpose of determining whether to grant leave under s 500(2) of the Corporations Act 2001 (Cth) ("Act").

1. The primary judge erred at [132] in holding that "it could be concluded that", in the sense and to the extent necessary to justify the refusal of leave under s 500(2) of the Act:
   1. to the extent that the Joint Venturers, being the first and second appellants, had permitted the General Manager, being the respondent, to hold legal title to the Joint Venture Property, that it must follow that:
      1. the General Manager held the said property as trustee for the Joint Venturers;
      2. the General Manager would have a trustee's right to indemnity in respect of such liabilities; and
      3. the right of indemnity would be regarded as secured by an equitable charge or lien over the Joint Venture Property; and
   2. to the extent that the General Manager held Joint Venture Property but legal title to the Joint Venture Property remained in the Joint Venturers:
      1. the General Manager would have an indemnity in respect of the Joint Venture Expenses properly incurred; and
      2. the right of indemnity would be regarded as secured by an equitable lien over the Joint Venture Property.
2. The primary judge erred at [132] in reasoning that it could be concluded that the General Manager had a right of indemnity which would be regarded as secured by an equitable charge or lien over the Joint Venture Property by reason of the matters set out at [132](a) and [132](b) in circumstances where the matters referred to were, of their nature, not suitable for determination on an application for leave under s 500(2) of the Act because:
   1. factual findings would be required to be made in respect of each matter which could only be made at trial; and
   2. it was not appropriate for the Court to seek to predict the outcome of those findings at trial.
3. The primary judge erred at [142] in failing to conclude that there was a serious question to be tried, having regard to:

1. the matters contained in the statement of claim dated 13 June 2016; 2. the nature of the appellants' claim as a proprietary claim which stands outside the province of the proof of debt system; and

1. the findings made by the primary judge with respect to the operation of the Joint Venture Agreement including, inter alia: 1. at [8], by 17 September 1992, the project, being the nickel mining and refining project, had become owned and operated by two joint venturing companies whose relationship was governed by the terms of the Joint Venture Agreement bearing that date, which recorded the appointment of the respondent as the General Manager of the Joint Venture; 2. at [10], from 31 January 1995, the interests in the project had become held in the manner they were held at the date of the primary judge's judgment, with the first and second appellant holding as to 80% and 20% respectively, with the respondent in the role of General Manager; 3. at [14](d), under the Joint Venture Agreement, all the "Joint Venture Property" was beneficially owned by the Joint Venturers; 4. at [19], under the Joint Venture Agreement, the respondent's appointment as General Manager would continue until terminated, at which time, it would become obliged to deliver all Joint Venture Property to the successor and, if any Joint Venture Property was held in its name, to transfer the title to the successor; and 5. at [36](c), on 7 March 2016, the Joint Venturers notified the respondent of its termination as General Manager and demanded that all Joint Venture Property be provided to the third appellant and title to any Joint Venture Property in the respondent's name be transferred to the third appellant."

[34] The notice of contention does not seek to uphold the decision under appeal on some other ground. It is concerned solely with auxiliary orders that ought to be made in the event that the appeal is allowed.

[35] I now turn to consider each of the grounds of appeal. It is convenient to deal with Grounds 2 and 3 together as the parties have done in their respective written outlines.

[36] This ground contends that the learned primary judge erred in attributing decisive significance to the conditions upon which any final relief might be granted.[69] In oral submissions, senior counsel for the appellants maintained that there are really three claims made: the first one is a claim by the Joint Venturers to their property; the second claim is by the new manager to have the property delivered to it; and the third, in response, is by Queensland Nickel that that should not happen because there is a claim by it to that property.[70]

[37] In developing the argument on this ground, counsel observed that the consent order made on 2 June 2016 had not required a statement of claim to be prepared other than in accordance with the Uniform Civil Procedure Rules 1999 (Qld) ("UCPR"). Under r 151(1)(b), the appellants were not required to plead a fact if the burden of proving it did not lie with them. The burden of proof as to any claim to indemnity or lien, and its quantification, it was submitted, would lie with Queensland Nickel. Further, under r 153(1), there was implied in the statement of claim, the performance of any condition precedent necessary for the appellants' case; and under r 153(2), it was for Queensland Nickel, if it challenged the performance or occurrence of any condition precedent necessary for the appellants' case, to specifically plead a denial to that effect.[71] If Queensland Nickel did plead and succeed on a claim in relation to liabilities incurred in discharge of its functions as General Manager, then the appellants, nonetheless, would be entitled to the final relief they claimed, reduced or qualified pro tanto.[72]

[38] It was further submitted that, as no defence or cross-claim had yet been pleaded, questions concerning the nature and extent of liabilities incurred by Queensland Nickel and their potential effect on the appellants' claims either did not fall for consideration or, if they did, were not entitled to substantial weight, for the purpose of determining whether to grant leave under

[47] These grounds contend that the learned primary judge erred in a number of respects in treating "Queensland Nickel's potential rights of indemnity and potential equitable security interests" as requiring or permitting the refusal of leave.[79] His Honour erred in concluding at paragraph [132] of the Reasons as follows:[80]

• (a) as to Joint Venture Property, legal title to which is held by Queensland Nickel, that Queensland Nickel holds it as trustee for the Joint Venturers; that it would have a trustee's right of indemnity in respect of liabilities incurred as trustee; and that the right of indemnity would be regarded as secured by an equitable charge or lien over the Joint Venture Property; and
• (b) as to Joint Venture Property, legal title to which is held by the Joint Venturers, that Queensland Nickel would have an indemnity in respect of Joint Venture expenses properly incurred; and that the right of indemnity would be regarded as secured by an equitable lien over the Joint Venture Property.

[48] Such conclusions were, it was submitted, ones that could be reached only after resolution of questions of fact and law of some complexity, themselves dependent upon findings of fact made at trial. Illustrations of such questions given by the appellants are as to the capacity in which Queensland Nickel holds particular items of property and whether such items are specifically dedicated to a particular purpose as might limit the range of expenses that might be reimbursed from it.[81] Questions could arise as to whether certain liabilities incurred by Queensland Nickel for which it claimed a right of indemnity as trustee, were properly incurred by it, as trustee, and within the scope of the trust.[82]

[49] Further, the appellant submitted that if from 7 March 2016 when Queensland Nickel's appointment as General Manger was terminated, it held a legal interest in items of Joint Venture Property as bare trustee, then the Joint Venturers would be entitled to possession of such property.[83] Thus, there was a serious question to be tried as to whether from that date, such property was held on a bare trust.[84]

[61] By this ground of appeal, the appellants contend that the learned primary judge ought to have concluded that there was a serious question to be tried warranting the grant of leave.[93] It was submitted that the appellants' claim was proprietary in nature and that his Honour took no, or inadequate, account of their claim as one that stands outside the province of the proof of debt system.[94] In submissions in reply, senior counsel for the appellants argued that the result of the exercise of the discretion in this case failed to conform with the purpose for which the discretion was conferred.[95]

[62] I do not understand the appellants to propose that where any proprietary claim is made against a company in liquidation which cannot be the subject of a proof of debt, the Court must exercise the discretion under s 500(2) in favour of the grant of leave. The nature of the claim does not displace the need for the Court to assess whether there is a serious question to be tried with respect to an applicant's entitlement to the relief claimed. Here, the learned primary judge was not satisfied by the appellants that there was a serious question to be tried as to the declaratory relief claimed negating any beneficial interest in, or right of indemnity in respect of, the Joint Venture Property on the part of Queensland Nickel.

[63] In my view, this ground of appeal does not mount a successful challenge to the exercise of the discretion by the learned primary judge. That is not to say that a differently framed statement of claim which eschewed such negations might not warrant a grant of leave to proceed.

[64] As none of the grounds of appeal has succeeded, this appeal must be dismissed with costs. The dismissal would not prejudice a grant of leave in respect of such a differently framed statement of claim.

[65] It is unnecessary to decide the issue raised by the notice of contention.

[66] I would propose the following orders:

1. Appeal dismissed.
2. The appellants are to pay the respondent's costs of the appeal on the standard basis.

[67] DOUGLAS J: I agree with Gotterson JA.

[68] APPLEGARTH J: I agree with the reasons of Gotterson JA and with the proposed orders.

[2] The operative version referred to s 471B of the Corporations Act which is applicable to a winding-up in insolvency or by the Court. It is common ground that the application for leave to proceed was made under s 500(2) which is applicable to a creditors' voluntary winding-up.

[11] Ibid [14](d): AB1244. Clause 11 stated expressly that the Joint Venturers' ownership of their respective Participating Interests was not to be considered as creating a trust relationship as between them.

[13] Clauses 3.1, 3.3. His Honour proceeded on the footing that products were Joint Venture Property: Reasons [14](c). The error did not play a significant role in his reasoning.

[14] It is common ground that the Joint Venturers are the registered owners of the nickel refinery land at Yabulu. That land is not the subject of any of the appellants' proprietary claims. Adjacent land is, however, registered in Queensland Nickel's name.

[18] Ibid [28]: AB1247. Arguably, that event terminated Queensland Nickel's appointment as Manager pursuant to clause 5.6(a)(vi).

[19] AB563-564. The removal resolution was expressed as being contingent upon Queensland Nickel not having already been removed.

[20] Reasons [36](c): AB1249. Correspondence at AB568, 570-572.

[23] The application for that relief was subsequently withdrawn.

[25] Draft Statement of Claim, Prayer 4: AB1185.

[34] Ibid paras 53(c), 61(f): AB1166, AB1170.

[46] Appellants' submissions dated 15 August 2016: AB1209-1218; Queensland Nickel's submissions, dated 19 August 2016: AB1219-1226.

[47] Queensland Nickel's submissions, dated 19 August 2016, para 12: AB1222.

[48] AB133; Tr1-6 l11 - AB135; Tr1-8 l10.

[50] [2008] ACTSC 124; (2008) 164 ACTR 1.

[51] [1983] 2 Qd R 314.

[52] Reasons [44]-[51]: AB1251-1252.

[65] 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 definitions of "Encumbrance" and "Permitted Encumbrance" in clause 1.1 and clauses 4.10 and 5.5(i).

[69] Appellants' Outline of Submissions, pp 4-5.

[70] Appeal Transcript ("AT") 1-7 ll23-27.

[71] Appellants' Outline of Submissions, para 24.

[76] It would not deal with, inter alia, the statutory right to reimbursement from trust property conferred by s 72 Trusts Act 1973 (Qld).

[78] No amendment or amendments have been intimated.

[79] Appellants' Outline of Submissions, p 5.

[86] Respondent's Outline of Submissions, para 15.

[87] 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]-[51], applicable to joint venture property of which Queensland Nickel owns legal title. See also ss 65 and 72 of the Trusts Act 1973 (Qld) and Kemtron Industries Pty Ltd v Commissioner of Stamp Duties [1984] 1 Qd R 576 at 584-585.

[88] Bertrand v Davies [1862] EngR 968; (1862) 31 Beav 429; (1862) 54 ER 1204 per Romilly MR at 1207 cited in Hill v Venning (1979) 4 ACLR 555 per Connolly J at 557, applicable to joint venture property of which Queensland Nickel does not own legal title.

[89] Respondent's Outline of Submissions, para 17.

[91] Ibid citing Jacob's Law of Trusts in Australia para [21-04].

[92] [2010] FCA 64; (2010) 77 ACSR 84 at [50], cited in Jacob's Law of Trusts in Australia at para [21-04].

[93] Appellants' Outline of Submissions p 8.