Queensland Nickel Sales Pty Ltd v Park in his capacity as liquidator of Queensland Nickel Pty Ltd

Queensland Nickel Sales Pty Ltd v Park in his capacity as liquidator of Queensland Nickel Pty Ltd - [2023] FCAFC 150 - FCAFC 2023 case summary — Zoe

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A. Introduction 1 This is an appeal from orders made by a judge of this Court dismissing claims made by the appellants and making orders that the first respondents, Mr John Park and Ms Kelly-Anne Trenfield (GPLs), in their capacity as liquidators of the second respondent, Queensland Nickel Pty Ltd (in liquidation) (QNI), were justified in refusing to pay a judgment sum to Queensland Nickel Sales Pty Ltd (QNS) and in paying specified categories of liabilities of QNI from trust assets: Park, in the matter of Queensland Nickel Pty Ltd (in liq) (No 3) [2022] FCA 1301 (J). 2 The appellants, Queensland Nickel Sales Pty Ltd (QNS), QNI Metals Pty Ltd (QNI Metals) and QNI Resources Pty Ltd (QNI Resources) (together, the Palmer Parties), were not parties to the judicial advice applications made by the GPLs but were served with the originating process and made separate applications for relief in the proceeding before the primary judge in an amended statement of claim. 3 The third respondent, Vannin Capital Operations Limited (Vannin), funded the prosecution by the GPLs and QNI (together, the GPL Parties) of a claim against Mineralogy Pty Ltd (Mineralogy) in the Supreme Court of Queensland (Mineralogy proceeding). Vannin appeared before the primary judge as an interested person in support of the application by the GPLs for judicial advice and directions. 4 The principal issues raised in this appeal for determination are: (a) did the orders appointing special purpose liquidators to QNI permit them to pursue the Mineralogy proceeding; (b) did the primary judge apply an incorrect onus in finding that the terms of the litigation funding provided by Vannin to the GPL Parties to pursue the Mineralogy proceeding were reasonable by ordinary commercial standards; (c) in any event, could the primary judge be satisfied that the terms of the litigation funding provided by Vannin to the GPL Parties to pursue the Mineralogy proceeding were reasonable by ordinary commercial standards; (d) did the joint venture agreement between QNI Resources and QNI Metals have the effect of appointing QNI, as manager of the joint venture (Manager), as the trustee of all of the assets of the joint venture, or only funds held in a joint venture bank account; (e) what are the rights, duties and obligations of a trustee who has been replaced by a subsequent trustee; and (f) were the Palmer Parties precluded by a settlement deed from seeking the declaratory relief they sought before the primary judge. 5 For the reasons that follow, we have concluded that the amended notice of appeal should be dismissed.

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C. Background 10 The following is a summary of the background facts which are relevant to the disposition of the appeal and which are not contested on appeal. 11 QNI is the former Manager of a joint venture (JV) between QNI Resources and QNI Metals (together, the JVCs). 12 Mr Clive Palmer and Mr Clive Mensink were directors of QNI during various periods between 2009 and 2017. Mr Palmer remains one of the secretaries of QNI. Mr Mensink is a former director and secretary of each of the JVCs. The sole shareholder of QNI Resources is Palmer Resources Holdings Pty Ltd. The sole shareholder of QNI Metals is Palmer Metals Holdings Pty Ltd. 13 The JV was relevantly governed by a joint venture agreement dated 17 September 1992 (JVA). 14 As Manager of the JV, QNI operated a business of importing, sourcing and processing nickel ore which was used to produce nickel and cobalt products for export overseas for sale to metal traders and industrial consumers. The money that QNI received from its sales was deposited into bank accounts that it maintained as Manager. 15 QNI had employees and otherwise incurred debts in the course of operating its business. 16 Under the JVA, QNI could issue call notices to the JVCs for funds to meet all costs, liabilities and expenses of the joint venture. 17 QNI did not operate any other business. 18 On 18 January 2016, Mr Richard Park and Ms Kelly Trenfield were appointed as joint and several administrators of QNI pursuant to s 436A of the Corporations Act 2001 (Cth), together with Mr Quentin Olde and Mr Stefan Dopking (together, the Administrators). 19 On 7 March 2016, the Administrators were served with notices which stated that on 3 March 2016, the JVCs had resolved to appoint QNS as Manager of the joint venture. 20 The JVCs are the shareholders of QNS. 21 On 22 April 2016, at a creditor's meeting, the creditors of QNI resolved that QNI be wound up and that Mr Park and Ms Trenfield, the GPLs, together with Mr Olde and Mr Dopking, be appointed as liquidators of QNI. 22 On 18 May 2016, Mr Stephen Parbery, Mr Marcus Ayres and Mr Michael Owen were appointed special purpose liquidators (together, the SPLs) of QNI by Dowsett J. The appointment order identified the particular tasks to be undertaken by the SPLs, who received funding from the Commonwealth to perform those tasks pursuant to a litigation funding agreement (Commonwealth LFA). 23 On 5 July 2016, the GPL Parties commenced proceedings in the Supreme Court of Queensland seeking to set aside a suite of transactions that QNI entered into on 13 January 2016, prior to the appointment of the Administrators (Voidable Transactions proceeding). 24 On 13 March 2017, Mr Ayres resigned as a special purpose liquidator of QNI. 25 On 29 March 2017, QNI, by the GPLs, commenced the Mineralogy proceeding. Mr Palmer is also a director of Mineralogy. The Mineralogy proceeding concerned payments that QNI had made to, for or at the request of Mineralogy, from funds held in a joint venture bank account by way of loans. The first payments were made on 25 February 2011. The payments totalled $102,884,346.26. The Mineralogy proceeding was brought to recover those funds in circumstances where there were potential issues concerning the expiry of limitation periods by reason of s 10(1) of the Limitation of Actions Act 1974 (Qld). 26 On 9 May 2017, QNI, by the GPLs, commenced proceedings in the Supreme Court of Queensland in respect of a deed that it had purportedly entered into with China First Pty Ltd (Martino proceeding). 27 Litigation funding to conduct the Mineralogy proceeding was obtained by QNI from Vannin Capital Operations Limited pursuant to a litigation funding agreement dated 13 September 2016 (Vannin LFA). Funding was also provided pursuant to the Vannin LFA to pursue the Voidable Transactions proceeding and the Martino proceeding. 28 The committee of inspection of QNI approved the entry into the Vannin LFA. 29 On 30 June 2017, the SPLs commenced proceedings in the Supreme Court of Queensland against 21 defendants, including the JVCs, Mr Palmer and Mineralogy (SPL proceeding). 30 In August 2017, Mr Palmer and entities associated with him (including Mineralogy) challenged the SPLs' ability to bring claims against Mineralogy, claiming, in response to a freezing order sought by the SPLs, that the SPLs do not have authority to bring claims against defendants other than the JVCs. 31 On 19 April 2018, Bond J made orders consolidating the Mineralogy proceeding, the Voidable Transactions proceeding, the Martino proceeding and the SPL proceeding (Consolidated proceeding). 32 On 23 July 2018, Mr Owen resigned as a special purpose liquidator of QNI. 33 On 3 August 2019, during the course of the hearing of the Consolidated proceeding, QNI, the SPLs and the Palmer Parties (together with other defendants) entered into a settlement deed (Settlement Deed). Under the Settlement Deed, the JVCs agreed to pay certain amounts, including $68.5 million to the Commonwealth, the SPLs agreed to discontinue the SPL proceeding and mutual releases were provided between the parties, other than with respect to the GPL claims. The Settlement Deed did not extend to the remaining claims being pursued by the GPLs, including the claims advanced in the Mineralogy proceeding. 34 On 23 August 2019, Mullins J (as her Honour then was) dismissed an application by the Palmer Parties for a stay of the Consolidated proceeding as an abuse of process in the light of the Settlement Deed: Parbery & Ors v QNI Metals Pty Ltd & Ors [2019] QSC 207. 35 On 15 October 2019, by an order of Greenwood J, Mr Parbery was removed as a special purpose liquidator of QNI. 36 On 3 June 2020, following the hearing of the remainder of the Consolidated proceeding, Mullins J delivered judgment dismissing the claims made in the Mineralogy proceeding and otherwise giving judgment in favour of the GPL Parties in relation to the Voidable Transaction proceeding: Parbery & Ors v QNI Metals Pty Ltd & Ors [2020] QSC 143. 37 On 30 June 2020, QNI, by the GPLs, filed a notice of appeal in relation to the dismissal of the Mineralogy proceeding. 38 On 25 June 2021, the Queensland Court of Appeal determined that QNI as trustee had made loans to Mineralogy, and QNI was entitled to have them repaid: Queensland Nickel Pty Ltd (in liq) v QNI Metals Ltd [2021] QCA 138 (Fraser and Morrison JJA and Burns J) (QCA decision). 39 On 17 March 2022, an application for special leave to appeal from the QCA decision to the High Court was dismissed. 40 On 5 July 2021, the sum of $102,884,346.26 was paid to QNI by Mineralogy as a consequence of the QCA decision, with interest and costs yet to be determined. Interest on the judgment sum is estimated to be in the range of $13.915 million to $48.8 million and recoverable costs were estimated to be in the order of $3 million to $4 million (together, the judgment proceeds). 41 Vannin submitted, and it was not disputed by the Palmer Parties, that the objective benefit to the estate, as a result of the Mineralogy proceeding, was between approximately $74 million and $97 million, after the payment of a funding premium to Vannin which is payable under the Vannin LFA but not costs. 42 On the same day that the sum of $102,884,346.26 was paid by Mineralogy, QNS demanded that the entire amount be paid to it, without deduction. The demand was not complied with. 43 The GPL Parties submit that they are entitled to use the judgment proceeds to discharge the liabilities which have been incurred to Vannin under the Vannin LFA, the remuneration and costs of the GPLs and the admitted proof of debt of any creditor of QNI. 44 The GPL Parties accept that, in due course, any surplus proceeds will be transferred to the replacement trustee, but say that such a transfer should not occur until after these liabilities have been discharged and these costs and expenses have been paid from the judgment sum. 45 The descriptions adopted by the Palmer Parties for the claim by the GPLs for remuneration and for disbursements such as legal fees, valuation fees and accounting fees as the GPL Liabilities and, when combined with the funding premium, as the Mineralogy Claim Expenses and Liabilities are adopted in these reasons. 46 The Palmer Parties oppose the payment of these amounts from the judgment sum on the basis that they were not properly and reasonably incurred. 47 The GPLs estimate that QNI's liabilities, including to trade creditors, is in the range of approximately $137 million to approximately $215 million.

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D.1. Overview 48 It is alleged in Ground 1 that the primary judge erred in finding that the Mineralogy Claim Expenses and Liabilities were properly incurred given that (a) it was open to QNI to prosecute the Mineralogy proceeding through the SPLs, acting consistently with its fiduciary obligations, and (b) QNI had not provided any proper justification as for why it could or should not have done so. 49 The case advanced by the Palmer Parties necessarily proceeds on the assumptions that (a) the SPLs would have agreed that they had the authority to pursue the Mineralogy proceeding and would have prosecuted the claim, (b) the Commonwealth would have agreed to fund the SPLs to prosecute the claim and on the same basis as other claims pursued by the SPLs, and (c) the SPLs would not have settled the claim for any amount less than the full recovery achieved by the GPLs. 50 The specific powers and responsibilities of the SPLs, including with respect to the making of any claims, were set out in orders made by Dowsett J on 18 May 2016 appointing the SPLs (SPL Appointment Orders). 51 Order 4 of the SPL Appointment Orders, relevantly, was in the following terms: 4. Pursuant to sections 511 and 473(8) of the Corporations Act, that: (a) the appointment of the Special Purpose Liquidator is limited to the matters set out in paragraphs 4(b) to (d) below; (b) the following things may be done by the Special Purpose Liquidators on behalf of the company: (i) conducting investigations into any of the matters set out in the Schedule to these orders (the Special Purpose Liquidator's Tasks), including by: (A) inspecting the books and records of the Company; (B) conducting examinations pursuant to sections 596A or 596B of the Corporations Act or obtaining orders for production pursuant to section 597(9) of the Corporations Act; and (C) requiring statements to be provided pursuant to section 475(2) of the Corporations Act; (ii) pursuing any claim, including by commencing legal proceedings, that may be available to the company or the Special Purpose Liquidators in relation to any of the matters identified in the Special Purpose Liquidators' Tasks, including considering and obtaining legal advice in respect of pursuing any such claim; (c) in relation to only those matters set out in the Special Purpose Liquidator's Tasks, the Special Purpose Liquidators may take steps, including by commencing legal proceedings, to preserve or protect the assets of the Company, whether or not in the possession of the Company; (d) in relation to only those matters set out in the Special Purpose Liquidator's Tasks, the Special Purpose Liquidators, as additional liquidators of the Company, are entitled to exercise all powers conferred on a liquidator by section 506 of the Corporations Act, except for the powers contained in section 477(1)(a); 52 Order 4(b)(i) of the SPL Appointment Orders provided that the matters the subject of the "Special Purpose Liquidators' Tasks" were identified in the schedule to the SPL Appointment Orders (Schedule). The Schedule, relevantly, included the following matters: 1 All dealings or transactions between the First Respondent, its directors and officers and any of: (a) QNI Metals Pty Ltd ACN 066 656 175 (QNI Metals); (b) QNI Resources Pty Ltd ACN 054 117 921 (QNI Resources): and/or (c) the directors or officers of QNI Metals and QNI Resources, including but not limited to dealings or transactions arising under the Joint Venture Agreement dated 17 September 1992 (Joint Venture Agreement). 2 All potential claims or claims arising against: (a) QNI Metals; (b) QNI Resources; and/or (c) the directors or officers of QNI Metals and QNI Resources, including but not limited to potential claims or claims arising under the Joint Venture Agreement.

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D.2. Findings of the primary judge 53 The primary judge concluded that the SPL Appointment Orders did not authorise the SPLs to commence the Mineralogy proceeding. Her Honour reached the conclusion (a) by applying the plain words of the Schedule, and (b) because there was no reference in the Schedule to Mineralogy itself or to any dealings between QNI, its directors and officers on the one hand and Mineralogy on the other, that would extend to the loans which formed the basis for the Mineralogy proceeding: at J [213]-[214]. 54 The primary judge rejected a submission made by the Palmer Parties to the effect that the Mineralogy proceeding was "captured" by the Schedule, as a dealing between QNI and the JVCs or, alternatively, a dealing under the JVA because it was a claim by QNI as trustee under the JVA to recover trust assets for the benefit of the beneficiaries, the JVCs. The primary judge found at J [217]: However, the loans made by QNI to Mineralogy did not constitute a dealing or transaction between QNI and either or both [QNI] Metals and [QNI] Resources. Further, the proper construction of paragraph 1 of the Schedule is that it captures (1) all dealings or transactions between QNI, its directors and officers and any of the persons or entities described in (a), (b) and/or (c) which (2) includes but is not limited to dealings or transactions arising under the JVA. One does not get to (2) without also satisfying (1). In other words, and contrary to the construction contended for by the Palmer Parties, paragraph 1 of the Schedule does not capture all dealings or transactions arising under the JVA regardless of the parties to those dealings or transactions. 55 The primary judge also rejected the following submissions by the Palmer Parties directed at the pleadings and the parties in the Mineralogy proceeding (Mineralogy Pleadings Submission) that: the [Mineralogy] claim properly characterised, concerned whether the loan to Mineralogy was a trust asset in which QNI Metals and QNI Resources had a beneficial interest as beneficiaries of the Bank Account Trust but in which QNI had a beneficial interest by way of its rights of exoneration. QNI Metals and QNI Resources were properly defendants to the proceeding, including after consolidation. The defence to the claim included an allegation denying that QNI had a beneficial interest in the asset (paragraph 133(e) to the consolidated defence). Further, they alleged that they had made the loan not QNI (paragraph 133(aa)) and also that they had forgiven the loan or released Mineralogy (paragraph 177 to 180A). There was also a pleaded dispute as to whether QNI had been replaced by the Joint Venturers by QNS. The defences were raised because of the objective apprehension that the Mineralogy Claim concerned whether QNI was entitled to the proceeds to exercise a right of exoneration. (Footnotes omitted.) 56 The primary judge rejected the Mineralogy Pleadings Submission for the following reasons. 57 First, the primary judge was satisfied that the Mineralogy proceeding was a claim for the repayment of loans made by QNI to Mineralogy, the relevant transactions or dealings were between QNI and Mineralogy, and the claim was made against Mineralogy: at J [221]. 58 Second, the primary judge did not accept that the Mineralogy proceeding was transformed into a dealing or transaction between QNI and either or both of the JVCs within paragraph 1 of the Schedule because of the defence that was advanced to the Mineralogy proceeding, that the loans to Mineralogy were made by the JVCs not QNI and the loans had been forgiven or released by the JVCs: at J [222]. 59 Third, the primary judge did not accept that (a) the JVCs becoming defendants in the Consolidated proceeding, or (b) the observation by Bond J in Re Queensland Nickel (in liq) [2017] QSC 258 at [129], in the context of his Honour deciding whether to consolidate those proceedings, that the question of the basis on which QNI held monies in its accounts was relevant to both the Mineralogy proceeding and the SPL proceeding, transformed the Mineralogy proceeding into a claim within paragraph 2 of the Schedule: at J [223]. 60 Finally, the primary judge found that there were the following four fundamental problems with the Palmer Parties' contentions that the Mineralogy proceeding should have been pursued by the SPLs not the GPLs. 61 First, the primary judge found that there was no evidence that the SPLs would have consented to any extension of the powers conferred by the SPL Appointment Orders to permit them to bring the Mineralogy proceeding. Her Honour was satisfied that even if the SPLs had consented, or the existing orders had permitted them to bring the proceeding, there was no evidence that they would have agreed to pursue it: at J [254]. 62 Second, the primary judge did not accept the Palmer Parties' submission that it was not objectively beneficial for a trustee to deplete trust property by entering into unnecessary and duplicative funding arrangements. Her Honour rejected that submission because the pursuit of the Mineralogy proceeding by QNI through the GPLs, resulted in a benefit to the estate of "at least $74 million and potentially as much as $97 million (net of the funding premium, but not costs)": at J [255]-[256]. 63 Third, the primary judge found that there was no evidence to support the underlying premise of the Palmer Parties' contentions that the SPLs would have achieved the same or better result than the GPLs in pursuing the Mineralogy proceeding having "incurred much less expenses, to the benefit of the trust estate": at J [257]-[258]. 64 Fourth, the primary judge found that the Palmer Parties had failed to articulate and identify, what, if any, impact the Settlement Deed would have had on the Mineralogy proceeding. Her Honour considered the following questions had not been addressed. Would the Settlement Deed have been entered into on terms that would have permitted the SPLs to have continued with the Mineralogy proceeding? Would the Palmer Parties not have entered into the Settlement Deed at all if the SPLs had taken over the Mineralogy proceeding? Would the Palmer Parties have entered into a revised settlement deed that also compromised the Mineralogy proceeding, and if so on what terms?

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D.3.1. Palmer Parties 65 The Palmer Parties advance two principal contentions in support of Ground 1. 66 First, the Palmer Parties contend that the primary judge erred in finding, at J [209]-[227], that the Mineralogy proceeding was not within the scope of the SPL Appointment Orders. 67 The Palmer Parties submit that on the proper construction of the SPL Appointment Orders, objectively ascertained, the SPLs were authorised to conduct the Mineralogy proceeding on two alternative bases. 68 The first basis was that the SPL Appointment Orders authorised and were made for the purpose of the SPLs instituting and conducting claims such as the Mineralogy proceeding. They submit that this is confirmed by orders ultimately made by Bond J, over the objection of the GPLs, consolidating the Mineralogy proceeding, the SPL proceeding and the GPL proceedings comprising the Voidable Transactions proceeding and the Martino proceeding. They submit that the loan by QNI to Mineralogy was: a 'dealing or transaction' between QNI and QNI Metals and QNI Resources for the purpose of the SPL Order as it involved QNI as trustee advancing funds to a third party, which funds were held on trust for QNI Metals and QNI Resources as beneficiaries. QNI would (and will) need to account to QNI Metals and QNI Resources in respect of the proceeds of that loan. That the loan to Mineralogy was transacted by QNI on behalf of QNI Metals and QNI Resources made it a 'dealing or transaction' between QNI, QNI Metals and QNI Resources for the purposes of the SPL Order, including because the Mineralogy loan was a dealing or transaction "arising under" the JVA. 69 They submit that this construction is supported by the transcript of the hearing in which Dowsett J made the SPL Appointment Orders. They submit that the transcript makes clear, in unqualified terms, that it was intended that, by reason of their appointment, the SPLs would "have the funds available to prosecute claims without which there will be no return for unsecured creditors". 70 Alternatively, the Palmer Parties contend that the Mineralogy proceeding was "captured" by paragraph 2(b) of the Schedule, contrary to the primary judge's conclusion at J [218]-[223]. The Palmer Parties submit that the SPLs were authorised by paragraph 2(b) to conduct all claims or potential claims against QNI Metals and QNI Resources, including claims or potential claims arising under the JVA. They submit that by the time of the SPL Appointment Orders on 18 May 2016: QNI had received notice (on 7 March 2016) from QNI Metals and QNI Resources that QNI had been replaced as Manager and calling on QNI to attend to its obligations under clause 5.6(d) of the JVA, which required transfer of all joint venture assets to QN Sales. From receipt of that notice there was a potential claim by QNI against QNI Metals or QNI Resources in respect of the entitlement to prosecute the Mineralogy claim. That potential crystallised in the consolidated proceeding, which involved a claim that the loans to Mineralogy were made by QNI Metals and QNI Resources (not QNI) and that those loans had been forgiven. QNI Metals and QNI Resources were proper parties to those claims, including after consolidation. It was erroneous to dismiss the Palmer Parties' claim on the basis that the consolidated proceedings did not transform the Mineralogy loan into a transaction between QNI and the JVCs (J[222]). Paragraphs one and two of the SPL Tasks are independent sources of power for the SPLs. (Footnotes omitted.) 71 In substance, this is a restatement of the Mineralogy Pleadings Submission advanced before the primary judge. The submission includes a contention that paragraphs 1 and 2 of the Schedule provide independent sources of power for the SPLs. 72 Second, the Palmer Parties contend that the primary judge erred in rejecting the proposition that the SPLs would have achieved the same or a better result than the GPLs because they would have incurred lesser expenses, to the benefit of the trust estate: at J [257]-[258]. They submit that the absence of a funding premium in the Commonwealth LFA would have provided an indisputable benefit to the trust estate. 73 The Palmer Parties submit that the proper question for the Court to have considered in giving the judicial advice was whether the GPLs demonstrated that the SPLs could not have achieved a better result by pursuing the Mineralogy proceeding. They submit that the Mineralogy proceeding had not been settled by them. The relevant counterfactual, therefore, was that the Mineralogy proceeding would have been conducted to its conclusion in the same manner but the GPLs and their funding arrangements would be replaced by the SPLs and their funding arrangements. 74 The Palmer Parties advance the following submissions in support of this alleged counterfactual. 75 First, the Palmer Parties submit that the Mineralogy proceeding was determined by the Court's construction of the terms of the JVA. They submit that there "was the only one proper construction of the JVA, regardless of whether it was argued by the GPL's lawyers, or the SPL's lawyers, along with the rest of their case". 76 Second, the Palmer Parties submit that there was nothing to preclude the SPLs from leading the same evidence as that relied upon by the GPLs. They submit that: the GPLs' evidence in support of the Mineralogy claim was generally of two kinds:(a) financial data regarding the payments and their recording in QNI's accounting system (known as "SAP"); (b) evidence supporting an inferential contractual relationship. The GPLs' evidence was primarily adduced by one of the GPL's employed accountants (Ms Packer). There was nothing to suggest rationally, a counterpart in the employ of the SPLs would not have adduced the same evidence. 77 Third, the Palmer Parties submit that the SPL Appointment Orders permitted the conduct by the SPLs of the Mineralogy proceeding. It was, therefore, unnecessary for any further agreement to be reached with the Commonwealth to extend funding to cover the costs of the Mineralogy proceeding. 78 Fourth, the Palmer Parties submit that contrary to the apparent finding by the primary judge at J [242], the Vannin LFA was not an obstacle as it was entered into after the SPL Appointment Orders were made. The Vannin LFA was, therefore, an "obstacle of its own making" and constituted the wrongful conduct of QNI. They submit that QNI could and should have used its pre-existing and superior funding arrangements to conduct the Mineralogy proceeding. 79 Finally, the Palmer Parties submit that QNI breached the duties it owed as a trustee by failing to act reasonably in mitigating the costs and expenses that it incurred. They submit that had it acted with due care and skill, it could and should have utilised the SPLs to pursue the Mineralogy proceeding. They submit that if the SPLs had pursued the claim, QNI would not have incurred the Mineralogy Claim Expenses and Liabilities and, therefore, it would have incurred lesser expenses, to the benefit of the trust estate, because the SPLs were funded by the Commonwealth pursuant to the Commonwealth LFA which did not include any funding premium.

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D.4. Consideration 88 We address, first, the proper construction of the SPL Appointment Orders. 89 We are satisfied that there was no discernible error in the primary judge's finding that the SPLs' tasks, given to the SPLs pursuant to the SPL Appointment Orders, did not extend to the pursuit of the Mineralogy proceeding. 90 First, in our view, paragraphs 1 and 2 of the Schedule must be construed together. Paragraph 1 delineates the scope of the subject matter that the SPLs are authorised to investigate pursuant to Order 4(b)(i) of the SPL Appointment Orders. It is directed at "dealings or transactions" that QNI (and its directors and officers) might have had with QNI Resources and QNI Metals (and each of their respective directors and officers). Paragraph 2 of the Schedule, read in conjunction with Order 4(b)(ii) of the SPL Appointment Orders, then provides that claims against QNI Resources and QNI Metals (and each of their respective directors and officers), fall within the scope of the SPLs' Tasks. 91 The combined effect of Order 4(b)(ii) of the SPL Appointment Orders and paragraph 2 of the Schedule is that the SPLs may bring claims against QNI Resources and QNI Metals. The claims that might be made by reason of paragraph 2 of the Schedule must be claims arising from the investigation into the "dealings or transactions" the subject of paragraph 1 of the Schedule. 92 Second, the natural and ordinary meaning of the words in paragraphs 1 and 2 of the Schedule, read in context, make clear that any claim or potential claim against QNI Metals and QNI Resources, and/or their respective directors and officers, must arise from a dealing or transaction between QNI, its directors and officers, on the one hand, and QNI Metals and QNI Resources, and/or their respective directors and officers, on the other hand. The claims advanced in the Mineralogy proceeding were clearly not claims of that character. 93 The "including but not limited" reference to "potential claims or claims arising under the Joint Venture Agreement" at the end of paragraph 2 of the Schedule cannot textually be construed as expanding the scope of the "potential claims or claims" that were earlier delineated in paragraph 2 to extend to claims made against entities other than QNI Metals and QNI Resources and each of their respective directors and officers. 94 Third, the transcript of the application before Dowsett J on 18 May 2016 for the appointment of the SPLs to QNI, does not assist the Palmer Parties. It relevantly records: MR DOYLE: Unless - so the liquidators, whilst administrators, identified some worthwhile actions which could be pursued - or investigated and then pursued to recover funds from a number of people. They include from the owners of - that is, from the companies called Queensland Resources and Queensland Minerals, who are the joint venture principals of the Queensland Nickel, some preference claims, some uncommercial transaction claims, some claims against the director and claims against the shadow director. Subject to something that I will touch upon in a moment, the liquidator has said he has no funds to pursue those proceedings. Unless those recovery proceedings are pursued, there will be nil return to the unsecured creditors. The Commonwealth is a creditor for some $65 million-odd and it has agreed to fund the special purpose liquidator for the purposes of seeking to investigate, and if appropriate, to prosecute particular kinds of claims, which are those identified in the schedule to the application. Now, that alone, in our submission, makes it in the best interests of the company and the creditors that the special purpose liquidator be appointed, because he, and only he, or they, and only they, have the funds available to prosecute claims, without which there will be no return for the unsecured creditors. The drafting of the order has been such as to try to minimise any potential inefficiencies and overlap. We recognise that possibility exists, that there might be some duplication of efforts, but that has been minimised as far as possible in the order form of the order. There will be no delay because the funding is available for the special purpose liquidator immediately. All of those things, in our submission, point to this being an appropriate case for the special purpose liquidators. (Emphasis added.) 95 The submissions made by Mr Doyle, who appeared for the SPLs, emphasised that the "particular types of claims" were those identified in the schedule to the application and any duplication was intended to be "minimised as far as possible" by the "form of the order". The submissions do not support an expansive approach to the construction of the SPL Appointment Orders, particularly where such a construction is not supported by the text of the SPL Appointment Orders. 96 We turn now to the contention advanced by the Palmer Parties that the SPLs would have achieved the same or a better result in the Mineralogy proceeding than the GPLs but for a lesser expense. 97 The fundamental and insurmountable hurdle to any acceptance of this contention is the absence of any evidence that would support such a finding. The contention is based on a hypothetical and speculative premise that the SPLs would have been funded by the Commonwealth to prosecute the Mineralogy proceeding to completion, on the same terms as the Commonwealth LFA. 98 The unchallenged factual findings made by the primary judge do not provide any support for the drawing of an inference to that effect. Those findings relevantly included that (a) the GPLs sought funding from the Commonwealth to pursue the Mineralogy proceeding but their application was rejected: at J [232], (b) the Commonwealth did not advance any funding proposals to fund the Mineralogy proceeding after the consolidation of the proceeding: at J [232], (c) the Commonwealth had, earlier, made clear its limited objective to only pursue the $65 million that it was likely to be paid pursuant the Fair Entitlements Guarantee Scheme (FEG Scheme): at J [234], and (d) QNI was required to pursue the Mineralogy proceeding pursuant to the Vannin LFA and that agreement did not permit QNI to unilaterally terminate it and obtain alternative funding: at J [234]. 99 For the foregoing reasons, Ground 1 has not been established.

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E.2. Findings of the primary judge 103 The primary judge found at J [402]: As to the proposed order 3(a) and for the reasons already given, the liabilities incurred by QNI under the Vannin LFA were properly and reasonably incurred in relation to the winding up. 104 Proposed order 3(a) was to the effect that the GPLs would be justified in paying from the funds of QNI, the liabilities that they had incurred under the Vannin LFA: at J [396]. 105 An equivalent finding was made by the primary judge at J [404] with respect to the incurring of the GPL Liabilities. 106 We infer that the reference to the "reasons already given" in J [402] and [404] includes the reasoning of the primary judge at J [274]-[283]. That reasoning commences at J [274] with the statement: The Palmer Parties also complain that the funding premium was and is "unreasonable by ordinary commercial standards". 107 The primary judge observed at J [277] that the Palmer Parties had not adduced evidence to establish that the funding premium was unreasonable by commercial standards and rather, had tendered an affidavit of Ms Trenfield, filed in the Consolidated proceeding, which stated: On 13 September 2016 the Litigation Funding Agreement was entered into between the GPLs and Vannin (LFA). At the request of the GPLs, pursuant to its rights under the LFA, Vannin has nominated an increase in the funding limit under the LFA, but the terms and the funding premium entitlements of Vannin have not otherwise changed. I have read and am familiar with the terms of the LFA however have not exhibited that document to maintain its confidentiality. In my opinion, the terms and conditions of the LFA are reasonable and contain usual litigation funding terms and conditions including the extent of Vannin's funding premium entitlements and the indemnity made available to the GPL Parties. 108 The primary judge then found at J [278], that the opinion expressed by Ms Trenfield was supported by other evidence that established: (1) prior to entry into the Vannin LFA, the GPLs had canvassed major creditors of QNI (including the Commonwealth) as well as the commercial litigation funding market for potential funding for various claims by QNI, including the Mineralogy claim. That is, the GPLs, who are very experienced insolvency practitioners, conducted what was effectively an arms-length tender process in the commercial litigation funder market; (2) after exchanges and negotiations, the GPLs ultimately received offers for funding from three litigation funders, including Vannin. In the circumstances, it may be inferred that the terms of these offers were consistent with ordinary commercial terms then available in the market; (3) the GPLs rejected one offer as it was confined to funding public examinations only, as the GPLs were looking to fund recovery actions in circumstances where, in the case of the Mineralogy claim, limitation periods were due to commence expiring, at least potentially, within the next six months; (4) the GPLs shortlisted the remaining two offers for presentation to the Committee of Inspection. In many respects, the terms of those two offers (which became a confidential exhibit) have many similarities including as to the premium payable to the litigation funder; (5) the GPLs' recommendation to the Committee of Inspection was to approve the Vannin offer. As to why the Vannin offer was preferred to the ILP offer, and why the Vannin LFA should be entered, Mr Park gave unchallenged evidence that: The fundamental problem with the ILP offer … was the funding required - that we would continue to roll from litigation to litigation, with the positive obligation to use the funding from ILP, which attracted a premium, as opposed to the Vannin offer, which was the possibility for us to discharge that in sub two years, through some funding solution or a settlement, which we then could fund without the requirement for litigation funding going forward. That was the major reason, from my perspective, on adopting the Vannin funding. … I considered it to be in the interests of the creditors of Queensland Nickel to enter into [the Vannin LFA and] to finalise the realisations of the trust assets for distribution, yes. 109 The primary judge found at J [279] that: Having regard to this evidence, the complaint that the funding premium was and is "unreasonable by ordinary commercial standards" cannot be accepted. To the contrary, this evidence establishes that the funding premium was reasonable by ordinary commercial standards and that it was comparable to funding terms usually offered in the market at the relevant time. 110 After considering the affidavit and oral evidence of Mr Park as to the reasonableness of the GPLs' entry into the Vannin LFA, and noting the submission by the Palmer Parties that no weight should be given to Mr Park's evidence, the primary judge concluded at J [283]: In the circumstances and having regard to the other evidence which is identified above, it is not necessary to place any weight on Mr Park's evidence to make the finding (as has been done) that the funding premium was reasonable by ordinary commercial standards and that it was comparable to funding terms usually offered in the market at the relevant time.

[31]

E.3.1. Palmer Parties 111 The Palmer Parties submit that "the reasons already given" by the primary judge for her Honour's finding that the Mineralogy Claim Expenses and Liabilities were properly and reasonably incurred by the GPLs were the reasons given for rejecting the Palmer Parties' complaints that those costs were not properly and reasonably incurred. They submit that it necessarily follows that the primary judge erroneously imposed the onus on the Palmer Parties to demonstrate that the costs and expenses were not properly incurred. They submit that the tenor of J [277]-[283] demonstrates that the primary judge proceeded on the basis that the Palmer Parties had to establish that the funding premium was unreasonable by ordinary commercial standards. 112 Next, the Palmer Parties submit that respondents did not satisfy that onus. They submit that the evidence relied on by the primary judge was limited to Ms Trenfield's opinion about the reasonableness of the funding premium. Such an inference was based on the process conducted by the GPLs and the evidence of Mr Park's subjective belief that the Vannin offer was to be preferred to another offer. They submit that (a) Ms Trenfield's opinion was a subjective belief about a course of action already taken by her as liquidator, (b) there was no evidence on which the Court could infer that Ms Trenfield was qualified to give such opinion evidence, and (c) the Court treated her evidence without the necessary caution ordinarily given to a liquidator's opinion evidence on a fact in issue in proceedings to which they are a party. 113 The Palmer Parties submit that the evidence adduced by the GPLs did not include any independent assessment of the reasonableness of the Vannin LFA. They further submit that the evidence showed that alternative, less costly, funding arrangements were or may have been available and could and should have been pursued including (a) the GPLs obtaining staged funding from IMF Bentham Limited (IMF) to conduct public examinations and then going to market to obtain funding, or (b) QNI could have gone to market to obtain funding after the SPLs had conducted public examinations.

[33]

E.3.3. Vannin 117 Vannin submits that the Palmer Parties misconceive the different onuses of proof relevant to the proceeding and their application by the primary judge. 118 Vannin submits that the primary judge correctly rejected the contention of the Palmer Parties that was repeated on appeal, that the GPLs bore an onus to disprove any assertions that the Palmer Parties might make in opposition to the judicial advice sought. It submits that if the contention had been accepted, it would permit any party objecting to the judicial advice to raise any assertion, however speculative or hypothetical, without any evidentiary foundation and then place an onus of disproving the assertion on the trustee. 119 Vannin submits the primary judge correctly (a) rejected the objections made by the Palmer Parties to the funding premium on the basis that they advanced no evidence in support of them and then (b) weighed and accepted on its merits the evidence relied upon by the GPLs in support of the reasonableness and commerciality of the funding premium. 120 Next, Vannin addresses the complaint by the Palmer Parties that the primary judge accepted the GPLs' evidence that the funding premium was reasonable and conformed with ordinary commercial standards. 121 Vannin submits that the complaint is misconceived because (a) the evidence surveyed by the primary judge was not limited to Ms Trenfield's opinion, rather it extended to documentary and affidavit evidence of "what was effectively an arms-length tender process in the commercial litigation funder market", (b) there was no error in the primary judge relying on Mr Park's evidence in relation to one limited matter, being his reasons for recommending the Vannin offer to the Committee of Inspection, (c) the Committee of Inspection provided an independent assessment of the reasonableness of the Vannin LFA and the primary judge assessed the reasonableness of the funding premium against a similar arrangement found to be reasonable by the Full Court of this Court in IMF (Australia) Limited v Meadow Springs Fairway Resort Limited (in Liquidation) [2009] FCAFC 9 at [75]-[80] (North, Emmett and Rares JJ), and (d) the complaints otherwise made by the Palmer Parties are at best speculative, made with the benefit of hindsight and invite the Court to second-guess commercial decisions made by the GPLs.

[34]

E.4. Consideration 122 We do not accept that the primary judge has impermissibly reversed the onus in finding that the Vannin LFA and funding premium were reasonable by ordinary commercial standards. 123 The paragraphs alleged by the Palmer Parties to evidence the imposition of an onus on them (J [277]-[283]) unequivocally include positive findings directed at the reasonableness of the funding premium and its comparability to funding terms usually offered in the market at that time: see J [279] and J [283]. The reversal of the onus contention advanced in Ground 2 depends on seeking to characterise these findings as being limited to findings made for the purpose of dismissing the Palmer Parties' complaint that the funding premium was unreasonable by ordinary commercial standards. 124 Such a characterisation lacks any textual support. In the first sentence of J [279], the primary judge found that the Palmer Parties' funding premium complaint "cannot be accepted". In the second sentence of J [279], the primary judge expressly states "To the contrary", the evidence establishes that it was "reasonable by ordinary commercial standards" and "comparable to funding terms usually offered in the market at the relevant time". 125 The approach of the primary judge to commence an evaluation of the reasonableness of the funding premium by reference to the complaints made by the Palmer Parties, was unexceptional. It cannot transform findings subsequently made by her Honour into responsive or reflective findings limited to responding to any alleged positive case advanced by the Palmer Parties. 126 Nor do we accept, for the following reasons, that the Palmer Parties have established any basis to disturb the primary judge's finding that the Vannin LFA and funding premium were reasonable by ordinary commercial standards. 127 First, there was no error in the approach that the primary judge took to the opinion evidence of Ms Trenfield as to the reasonableness of the Vannin LFA and funding premium. The primary judge did not accept the evidence uncritically. Rather, her Honour assessed the weight to be given to her evidence against the objective facts and circumstances that her Honour summarised at J [278], none of which was challenged by the Palmer Parties on appeal. Ms Trenfield's independence and expertise, as submitted by the GPL Parties, were also not challenged. 128 Second, the evidence relied upon by the primary judge to conclude that the Vannin LFA and funding premium were reasonable by ordinary commercial standards extended well beyond the evidence of Ms Trenfield. 129 The evidence surveyed by the primary judge included evidence of approaches to creditors to fund recovery actions. The evidence was to the effect that (a) the GPLs had made unsuccessful approaches to seek suitable funding from the Commonwealth and several larger creditors of QNI, and (b) the only proposal for funding provided by the Commonwealth was limited to funding for the verification and distribution of FEG payments to employees: at J [79]-[80]. 130 The primary judge also had regard to evidence of approaches to litigation funders and the process by which Vannin was selected to provide funding. The evidence considered by the primary judge at J [82]-[89] was to the effect that: (a) on 5 July 2016, the Committee of Inspection was provided with information summarising expressions of interest that the GPLs had received from litigation funders; (b) the GPLs ultimately received offers for funding from Vannin, IMF and International Litigation Partners Pte Ltd (ILP); (c) the offer received from IMF was limited to funding public examinations; (d) on 30 August 2016, Mr Park informed a meeting of the Committee of Inspection that eight funding expressions of interest had been received but only three formal proposals had been received and he recommended the Vannin offer over the ILP offer; and (e) on 5 September 2016, a further meeting of the Committee of Inspection was held at which the Commonwealth representative suggested that the Commonwealth might be in a position to consider a further funding proposal after the conclusion of public examinations but those present resolved by majority vote to approve the GPLs accepting the Vannin offer on the basis of advice from Mr Park that it would provide immediate funding in circumstances where, until funding had been obtained, the GPLs would not be able to pursue any claims. 131 In our view, the finding by the primary judge that the Vannin LFA and funding premium were reasonable by ordinary commercial standards was entirely unexceptional given (a) the absence of any funding proposals from the Commonwealth or other creditors, (b) the absence of any objectively superior funding offer from an alternative funder, (c) the absence of any available funds to pursue the proceedings against Mineralogy, (d) the assessment made by the GPLs as to the merits of the Mineralogy proceeding, and (e) the time pressures on commencing proceedings as a result of the impending expiry of limitation periods. 132 For the foregoing reasons, Ground 2 has not been established.

[37]

F.3.1. Palmer Parties 137 The Palmer Parties submit that the Court of Appeal only held that QNI was acting as a trustee in holding monies in the working bank account established in the name of the joint venture pursuant to cl 6.4(f) of the JVA (JV Bank Account). They submit that the question of whether there was a general trust over all of the funds held in the JV Bank Account (Joint Venture Property) was not before the Court of Appeal and the only issue joined on the appeal concerned the JV Bank Account and the Mineralogy loan. 138 The Palmer Parties submit that in the QCA decision, the Court of Appeal (a) considered whether QNI incurred liabilities in different capacities for the benefit of the JVCs as an agent for the JVCs, not a trustee, and (b) found that only some of the Joint Venture Property was held on trust for the JVCs. The Palmer Parties also submit that the creditors to whom QNI incurred liabilities in the course of managing the joint venture were general creditors of QNI, "not trust creditors" of the Bank Account Trust or the Chose in Action Trust. 139 Next, the Palmer Parties submit that QNI could only call in and apply trust property of the Bank Account Trust and the Chose in Action Trust to discharge trust liabilities that it had incurred but not already discharged. They submit that these liabilities (a) were limited to liabilities that were properly incurred to third parties in the course of administering the Bank Account Trust or the Chose in Action Trust, (b) did not include liabilities to pay Joint Venture Expenses out of the JV Bank Account, (c) were incurred by QNI in the course of acting as Manager/agent of the JV pursuant to the wider terms of the JVA, and (d) were not incurred in performing any duty or exercising any powers conferred by the Bank Account Trust or Chose in Action Trust. 140 They submit that QNI could not institute proceedings to call in trust property (by instituting proceedings to recover the Mineralogy loan) for the purpose of paying non-trust creditors. 141 The Palmer Parties submit, however, that QNI instituted and pursued the Mineralogy proceeding to pay creditors incurred by QNI acting as General Manager of the joint venture. They submit that it was not established before the learned primary judge that any creditors of the joint venture were trust creditors of either the Bank Account Trust or Chose in Action Trust. 142 Finally, the Palmer Parties submit that QNI had no right to use the assets of the Bank Account Trust "to exonerate itself" against such creditors. They submit that QNI's pursuit of the Mineralogy proceeding for that purpose had caused it to improperly incur liabilities and expenses that were in excess of its rights as a trustee.

[40]

F.4. Consideration 147 We do not accept that the trust found by the Court of Appeal in the QCA decision was limited to a trust over monies or choses in action constituted by the bank account held by QNI from which the loan to Mineralogy was made. 148 As the primary judge found at J [147]: the funds held in the bank account formed part of the Joint Venture Property, and the Joint Venture Property (which included but was not confined to these funds) was stipulated to be beneficially owned by the JVCs with the legal title held by QNI. The Court of Appeal considered that the language of clause 3.1 of the JVA "makes it clear that there is a trust relationship" in relation to the Joint Venture Property. The existence of that trust relationship was recognised by the Court of Appeal in [58]-[61], [65], [66], [68]-[73] of the QCA decision, and, with respect, these findings accord with the proper interpretation of the JVA in any event. 149 In our view, it is plain that the Court of Appeal did not make any finding that the trust was limited to a trust over monies or choses in action constituted by the bank account held by QNI from which the loan to Mineralogy was made. 150 The Court of Appeal placed particular emphasis on cl 3.1 of the JVA which relevantly provides: 3.1 Specification of Participating Interests; Ownership of Property All the Joint Venture Property shall at all times be made available for the purpose and duration of the Joint Venture and during such duration shall not be used for any other purpose. All the Joint Venture Property and, subject to Clause 3.3, all estate and interest in Products produced at the Treatment Facilities shall be beneficially owned by the Joint Venturers as tenants in common, and all liabilities of the Joint Venture shall be severally borne by such Joint Venturers, in the following percentages (such percentages being the parties' respective Participating interests as at the Effective Date): Joint Venturer Participating Interest QNR 80% NRNQ 20% … 151 The Court of Appeal observed that the term "Joint Venture Property" by reason of cl 1.1 of the JVA included the chose in action constituted by the rights against the bank holding the Manager's account: QCA decision at [61]. Clause 1.1 of the JVA provides an expansive definition of Joint Venture Property that includes in paragraph (g): "Joint Venture Property" means: … (g) 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, including without limitation, (i) lands, security deposits, leases, licences, easements and other rights and incorporeal hereditaments; (ii) those arising out of the holding of any of, or being renewals, extensions, modifications, substitutions, variations, amalgamations or subdivisions of, or applications for, any of the rights, titles, interests, claims or benefits described elsewhere in this definition; and (iii) those granted pursuant to the Queensland Nickel Agreement Act; and 152 There is no support in cl 3.1 of the JVA for the existence of any discrete Bank Account Trust or Chose in Action Trust. Clause 3.1 provides that "all the Joint Venture Property" is only to be made available for the "purpose and duration of the Joint Venture" and relevantly "All the Joint Venture Property" shall be "beneficially owned by the Joint Venturers as tenants in common". 153 The Court of Appeal relied on this text, included in both in cl 3.1 and cl 3.2 of the JVA, to find that contrary to the findings of the primary judge, the relationship between QNI and the JVCs was one of trustee and beneficiary. Further, and importantly for present purposes, the Court of Appeal found that the trust was not limited to the JV Bank Account or any chose in action referrable to the JV Bank Account: QCA decision at [64]-[66] and [73] (with respect to cl 3.1 of the JVA). 154 Clause 5.5 (b) of the JVA is also significant. By that clause QNI agreed not to "directly or indirectly carry on or be interested in any other business or activity or other operation". 155 Moreover, the Court of Appeal, ultimately concluded at [173] that: As a consequence, in our respectful view, the conclusion that the loans were made by the JVCs to Mineralogy cannot be sustained. They were made by QNI as trustee and QNI is entitled to have them repaid. (Footnote omitted.) 156 That conclusion is binding on the Palmer Parties as parties to the QCA decision and in our view, is also consistent with the proper construction of the terms of the JVA. 157 The Palmer Parties have not identified any error by the primary judge in finding that all of QNI's trading, assets and liabilities were in furtherance of the joint venture and as trustee and, therefore, there was only one trust and one pool of creditors. 158 For the foregoing reasons, Ground 5 has not been established.

[42]

G.2. Findings of the primary judge 161 The primary judge rejected a submission by the Palmer Parties that after QNI's replacement as trustee by QNS, QNI was not permitted to undertake any duties as trustee, including getting in trust property, as those duties were now imposed on a new manager and trustee. 162 The primary judge found at J [170]-[176] that the submission was contrary to established legal principles, including: (a) a trustee's right of indemnity confers on the trustee a proprietary interest in the nature of an equitable lien or charge: Carter Holt Harvey Woodproducts Australia Pty Limited v The Commonwealth of Australia (2019) 268 CLR 524; [2019] HCA 20 at [32] (Kiefel CJ, Keane and Edelman JJ) at [83] (Bell, Gageler and Nettle JJ) and at [132] (Gordon J); (b) a trustee's accrued right of indemnity (including the right of exoneration), and the accompanying equitable lien, in respect of liabilities incurred whilst acting as trustee, survives removal as trustee (and, indeed, the appointment of a new trustee): Bruton Holdings Pty Ltd (in liq) v Commissioner of Taxation of the Commonwealth of Australia (2009) 239 CLR 346; [2009] HCA 32 (Bruton HCA) at [43] (French CJ, Gummow, Hayne, Heydon and Bell JJ); Jones v Matrix Partners Pty Ltd; Re Killarnee Civil & Concrete Contractors Pty Ltd (in liq) (2018) 260 FCR 310; [2018] FCAFC 40 at [142] (Allsop CJ); Cremin, Re Brimson Pty Ltd (in liq) [2019] FCA 1023 at [48] (Moshinsky J); Break Fast Investments Pty Ltd v Sclavenitis (2022) 67 VR 132; [2022] VSC 288 at [51(c)] (Riordan J); (c) where a corporate trustee is placed into liquidation, the right of indemnity passes to the liquidator: Carter Holt at [34]; Matrix Partners at [78-[79], [197] (Allsop CJ); In Re Suco Gold Pty Ltd (in liq) (1983) 33 SASR 99 at 107-108; (d) the proceeds from the exercise of corporate trustee's right of exoneration (as distinct from the right of reimbursement or recoupment) may only be applied in satisfaction of the trust liabilities to which the right of exoneration relates: Carter Holt at [40]-[42], [92]; Matrix Partners at [100]-[101]; (e) where a corporate trustee is in liquidation, the liabilities of the trust to which the right of exoneration exists include the cost of the liquidation and the liquidator's remuneration as they are to be regarded as debts incurred by the company in discharging trust obligations: Suco Gold at 110; Matrix Partners at [105]-[107]; Brimson at [51]; (f) where a former trustee continues to hold trust assets, it will do so as a bare trustee: Matrix Partners at [142]; Brimson at [48] and; Break Fast at [51]; and (g) a bare trustee retains the obligations that exist by virtue of its office, including the obligations described by the High Court in CGU Insurance Limited v One.Tel Limited (in liquidation) (2010) 242 CLR 174; [2010] HCA 26 (French CJ, Heydon, Crennan, Kiefel and Bell JJ) "to get the trust property in, protect it, and vindicate the rights attaching to it" (at [36]), including protecting and vindicating the rights attaching to trust property in the form of a chose in action, by prosecuting or continuing legal proceedings (at [37]), also referring to Bruton Holdings Pty Ltd (in liq) v Federal Commissioner of Taxation (2011) 193 FCR 442; [2011] FCAFC 79 (Bruton 2011) at [12], [15], [16] and [23] (Stone, Jacobson and Edmonds JJ). 163 Next, her Honour applied those principles to find at J [178] that: It therefore follows that, when QNI was replaced as Manager and trustee, QNI's accrued right of indemnity and the accompanying equitable lien survived its removal and QNI retained the obligation "to get the trust property in, protect it, and vindicate the rights attaching to it" as bare trustee. 164 Her Honour concluded that the replacement of QNI as Manager and trustee did not mean that it had acted beyond power in pursuing the Mineralogy proceeding. The contention advanced by the Palmer Parties that it was not permitted to be indemnified out of trust property for the Mineralogy Claim Expenses and Liabilities, therefore, must fail: at J [179]-[180].

[46]

G.4. Consideration 174 We do not accept the Palmer Parties' submission that the obligations of a bare trustee who has been replaced by a new trustee are confined to transferring assets to the new trustee or as directed by the beneficiaries. 175 The reliance by the Palmer Parties on Bruton 2008 is misplaced. There was no new trustee in that case and, in any event, the Full Court characterised a bare trustee's duties, powers and rights as "protecting the trust's assets": Bruton 2008 at [79]. 176 In Bruton 2008, the appellant had become a bare trustee of the assets of an educational trust upon the trust being wound up. The respondent, the Federal Commissioner of Taxation (Commissioner), then sought to use the garnishee regime pursuant to s 260-5 of Sch 1 to the Taxation Administration Act 1953 (Cth) (TAA) in relation to funds held by the appellant's solicitor on account of the educational trust. The appellant refused to comply with the s 260-5 notice on the grounds that the Commissioner should have used the liquidation regime under Subdiv 260-B of Sch 1 to the TAA. 177 The High Court in Bruton HCA allowed an appeal from the decision of the Full Court in Bruton 2008. The Full Court had earlier set aside a declaration made by the primary judge, Allsop J (as his Honour then was), that the s 260-5 notice was void. As submitted by the GPL Parties, their Honours stated at [43]: The appellant was not entitled to charge any remuneration, but, by force of cl 13 of the Trust Deed, the appellant has a lien on the trust assets for all liabilities, costs and expenses properly incurred by it in administration of the Trust. Further, even without that express provision, the appellant has rights of recoupment or exoneration in respect of all obligations incurred by it in that administration. These rights were supported by a lien over the whole of the trust assets which amounted to a proprietary interest therein and they survived the appellant's loss of office as trustee. The amount so secured to the appellant has yet to be determined. (Footnotes omitted.) 178 In Bruton 2011, the Full Court (Stone, Jacobson and Edmonds JJ) held that the commencement of proceedings by the appellant to prevent the Commissioner from impermissibly garnishing trust property was a valid exercise of the appellant's functions as a bare trustee: at [23]. The Full Court made a declaration that the appellant was, therefore, not disqualified from "indemnification by exoneration out of the property" of the educational trust for its costs and expenses incurred in bringing the proceedings: at [29]. 179 Their Honours stated in Bruton 2011 at [12] that it "was not in contention, indeed it could hardly be doubted that a bare trustee has an obligation to protect and maintain the trust property". In support of that proposition, their Honours referred to the decision of the High Court in CGU. 180 In CGU, a trustee under a deed of arrangement pursuant to Pt X of the Bankruptcy Act 1966 (Cth) commenced proceedings in the New South Wales Supreme Court in October 2006 in respect of a $20 million claim under an insurance policy. On 30 November 2007, the deed of arrangement had expired by effluxion of time. The summons in the Supreme Court was subsequently changed so the plaintiff was identified in his personal capacity and not as the trustee under the deed of arrangement. The primary judge determined that as the deed of arrangement had terminated the plaintiff had no power to continue the proceedings. An appeal from the primary judge's decision was allowed by the New South Wales Court of Appeal. 181 The High Court in CGU found that even if the trustee no longer held the chose in action under the trusts of the deed, following the termination of the deed of arrangement, the trustee remained a trustee and had an obligation to "continue the process of complying with the duty to vindicate the rights associated with the trust property": at [37]. Their Honours made the following statements directed at the rights and obligations of a bare trustee: 36 The primary judge described the trust on which the trustee held the rights under the policy which Mr Greaves assigned to it as a "bare trust" after the termination of the deed. Let that be assumed. The trustee of a bare trust has no interests in the trust assets other than those which exist by reason of the office of trustee and the holding of legal title. Further, the trustee of a bare trust has no active duties to perform other than those which exist by virtue of the office of the trustee, with the result that the property awaits transfer to the beneficiaries or awaits some other disposition at their direction. One obligation of a trustee which exists by virtue of the very office is the obligation to get the trust property in, protect it, and vindicate the rights attaching to it. That obligation exists even if no provision of any statute or trust instrument creates it. It exists unless it is negated by a provision of any statute or trust instrument. Here no provision of the Act or the deed negates it. Mr Greaves's equitable assignment of his right to sue CGU under the policy gave the trustee the duty to vindicate that right. After the deed terminated, the trustee continued to comply with the duty to vindicate that right by prosecuting the trustee proceedings against CGU in order to crystallise its advantages by reducing them to a judgment in damages. Even assuming in favour of CGU that, after termination of the deed, the trustee no longer held the chose in action on the trusts of the deed, the trustee did remain a trustee, and did have an obligation to continue the process of complying with the duty to vindicate the rights associated with the trust property. 37 It does not follow from CGU's contention that the trustee had no entitlement to continue the proceedings which could be derived from the deed once it had terminated that the trustee did not have an entitlement to continue the proceedings after the deed terminated which derives from a source other than the deed. The latter entitlement derives from the duty and power of trusteeship. The deed created a trusteeship with express duties. The termination of the deed caused the trustee to have duties and powers outside the deed. Here the duty of the trustee to vindicate the rights connected with the trust property related to a chose in action being enforced in the trustee proceedings. The hoped-for fruits of those proceedings lay in an order for damages. Discontinuance by the trustee with a view to letting some other person enforce the chose in action by starting a new action may have run the risk that the new action might be statute-barred, and would certainly have involved a waste of costs. In these circumstances the only way of protecting the chose in action, vindicating the rights attached to it and getting in its fruits was for the trustee to continue the proceedings. 182 After citing the above statements of the High Court in CGU, the Full Court stated in Bruton 2011 at [12]: It has long been accepted that what a bare trustee must do in discharge of its obligations will vary with the nature of the trust property and whatever might threaten it. In the absence of any challenge to the property a bare trustee may remain passive however as Meagher JA (with whom Samuels JA agreed) said in Corumo Holdings Pty Ltd v C Itoh Ltd (1991) 24 NSWLR 370 at 398, "almost no situation can be postulated where a trustee cannot in some circumstances have active duties to perform". In Chief Commissioner of Stamp Duties v ISPT Pty Ltd (1998) 45 NSWLR 639 at 651 Mason P said that though active and bare trusts were generally distinguished by the presence of active duties of management in the former and not the latter, "[i]t is equally clear that some active duties, though not of management, are imposed on some, but not all, bare trustees". Those active duties will, at the very least, include actions necessary to protect the trust property. 183 In neither Bruton 2011 nor CGU was a new trustee appointed, but the characterisation by the Full Court and the High Court of the rights and obligations of a bare trustee are equally apposite to any bare trustee, including as in this case, a trustee who had commenced proceedings to vindicate rights associated with trust property but has been replaced by a new trustee. 184 Nor do we accept the submission of the Palmer Parties that the Mineralogy proceeding was brought to vindicate the rights of non-trust creditors. The submission relies on the premise, that we have rejected in addressing Ground 5, that there was a discrete Bank Account Trust or Chose in Action Trust. 185 Further, the stark reality is that on any view, the trust estate in this case was enriched by a figure of between some $74 million and $97 million. Even if it were to be assumed that the pursuit of the Mineralogy proceeding was unauthorised or in breach of trust, a trustee is entitled to be indemnified for costs and expenses incurred in securing benefits for the trust fund. As the Full Court of this Court explained in Fitzwood Pty Ltd (ACN 005 180 163) v Unique Goal Pty Ltd (In Liq) (ACN 064 926 843) [2002] FCAFC 285 at [138] (Lee, Hill and Drummond JJ): It is because the trustee's right of indemnity is founded on this equitable consideration that requires beneficiaries who benefit from the activities of their trustee to meet the liabilities incurred by the trustee in generating these benefits that trustees are not disentitled to indemnity merely because they have been guilty of breach of trust or other misconduct. Even a trustee who improperly incurs a liability is entitled to be indemnified in respect of that liability to the extent to which, acting in good faith, he has benefited the trust estate. Nor does a trustee liable to compensate the trust for loss caused by his misconduct necessarily lose his right of indemnity: if there is a balance in favour of the defaulting trustee between what is due to the trust from the trustee by way of compensation and what is due to the trustee from the trust by way of indemnity, the trustee can recover the balance (and he can do that without first paying what is due by way of compensation). See RWG Management Ltd v Commissioner for Corporate Affairs [1985] VR 385 at 396 and 397-398. 186 The reliance by the Palmer Parties on the decision of Brooking J in R.W.G. Management is misplaced. The statement by Brooking J relied upon by the Palmer Parties, is quoted outside of its full context. In the same paragraph from which that statement is taken, Brooking J stated: A trustee is, however, entitled to be indemnified in respect of a liability improperly incurred to the extent to which, acting in good faith, he has benefited the trust estate: Vyse v Foster (1872) 8 Ch 309; LR 7 HL 318; Jesse v Lloyd (1883) 48 LT 656. 187 The contention advanced by the Palmer Parties that the decision to prosecute the Mineralogy proceeding and incur the Mineralogy Claim Expenses and Liabilities was "not a mere oversight or error of judgment" but rather was for the improper purpose of paying non-trust creditors, is misconceived. It necessarily depends on the premise, that we do not accept, that the trust assets were limited to the Bank Account Trust or the Chose in Action Trust. As we have concluded at [154] above, the whole of the assets of the joint venture were held on trust by QNI for the JVCs and those assets were available to meet the liabilities of all creditors. 188 We are satisfied that the Mineralogy Claim Expenses and Liabilities were properly incurred by QNI in pursuing the Mineralogy proceeding and that the primary judge did not err in making that finding. 189 For the foregoing reasons, Ground 4 has not been established.

[49]

H.3.1. Palmer Parties 198 The Palmer Parties submit that properly construed, cl 6.1(a) of the Settlement Deed releases QNI's conduct as engaged in by the SPLs. 199 They submit that, relevantly, (a) each of cl 6.1(b) to cl 6.1(e) of the Settlement Deed is confined to the SPLs and former SPLs, (b) pursuant to cl 6.2 of the Settlement Deed, only the SPLs and former SPLs can plead the Settlement Deed as a bar to the commencement or maintenance of any claim, and (c) the release in cl 6.1 is reciprocal to cl 4.1, which relates only to the "SPL Claims" and explicitly excludes the "GPL Claims". 200 They submit that such an interpretation is reinforced when regard is had to Sch 1B to the Settlement Deed, which comprises draft consent orders which were made by Mullins J on 5 August 2019. Those orders are consistent with a release of the SPLs but not QNI. By Order 7, QNI Resources and QNI Metals were granted leave to commence or continue proceedings (including by way of counterclaim) against QNI in respect of certain matters. By Order 8, the Court declared that QNI Resources and QNI Metals were persons with "a financial interest in the external administration of the second plaintiff (within the meaning of s 90-20 of the Insolvency Practice Schedule to the Corporations Act)". They submit that this construction supports an interpretation that cl 6.1(a) of the Settlement Deed only releases QNI's conduct as engaged in by the SPLs. 201 Third, the Palmer Parties submit that the purpose of the Settlement Deed was to settle the "SPL Claims" and maintain the "GPL Claims". Clause 4.1(b) provides that nothing in the Settlement Deed affects the "GPL Claims". The "GPL Claims" include the Mineralogy proceeding. By cl 6.2, the SPL and former SPLs can plead this Deed as a bar to any "QN Party Claims". There was no express provision for QNI or the GPLs to plead the Deed as a bar to any claims. The evident intent of the parties to the Settlement Deed was that claims by the GPL Parties relating to the "GPL Claims" were not the subject of any release by any party. 202 Fourth, the Palmer Parties submit that the parties never intended that the release in cl 6.1 would extend to the matters the subject of this proceeding. That intention is objectively established by the exclusion or carve out of the "GPL Claims" from the releases in the Settlement Deed.

[52]

H.4. Consideration 207 The following clauses of the Settlement Deed are relevant to a determination of Ground 3. We note at the outset that QNI is referred to in the Settlement Deed as QN. 208 Clause 1.1, relevantly, provides that: (a) QN Parties means: the QN Defendants, and Related Parties of the QN Parties and any former or present officers or directors of any QN Defendants which are companies, but excluding QN. (b) QN Party Claims means: a Claim by a QN Party against or in respect of QN, the SPL and the Commonwealth (whether all or any of them and for the avoidance of doubt includes any Claim in respect of the Mareva Undertaking). (c) SPL Claims means: a Claim by QN, the SPL either by himself or on behalf of QN (whether jointly or alone) against or in respect of a QN Party, other than the GPL Claims. (d) GPL Claims means: the Claims of the GPLs and QN currently being prosecuted by the GPLs in the QN Proceedings. For the avoidance of doubt, this includes the Claims originally contained in proceedings BS6847/16, BS3202/17 and BS4720/17 as those claims are continued and amended in consolidated proceedings BS6593/17. 209 Clause 4.1 provides that: 4.1 Releases Subject to QNIR and QNIM making payment of the sums required by clause 2.l(b), QN and the SPL: (a) Release the QN Parties and their Associates from the SPL Claims; (b) must not commence or maintain any Claim or action (including any Claim for costs) against the QN Parties relating to the QN Party Claims; (c) must ensure that any person for whom they are responsible or over whom they have control must withdraw, not commence or maintain any Claim or action (including any claim for costs) against the QN Parties or their Associates relating to the SPL Claims. For the avoidance of doubt: (a) the Consent Order Payment is not affected by the release in this clause; (b) nothing in this Deed affects the GPL claims; and (c) nothing in this clause affects any Claim to enforce the terms of this Deed or the Consent Orders. 210 The effect of cl 4.1 when read in conjunction with the definitions in cl 1.1, is that QNI has released the Palmer Parties (as QN Parties) from any Claims, other than those claims advanced in the Mineralogy proceeding. 211 Clause 4.2 provides that: 4.2 Bar The QN Parties and their Associates can plead this Deed as a Bar to any SPL Claim or Claim other than an SPL Claim in relation to the Consent Order Payment. 212 Clause 6.1 provides that: 6.1 QN Party Releases and Discontinuance (a) The QN Defendants Release QN, the SPL, SPLs (Former) and the SPL Associates from the QN Party Claims. (b) The QN Defendants must forthwith Discontinue any QN Party Proceedings to the extent they concern the SPL and SPLs (Former). (c) The QN Defendants must not commence or maintain any claim or action (including any claim for costs) against the SPL, the SPLs (Former) or the SPL Associates relating to the QN Party Claims in connection with the SPL's or the SP Ls (Former)'s appointment as liquidators of QN. (d) The QN Defendants must ensure that the Associates of any QN Parties and any other person for whom they are responsible or over whom they have control does not commence or maintain any claim or action (including any claim for costs) against the SPL, the SP Ls (Former) or the SPL Associates relating to the QN Party Claims in connection with the SPL's or the SP Ls (Former)'s appointment as liquidators of QN. (e) The QN Defendants must forthwith withdraw any subpoenas issued by them or at their request directed to the SPL in respect of the QN Proceedings. 213 Clause 1.1, relevantly, defines the following: (a) QN Defendants means: all of the defendants to the "QN Proceeding, and who are parties to this deed; (e) QN Proceedings means: Supreme Court of Queensland Proceeding BS6593/17", that is, the plaint number of the proceeding referred to in these reasons and below as the SPL proceeding, that was subsequently consolidated with the Voidable Transactions proceeding, the Mineralogy proceeding and the Martino Proceeding. The plaint number of the SPL proceeding was retained as the plaint number for the Consolidated proceeding; (f) QN Parties means: the QN Defendants, and Related Parties of the QN Parties and any former or present officers or directors of any QN Defendants which are companies, but excluding QN. (g) QN Party Claims means: a Claim by a QN Party against or in respect of QN, the SPL and the Commonwealth (whether all or any of them and for the avoidance of doubt includes any Claim in respect of the Mareva Undertaking). 214 Each of the Palmer Parties, relevantly, was both a defendant in the "QN Proceedings" and a party to the Settlement Deed. 215 Clause 1.1 of the Settlement Deed also defines the following: (a) Claims means: all existing or future claims, counter claims, actions or demands, rights to claim, appeals or reviews, claims for interest or claims for costs (including any costs orders) whether arising at equity or law or through subrogation or any other means and whether known or unknown at the time this Deed was entered into and includes any proceeding in a court and any action, subpoena, warrant, summons, investigation or legal process of any kind or type whatsoever and which arise out of or in relation to the QN Proceedings… (Emphasis added.) (b) Release means: absolutely, fully and irrevocably to release, withdraw, discharge and forgive. 216 We do not accept that the primary judge erred in finding that the Palmer Parties had released QNI from claims for relief premised on the proposition that the expenses incurred in advancing the Mineralogy proceeding were not properly or reasonably incurred. With respect, for the following reasons, we agree with the primary judge that the declaration sought by the Palmer Parties in their amended statement of claim fell within the scope of the definition of Claims that were released pursuant to the Settlement Deed. 217 First, the release given by each of the Palmer Parties (as QN Defendants) in cl 6.1(a) includes a release of QNI from the QN Party Claims. In turn, the QN Party Claims include any Claim by each of the Palmer Parties (as a QN Party) which arise out of or in relation to the QN Proceedings. As explained above, the QN Proceedings at the time of entry into the Settlement Deed referred to the Consolidated proceeding. It is readily apparent from the definition of "GPL Claims" in the Settlement Deed that the QN Proceedings were not limited to the SPL proceeding. Clause 1.1 provides that GPL Claims means: the Claims of the GPLs and QN currently being prosecuted by the GPLs in the QN Proceedings. For the avoidance of doubt, this includes the Claims originally contained in proceedings BS6847/16, BS3202/17 and BS4720/17 as those claims are continued and amended in consolidated proceedings BS6593/17. 218 Second, the pursuit of a declaration that the Mineralogy Claim Expenses and Liabilities were not properly and reasonably incurred was plainly a claim "in relation to" the QN Proceedings, that is, the Consolidated proceeding. The Consolidated proceeding included the claims advanced in the Mineralogy proceeding. The Mineralogy Claim Expenses and Liabilities plainly related to the Mineralogy proceeding. 219 Third, the focus in cl 6.1(b) to cl 6.1(e) of the Settlement Deed on the SPL, former SPLs and SPL associates does not qualify or provide a basis to read down the unqualified release by the Palmer Parties of QNI with respect to the QN Party Claims in cl 6.1(a). 220 Fourth, we accept that the release by QNI and the SPL in cl 4.1 can be construed as a reciprocal release to that provided by the Palmer Parties (as QN Defendants) in cl 6.1(a), subject only to the exclusion of the GPL Claims. That exclusion, does not otherwise confine the width of the mutual releases provided in those clauses. The SPL Claims include any other Claim by QNI and the QN Party Claims include any Claim by the Palmer Parties (as QN Parties) against QNI.

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