Parbery v QNI Metals Pty Ltd

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SUPREME COURT OF QUEENSLAND

CITATION:

Parbery & Ors v QNI Metals Pty Ltd & Ors [2018] QSC 107

PARTIES:

STEPHEN JAMES PARBERY AND MICHAEL ANDREW OWEN IN THEIR CAPACITIES AS LIQUIDATORS OF QUEENSLAND NICKEL PTY LTD (IN LIQ)
ACN 009 842 068

(first plaintiffs)

QUEENSLAND NICKEL PTY LTD (IN LIQ)
ACN 009 842 068

(second plaintiff)

JOHN RICHARD PARK, KELLY-ANNE LAVINA TRENFIELD & QUENTIN JAMES OLDE AS LIQUIDATORS OF QUEENSLAND NICKEL PTY LTD (IN LIQUIDATION)
ACN 009 842 068

(third plaintiffs)

v  

QNI METALS PTY LTD

ACN 066 656 175

(first defendant)

QNI RESOURCES PTY LTD

ACN 054 117 921

(second defendant)

QUEENSLAND NICKEL SALES PTY LTD
ACN 009 872 566

(third defendant)

CLIVE FREDERICK PALMER

(fourth defendant)

CLIVE THEODORE MENSINK

(fifth defendant)

IAN MAURICE FERGUSON

(sixth defendant)

MINERALOGY PTY LTD
ACN 010 582 680

(seventh defendant)

PALMER LEISURE AUSTRALIA PTY LTD
ACN 152 386 617

(eighth defendant)

PALMER LEISURE COOLUM PTY LTD
ACN 146 828 122

(ninth defendant)

FAIRWAY COAL PTY LTD
ACN 127 220 642

(tenth defendant)

CART PROVIDER PTY LTD
ACN 119 455 837

(eleventh defendant)

COEUR DE LION INVESTMENTS PTY LTD
ACN 006 334 872

(twelfth defendant)

COEUR DE LION HOLDINGS PTY LTD
ACN 003 209 934

(thirteenth defendant)

CLOSERIDGE PTY LTD
ACN 010 560 157

(fourteenth defendant)

WARATAH COAL PTY LTD
ACN 114 165 669

(fifteenth defendant)

CHINA FIRST PTY LTD
ACN 135 588 411

(sixteenth defendant)

COLD MOUNTAIN STUD PTY LTD
ACN 119 455 248

(seventeenth defendant)

EVGENIA BEDNOVA

(eighteenth defendant)

ALEXANDER GUEORGUIEV SOKOLOV

(nineteenth defendant)

ZHENGHONG ZHANG

(twentieth defendant)

SCI LE COEUR DE L’OCEAN

(twenty-first defendant)

DOMENIC MARTINO

(twenty-second defendant)

MARCUS WILLIAM AYRES

(first defendant added by counterclaim)

STEFAN DOPKING

(second defendant added by counterclaim)

FILE NO/S:

SC No 6593 of 2017

DIVISION:

Trial Division

PROCEEDING:

Application

DELIVERED ON:

25 May 2018

DELIVERED AT:

Brisbane

HEARING DATE:

23 August 2017; 14 September 2017; 15 September 2017;
17 October 2017; 18 October 2017; 19 October 2017;
30 October 2107; 21 December 2017; 6 March 2018

JUDGE:

Bond J

ORDER:

The orders of the Court are as follows:

1.       Order as set out in annexure A to these reasons, amended as identified in paragraph [321] of these reasons.

2.       The plaintiffs are directed to draw up a form of order embodying the order made by [1] above and to file that order in Court by 4:00pm on 28 May 2018.

CATCHWORDS:

PROCEDURE – STATE AND TERRITORY COURTS: JURISDICTION, POWERS AND GENERALLY – INHERENT AND GENERAL STATUTORY POWERS – TO PREVENT ABUSE OF PROCESS – GENERALLY – where company in liquidation – where liquidators commenced proceedings against former directors and certain companies within the corporate group – where liquidators brought an application for freezing orders and ancillary orders – where orders are sought pursuant to the Uniform Civil Procedure Rules 1999 (Qld) or pursuant to the Court’s inherent jurisdiction – whether a freezing order should be made against all or any of the defendants – whether, in the alternative, a form of notification order should be…

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Details
Case
[2018] QSC 107
Decision Date

CaseChat Overview and Summary

Parbery v QNI Metals Pty Ltd involved a case where liquidators of Queensland Nickel sought freezing orders and ancillary orders against former directors and companies within the corporate group. The Court was required to determine whether a freezing order should be granted against any of the defendants, and if not, whether a form of notification order should be made. The court also had to assess whether the plaintiffs had a good arguable case, whether there was a risk to the integrity of prospective court processes of execution and enforcement, and whether the interests of justice favoured the granting of the orders sought.

The court examined the legal criteria for granting a freezing order, which includes demonstrating a real risk that a future judgment would not be met due to unjustifiable dissipation of assets. The court held that it was not necessary for the plaintiff to show that the defendant’s purpose in dealing with assets was to prevent recovery of any judgment, but rather that the effect of the conduct would be to prevent such recovery. The court noted that the weight of Australian authority, including binding precedent, supported this approach. The court also discussed the need for some examination of the prospects of a freezing order being made in the future when ancillary orders were sought.

In its decision, the court found that the liquidators did not meet the required threshold to justify the granting of freezing orders. The court outlined the responsibilities of Queensland Nickel, including managing the joint venture, maintaining accounting records, and controlling joint venture property. It concluded that there was insufficient evidence to demonstrate a real risk of dissipation of assets that would justify the granting of the orders sought. The court therefore denied the application for freezing orders but left open the possibility of a notification order to be determined at a later stage.

Orders

Orders of the court

The orders of the Court are as follows:

1. Order as set out in annexure A to these reasons, amended as identified in paragraph [321] of these reasons.

2. The plaintiffs are directed to draw up a form of order embodying the order made by [1] above and to file that order in Court by 4:00pm on 28 May 2018.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

There is not a great deal of authority touching upon applications for orders on the basis that they are ancillary to a prospective freezing order. However, such authority as there is supports the view which I have expressed that there must be some examination at the time the ancillary order is sought of the sufficiency of the prospects that a freezing order will be made in the future. Thus:(a)In Perdaman Chemicals and Fertilisers Pty Ltd v the Griffin Coal Mining Company Pty Ltd [2011] WASC 188, Beech J wrote (emphasis added):[151] The order sought by Perdaman might be characterised as an ancillary order to preserve the position to enable Perdaman to apply for a freezing order, if so advised, following receipt of notice from Griffin pursuant to the injunction. Insofar as it is characterised in this way, it will be relevant to assess, in this application, the prospects of Perdaman obtaining a freezing order at that later time, to take into account whether those prospects are sufficient to warrant the imposition of the notice requirement on Griffin. I will return to this point.…[210] I have found that, apart from under cl 2.3 of the Negative Pledge Deed, the evidence does not establish a real threat or danger of execution by Griffin of an ICICI Charge. The only threat or danger of execution of an ICICI Charge is under cl 2.3.[211] I have identified the likely prejudice to Griffin by the grant of an injunction restraining the execution of an ICICI Charge under cl 2.3 without notice to Perdaman.[212] The injunction sought restrains execution of a charge (of a particular kind) without notice. The purpose of requiring notice before execution is to enable Perdaman to apply for a substantive freezing order in the form of an injunction restraining the execution of an ICICI Charge. The question arises whether, on the evidence before me, there is sufficient prospect of a substantive freezing order being made at the second stage (after notice to Perdaman pursuant to the injunction sought in this application), restraining execution by Griffin of an ICICI Charge pursuant to cl 2.3, to justify the imposition of the notice requirement on Griffin.[213] Perdaman submits that the question of whether such an injunction might be granted at the second stage should be left to be assessed at the time of any application, on the basis of all the facts and circumstances then revealed. There is some force in this argument. However, on balance, I am not persuaded by it. In my view, there must be a sufficient foundation for the prospect of a substantive freezing order at the second stage to justify the imposition of the injunction to restrain execution without notice. In the circumstances of this case, unless there is some reasonable prospect of a substantive freezing order being made at the second stage, I think it would be inappropriate to require notice before execution of a relevant charge. What is a sufficient foundation, and what is a reasonable prospect, must take into account the limited extent of the prejudice to Griffin that I have found in the preceding section of these reasons. All the circumstances are to be weighed in the exercise of the discretion.[214] For the reasons that follow, subject to one qualification, I am unable to identify circumstances in which there is any sufficient or reasonable prospect that I would, at the second stage, restrain execution, pursuant to cl 2.3, of an ICICI Charge.(b)In BGC Australia Pty Ltd v Minspec Pty Ltd [2015] WASC 134, Mitchell J observed:[11] As a freezing order is not contemplated at this stage, I do not need to determine whether the criteria for making a freezing order are satisfied. It is sufficient that there is a proper basis for apprehending that there might be grounds for making such an application in the future.(c)In JSC Mezhdunarodniy Promyshlenniy Bank v Pugachev [2015] EWCA Civ 139 at [50]-[52], Lewison LJ approved a suggestion in an earlier case that what was requisite was that the applicant establish at least that there were “credible grounds for making [the prospective freezing order application] if so advised”.

Decision

Reasons for decision

The defendants submitted that “real risk of dissipation” was an insufficient description of the required degree of proof. They invited me to follow Candy v Holyoake [2017] EWCA Civ 92 per Gloster LJ (with whom Jackson LJ agreed) at [34], to conclude that, in every case (emphasis added):There must be a real risk, judged objectively, that a future judgment would not be met because of an unjustifiable dissipation of assets. But it is not every risk of a judgment being satisfied which can justify freezing order relief. Solid evidence will be required to support a conclusion that relief is justified... I decline to take that course. Expressing the matter in a way which required the plaintiff to establish a risk of an “unjustifiable” dealing with assets would invite an enquiry into the defendant’s purpose or motivation in embarking on an actual or apprehended dealing with assets, with a view to establishing a purpose that can be impugned as “unjustifiable”. The weight of authority in Australia (including authority binding on me[22]) supports the view that a plaintiff seeking a freezing order does not have to show that the purpose of the defendant’s conduct, occurring or apprehended, is to prevent recovery of the amount of any judgment which might be obtained in the plaintiff’s action. Rather, it will suffice if the plaintiff can demonstrate that that would be the effect of the conduct: see Glenwood Management Group Pty Ltd v Mayo [1991] 2 VR 49 per Young CJ at 53; Northcorp Limited v Allman Properties (Australia) Pty Ltd [1994] 2 Qd R 405 per Pincus JA, Ambrose and White JJ at 407; Hayden v Teplitzky (1997) 154 ALR 497 per Lindgren J at 505-507; Consolidated Constructions Pty Ltd v Bellenville Pty Ltd [2002] FCA 1513 per Carr J at [17]-[26]; Victoria University of Technology v Wilson [2003] VSC 299 per Redlich J at [24]; BGC Contracting Pty Ltd v WA Construction Hire Pty Ltd [2010] WASC 25 per Le Miere J at [11]-[14]; Perdaman Chemicals & Fertilisers Pty Ltd v Griffin Coal Mining Co Pty Ltd [2011] WASC 188 per Beech J at [135]. [22] See Northcorp Limited v Allman Properties (Australia) Pty Ltd [1994] 2 Qd R 405. The binding status of Northcorp was recognized in Fletcher v Fortress Credit Corporation (Australia) II Pty Limited per McMurdo J at [28]. It is appropriate to make some (non-exhaustive) observations as to the way in which a plaintiff may go about demonstrating the existence of the relevant risk. First, although it is not essential to prove that a defendant’s purpose or intention is to frustrate any potential judgment against the defendant, that is not to say that the question of purpose or intention is irrelevant. If a plaintiff adduced evidence which shed light on the likely actual intentions of a defendant, that evidence might well prove to be extremely relevant. In his text Freezing and Search Orders,[23] Biscoe observes (at [6.19]):However, if there is evidence of a positive intention to frustrate a judgment, that should almost certainly lead the court to exercise its discretion to grant a freezing order. Thus the respondent’s own boasts were held sufficient evidence of the necessary danger in A/S D/S Svendborg v Wansa [1997] 2 Lloyd’s Rep 183 at 188-9; and in Ausbro Forex Pty Ltd v Mare (1986) 4 NSWLR 419 evidence of a threat by the defendant to close up his companies and take his money and himself overseas led Young J to grant a Mareva order.[23] Peter Biscoe, Freezing and Search Orders (LexisNexis Butterworths, 2nd Ed, 2008).

Ratio Decidendi

Legal Principle Established

Queensland Nickel as General Manager was in charge of and responsible for (amongst other things, emphasis added):(a)the overall management, operation and administration of the Joint Venture: cl 5.2(a)(i);(b)managing the funds of the Joint Venture: cl 5.2(a)(ii);(c)maintaining the accounting records of the Joint Venture: cl 5.2(a)(iii); (d)preparing and maintaining complete books and accounting records describing each Joint Venturer’s financial involvement in the Joint Venture: cll 5.2(a)(iii) and 5.2(b)(xvii); (e)the management and control of the Joint Venture Property (a term which was defined, to which I will shortly turn) and all operations under the Joint Venture Agreement as agent for and for the account of the Joint Venturers: cl 5.2(a)(vii); (f)the performance of “Management Services” as described in the Administration Agreement: cl 5.2(a); and(g)the doing of all other acts and things as may be necessary or advisable for efficient and economic operation of the Joint Venture: cl 5.2(b)(xxiv). As to the Joint Venture Property (the management and control of which was the responsibility of Queensland Nickel as just recorded):(a)Clause 3.1 of the Joint Venture Agreement recorded the agreement of the Joint Venturers (and Queensland Nickel) that (emphasis added) – 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. …(b)The expression “Joint Venture Property” is comprehensively defined in cl 1.1 of the Joint Venture Agreement 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”. However, products produced at the nickel refinery did not fall within the definition of Joint Venture Property: cll 3.1 and 3.3 and the definition of “Products” in cl 1.1. (c)All the “Joint Venture Property” and, subject to cl 3.3, all Products, were beneficially owned by the two Joint Venturers as tenants in common in proportion to their participating interest in the Joint Venture and all liabilities of the Joint Venture were to be severally borne by the two Joint Venturers in that proportion: cl 3.1. By cl 3.3 “Each of the Joint Venturers shall have the right to, and shall, receive in kind its Subject Products on production thereof at the Treatment Facilities and separately dispose of or market such share.”(d)Notwithstanding the statement concerning beneficial ownership of Joint Venture Property, the Joint Venture Agreement expressly contemplated that (with the exception of real property and mining titles) legal title to any Joint Venture Property could, for purposes of convenience and at the request of the Joint Venturers, be held solely in the name of Queensland Nickel: cl 3.2. If that occurred, the Joint Venture Property would be held “for the use and benefit of the Joint Venturers in proportion to their Participating Interests”. Thus the possibility that Queensland Nickel might hold Joint Venture Property on trust was obviously contemplated.(e)The Joint Venture Agreement imposed restrictions on the ability of the Joint Venturers and a Joint Venture Owners Committee (“the JVOC”, as to which see [89] below) to create “Encumbrances” over Joint Venture Property, but in terms which contemplated that “Permitted Encumbrances” might be created. Thus:(i) “Encumbrance” was defined in cl 1.1 to mean mortgage, hypothecation, pledge lien or charge or anything analogous to any of those things;(ii) “Permitted Encumbrance” was defined in cl 1.1 to include various liens arising in the ordinary course of business, including –Aany mechanics’ workmen’s or other like lien arising in the ordinary course of business securing obligations which are not yet overdue or which are being contested or litigated in good faith; andBany Encumbrance in respect of deposits of money or property by way of security for the performance of any contractual or statutory obligations arising in the ordinary course of business other than obligations for borrowed moneys or the deferred purchase price of goods or services;(iii) other than a Permitted Encumbrance, the creation of any Encumbrance over all or any part of the Joint Venture Property was regarded as a decision required to be made by the approval of each Joint Venturer: cl 4.10; and(iv) without the prior consent of the other Joint Venturer, no Joint Venturer could create or suffer to subsist any Encumbrance of its interest except a Permitted Encumbrance.(f)Queensland Nickel was constrained (except for liens arising in the normal and ordinary course of business) against creating any mortgage, pledge, charge, encumbrance, lien over, or trust in respect of Joint Venture Property or any of it: cl 5.5(i).