Parbery v QNI Metals Pty Ltd - [2018] QSC 240

SUPREME COURT OF QUEENSLAND

CITATION: Parbery & Ors v QNI Metals Pty Ltd & Ors [2018] QSC 240

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 LIQ) 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)
ALEXANDAR GUEORGUIEV SOKOLOV
(nineteenth defendant)
ZHENGHONG ZHANG
(twentieth defendant)
SCI LE COEUR DE L’OCEAN
(twenty-first defendant)
DOMENIC MARTINO
(twenty-second defendant)
and
MARCUS WILLIAM AYRES
(first defendant added by counterclaim)
STEFAN DOPKING
(second defendant added by counterclaim)
FILE NO: SC 6593 of 2017
DIVISION: Trial Division
PROCEEDING: Applications filed by defendants on 12 July 2018 (CFI 302)
and 3 October 2018 (CFI 358)

Applications filed by plaintiffs on 18 June 2018 (CFI 287) and 11 July 2018 (CFI 300)
DELIVERED ON: 22 October 2018
DELIVERED AT: Brisbane
HEARING DATE: 8 and 9 October 2018
JUDGE: Jackson J
ORDER: The order of the court is that:

1.

The application for leave to proceed filed on 3 October 2018 is dismissed, except for the counterclaim not struck through on the draft pleading that is the Annexure to these reasons

2.

The defence and counterclaim filed 12 April 2018 is struck out with leave to the defendants other than the fourth, twentieth and twenty-first defendants to file an amended consolidated defence and counterclaim in accordance with the draft pleading that is the Annexure to these reasons.

3.

As to the consolidated statement of claim filed 6 August 2018:

(a) the words “and were subject to the equitable liens
pleaded in paragraphs 112 and 113” are struck out

of paragraphs 182, 187, 194, 203, 208, 214, 220,
226, 232, 238, 244, 250, 256, 263, 271, 278, 290, 309,
318, 329, 337, 345, 353, 359, 365 and 372;

(b) paragraph 313 is struck out; and
(c) paragraphs 378 and 379 are struck out.
4. Adjourn the hearing of any further orders or directions as to pleadings to a date to be fixed.
5. Reserve all questions of costs of the applications.

CATCHWORDS:

CORPORATIONS – WINDING UP – CONDUCT AND INCIDENTS OF WINDING UP – PROCEEDINGS BY OR AGAINST THE COMPANY – LEAVE TO PROCEED – WHEN LEAVE GRANTED – where leave sought to proceed
against company in liquidation that was manager of joint
venture business – where counterclaim for failure to transfer
property to new manager as required alternatively by contract,
trust, agency or bailment – where causation of two billion
dollar loss alleged on basis that business ceased operations due

to failure to transfer property – where alleged particular leases, licences and contracts necessary for continued operation – where various other counterclaims – whether leave to proceed
against company in liquidation should be granted

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – PLEADINGS – STRIKING OUT –
DISCLOSING NO REASONABLE CAUSE OF ACTION OR
DEFENCE – OTHERWISE ABUSE OF PROCESS – where
plaintiffs apply for strike out of counterclaim and defence of
set-off – where no leave to proceed on counterclaim that forms
the basis of set-off – whether set-off should be struck out as
disclosing no reasonable defence

EQUITY – TRUSTS AND TRUSTEES – POWERS, DUTIES, RIGHTS AND LIABILITIES OF TRUSTEES – INDEMNITY, LIEN AND REIMBURSEMENT – RELEVANT PRINCIPLES – where statement of claim alleges
joint venture agreement contract gives rise to trust relationship
– where statement of claim alleges right to indemnity, lien and
right of retention for liability incurred in conducting joint

venture – where lien alleged as basis for proprietary relief throughout statement of claim – where defendants complain that lien cannot extend to all trust property – where no

allegation that at the time of payments or transfers the trust property was insufficient to meet right of indemnity should the
payment or transfer be made – whether lien allegations should
be struck out as disclosing no reasonable cause of action

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – PLEADINGS – FORM OF PLEADING – SHORT FORM MONEY COUNTS – where claims for money paid – where defendants complain that no allegation that the payments discharged relevant debts –
whether claims for money paid should be struck out as
disclosing no reasonable cause of action

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – OVERRIDING PURPOSE OF
AND OBLIGATIONS UNDER RULES OR ACTS
REGULATING CIVIL PROCEEDINGS – where Uniform

Civil Procedure Rules 1999 (Qld) provide for overriding objective, undertaking to the court to proceed expeditiously
and sanctions for failure to comply – discussion of relevant
principles to be applied
Corporations Act 2001 (Cth), s 471B, s 588FE, s 588FF, s
1324
Trusts Act 1973 (Qld), s 72
Uniform Civil Procedure Rules 1999 (Qld), r 5, r 171, r 292, r
293
Agar v Hyde (2000) 201 CLR 552, cited
Agricultural and Rural Finance Pty Ltd v Gardiner (2008)
238 CLR 570, cited
Agusta Pty Ltd v Official Trustee in Bankruptcy (2008) 6
ABC (NS) 164, cited
Agusta Pty Ltd v Official Trustee in Bankruptcy [2009]
NSWCA 129, cited
Alati v Kruger (1956) 94 CLR 216, cited
American Dairy Queen (Qld) Pty Ltd v Blue Rio Pty Ltd
(1981) 147 CLR 677, cited
Ancient Order of Foresters in Victoria Friendly Society
Limited v Lifeplan Australia Friendly Society Ltd [2018]
HCA 43, cited
Aon Risk Services Australia Ltd v Australian National
University (2009) 239 CLR 175, considered
Australian Securities and Investments Commission v Letten
(No 17) (2011) 286 ALR 346, cited
Australian Securities Commission v Marlborough Gold

Mines Ltd (1993) 177 CLR 485, cited Basha v Basha [2010] QCA 123, cited
Batistatos v Roads & Traffic Authority of New South Wales
(2006) 226 CLR 256, considered
Birbilis Bros Pty Ltd v Chubb Fire and Security Pty Ltd
[2018] QSC 3, cited
Burness (as liquidator of Denward Lane Pty Ltd (in liq)) v

Byrnes v Kendle (2011) 243 CLR 253, cited
Cherry v Boultbee (1839) 4 My & Cr 442, 41 ER 171, cited
Commonwealth v Davis Samuel Pty Ltd (No 5) (2008) 164
ACTR 1, cited
Denton v TH White Ltd [2014] 1 WLR 3926, cited
Dey v Victorian Railways Commissioners (1949) 78 CLR 62,
cited

Supaproducts Pty Ltd (2009) 259 ALR 339, cited cited
Expense Reduction Analysts Group Pty Ltd v Armstrong
Strategic Management and Marketing Pty Ltd (2013) 250
CLR 303, cited
Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230
CLR 89, cited
General Steel Industries Inc v Commissioner for Railways
(NSW) (1964) 112 CLR 125, cited
Graham & Linda Huddy Nominees Pty Ltd v Byrne [2016]
QSC 221, cited
Hartglen Pty Ltd v Geoff Mitchell & Associates Pty Ltd
[2004] QSC 67, cited
Hartnett v Hynes [2009] QSC 225, cited
Hartnett v Hynes [2010] QCA 65, cited
Hendersons Automotive Technologies Pty Ltd (in liq) v

Flaton Management Pty Ltd (2011) 32 VR 539, cited Heperu Pty Ltd v Belle (2009) 76 NSWLR 230, cited Hewett v Court (1983) 149 CLR 639, cited
Kemtron Industries Pty Ltd v Commissioner of Stamp Duties

(Qld) [1984] 1 Qd R 576, considered cited
Lemery Holdings Pty Ltd v Reliance Financial Services Pty
Ltd (2008) 74 NSWLR 550, cited
Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR
635, cited
Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938)
61 CLR 286, cited
Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (2013)
42 VR 27, cited
Maritime Electric Co Ltd v General Dairies Ltd [1937] AC
610, cited
Metropolitan Bank Ltd v Pooley (1885) 10 App Cas 210,
cited
Parbery & Ors v QNI Metals Pty Ltd & Ors (2018) 127
ACSR 582, related
Park v Whyte (No 3) [2018] 2 Qd R 475, cited
Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA
154, cited
Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165, cited
Proactive Management & Ors v Over Fifty Funds & Ors
[2007] NSWSC 802, cited
QNI Resources Pty Ltd & Ors v Park & Ors (2016) 116
ACSR 321, related
QNI Resources Pty Ltd & Ors v Queensland Nickel Pty Ltd
(in liq) [2017] QCA 167, related
Quinlan v Rothwell [2002] 1 Qd R 647, cited
Re Nisbet and Potts’ Contract [1906] 1 Ch 386, cited
Re Siromath Pty Ltd (No 3) (1991) 25 NSWLR 25, cited
Re Worldwide Specialty Property Services Ltd (in liq) [2017]
NSWSC 1851, cited
Ridolfi v Rigato Farms Pty Ltd [2001] 2 Qd R 455, cited
Roxborough v Rothmans of Pall Mall Australia Ltd (2001)
208 CLR 516, cited
RWG Management Ltd v Commissioner for Corporate Affairs
[1985] VR 385, cited
Southern Cross Mine Management Pty Ltd v Ensham
Resources Pty Ltd [2004] QSC 457, cited
Spencer v Commonwealth (2010) 241 CLR 118, cited
Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245, cited
Testel Australia Pty Ltd v KRG Electrics Pty Ltd [2013]
SASC 91, cited
Trident General Insurance Co Ltd v McNiece Bros Pty Ltd
(1988) 165 CLR 107, cited
UBS AG v Tyne [2018] HCA 45, cited
Webster v Lampard (1993) 177 CLR 598, cited
X v A [2001] 1 All ER 490, cited
COUNSEL: G Gibson QC, with T Sullivan QC, C Curtis and A Rae for
the plaintiffs
M Condon SC, with N Kabilafkas and T March for the
defendants except the fourth, twentieth and twenty-first
defendants
SOLICITORS: King & Wood Mallesons and HWL Ebsworth for the
plaintiffs
Alexander Law for the defendants except the fourth,
twentieth and twenty-first defendants
JACKSON J:
Introduction

These are four applications that were argued at the same time. They are of two kinds. First, the defendants except the fourth, twentieth and twenty-first defendants
(“defendants”) apply for leave to proceed on their counterclaim (“application for
leave”) against the second plaintiff (“QNI”) and the third plaintiffs and second
defendant added by counterclaim (“GPLs”).[1] Second, the defendants apply to strike out paragraphs of the amended consolidated statement of claim (“CSOC”) and the
[1] For clarity, in these reasons I will adopt the same abbreviations and naming conventions for the parties that are used in the pleadings.

plaintiffs bring two applications to strike out paragraphs of the consolidated further
amended defence and counterclaim.
[2] On 19 April 2018, the proceeding was by order continued as a consolidated proceeding of four earlier originating proceedings. The CSOC is as filed on 6 August 2018. The consolidated defence and counterclaim evolved from the document filed on 12 April 2018 through a series of iterations produced in the few days before the
hearing and during the hearing until the final form that was made exhibit “B” on 9
October 2018 (“9 October CDAC”).

Leave to proceed is applied for against QNI as a company ordered to be wound up in
insolvency under s 471B of the Corporations Act 2001 (Cth) (“CA”). Leave to

proceed is applied for against the GPLs, who are the general purpose liquidators of
QNI, for conduct as the former administrators of QNI and (possibly) as liquidators.

Leave is sought nunc pro tunc, because the originating proceedings were started and the consolidated proceeding has continued without it being granted. An earlier

application for leave was dismissed (“first application for leave”),[2] and an appeal from
that order was dismissed (“appeal”).[3]
[2] QNI Resources Pty Ltd & Ors v Park & Ors (2016) 116 ACSR 321; [2016] QSC 222.
[3] QNI Resources Pty Ltd & Ors v Queensland Nickel Pty Ltd (in liq) [2017] QCA 167.

In effect, the defendants submit that there are two distinctions to be drawn between the circumstances at the time of the first application for leave and those that obtain now. First, they submit that the bases of their counterclaim as now formulated in the 9 October CDAC are improved. Second, they submit that the decisions on the first application for leave and appeal did not fully consider the strength of the relevant causes of action.
QNI and the GPLs submit that nothing of substance has changed and the present application for leave should be dismissed for much the same reasons as the first application and appeal. As well, they submit that the 9 October 2018 counterclaim and evidence tendered in support of it are insufficient.
On their applications to strike out, the plaintiffs submit that, if leave to proceed is not granted, the counterclaim must be struck out and the same outcome must follow for the paragraphs of the defence that set up the causes of action alleged in the counterclaim as a set-off, as not disclosing a reasonable defence or otherwise an abuse
of process, relying upon Uniform Civil Procedure Rules 1999 (Qld) (“UCPR”) r 171.
A submission of abuse of process also engages the inherent jurisdiction. Alternatively, if leave to proceed is granted, they challenge particular paragraphs of both the counterclaim and the defence.
On their application to strike out, the defendants challenge the substance of the
plaintiffs’ pleaded causes of action based on QNI’s alleged right to an indemnity for
debts and liabilities incurred in relation to the operation of the joint venture business
of the Yabulu refinery (“Joint Venture”), whether in the character of General Manager of the Joint Venture under the Joint Venture Agreement (“JVA”) or as trustee, both against the first and second defendants (“Joint Venturers”) personally and by a lien as
against the assets of the Joint Venture, including by a right of retention of the Joint Venture assets it holds. The defendants submit that the pleading and uncontentious facts show that the causes of action alleged do not disclose a reasonable cause of action or are otherwise an abuse of process. As well, they challenge many other paragraphs on pleading grounds. This, notwithstanding that prior interlocutory decisions have held that the plaintiffs have an arguable or prima facie case.[4]
[4] Parbery & Ors v QNI Metals Pty Ltd & Ors (2018) 127 ACSR 582; [2018] QSC 107.
Detailed written submissions were exchanged in the days before the hearing of the applications and the oral hearing extended over two days. Because of the need for expedition, and having regard to the views I have reached on some of the different issues, I propose to deal with the applications by considering the application for leave first, and the cross applications to strike out second.
Summary of conclusions
First, in my view, with some exceptions, the application for leave must be refused. It follows that most of the counterclaim must be struck out.
Second, the parts of the defence that set up the same claims by the Joint Venturers against QNI for damages or equitable compensation by way of set-off of must also be struck out.
Third, other parts of the defence must be struck out.
Fourth, some parts of the statement of claim must be struck out.
Leave to proceed
The parties made detailed submissions in writing as to the law and principles to be applied in considering whether to grant leave to proceed against QNI, captured in
summary by the requirement of a “serious question to be tried” or a “solid foundation
[that] gives rise to a serious dispute”.[5] One difference between the present application
[5]           Commonwealth v Davis Samuel Pty Ltd (No 5) (2008) 164 ACTR 1, 7 [24]-[29].
and the first leave application is that QNI is now ordered to be wound up in insolvency, so the application against it is now brought under s 471B, not s 500, of the CA. That does not change matters in any significant way. The principles to be applied on the application for leave against QNI were also stated in the reasons for judgment on the first leave application[6] and referred to in the reasons for judgment on the appeal.[7] In the circumstances, it is unnecessary to set out more about them in these reasons.
[6]           QNI Resources Pty Ltd & Ors v Park & Ors (2016) 116 ACSR 321, 330-332 [44]-[51].
[7]           QNI Resources Pty Ltd & Ors v Queensland Nickel Pty Ltd (in liq) [2017] QCA 167, [26].
On the application for leave against the GPLs, the parties also made detailed submissions in writing as to the law and principles to be applied, if leave to proceed
is required, summarised as whether the court is “satisfied that there is a prima facie case” considering the “sufficiency of the evidence adduced as to the prospects of
success” and whether the claim has “sufficient merit”.[8] There was no significant
[8] Eighty Second Agenda Pty Ltd v Handberg [2014] VSC 665, [32], [33] and [34].
difference between the parties’ submissions as to the law to be applied, except that the
Joint Venturers submit that leave to proceed is not required against a liquidator in a
creditors’ voluntary winding up.
The only point I would add to those made by the parties as to the law to be applied on either of the aspects of the application for leave to proceed is to refer to Agar v Hyde.[9] That case concerned the correct approach to be taken on an application for leave to proceed by a plaintiff who brings a proceeding against a defendant resident outside
[9] (2000) 201 CLR 552.
the jurisdiction, under what is sometimes called the “exorbitant” jurisdiction. That
context is different. But there are two points of present interest that emerge from the reasons of the plurality. First, as will appear later in these reasons in relation to the applications to strike out under UCPR r 171 based on abuse of process, the plurality re-emphasised the point that a court whose jurisdiction is regularly invoked should not decide the issues raised in the proceeding in a summary way except in the clearest of cases, relying on Dey v Victorian Railways Commissioners[10] and General Steel Industries Inc v Commissioner for Railways (NSW).[11] Second, the plurality held that the question whether leave should not be granted in that context because of the
[10] (1949) 78 CLR 62, 91.
[11] (1964) 112 CLR 125, 130.
plaintiff’s poor prospects of success should be the same test “as is applied in an
application for summary judgment by a defendant”.[12]
[12] (2000) 201 CLR 552, 576.

As there are separate claims for different defendants made by the counterclaim, it is convenient to deal with them separately, starting with the claim of the Joint Venturers.
The claim of the Joint Venturers may be conveniently divided between the causes of action and claims for relief made against QNI and those made against the GPLs. As against QNI, they are for damages for breach of contract or equitable compensation for breach of trust and other relief. As against the GPLs, they are for damages for the tort of inducing breach of contract or equitable compensation for procuring or
inducing breach of trust. It is convenient, therefore, to consider QNI’s position first.
Claim of the Joint Venturers against QNI
The claim by the Joint Venturers against QNI is alleged in paragraphs 582 to 586, 598 to 602 and 639 to 641 of the 9 October CDAC and paragraphs D, E, F, M, N, O, P, Q, R, S, V and W of the claim for relief.
Paragraph 583 cross-refers to paragraphs 492 to 512C, 513 to 516D, 516M and 519 to 537. Paragraphs 519 to 528 are deleted, so need not be considered. Except for paragraphs 515 to 516 and the allegation of breach in paragraph 516A, paragraphs 513 to 516D and paragraphs 535C to 535E are not, in substance, allegations made against QNI[13] and do not need to be considered on this question. It will be necessary to return to the remaining paragraphs cross-referred to in paragraph 583, but it is convenient first to identify the burden of paragraphs 584 and following.
[13] Paragraph 516A alleges breaches of the JVA and the Administration Agreement. No term of those agreements is alleged that depends on the states of mind of the GPLs alleged in paragraphs 513, 514 and 514A.
Paragraph 584 alleges that by reason of those paragraphs “QNIM and QNIR” (an
obvious mistake – it should have said QNI) breached the JVA, Administration Agreement and QNI’s obligations as agent of or alternatively as trustee for the Joint
Venturers causing the Joint Venturers loss and damage. The particulars under that paragraph cross-refer to paragraph 516L, but that paragraph is deleted.
Paragraphs 585 and 586 allege that the Joint Venturers are entitled to the relief claimed in paragraphs D, E, F and M of the relief claimed.
Paragraphs D and E of the claim for relief
Paragraphs D and E are in the nature of a claim for specific performance. Paragraph
D claims a declaration that QNI is obliged to perform what are called the “Transfer Obligations”. Paragraph E claims an order that QNI perform the Transfer Obligations.
The claims for orders in the nature of specific performance depend on the alleged breach of a contractual obligation to perform the Transfer Obligations. Those obligations are central to the counterclaims of the Joint Venturers against QNI and are alleged in paragraph 508 of the 9 October CDAC as follows:
“508. Upon the termination of QNI’s appointment as Manager and upon
the appointment of QN Sales as Successor Manager, QNI was
obliged to deliver to:

(a) QN Sales – all Joint Venture Property in its name or in its
possession and all documents, books, records and accounts which QNI had maintained pursuant to the JVA, pursuant to clause 5.6(d) of the JVA;

(b) the Joint Venturers – documents, books, records and accounts
which QNI had maintained pursuant to the Administration Agreement, pursuant to clause 8.3 of the Administration Agreement; and

(c) the Joint Venturers – all ore, Products and proceeds of the sale
thereof in its possession, by reason that the ore, Products or proceeds of sale was the property of the Joint Venturers and
held by QNI as bailee or agent or bare trustee.”

Paragraphs D and E of the claim for relief may be seen as the other side of the coin of
QNI’s claim for relief for a lien over the Joint Venture Property and a right of retention
of the assets it holds in support of the lien for the debts and liabilities that QNI claims are subject to rights of indemnity from the Joint Venturers. Accordingly, it might be
thought that the Joint Venturers, who defend QNI’s claims for that relief to a lien or

right of retention, should be permitted to advance a claim that turns on the alleged
Transfer Obligations.

By recent amendments made in paragraph 508(c), the Joint Venturers advance some of the Transfer Obligations on the basis of non-specific or non-contractual bases of
the legal relationships of bailor and bailee, principal and agent and “bare” trustee and
beneficiary.
However, the plaintiffs oppose any grant of leave to proceed, including on the obligation alleged in paragraph 508(c), on the ground that the alleged breaches of the Transfer Obligations do not give rise to a sufficiently strong claim for any relief. I will return to that point. It may be put to one side to first consider the other counterclaims of the Joint Venturers against QNI.
Paragraphs F and M of the claim for relief
Paragraphs F and M are claims for damages or equitable compensation or an order under s 1324(10) of the CA. Paragraph F claims the sum of $1,800,438,000 or such other sum as the court determines. Paragraph M claims an unspecified amount.
A claim for damages under s 1324(10) of the CA depends on the condition that the court has power under s 1324(1) or (2) to grant an injunction. If the condition exists, the court may order a person to pay damages in addition to or in substitution for the grant of an injunction under s 1324(10). The power to grant an injunction under s 1324(1) or (2) turns on conduct constituting a contravention of the CA. There is no claim in the proceeding by the Joint Venturers that QNI has engaged in any such conduct or that there is power to grant an injunction against QNI under s 1324(1) or (2). No leave to proceed should be granted on that claim.
Accordingly, paragraphs F and M of the claim for relief should be seen as relevantly confined to claims for damages or equitable compensation.
Paragraph 511 of the 9 October CDAC alleges, in effect, that the failure of QNI to perform the Transfer Obligations, when demanded by the Joint Venturers, was a breach of:

(a) clause 5.6(d) of the JVA;
(b) clause 8.3 of the Administration Agreement; and
(c) the duties alleged in paragraph 508(c), “including QNI’s obligations as agent,
bailee, nominee and/or bare trustee”.

Both (a) and (b) are alleged breaches of contract, while the pleader casts the net more widely in (c). Only (c) could arguably support a claim for equitable compensation for breach of trust.
Causation and loss alleged
Paragraphs 512 to 512B allege causation and loss. For brevity, they may be summarised, as follows:

(a) 512 – the QN Business Property (defined in paragraph 507 to be the Joint
Venture Property defined in the JVA identified in paragraph 506(a) and the products of the refinery and funds from the sale of the products held by QNI) was essential to the continuation of the Joint Venture;

(b) 512AA – had the QN Business Property been delivered to the third defendant (“QN Sales”) “it would have attempted to conduct the Joint Venture”;
(c) 512AB – in March 2016 the GPLs identified $10 million as the amount required
to cover a cash flow shortfall to permit the continuation of the Joint Venture into
the indefinite future;
(d) 512AC – on 7 March 2016 QNIM had the benefit of an indicative offer of a loan facility from Chifley Securities for $23 million “which it would have accepted,
and attempted to convert into an actual loan if the QN Business Property was
transferred to QN Sales”;

(e) 512AD – failure to deliver the QN Business Property caused:

(i) the Joint Venture to cease to operate;
(ii) the JVA and Administration Agreement to be discharged; and
(iii) the loss of “leases and contracts” – the particulars allege further that all
leases and contracts were required to be transferred for the effective continued operation of the Joint Venture, that access to the Port of Townsville was critical to the ongoing operation of the refinery and that
the leases and licenses for access to the Port that were “lost” included the
Berth 2 Licence (as defined) and the leases and licences referred to in paragraph 506(a)(iii);

(f) 512AE – “by reason of” the:

(i) Joint Venture ceasing to operate;
(ii) JVA and Administration Agreement being discharged;
(iii) essential leases and contracts being lost;
the Joint Venturers have suffered loss; and

(g) 512AE and 512AF – the loss suffered is:

(i) a lost opportunity to earn profits;

(ii)

loss of value of the Joint Venturers’ net assets, “the current best estimate of” which loss is approximately $1.8 billion, being the difference between
approximately $1.95 billion and a “recent” value of $150 million; and
(iii) loss of the value of “installed assets” at the Port of Townsville of $214.5
million.

In summary, therefore, the counterclaim for damages on which the Joint Venturers apply for leave to proceed is for the total identified amount of over $2 billion and an unquantified amount for the lost opportunity to earn profits.
The loss of value of the net assets is represented mostly by alleged value of the plant, property and equipment, as disclosed in the QN Group Special Purpose Financial Statements for the year ended 30 June 2015.[14] As at 30 June 2015, QN Group revalued the plant, property and equipment to $2.193 billion, up from $563 million at 30 June 2014, with resultant net assets as at 30 June 2015 of approximately $1.95 billion.
[14] Affidavit of D Wolfe filed 22 August 2017, CFI 63, Exhibit DW-02, p 476.
In assessing the reasonableness of the claim for loss of value of the net assets, the
likely admissibility and reliability of QN Group’s adopted value should not be
ignored. The Joint Venturers submit that it will be admissible and probative.
However, the date of assessment of any damages for breach of contract is the date of the breach and the date of assessment of any equitable compensation for breach of trust is no earlier that when the alleged loss was suffered, which is at early March 2016 or later. Further, in assessing damages or equitable compensation, the court is
not only concerned with a “market value”, per se, but has regard to “true value”, taking
into account the benefit of hindsight.[15]
[15] Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281, 292-296.
The reliability of the valuation of the plant, property and equipment as at 30 June 2015, if admitted as relevant evidence of value as at the date of the alleged breach or loss in early March 2016, would have to be assessed against other uncontroversial facts, including that:

(a) on 7 September 2015, the fifth defendant (“Mr Mensink”) as director of the Joint
Venturers signed the special purpose financial statements as at 30 June 2015.
He was also sole director of QNI;

(b) Note 1(c) to the special purpose financial statements shows that the accounting for the value of plant, property and equipment was changed to the fair value method of valuation, based on a discounted cash flow forecast valuation methodology of the Joint Venture business operations;
(c) however, Note 1(b) to the special purpose financial statements stated that the ability to generate sufficient net cash inflows from operations in order to meet
obligations as and when they fell due was “dependent upon improvement in
nickel commodity prices; the ongoing QN Group cost reduction program and
funding options which may be considered from time to time”.

(d)

that note also stated that at 30 June 2015 the QN Group had minimal loans and borrowings payable to third parties totaling $25.3 million;

(e)

from at least 16 or 17 September 2015 onwards, Mr Palmer and Mr Mensink tried, no doubt using their best efforts, to borrow amounts for working capital for the Joint Venture business against the value of its assets (including the amount of the revaluation of the property, plant and equipment as at 30 June 2015) but were unable to do so;
(f) on 13 November 2015, Mr Palmer advanced $US1.86 million to QNI to meet
QNI’s liabilities in respect of employee entitlements; and

(g) on 18 January 2016, in that context, Mr Mensink, as sole director, appointed the GPLs as administrators of QNI on the basis of a resolution that QNI was in his opinion then insolvent or would become so.

Because the methodology for the revaluation was a discounted cash flow forecast, in the absence of any evidence to the contrary, necessarily the value of the plant, property and equipment on revaluation at 30 June 2015 depended on the assumption that the Joint Venture business would continue as a going concern so as to generate the forecast cash flows from operations.
In the absence of any evidence to the contrary, the forecast cash flows for the value of the plant, property and equipment on revaluation at 30 June 2015 necessarily will have included the cashflows from which profits of the kind that the loss of opportunity to earn profits alleged in paragraph 512AE(a) would be derived. There is double counting as between paragraphs 512AE(a) and (b).
It is difficult to make any further assessment of the reasonableness of the alleged loss of opportunity to earn profits, because the allegation of the loss of opportunity to earn profits is made without complying with UCPR r 155(1) which requires that the
“pleading must state the nature and amount of the damages claimed” or the other
requirements of that rule. I have previously sought to analyse how a pleading of a claim for loss of a valuable commercial opportunity should be made.[16] No attempt of that kind was made by the Joint Venturers in the present case.
[16] Graham & Linda Huddy Nominees Pty Ltd v Byrne [2016] QSC 221, [50]; and see Birbilis Bros Pty Ltd v Chubb Fire and Security Pty Ltd [2018] QSC 3, [34].
There is a question whether the alleged loss of value of the “installed assets” at the
Port of $214.5 million, in paragraph 512AF, is not included in the alleged loss of value of the net assets of $1.8 billion in paragraph 512AE(b). In the absence of any evidence
to the contrary, the value of the “installed assets” in the Port will be included in the
value of the net assets of QN Group. If so, the loss of the value of the “installed assets” at the Port is not an addition to the loss in value of the net assets, yet paragraph
512AF is not pleaded as an alternative allegation.
These points show that there are significant difficulties with amounts of the loss alleged in paragraphs 512AE and 512AF. But, in my view, there is a more significant problem, based in the allegation of causation of those losses.
Causation further considered
Paragraphs 512AE and 512AF allege that the loss was suffered by reason of the Joint Venture ceasing to operate, the JVA and Administration Agreement being discharged
and the “essential leases and contracts” being lost. Paragraph 512AD alleges, in turn, that those events were caused by QNI’s failure to “deliver” the QN Business Property. Paragraph 511 alleges that the failure to “perform” the Transfer Obligations was the
breach of the relevant obligations of QNI.
A claim for damages for breach of contract (other than for nominal damages) and a claim for equitable compensation for breach of trust require a pleading of a causal connection.[17] The causal connection of the alleged breaches to the alleged loss in this
[17]          Graham & Linda Huddy Nominees Pty Ltd v Byrne [2016] QSC 221, [25]-[27]; Southern Cross Mine Management Pty Ltd v Ensham Resources Pty Ltd [2004] QSC 457, [15].
case is alleged as one of “but for” causation, meaning that the Joint Venturers must at
trial prove a counterfactual scenario whereby if QNI had carried out the alleged
Transfer Obligations they would have been able to obtain the transfer of “all leases and contracts to be transferred” that the Joint Venturers allege were “required” for the
“effective continued operation of the Joint Venture”.[18] In other words, a necessary
[18]          9 October CDAC, paragraph 512AD, particulars of sub-paragraph (c).
factual element of the Joint Venturers case is that they would have been able to obtain the transfer (either to QN Sales or to them) of all those leases and contracts, because otherwise the Joint Venture business would have ceased in any event.[19]
[19]          Compare, for example Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286, 301, 307, 311 and 312 (breach of contract) and Ancient Order of Foresters in Victoria Friendly Society Limited v Lifeplan Australia Friendly Society Ltd [2018] HCA 43, [9], [88] and [190] (equitable compensation).
However, paragraph 512AA alleges that had the QN Business Property been delivered
to QN Sales (as Successor Manager under the JVA) it would have “attempted to conduct the Joint Venture”. In other words, the Joint Venturers do not allege that QN
Sales would have been able to do so. This point is reinforced by paragraphs 512AB and 512AC. Paragraph 512AB is not an allegation of material fact but a pleading of evidence. In effect, it alleges that in March 2016 the GPLs made a statement of opinion that $10 million was all that was required to cover the cash flow shortfall.
Paragraph 512AC alleges that the first defendant (“QNIM”) had the benefit of a $23 million “indicative” offer of finance[20] that it would have “attempted to convert into
[20] Somewhat inconsistently, paragraphs 502 and 503 allege that Mr Palmer obtained the offer and had agreed to provide the $23 million to QN Sales upon transfer of the QN Business Property. However, the letter of offer is addressed to the directors of QNIM.
an actual loan”.
The point is that the defendants do not allege that any other basis of funding the necessary working capital to continue the Joint Venture business would have been forthcoming, had the Transfer Obligations in relation to the QN Business Property been performed.
It appears that the GPLs as administrators sought funding of $10 million from the Joint Venturers, Mr Palmer and the State Government, but were unable to secure that funding. In any event, on 7 March 2016, the Joint Venturers terminated or notified
the GPLs as administrators of the termination of QNI’s appointment as General
Manager of the Joint Venture, so no question of QNI continuing the Joint Venture can arise after that date.
It also appears that the “indicative” offer of finance made on 7 March 2016 was that
made by Chifley Securities to QNIM.[21] That was not an offer capable of acceptance. It was also subject to conditions as to due diligence, satisfactory first mortgage security over assets to produce a loan to security value ratio of 65 percent and the provision of personal guarantees. The Joint Venturers do not allege that any of these conditions would have been satisfied.
[21] Affidavit of SM Iskander filed 3 October 2018, CFI 359, Exhibit SMI-108, pp 197-199.
To further understand some of the bases of the necessary counterfactual scenario (and to some extent the alleged breaches of obligation of QNI by failing to perform the Transfer Obligations), it is necessary to identify more of the QN Business Property previously mentioned. Part of that property is as follows:
“(i) Real property including Lot 1 on RP 730220 (Title Reference 21019214), Lot 2 on RP 709243 (Title Reference 20314194), Lot 3 on RP 709243 (Title Reference 20314195), Lot 277 on CP K124656 (Title Reference 21300136);
(ii) Personal property including more than 40 motor vehicles;
(iii) Contracts, Leases and Licences including:

(1) Berth 2 Licence Agreement dated 23 August 1994 between QNI
and MIM (MIM Licence);
(2) Stockpile Area Lease dated 21 April 1998 between QNI and Port
of Townsville Limited in respect of:

i.         Lot 150 on CP904971;
ii.        Lot 152 on CP904791;
iii.      Lot 153 on CP904791;
iv.       Lot 155 on CP904793;
v.        Lot 156 on CP904793; and
vi.       Lot AA on SP116244 (being part of Lot 791 on EP2348);

(3) Cargo Lease dated 3 November 2008 between QNI and Port of
Townsville Limited in respect of:

i. Lease B in Lot 601 on CP EP1802 SP 220262;
ii. Lease C in Lot 594 on CP EP1758 SP 220263; and

iii.

Lease A in Lot 430 on CP EP1068 SP220261 with follow on titles:
iv. Lot 430 on CP EP1068 on title reference 47582106;
v. Lot 594 on CP EP1758 on title reference 50305516; and
vi. Lot 601 on CP EP1802 on title reference 50309780.
(4) Lease 714895003 dated 4 January 2012 between QNI and Port of
Townsville Limited, Lease QN on 228139;
(5) Lease N979022 dated 16 February 1981 in respect of Lease B of
Lot 1 on RP30923;
(6) Licence (Conveyor Route) dated 21 April 1998 between QNI and
Townsville Port Authority;
(7) Fuel Pipeline Licence dated 11 April 2014 between QNI and
Townsville Port Authority;
(8) Stevedoring Licence Agreement dated 22 August 2012 between
QNI and Port of Townsville Limited;
(9) Gas Sale Agreement dated 12 May 2005 between QNI and
Queensland Power Trading Corporation;
(10) Enertrade Gas Transportation Agreement dated 12 May 2005 between QNI and Enertrade (NQ) Pipeline No 1 Pty Ltd and
Enertrade (NQ) Pipeline No 2 Pty Ltd”.

Four of the items of property listed were leases with a third party as lessor. It is trite that the incidents of the estate of a lessee at common law include a right to assign or
sublet,[22] but conditions prohibiting or requiring the landlord’s consent to assignment are ubiquitous. In other words, it is highly unlikely that QNI was entitled to “deliver”
[22] American Dairy Queen (Qld) Pty Ltd v Blue Rio Pty Ltd (1981) 147 CLR 677, 683 and 685.
the leases, by transfer of possession upon assignment or sublease, without the
landlord’s consent. It is neither alleged in the 9 October CDAC nor is there any
evidence on the application for leave that the leases were assignable or able to be sublet by QNI to QN Sales or the Joint Venturers or that the lessors would have agreed to any assignment, or, if so, on what commercial terms as to any existing debts of QNI.
Other items of the property listed are licences with third parties, items of personal
property, but not such that QNI could “deliver” by assignment or transfer of
possession. It is neither alleged in the 9 October CDAC nor is there any evidence on the application for leave that the licences were assignable by QNI to QN Sales or the Joint Venturers, or that the licensors would have agreed to any assignments, or, if so on what terms as to any existing debts of QNI. By way of example, on the Joint
Venturers’ case of loss, one of the critical licences was the Berth 2 Licence Agreement
between QNI and MIM (Mount Isa Mines) referred to in paragraph 506(a) particular (iii)(1), as extracted above. On 6 January 2016, the Scheduling Officer of Glencore Port Operations sent an account statement of the overdue invoices payable to MIM in the sum of $1,472,201.52.[23]
[23] CSOC paragraph 82(x); 9 October CDAC paragraph 88.
The lack of attention that the Joint Venturers have given to the counterfactual scenario
necessary to establish the required “but for” causal condition to recover the alleged
loss is apparent on the face of the pleading.
But, in my view, there is a greater problem of that kind, not dealt with by the pleading or the evidence at all. The listed QN Business Property does not include any contracts between QNI and Aurizon. Accordingly, the Joint Venturers do not allege that QNI
breached the Transfer Obligations by failing to “deliver” any such contract to QN
Sales or the Joint Venturers.
It is not contentious that the Joint Venture business of operating the Yabulu refinery involved necessary elements of rail transport, including transport of ore to the refinery and transport of product from the refinery. Without the necessary rail transport there
is a fundamental flaw in the counterfactual scenario on which the Joint Venturers’

claims for loss are premised. No other basis for the Joint Venture business to have
continued is alleged.

QNI’s dealings with Aurizon over the relevant contracts is a significant subject of the
CSOC. Paragraph 69 alleges that there were four transport service agreements
described as the “Rail Haulage Agreement Bulk Coal”, “Transport Specification and Services Agreement”, “Nickel Ore Rail Transport Agreement” and “Glen Geddes Rail
Transport Agreement”. Paragraphs 70 to 81 allege dealings between QNI and
Aurizon over their relations under those agreements and the amounts of QNI’s
indebtedness from time to time. It is also not contentious that on 27 November 2017, Aurizon gave notice of default and made a demand for immediate payment of approximately $7.8 million under one of the agreements and approximately $4 million under another of the agreements, or that on 13 January 2016, Aurizon gave notice that if the amounts owing were not paid by 18 January 2016, it would suspend transport of product under the agreements.
Copies of the Nickel Ore Rail Transport Agreement and the Glen Geddes Rail Transport Agreement are in evidence. Each of them is made between Aurizon and QNI only. Each of them contains a provision prohibiting assignment by QNI without
Aurizon’s consent.[24]
[24] Clause 18.2 of the the Nickel Ore Rail Transportation Agreement and clause 17.2 of the Glen Geddes Rail Transportation Agreement. See Affidavit of SM Iskander filed 3 October 2018, CFI 363, Exhibit SMI-128, pp 1105 and 1184.
Also in evidence is a copy of Aurizon’s proof of debt dated 27 January 2016[25] given
[25] Affidavit of SM Iskander filed 3 October 2018, CFI 363, Exhibit SMI-128, p 1215.

for a meeting of creditors under Part 5.3A of the CA claiming that it was owed
$88,197,831.55 as at that date as follows:

Date How debt arose Amount
19 February 2015 Pursuant to the Glen Geddes Rail $6,449,455.50
Transportation Agreement dated
19 February 2015

31 October 2014 Pursuant to the Nickel Ore $81,748,376.05
Transportation Agreement dated
31 October 2014

A number of allegations are made about Aurizon’s debt from time to time in
paragraphs 72 to 87 of the 9 October CDAC. It is unnecessary to refer to them further. For present purposes, it is enough to refer to paragraph 104, where the Joint Venturers allege that of the amount of $88,197,831 that the plaintiffs allege QNI owes to Aurizon, $66,319,669 only arose on the termination of the JVA (presumably meaning
termination of QNI’s conduct of the Joint Venture business). In other words, the Joint
Venturers do not challenge that Aurizon was and is owed the difference by QNI, being approximately $21.8 million.
There is no allegation in the 9 October CDAC, or evidence on the application for
leave, either that QNI was obliged to “deliver” the Aurizon agreements to QN Sales
by assignment, or that Aurizon would have consented to any assignment or novation of those agreements, or that QN Sales or the Joint Venturers would have been able to
enter into new contracts with Aurizon, without dealing with QNI’s debt.
Breach of the Transfer Obligations further considered
The Joint Venturers’ claims for relief based on breaches of the Transfer Obligations

depend on a number of steps and alternatives, before the court would reach the
question of whether any of the relief claimed should be granted.

The plaintiffs claim in the CSOC is that they were and are not obliged to “deliver”
any of the Joint Venture Property that QNI holds or held to QN Sales or the Joint
Venturers, by reason of the QNI’s rights to indemnity for expenses and liabilities
incurred acting as the General Manager and trustee, supported by a lien and right of
retention over the relevant property. Both the Joint Venturers’ defence and their

counterclaim based on breach of the Transfer Obligations depend on negating that
claim.

It is appropriate to further consider paragraph 508 of the 9 October CDAC, as set out above. Paragraph 508(a) relies upon clause 5.6(d) of the JVA. That sub-clause provides that when a General Manager ceases to be such it shall deliver to the Successor Manager all Joint Venture Property and all documents, books, accounts and records relating to the Joint Venture which it was the responsibility of the outgoing General Manager to maintain.
Paragraph 508(b) relies upon clause 8.3 of the Administration Agreement. That clause provides that upon termination of the Administration Agreement QNI shall deliver forthwith to the Joint Venturers all books, records and other documents the property of the Joint Venturers or kept by QNI pursuant to the agreement. Clause 8.3 is partly inconsistent with clause 5.6(d) of the JVA, because it provides for delivery of the books etc to the Joint Venturers, not to the Successor Manager where a Successor Manager is appointed, and QN Sales was appointed Successor Manager on 7 March 2016. But, in any event, in my view, clause 8.3 does not add much to the contractual effect of clause 5.6(d).
Of greater interest is paragraph 508(c), that alleges an obligation of QNI to “deliver” to the Joint Venturers “ore, Products and proceeds of sale”. It implicitly recognises
that these species of property are not fully dealt with by the JVA, or by the Administration Agreement. Instead the particulars allege or rely upon the obligation arising as:

“(i)

bailee, by virtue of its possession and pursuant to pursuant to (sic) clause 5.2(a), (b) and (c) of the JVA, which required QNI to obey directions of the Joint Venturers, the terms of the bailment being subject to directions of the Joint Venturers from time to time, including to deliver up that property on request;

(ii)

in the alternative as agent, pursuant to clause 5.2(a), (b) and (c) of the JVA, which required QNI to obey directions of the Joint Venturers from time to time, including to deliver up that property on request; and

(iii)

in the further alternative, as bare trustee, by reason of paragraphs 37 and 108A hereof, its obligation to deliver up that property to the
Joint Venturers on request.” (emphasis added)

On the first leave application,[26] Bond J considered whether the Joint Venturers had
[26] QNI Resources Pty Ltd & Ors v Park & Ors (2016) 116 ACSR 321; [2016] QSC 222.
negatived QNI’s entitlement to a lien for expenses and liabilities incurred as General
Manager and trustee. Their pleading at the time alleged, in paragraph:

(a) 53 – QNI neither owned, nor obtained any beneficial interest in, any part of such
Joint Venture Property, including Products;

(b) 61(f) – QNI did not own the Joint Venture or obtain beneficial ownership of the
Joint Venture;

(c) 61(h) – QNI has and had no right of indemnity as a trustee of the Joint Venture
out of any of the property or assets of the Joint Venture in respect of any
liabilities incurred by it; and
(d) 67 – in the circumstances and by virtue of clause 5.6(d) of the JVA, as from 7
March 2016, QNI was obliged to deliver all Joint Venture Property and all documents etc to QN Sales.

Bond J held on the first leave application that QNI might be entitled to an indemnity and lien either because as trustee it had a beneficial interest in the trust assets to the extent of its right to an indemnity or to an equitable lien if the assets were not held on trust[27] and the Joint Venturers had not persuaded him that there was a serious question to be tried as to breach of the alleged obligation to deliver all Joint Venture Property and all documents etc to QN Sales.[28]
[27] (2016) 116 ACSR 321, 349 [132].
[28] (2016) 116 ACSR 321, 351 [142].
On the appeal,[29] Gotterson JA accepted two uncontroversial principles of law:
[29] QNI Resources Pty Ltd & Ors v Queensland Nickel Pty Ltd (in liq) [2017] QCA 167.

(a)

first, where the management of property has been conducted by a person authorised to do so by the owner of property, the manager will have a lien over the property in respect of expenditure incurred in managing the property; and

(b)

second, where a trustee acting within power incurs a liability to a third person in the course of administering a trust the trustee is entitled to an indemnity out of the trust assets in respect of the liability and will have a commensurate equitable charge or lien over the trust assets in aid of the indemnity. [30]
[30] [2017] QCA 167, [51].

Not surprisingly, the plaintiffs rely upon both decisions as supporting the conclusion that no leave to proceed should be granted for a claim based on the Transfer Obligations, that again proceeds from the contractual right under clause 5.6(d) of the JVA. They submit, in effect, that the addition in paragraph 508(b) of reliance upon clause 8.3 of the Administration Agreement does not add anything of significance to the reasonableness of the causes of action.
They also submit, in effect, that the matters relied on in the particulars under paragraph 508(c) do not undermine the reasoning or the conclusions reached in the earlier decisions. In my view, the first uncontroversial principle accepted in the Court of Appeal would support that argument. A person entrusted with property to manage it is often a bailee. A relationship of bailee and bailor, stemming from the possession of the manager, as relied on in the particulars under paragraph 508(c), does not, without more, affect the application of the uncontroversial principle. Equally, a relationship of principal and agent, as relied upon in the particulars, does not, without more, affect the application of the first uncontroversial principle.
The reliance in the particulars under paragraph 508(c) upon the allegation that QNI
was a “bare” trustee, potentially engages the second uncontroversial principle as to a

trustee acting within power who incurs a liability to a third person in the course of
administering the trust.

The particulars of paragraph 508(c) cross-refer to paragraph 37 of the 9 October CDAC. That lengthy paragraph alleges in paragraph 37(c) that the funds paid into
bank accounts in QNI’s name were held on “bare” trust for the Joint Venturers. But
there is no suggestion that before on or after about 7 March 2016, when the Joint Venturers demanded that QNI deliver the funds to them, funds were used by QNI to pay expenses of the Joint Venture without the consent or acquiescence of the Joint
Venturers. In other words, whatever concept of “bare” trust is sought to be engaged
by the Joint Venturers, it is not based on the factual contention that prior to the date of termination of the appointment of QNI as the General Manager of the Joint Venture no funds from the accounts were to be utilised to pay expenses or liabilities.
In my view, an allegation that QNI was a “bare” trustee, without more, does not add to the strength of the Joint Venturers’ allegation of breach of the Transfer Obligations.
However, the defendants raise another ground of defence to the plaintiffs’ case of a

lien and right of retention in support of the right to an indemnity. Paragraph 508B
and 508C of the 9 October CDAC allege, in part:

“508B. …to the extent that QNI was able to enforce its rights pursuant to

any indemnity secured by a charge or lien (which is denied) then such charge or lien only extended to such assets as were necessary to secure the payment of such monies as were properly payable to QNI pursuant to the said indemnity upon it asserting what monies were in fact properly payable to it.

508C.

If, as pleaded in paragraph 508B hereof, QNI was obliged, upon a call being made upon it to transfer the QN Business Property, it was obliged to:

(a)

provide an account to QNIR and QNIM of the amounts properly due to it;

(b)

identify which assets should be retained by it to secure its right of indemnity; and
(c) otherwise transfer the balance of the assets to QN Sales or
the Joint Venturers.”

Similar allegations are made in paragraphs 510(b), 510B, 532A, 532B, 535(b) and 535B. The Joint Venturers allege that provision of the account and identification of
the assets are a condition precedent to QNI’s rights of lien or retention as trustee. The “call” for transfer of the QN Business property relied upon consists of the demands
alleged in paragraph 509, occurring between 6 or 7 March 2016 and 16 March 2016.
The point raised was argued by reference to part of the reasons in Kemtron Industries Pty Ltd v Commissioner of Stamp Duties (Qld),[31] where McPherson J said:
[31] [1984] 1 Qd R 576.
“… in any case in which a trustee is entitled in respect of liabilities
properly incurred to his indemnity and lien over assets vested in him as trustee, the trust property (which means the property to which the beneficiaries are entitled in equity) is confined to so much of those assets as is available after the liabilities have been discharged or at least provided
for … and the fact that a valuation may be required for accounting
purposes merely serves to emphasize that the right of the beneficiaries is limited to the balance remaining after the liabilities are paid or provided for out of the assets once their value is determined. It is therefore not
correct to say … that the trustee’s lien at all times attaches to all of the
assets.”[32]
[32] [1984] 1 Qd R 576, 587.
The passage relied upon does not support the conclusion that it is condition precedent
to a trustee’s rights of lien and retention that the trustee must first provide the trustee’s
accounts to the beneficiaries. In principle, in my view, there is no reason why
provision of a trustee’s account is a condition precedent to those rights. For example,
it may be uncontroversial that whatever the precise balance of the account, the
trustee’s right of indemnity will far exceed the value of the trust property or the value
of the trust property that the trustee might retain. No purpose would be served, in
such circumstances, in making the trustee’s obligation to render accounts a condition
precedent to the trustee’s rights of lien or retention.
Questions may arise when there is a dispute as to a trustee’s right to indemnity by reason of the trustee’s liability to make good trust assets that have been lost on a
breach of trust, by reason of what is sometimes called the “clear accounts rule”[33] or
[33] Park v Whyte (No 3) [2018] 2 Qd R 475, 503-507, [125]-[144]; Australian Securities and Investments Commission v Letten (No 17) (2011) 286 ALR 346, 353 [20]; RWG Management Ltd v Commissioner for Corporate Affairs [1985] VR 385, 396-397.
when there is a dispute as to an equitable right to share in a fund where the claimant has an obligation to make good a contribution to the fund under the rule in Cherry v
Boultbee.[34] But, in my view, the defendants’ allegation of law in the present case as
[34] (1839) 4 My & Cr 442, 41 ER 171; Heydon, Leeming and Turner, Meagher, Gummow & Lehane’s

to a condition precedent to the rights of lien and retention is not reasonably supported
by authority.

In my view, the sum of, and the conclusion that follows from, the points discussed as
to the Joint Venturers’ claims against QNI is that leave to proceed should not be
granted to the extent that the Joint Venturers seek to claim damages or equitable compensation for breach of the Transfer Obligations under paragraphs F or M of the claim for relief.
Paragraphs Q, R and S of the claim for relief

In both paragraphs Q and R of the claim for relief, the Joint Venturers claim equitable compensation. Those claims seem to reiterate the same claim for equitable compensation for breach of trust previously considered. Although paragraph R cross- refers to paragraphs 536, 543 and 550 of the pleading, both paragraphs 543 and 550 are deleted in the 9 October CDAC and paragraph 536 is now only a reference to the breach of trust in failing to perform the Transfer Obligations. No further discussion of these paragraphs is required.
Paragraph S is a claim for compound interest. It stands or falls with the decision as to whether the Joint Venturers are to be granted leave to proceed on paragraphs F, M, Q and R.
Paragraph W of the claim for relief
Paragraph W claims an order that the Joint Venturers are not liable to indemnify QNI for the sum of $74,031,845.17 as a liability incurred by QNI consequent upon termination of the employment of 550 employees on 11 March 2016.
Paragraphs 91(b)(i), (ii), 104(f)(iv), 128(d)(i), 500, 512A and 512B of the 9 October CDAC are the paragraphs that refer to these employees. Paragraph 583 repeats paragraphs 500, 512A and 512B in the counterclaim. Summarising for brevity, they allege that:

(a)

500 – on or about 3 March 2016 Mr Palmer took steps to acquire a loan facility of $23 million (presumably the Chifley Securities “indicative” offer made on 7 March 2016 to QNIM) “to continue the operations of the refinery and the
employment of the employees”;

(b) 512A – by reason of the termination of the employment of 550 employees of
QNI (presumably on or about 11 March 2016 as alleged in paragraph
104(f)(iv)), QNI incurred liabilities to those employees of $74,031,845.17;
(c) 512B – that liability would not have been incurred but for QNI’s alleged
breaches of contract in failing to deliver the QN Business Property to QN Sales
or the Joint Venturers.

It may be observed that:

(a) on 7 March 2016, the Joint Venturers notified termination of QNI’s appointment
as General Manager of the Joint Venture;

(b) on 11 March 2016, when QNI terminated the 550 employees, QNI no longer had the business of operating the Joint Venture under the JVA;
(c) the 9 October CDAC does not allege in the counterclaim, as prior iterations of the pleading did, that QNI was obliged to deliver the employees to QN Sales or
the Joint Venturers on termination of QNI’s appointment as General Manager
of the Joint Venture.

It might be thought unlikely, in those circumstances, that the GPLs as adminstrators, short of funds, had an option not to terminate the employment of the employees. But it is unnecessary to consider that question any further. The short answer to the Joint
Venturers’ application for leave in relation to Paragraph W is that if the Joint Venturers are successful in defending QNI’s claim for indemnity in respect of the
alleged employees’ entitlements, on the grounds raised in paragraphs 104(f)(iv) and 128(d)(i) of the defence, it will not require an “order” that it is not liable for those

amounts as sought in paragraph W. No basis for that relief as a claim appears or was
advanced.
Paragraphs N, O and P of the claim for relief

Paragraphs N and O claim an order that an account be taken of all the property belonging to the Joint Venturers received and disbursed by QNI from 18 January
2016, the date of the SPLs’ appointment as administrators, and that QNI deliver to the
Joint Venturers the property found to be due on the taking of the account.
Paragraph P claims an order that QNI “account” to the Joint Venturers for the QN
Business Property.
No specific paragraph of the 9 October CDAC alleges that the Joint Venturers are entitled to any such relief, unlike the other paragraphs of the claim for relief. No submission either in writing or made orally by the defendants was directed to paragraphs N, O or P.
The Joint Venturers sought leave to proceed on a claim or claims for account on the first leave application. Bond J, inter alia, held that before the court would order the taking of an account it is necessary for the Joint Venturers to demonstrate that they are entitled to some sum from QNI[35] and that a discretionary factor against an order is the failure of a claimant for an account to make an offer and to disclose the capacity to repay any deficiency on the taking of the account.[36] These points were not challenged by the Joint Venturers on the appeal.[37]
[35]          QNI Resources Pty Ltd & Ors v Park & Ors (2016) 116 ACSR 321, 336 [70].
[36]          QNI Resources Pty Ltd & Ors v Park & Ors (2016) 116 ACSR 321, 337 [73].
[37]          QNI Resources Pty Ltd & Ors v Queensland Nickel Pty Ltd (in liq) [2017] QCA 167.
In my view, given that the Joint Venturers have not alleged, and there is no evidence on the application for leave, that:

(a) there would be a balance in their favour on the taking of an account;
(b) they have made an offer to repay any amount in favour of QNI on the taking of an account; and
(c) they make no submission as to why the approach taken by Bond J on the first leave application should not be followed, no leave to proceed should be granted on paragraphs N, O or P of the claim for relief.
Leave that should be granted

However, to the extent that the Joint Venturers claim specific performance of the Transfer Obligations as contractual obligations or a like order as against QNI as trustee of an obligation to transfer the trust property, they should be granted leave to proceed,[38] because those claims will not substantially add to the questions to be
[38] Compare Proactive Management & Ors v Over Fifty Funds & Ors [2007] NSWSC 802.
decided at the trial of the plaintiffs’ claims.
Joint Venturers’ counterclaims against the GPLs
The claim of the Joint Venturers against the GPLs is alleged in paragraphs 587 to 591 and 598 to 600 of the 9 October CDAC and paragraphs G, H, I, M, O, P, Q, R and S of the relief claimed.
Broadly speaking, the claims may be divided into two classes: first, personal claims against the GPLs for damages for equitable compensation or orders for an equivalent
account (“claims for damages or equitable compensation”); second, orders to require
the GPLs to perform QNI’s obligations.
Claims against the GPLs for damages or equitable compensation
Paragraph 587 cross-refers to paragraphs 492 to 512C, 513 to 516M, 529 to 535C, 536 and 537 of the defence.
The lynchpin of the claims for damages or equitable compensation is in paragraphs 588 and 589, as follows:
“588. By reason of the material facts pleaded in 587 above, the GPLs have caused or induced QNI to breach the JVA, the Administration Agreement and its obligations as agent of or alternatively as trustee for QNIR and QNIM.
589. The GPLs’ conduct in causing or inducing QNI to breach the JVA,
the Administration Agreement and its obligations as agent of or alternatively as trustee for QNIR and QNIM has caused QNIR and QNIM loss and damage.
Particulars
QNIR and QNIM repeat and rely on the particulars in paragraph
516L of this defence.”
Paragraph 516L is deleted, but the application should be decided on the assumption that the loss alleged is that in paragraphs 512 to 512B (see the allegation in paragraph 512C of entitlement to the relief in paragraph M of the relief claimed).
A question arises whether the Joint Venturers require leave to proceed on their claims against the GPLs. It is not disputed that leave to proceed is required against a court appointed liquidator.[39] However, there are contradictory decisions as to whether the requirement extends to a liquidator in a creditors voluntary winding up, who is not an officer of the court. One case decides that it does.[40] Another case decides that it does not.[41] Detailed written submission were made by the plaintiffs as to why the former should be preferred and oral submission were made by the Joint Venturers that the latter should be preferred.[42]
[39]          The requirement was identified in Re Siromath Pty Ltd (No 3) (1991) 25 NSWLR 25, 28 by analogy between a court appointed liquidator as an officer of the court and a court appointed receiver. It has been accepted since in many cases, although an intermediate appellate court has not considered whether the principle is correctly applied to a liquidator.
[40]          Eighty Second Agenda Pty Ltd v Handberg [2014] VSC 665, [29]-[30].
[41]          Re Worldwide Specialty Property Services Ltd (in liq) [2017] NSWSC 1851, [26].
[42]          The defendants’ written submissions did not challenge that leave to proceed is required against the
Two points relevant to that question were not explored fully by the parties in argument. First, the tortious or equitable wrongs that the Joint Venturers allege against the GPLs relate principally to the time of their appointment as administrators, and subject to the rights and obligations of an administrator under Part 5.3A of the CA, not to their conduct as liquidators. Second, although the GPLs were voluntary liquidators when first appointed on 22 April 2016, they are not now. Their appointment was converted in to court appointed liquidators when QNI was ordered to be wound up in insolvency on 27 February 2017.
In support of the application for leave against the GPLs, the Joint Venturers made detailed submissions as to the potentially arguable causes of action for damages for the tortious liability of a company director for a breach of contract engaged in by the company or for the equitable liability of a person who procures or induces a breach of trust by a trustee.
The damages or equitable compensation claimed against the GPLs are for the same alleged loss as against QNI. In my view, if required, leave to proceed should not be granted on those claims against the GPLs for the same reasons that it should not be granted against QNI. It is unnecessary to consider whether leave to proceed should also be refused for additional reasons based on the weakness of the bases of the liability alleged against the GPLs.
However, in the view I take, it is unnecessary to resolve the question whether leave to proceed is required against the GPLs as former voluntary liquidators or former administrators. Whether or not leave to proceed is required, I would not permit the Joint Venturers to proceed on the counterclaim against them as pleaded and would strike out the relevant paragraphs as not disclosing a reasonable cause of action or otherwise as an abuse of process, either under UCPR r 171 or in the inherent jurisdiction. I deal with that question later in these reasons.
Orders to require the GPLs to perform QNI’s obligations
First, in my view, none of these claims is necessary. If an order is made that QNI perform an obligation by doing an act, there is no reason to make the order against the GPLs personally. They are officers of the court who may be expected to comply with
the court’s orders against QNI. They are not necessary or appropriate parties simply
because they are liquidators of QNI.
Second, to the extent that I would not grant leave to proceed against QNI on one or
more of the Joint Venturers’ claims against QNI, no leave to proceed should be
granted against the GPLs on the same claim.
Counterclaims by defendants other than the Joint Venturers
Mr Palmer’s counterclaim
First, it is appropriate to deal with the fourth defendant (“Mr Palmer”). The 9 October
CDAC purports to make a counterclaim on his behalf, in paragraph CC of the claim for relief for an order setting aside a security deed and a power of attorney executed by him. However, the counsel and solicitors responsible for the 9 October CDAC do not act for him.
At present, Mr Palmer represents himself in the proceeding. The solicitors for the defendants (as I have defined them above) have not filed a notice of appointment as his solicitors. The amended application for leave to proceed is not clear on its face as to on whose behalf it was filed as applicants. There is, however, no suggestion that the solicitors do in fact have instructions to represent Mr Palmer (or the twentieth and twenty-first defendants). At the outset of the hearing, I questioned whether counsel for the defendants were acting on some form of direct access brief for Mr Palmer. After some initial uncertainty, for a short period, an undertaking to file a notice of appointment as solicitors for Mr Palmer was given by the solicitors for the defendants. A few hours later, their instructions to act for him were withdrawn and they sought and were released from the undertaking. By inference, the position is that Mr Palmer chose not to be represented and thereby not to make an application for leave to proceed.
Accordingly, it is unnecessary to consider any question whether Mr Palmer should be given leave to proceed by counterclaim.
Mineralogy’s counterclaim
Second, the 9 October CDAC deleted the counterclaim of the seventh defendant
(“Mineralogy”). No question of leave to proceed on Mineralogy’s counterclaim
remains.
Mr Martino’s counterclaim
Third, the twenty-second defendant (“Mr Martino”) applies for leave to proceed on
his counterclaim in paragraphs 622 and 623 of the counterclaim and paragraph BB of the claim for relief for an order that the GPLs and QNI are estopped from claiming or obtaining the relief sought in paragraph 522 of the CSOC.
The claim for relief in paragraph 522 stems from Mr Martino’s involvement in the
events pleaded in Section W of the CSOC, in paragraphs 415 to 442, relating to the
“Mineralogy Settlement Deed”. In the interests of brevity, the relevant facts alleged
should be summarised.
On 13 January 2016, QNI, the Joint Venturers and the sixteenth defendant (“China First”), a company of which Mineralogy was the ultimate holding company and Mrs
Palmer was director, executed two documents:

(a)

first, a share subscription agreement by which QNI agreed to subscribe for 2 million shares to be issued by China First for an allotment amount of $135 million payable in two equal instalments on 31 December 2017 and 31
December 2018 (“Share Subscription Agreement”);

(b) second, a fixed and floating charge given by QNI to China First to secure the
allotment amount with interest and costs (“China First Charge”).

On 18 January 2016, five days later, Mr Mensink, as sole director of QNI resolved that in his opinion QNI was insolvent or was likely to become insolvent at some future time and appointed the GPLs as administrators.[43]
[43] CSOC, paragraph 3(a)(i); Corporations Act 2001 (Cth), s 436A(1).
On 1 July 2016, the GPLs and QNI started a proceeding claiming that the Share Subscription Agreement and the China First Charge were voidable transactions
(“China First voidable transaction claim”). That claim is continued in Section U and
paragraph 505 of the CSOC.
On 29 March 2017, QNI started a proceeding against Mineralogy claiming an order

that Mineralogy pay the amount of $104,480,277.21 for debt (“Mineralogy debt
claim”). That claim is continued in Section NA of the CSOC.
[114] On 3 May 2017, notwithstanding the unresolved China First Charge voidable transaction claim, Mr Palmer, on behalf of China First, purported to appoint Mr
Martino as a controller of QNI’s property, under the China First Charge.

On 4 May 2017, in the context of the unresolved Mineralogy debt claim, Mr Palmer, on behalf of Mineralogy and China First, executed a draft deed described as the
“Mineralogy Settlement Deed” that was forwarded to Mr Martino, in effect, as an
offer to compromise the Mineralogy debt claim. Within minutes of being forwarded
the draft Mineralogy Settlement Deed, Mr Martino, purportedly as controller of QNI’s
property, executed the document and returned it, in compromise of the claims of QNI.
The purported compromise was for China First to reduce the allotment amount under the challenged Share Subscription Agreement of $135 million to $125 million in
consideration of QNI’s promise to discontinue the Mineralogy debt claim proceeding
and not to make future claims against Mineralogy that were the subject of that proceeding. As well, the deed purported to release all directors and related parties of Mineralogy and China First from all claims.
On 9 May 2017, Mr Martino purported to change QNI’s representation in the
Mineralogy debt claim proceeding to himself and then purported to file a notice of discontinuance of the proceeding.
The plaintiffs allege that Mr Martino willfully or recklessly sacrificed the interests of QNI in executing the Mineralogy Settlement Deed and filing the notice of discontinuance.
In paragraph 522 of the CSOC they seek orders that he was not validly appointed as controller of QNI or be removed as controller, if he was validly appointed, and to restrain him from purporting to exercise any rights as a controller as well as orders as
to the invalidity of the Deed of Settlement and Mr Martino’s filing of a notice to act

on behalf of QNI and filing of a notice to discontinue the Mineralogy debt claim
proceeding.

Mr Martino’s claim of estoppel in paragraphs 622 and 623 of the 9 October CDAC

cross-refers to paragraphs 456 to 457. Again for brevity, the allegations made in those
paragraphs may be summarised.

On 18 January 2016, the day the administrators were appointed, the administrators (personally and on behalf of QNI), the Joint Venturers, China First and the fifteenth
defendant (“Waratah Coal”) executed a document described as the “Priority Deed”.
Clause 6.1(a) of the Priority Deed provided that the GPLs (as creditors under the deed) consented to the creation and execution by QNI of securities including the China First Charge.
Mr Martino alleges, in effect, that:

(a)

the GPLs (as administrators) and QNI (thereby) represented that the China First Charge was valid and that they would not dispute or challenge the rights of the
“relevant” defendants;

(b)

the Joint Venturers and China First entered into the Priority Deed in reliance on the representation and would suffer detriment of QNI or the GPLs were permitted to resile from them; and

(c)

the plaintiffs are precluded by estoppel from claiming the relief sought in paragraphs 504 and 505 of the CSOC.

Paragraph 504 and 505 of the CSOC relevantly claim relief under s 588FF of the CA against the Joint Venturers and China First as to the invalidity of the Share Subscription Agreement and the China First Charge.[44] It is relief that may be granted if a court is satisfied that a transaction is a voidable transaction.[45]
[44] Corporations Act 2001 (Cth), s 588FF(1)(h).
[45] Corporations Act 2001 (Cth), s 588FE(1) and (2).
It is unnecessary to dwell on the logic or strength of Mr Martino’s proposed defence
by estoppel against the operation of the statutory provisions of the CA for invalidity of the Share Subscription Agreement and the China First Charge as part of a voidable transaction as an uncommercial transaction of a company in liquidation.[46]
[46] Compare, for example, Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485, 506; Maritime Electric Co Ltd v General Dairies Ltd [1937] AC 610, 620.
For present purposes, it is enough to conclude that Mr Martino’s plea of estoppel is
raised by way of defence. It is unnecessary for him to claim any order by way of counterclaim. It follows that he should not be granted leave to proceed to make a counterclaim for the relief sought in paragraph BB of the relief sought in the 9 October CDAC.
China First’s counterclaim
China First proposes to prosecute two claims if granted leave to proceed. First, paragraphs 620 and 621 of the counterclaim and paragraph AA of the relief claimed in the 9 October CDAC raise the same estoppel plea as that raised by Mr Martino
upon his proposed counterclaim. For the same reasons as in Mr Martino’s case, no
leave to proceed should be given on that claim.

and attempted to convert into an actual loan if the QN Business Property was
transferred to QN Sales.

512AD The failure to deliver the QN Business Property

caused: (a) the Joint Venture to cease to operate;

(b) the JVA and Administration Agreement to be discharged;
and (c) caused the loss of leases and contracts.
Particulars of sub-paragraph (c)

As to (c), the counter claimants say that the effective continued operation of the Joint Venture required all leases and contracts to be transferred. Without limiting that, access to the Port was critical to the ongoing operation of the refinery, and the following leases and licenses were lost with the result that access to the Port was denied:
(i) the Berth 2 Licence Agreement dated 23 August 1994 between QNI and MIM, referred to in 506(a)(iii); and
(ii) The Leases and Licences between QNI and the Townsville Port Authority, referred to in 506(a)(iii).

512AE By reason of, inter alia, individually or collectively, the Joint Venture ceasing to

operate, the JVA and Administration being discharged and essential leases and
contracts being lost, QNIR and QNIM have suffered loss in the form of :

(a) the lost opportunity to derive profits; and
(b) the diminution of the value of QNIR’s assets and QNIM's assets, the
current best estimate of which is a diminution in value of $1,800,438,000.
Particulars of sub-paragraph (b)

(i)         The assets of the Joint Venture were valued in the accounts of those companies audited by Ernst and Young as at 30 June 2015 at $1,950,438,000.
(ii)        A recent confidential valuation of the refinery valued the refinery at less than that sum and QNIM and QNIR repeat paragraph 29 of the Affidavit of Sameh Morris Iskander sworn 3 October 2018.
(iii)       QNIR and QNIM will provide and rely upon an expert report as to the quantum of damages, which report will be provided in the course of interlocutory steps.

512AF By reason of the same matters referred to in 512AE above, and in particular the loss

of access to the Port, QNIR and QNIM have suffered detriment in the form of loss
of the installed assets at the Port of Townsville valued at $214.5 Million.
Particulars

The installed assets at the Port of Townsville were valued at $214.5 million in July
2015: Queensland Nickel Pty Ltd Yabulu Nickel Refinery Plant & Machinery
Buildings & Structures, Furniture, Fittings & Computers Insurance Valuation
Updated dated July 2015.

512A By reason of the termination of the employment of the 550 employees of QNI, QNI

incurred a financial liability to those employees in the sum of AUD$74,031,845.17.

Particulars
Creditors Report dated 11 April 2016.

512B The financial liability incurred by QNI in respect of the termination of the 550 employees would not have been incurred but for the conduct in breach of the JVA and Administration Agreement pleaded in paragraphs 510, 510A, 510B and 511 hereof, and therefore the liability pleaded in paragraph 512A above constitutes

additional loss and damage to QNIR and QNIM to the extent that QNI is entitled to
claim in respect of that liability from them (which right is otherwise denied).

512C By reason of the matters pleaded in paragraphs 2(f), 511, 512, 512A and 512B hereof, the Joint Venturers are entitled to the relief in paragraphs F, M and W below.

Breach of Duties and Obligation by GPLs

513. As at 7 March 2018 the GPLs were aware of the terms of the JVA and of the Administration Agreement.
Particulars

So much is to be inferred from the fact that:

(a) before their appointment, the GPLs and their staff carried out exhaustive due diligence of the affairs of QNI and were provided, inter alia, with the JVA and the Administration Agreement;
(b) pursuant to the GPLs’ role as administrators appointed to QNI and
their exclusive rights under the Corporations Act 2001 (Cth) to
control QNI, the GPLs were required to familiarise themselves with
the records of QNI.

514. Further, as at 7 March 2016, the GPLs knew that:

(a)

the property identified in paragraph 106(a) hereof was Joint Venture Property, as that term was defined in clause 1.1 of the JVA and was used in clause 5.6(d) of the JVA;

(b)

pursuant to clause 5.6(d) of the JVA, QNI was obliged to transfer the Joint Venture Property to QN Sales upon its appointment as Successor Manager;

(c)

pursuant to clause 8.3 of the Administration Agreement, QNI was obliged to deliver to QNIR and QNIM all books, records and other documents the property of QNIR and QNIM, or kept by it pursuant to the Administration
Agreement;

(d)

the cash sums identified in paragraph 106(b) hereof was held by QNI in its capacity as:

(i) nominee for QNIR and QNIM, or
(ii) as a trustee pursuant to a bare trust; and

(e)

whether as nominee or as trustee, QNI was obliged to deliver up the property identified in paragraph 106(b).

514A The GPLs also knew, or a reasonable person in their position would have	known, that clause 5.6(d) of the JVA (in so far as it related to the Joint related to the books and records contained therein) excluded the enforcement of any lien or charge which they QNI might otherwise have had.
515.	From 7 March 2016, QNIR and QNIM and QN Sales requested the GPLs to cause QNI to perform the Transfer Obligations.

Particulars
QNIR and QNIM repeat and rely on the particulars in paragraph 509 of this defence.

516. Despite demand and the material facts pleaded in paragraph to 492 to 515 above, the GPLs have failed to cause QNI to perform the Transfer Obligations.

516A In the circumstances pleaded in paragraphs 508 – 510B (inclusive), 513 and 516 hereof, QNI breached the JVA and the Administration Agreement.

516B	The GPLs ordered and procured that QNI decline to comply with the requests made by QNIM, QNIR and QN Sales, as pleaded in paragraph 509 hereof, and thus caused QNI to breach the JVA and the Administration Agreement.

Particulars
The fact that the GPLs declined to comply with the requests of QN Sales and ordered and procured the said breach is to be inferred that, at that time:

(a) the authorit y o f QN I’ s directors w as suspended;

516C	In the alternative, the conduct of the GPLs was such that they became so personally
involved in QN I’s breaches that it is just that the y should be rendered liable for
procuring the said breaches.

Particulars

(a) The particulars to paragraph 516B hereof are repeated.
(b)
have known, that clause 5.6(d) of the JVA (in so far as it related to the
Joint Venture Property) and clause 8.3 of the Administration
The GPLs also knew, or a reasonable person in their position would therein) excluded the enforcement of any lien or charge which they QNI might otherwise have had or they shut their eyes to that fact.

(c) The GPLs refused to provide an account to QNIR and QNIM of the monies it claimed were due to it referable to the discharge of its duties as Manager, and QNIR and QNIM repeat paragraphs 105, 106 and 108 of the affidavit of Clive Palmer sworn on 22 August 2017 and
paragr aphs 17 and 19 of t hat deponent’s a ffidavit s worn on 23 April
2018.

(d) The GPLs caused no inquiries to be made of the offer made by QNIR and QNIM to pay such sums as were required to bring the administration to an end, and QNIR and QNIM repeat paragraphs 20 and 23 of the affidavit of Clive Palmer sworn on 23 April 2018.

516D In the further alternative, the conduct of the GPLs made the conduct constituting a

breach of the JVA and the Administration Agreement their own, in that that they
deliberately refused to transfer the Joint Venture Property and documents in
circumstances where:

(a)

that conduct plainly involved a contravention of clause 5.6(d) of the JVA (in so far as it related to the Joint Venture Property) and clause 8.3 of the Administration Agreement (in so far as it related to the books and records referred to therein);
(b) a reasonable person would have so concluded;

(c)

the GPLs failed to seek declaratory relief or directions under s 447D of the Corporations Act in relation to the demands of QN Sales to deliver up the Joint Venture Property and the documents, books and records referred to in clauses 5.6(d) of the JVA and 8.3 of the Administration Agreement; and

(d)

the GPLs refused to provide an account to QNIR and QNIM of the monies it claimed were due to it referable to the discharge of its duties as Manager, and QNIR and QNIM repeat paragraphs 105, 106 and 108 of the affidavit
of Clive Palmer sworn on 22 August 2017 and paragraphs 17 and 19 of that
deponent’s af fidavit swor n on 23 April 2018.

516M In premises of paragraphs 513 to 516D (inclusive), QNIR and QNIM are entitled to

the relief in M below.

Breach of trust by QNI in respect of Business Property

529.      Further and in the alternative, if and only if contrary to the defence of the defendants, this Honourable Court finds that QNI acted as a trustee for Joint Venture Property (which is denied), the defendants say as follows in paragraphs
530 to 565 below.
530.      As at 7 March 2016, QNI held each item of QN Business Property as a bare trustee in respect of a trust for each individual item, for each of QNIR and QNIM as beneficiaries.
531.      By reason of the material facts pleaded in 499 above, on 3 March 2016, QN Sales was appointed as trustee to hold the QN Business Property in place of QNI.
532.      From 7 March 2016, up on the te rmination of Q N I’s appointment as M a n ager and
upon the appointment of QN Sales as Successor Manager, QNI:

(a)

had no right, vis-à-vis QN Sales, to retain any property which it held as Manager even if such right QNI had by way of indemnity was secured over the said property (which right is denied); and
(b) was obliged as trustee to transfer the QN Business Property to QN Sales.
Particulars

The obligation arises on the proper construction of clauses 3.2, 4.1, 5.1(a),
5.2, 5.5, 5.6 of the JVA and clause 8.3 of the Administration Agreement, or
pursuant to a term implied to give business efficacy to the JVA and the
Administration Agreement and pursuant to its role as agent for QNIR and
QNIM in the sale of Products, as trustee holding the QN Business Property
on behalf of QNIR and QNIM and/or the capacities pleaded in paragraph
37(c) to the Defence.

532A

In the alternative to paragraph 532 above, to the extent that QNI was able to enforce
a right of indemnity in respect of the trust, then such charge or indemnity only
extended to such assets as were necessary to secure the payment of such monies as
were properly payable to QNI pursuant to the said indemnity upon it asserting what
monies were in fact properly payable to it.

532B

If, as pleaded in paragraph 532A hereof, QNI was obliged, upon a call being made
upon it to transfer the QN Business Property, it was obliged to:

(a)	provide an account to QNIR and QNIM of the amounts properly due to it;
(b)	identify which assets should be retained by it to secure its right of indemnity; and
(c)	otherwise transfer the balance of the assets to QN Sales or the Joint Venturers.

533.

Further or alternatively, QNI, was as from 7 March 2016, obliged as trustee for referred to in paragraph 506 herein.

534.

On 7 March 2016, QNIR and QNIM requested that QNI transfer to QN Sales the QN Business Property.

Particulars

The defendants repeat the particulars to paragraph 509 above.

535.      In breach of trust, and despite the material facts pleaded in paragraph 506 and 529 to 534 hereof, QNI has failed and refused to perform the Transfer Obligations by:

(a) transferring:
(i)         the Joint Venture Property to QN Sales,
(ii)        the books, records and other documents enumerated in clause 8.3 of the Administration Agreement and described in clause 5.6(d) of the JVA to QNIM, QNIR and QN Sales pursuant to the obligation in
those clauses, and
(iii)       the balance of the assets pleaded in paragraph 506 to QNIM and QNIR pursuant to the obligations of QNI as agent, bailee or bare trustee as pleaded in paragraph 508(c) and (d) hereof; or

(b) alternatively:

(i)

providing an account to QNIR and QNIM of the amounts properly due to it,

(ii)

identifying which assets should be retained by it to secure its alleged right of indemnity; and
(iii) otherwise transfering the balance of the assets to QN Sales.

535A Further, QNI in fact had no right to assert a lien or a charge over the QN Business

Property because:

(a) any trust arises from the terms of the JVA and the Administration Agreement and cannot be inconsistent with the terms of those agreements;
(b) the existence of any such right was excluded by the JVA and the Administration Agreement, which expressly imposed obligations on QNI(by clause 5.6(d) of the former and by clause 8.3 of the latter) to transfer property which obligations were inconsistent with such a right;
(c) to the extent that money was held in an account in the name of QNI, it was absolutely obliged to transfer to the QNIR and QNIM the said monies in accordance with their respective entitlements;
(d) clause 3.1 of the JVA was also inconsistent with the existence of any such right; and
(e) the defendants otherwise rely upon paragraphs 91 – 121 hereof.

535B In the alternative to paragraph 535A above, if the Court finds that QNI had a right of indemnity or exoneration against QNIR and QNIM secured over the property of QNIR and QNIM which it held as trustee (which right is denied), then:

(a) it was a condition precedent to the assertion of that security as a basis for refusing to comply with the Transfer Obligations, that QNI provide to QNIR and QNIM an account of the extent of the asserted indemnity;
(b) at all times when QNIM and QNIR called upon QNI to fulfil the Transfer Obligations, QNI failed to provide such an account; and
(c) by reason of (a) and (b) above, QNI had waived, or was estopped from, or had elected not to, assert any such security interest as a basis for refusing the Transfer Obligations.

535C The GPLs ordered and procured that QNI decline to comply with the requests made by QNIM, QNIR and QN Sales, as pleaded in paragraphs 509 and 534 hereof, and

thus caused QNI to breach the trust pleaded in paragraphs 529 – 535B hereof.
Particulars

The fact that the GPLs declined to comply with the requests of QN Sales and ordered and procured the said breach is to be inferred that, at that time:

(a) the authorit y o f QN I’ s directors w as suspended;
(b) management and control of QNI rested entirely with the GPLs; and

(c)

in the circumstances recorded in paragraph (g) of the particulars to paragraph 509 hereof, Ms Trenfield rejected the request made on behalf of QNIR and QNIM to release the Joint Venture Property

535D	In the alternative, the conduct of the GPLs was such that they became so personally
involved in QN I’s breaches of trust that it is just that they should be rendered liable
for procuring the said breaches.

Particulars

(a) The particulars to paragraph 516B hereof are repeated.
(b)
have known, that clause 5.6(d) of the JVA (in so far as it related to the
Joint Venture Property) and clause 8.3 of the Administration
The GPLs also knew, or a reasonable person in their position would therein) excluded the enforcement of any lien or charge which they QNI might otherwise have had or they shut their eyes to that fact.

(c) The GPLs refused to provide an account to QNIR and QNIM of the monies it claimed were due to it referable to the discharge of its duties as Manager, and QNIR and QNIM repeat paragraphs 105, 106 and 108 of the affidavit of Clive Palmer sworn on 22 August 2017 and
paragr aphs 17 and 19 of t hat deponent’s a ffidavit s worn on 23 April
2018.

(d)

The GPLs caused no inquiries to be made of the offer made by QNIR and QNIM to pay such sums as were required to bring the administration to an end, and QNIR and QNIM repeat paragraphs 20 and 23 of the affidavit of Clive Palmer sworn on 23 April 2018.

535E

In the further alternative, the conduct of the GPLs made the conduct constituting

breaches of the trust pleaded in paragraphs 529 – 535B hereof their own, in that that

they deliberately refused to transfer the Joint Venture Property and documents in
circumstances where:

(a)	that conduct plainly involved a contravention of clause 5.6(d) of the JVA (in so far as it related to the Joint Venture Property) and clause 8.3 of the Administration Agreement (in so far as it related to the books and records referred to therein);
(b)	a reasonable person would have so concluded;
(c)	the GPLs failed to seek declaratory relief or directions under s 447D of the Corporations Act in relation to the demands of QN Sales to deliver up the Joint Venture Property and the documents, books and records referred to in

clauses 5.6(d) of the JVA and 8.3 of the Administration Agreement; and

(d)

the GPLs refused to provide an account to QNIR and QNIM of the monies it claimed were due to it referable to the discharge of its duties as Manager, and QNIR and QNIM repeat paragraphs 105, 106 and 108 of the affidavit of Clive Palmer sworn on 22 August 2017 and paragraphs 17 and 19 of that
deponent’s af fidavit swor n on 23 April 2018.

536. Further, the retention of and refusal to account for the trust property referred to in paragraph 534 and 535 of this defence above has caused detriment to QNIR and QNIM.
Particulars

(a)

Based on the conduct of the GPLs and of QNI while under the control of the GPLs, the defendants repeat the particulars to paragraph 516L above.

536A	In the premises, QN I’s fa ilure to transfer th e QN Business Property also
constituted a breach of the equitable obligation (if it be found to exist) pleaded in paragraph 532(b) hereof.

536B If QNI is held to be trustee of the assets of the Joint Venture, then QNI remains liable to transfer the said property to QN Sales.

537. By reason of the material facts pleaded in paragraphs 529 to 536 (inclusive) hereof, QNIR and QNIM are entitled to the relief in paragraphs M, Q, R, S and W below.

COUNTERCLAIM

This counterclaim is made by the Defendants against:

571.      The Second Plaintiff (QNI);
572.      The Third Defendants (GPLs);
574.      Stefan Dopking called “Second Defendant added by counterclaim)”
(Dopking)

This counterclaim is made in reliance upon the following facts:

Particulars

QNIR and QNIM repeat and rely on the particulars in paragraph 516L of this defence
585. By reason of the material facts pleaded in paragraphs 583 to 584 above, QNIR and QNIM are entitled to the relief in paragraphs D and E below.
586. Further or in the alternative, by reason of the material facts pleaded in paragraphs 583 to 584 above, QNIR and QNIM are entitled to the relief in paragraph F and M below.

Obligation on GPLs to cause QNI to transfer Business Property

587.      QNIR and QNIM repeat and rely on paragraphs 492 to 512C, 513 – 516D, 516M, 529 – 535C, 536 and 537 above.
588.     By reason of the material facts pleaded in 587 above, the GPLs have caused or induced QNI to breach the JVA, the Administration Agreement and its obligations as agent of or alternatively as trustee for QNIR and QNIM.
589.     The GPLs’ conduct in causing or inducing QNI to breach the JVA, the
Administration Agreement and its obligations as agent of or alternatively as trustee for QNIR and QNIM has caused QNIR and QNIM loss and damage.
Particulars

QNIR and QNIM repeat and rely on the particulars in paragraph 516L of this defence.

590. By reason of the material facts pleaded in paragraphs 587 and 588 above, QNIR and QNIM are entitled to the relief in paragraphs G and H below.
591. Further or in the alternative, by reason of the material facts pleaded in paragraph 587 to 589 above, QNIR and QNIM are entitled to the relief in paragraph I and M below.
of interlocutory steps.

599. Further, the joint venture business would have continued to trade from 7 March 2016 until the time of the filing of this counterclaim and generated significant profits in the financial years ended 31 December 2017 and in 2018.
Particulars

(a) The defendants repeat and rely on the particulars to paragraph 501 to 503 above.
(b) The price of nickel and the price of cobalt have substantially increased since 2016.
(c) The cost of production for the Refinery would have remained substantially lower that the price of nickel and cobalt.
(d) The estimate profits for 2017 would have been $60 million. The estimate profit to date for 2018 would have been $127 million.
(e) The defendants will provide and rely upon an expert report as to the quantum of damages, which report will be provided in the course of interlocutory steps.

600. By reason of the material facts pleaded in paragraph 598 to 599 above, QNIR and QNIM are entitled to the relief in paragraph M below.

Breach of trust by QNI in respect of Business Property

601. Further and in the alternative, if and only of contrary to the defence of the Defendants, this Honourable Court finds that QNI acted as a trustee for Joint Venture Property (which is denied), the defendants say as follows in paragraphs
602 below.
602. By reason of the material facts pleaded in paragraphs 529 to 536, the Joint Venturers are entitled to the relief in paragraph Q, R and S below.

China First Estoppel

620.      China First repeats and relies on paragraphs 407 to 419 of the defence above.
621.      In the circumstances of paragraph 620 above, China First is entitled to the relief in paragraph AA below.

(i)

by reason of the material facts pleaded in paragraphs 636 and 637(a) to 637 (g) above, China First has suffered loss and damage in that it will not receive the $135 million under the share sale agreement.
638.     By reason of the material facts pleaded in paragraphs 636 and 637 above, China First is entitled to the relief in paragraph Z below.

Purported Call Notices

639.      QNIR and QNIM repeat and refer to paragraphs 122 to 131 of the Defence.
640.      By reason of the material fact pleaded in paragraph 639 above, the Joint Venturers are entitled to the relief sought in paragraph V below.
(iii)       caused QNI to breach its duty as a trustee; and
(iv)        caused the Joint Venturers loss by causing a cessation of the joint venture business.
Particulars

The Joint Venturers repeat and rely on the particulars in paragraph 584 of this counterclaim.

(g)

In the premises, QNIR and QNIM are entitled to the relief in paragraph R and S below (as against the GPLs only).

THE DEFENDANTS CLAIM THE FOLLOWING RELIEF:

AA.	To the extent necessary, pursuant to ss. 471B and/or 500(2) of the Corporations Act 2001 (Cth), leave be granted nunc pro tunc to the Defendants to bring this Counterclaim.
A.	A declaration that the Deed of Settlement is a bar to the claims in the CSOC.
B.	An order that the Defendants are released and excused from the claims the subject of the CSOC.
C.	An order that the CSOC be dismissed, or alternatively, an order that all claims in the CSOC based upon the trust or trusts pleaded in Section K of the CSOC be permanently stayed and/or dismissed as an abuse of process.

THE FIRST AND SECOND DEFENDANTS CLAIM THE FOLLOWING RELIEF:

Obligation to transfer QN Business Property and Damages

D.	A declaration that QNI is obliged to perform the Transfer Obligations.
E.	An order that QNI perform the Transfer Obligations.
F.	An order for the payment by QNI of the sum of $1,800,438,000 or such other sum as this Honourable Court determines to be payable to the Joint Venturers including by way of damages or equitable compensation.
G.	Alternatively, a declaration that the GPLs are obliged to cause QNI to perform the Transfer Obligations.
H.	Alternatively, an order that the GPLs cause QNI perform the Transfer Obligations.

I. Alternatively, an order for the payment by the GPLs and/or FTI Consulting of the sum of $1,800,438,000 or such other sum as this Honourable Court determines to be payable to the Joint Venturers including by way of damages or equitable
compensation.

N.	An order that an account be taken of all property belonging to QNIR and QNIM received and disbursed as from 18 January 2016 by Queensland Nickel as Manager of the Joint Venture or alternatively by the GPLs as administrators or liquidators of Queensland Nickel.
O.	An order that Queensland Nickel or alternatively the GPLs deliver to QNIR and QNIM the property found due on taking such an account and pay to QNIR QNIM any sum found due on taking such an account.
P.	An order that QNI, or alternatively the GPLs or the SPLs account to QNIR and QNIM for the property referred to in paragraph 506 hereof.
Q.	Alternatively to order P, an order that QNI, the GPLs and/or the SPLs pay equitable compensation to the Joint Venturers in the sum of $1,800,438,000 or such other sum as this Honourable Court determines to be payable to QNIR and/or QNIM.
R.	An order that QNI, the GPLs and/or the SPLs provide equitable compensation to QNIR and QNIM in respect of the detriment referred to in paragraph 536, 543 and 550 respectively in the sum of $1,800,438,000 or such other sum as this Honourable Court determines to be payable to QNIR and QNIM.
S.	An order for compound interest from and including 7 March 2016 until the date the judgment on any sums ordered to be paid under paragraphs Q and R above.

Purported call notices

V. A declaration that the Old Call Notices and the New Call Notices were not valid notices under the JVA.

Employee liabilities

W.	An order that QNIR and QNIM are not liable for, and QNI may not recover from them, the sum of $74,031,845.17 incurred by QNI consequent upon its termination of 550 employees on 11 March 2016.

MINERALOGY CLAIMS THE FOLLOWING RELIEF:

CHINA FIRST CLAIMS THE FOLLOWING RELIEF:
Estoppel

AA.	A declaration that the second and third plaintiffs are precluded and/or estopped from seeking and obtaining the relief sought by them in paragraphs 504 and 505 of the CSOC.

MARTINO CLAIMS THE FOLLOWING RELIEF

BB.	An order that the GPLs and QNI are estopped from claiming and/or obtaining the relief sought in paragraph 522 of the CSOC.

MR PALMER CLAIMS THE FOLLOWING RELIEF

CC.	An order setting aside the Security Deed and Power of Attorney executed by Clive Palmer.
Signed:

Description: Alexander Law, Solicitor for the all the defendants other than the twentieth

and twenty-first defendants.

NOTICE AS TO REPLY AND ANSWER

To the Plaintiffs: You have 14 days within which to file and serve an answer to this counterclaim. If you do not do so, Rule 166 provides allegations of fact in the counterclaim are taken to be admitted by you unless denied or stated to be not admitted by you in a

pleading.

To each Defendant added by Counterclaim: TAKE NOTICE that you are being sued by the First and Second Defendants in the Court. If you intend to dispute this claim or wish to raise any counterclaim, you must within 28 days of the service upon you of this

counterclaim file a NOTICE OF INTENTION TO DEFEND in this Registry. If you do
not comply with this requirement, judgment may be given against you for the relief

claimed and costs without further notice to you. The Notice should be in Form 6 to the

Uniform Civil Procedure Rules. You must serve a sealed copy of it at the Defendants’

address for service shown in this counterclaim as soon as possible.

Address of Registry: QEII Courts of Law Complex, 415 George Street, Brisbane Qld

4000

Particulars of the First and Second Defendants:

PARTICULARS OF THE FIRST AND SECOND DEFENDANTS:

Name:	QNI Metals Pty Ltd
QNI Resources Pty Ltd
Residential or business address:	Care of 1/169 Given Terrace, Paddington in the State
of Queensland
Solicitor's name:	Sameh Morris Iskander
and firm name:	Alexander Law
Solicitor's business address:	1, 169 Given Terrace
Paddington QLD 4064
Address for service:	C/- Alexander Law
1, 169 Given Terrace
Paddington QLD 4064
DX (if any):
Telephone:	(07) 3369 0766
Fax:	(07) 3369 0966
E-mail address (if any):	[email protected]

Equity: Doctrines and Remedies, 5 ed (2015), 1117-1121 [39-110]-[39-155].
GPLs and the amended application for leave to proceed sought such leave.
Gummow and Lehane’s Equity: Doctrines and Remedies, 5 ed (2015), 1102-1109.
(2015), 1102-1115.
Heydon & Leeming, Meagher, Gummow & Lehane’s Equity: Doctrines and Remedies, 5 ed (2015),
351 [8-225].

Set-off generally

569A

QNIR ’s and QNIM ’s entitlement to damages by reason of their causes of action

pleaded in the following paragraphs herein:

(a)	paragraphs 508 – 512C; and
(e)	paragraphs 529 to 535B,

impeaches the title of the plaintiffs to claim for or in respect of any debt, whether owed in contract, restitution or in equity, which debt represents in whole or in part, the amounts claimed in the Old Call Notices, the New Call Notices, the Schedule E debts and/or the Expenditure Amount.

Deed of Settlement

575. The defendants repeat and rely paragraph 1A to the Defence.
576. By reason of the material facts pleaded in paragraph 575, the defendants are entitled to the relief in paragraphs A to C below.

Parties
577.	QNIR, QNIM and QN Sales repeat and rely upon paragraphs 2, 3, 4, 5, 6 and 7 of the Defence to the CSOC.
578.	In this counterclaim, a reference to the GPLs includes the GPLs and Dopking.
579.	At all times material to this counterclaim, Dopking was a duly appointed administrator and liquidator.

Establishment and Operation of the Joint Venture, including Material Terms of the
Joint Venture Agreement and Administration Agreement

582. QNIM and QNIR repeat and rely upon paragraphs 29, 31, 37 and 44 of the Defence.

QNI’s Transfer Obligations

583. QNIM and QNIR repeat and rely upon paragraphs 492 to 512C, 513 – 516D, 516M and 519 – 537 494 to 509 and 529 to 535A of the Defence.
584. By reason of the material facts pleaded in paragraph 583 above, QNIM and QNIR
breached the JVA, the Administration Agreement and QNI’s obligations as agent of

or alternatively as trustee for QNIR and QNIM, QNI has caused QNIR and QNIM
loss and damage.

Loss of opportunity damages

598. Further and in the alternative, by reason of the material facts pleaded in paragraphs 516M and 583 to 591 above, QNIR and QNIM have suffered loss and damage in the form of a lost opportunity to continue conducting the joint venture for profit.
Particulars

(a)

QNIR and QNIM repeat and rely on the particulars in paragraph 584 and 591 of this counterclaim.

(b)

QNIR and QNIM will provide and rely upon an expert report as to the quantum of damages, which report will be provided in the course

Martino Estoppel

622. Martino repeats and relies on paragraphs 456 to 457 of the defence above.
623. In the circumstances of paragraph 622 above, Martino is entitled to the relief in paragraph BB below.

Breach of Priority Deed

636. The defendants repeat and rely on paragraphs 379 to 393 of the Defence.
637. If, contrary to the defendants’ defence to the CSOC, this Honourable Court

finds that the China First Transaction is void by reason of ss588FE and 588FF of
the Corporations Act 2001 (Cth), China First says as follows:

(a)

China First had a legitimate expectation to receive $135 million by reason of the Share Subscription Agreement (as pleaded in paragraph 380(b)(i)(A) of the CSOC);
(b) China First’s legitimate expectation will not be fulfilled because the China
First Transaction has been found to be void;

(c)

by reason of clause 6.6 of the Priority Deed, the GPLs and QNI, must do or cause to be done anything which more satisfactorily secures the rights of China First under the Priority Deed;

(d)

on a proper construction of clause 6.6 of the Priority Deed or pursuant to an implied term, the GPLs and QNI agreed not to do anything which would not more satisfactorily secure the rights of China First under the Priority Deed;

Particulars

To the extent that the term alleged is to be implied, it is implied from the express words of clause 6.6 and/or in order to give business efficacy to the Priority Deed.

(e) China First’s rights under the Priority Deed included the right to occupy its
security position behind the GPLs. A necessary incident of that right is the
holding by China First of the China First Charge and the rights the
charge secured, namely the right to receive the payment of $135 million
under the share sale agreement;
(f) the GPL’s conduct:

(i) in seeking and obtaining orders voiding the China First Transaction;
(ii) by refusing recognise the proof of debt lodged by China First;
(iii) by refusing to allow China First to cast votes a meetings of creditors, the GPLs and QNI have acted in a manner which did not more satisfactorily secure the rights of China First under the Priority Deed.

(g) the GPLs and QNI have thereby breached the Priority Deed;
(h)

Failure to sell Real Properties

641. Further in the alternative to paragraphs 469 to 473 of the Defence, if and only if
contrary to the Defence, this Honourable Court finds that QNI held the Real
Properties on trust for the purposes of the Joint Venturers (as pleaded in paragraph
461 of the CSOC) (which is denied), QNIR and QNIM say as follows:

(a) The Real Properties were held by QNI from 18 January 2016 until 6 March 2016;
(b)
By virtue of the powers granted to them under the Corporations Act in its name;

(c) By failing to do so, QNI as manager breached its obligations as manager to sell the Real Properties;
(d) the GPLs failed at all times from on or about 18 January 2016, or alternatively on every day thereafter, to 6 March 2016 to cause QNI to sell the Real Properties held by QNI on trust by it for the purposes of the Joint Venture;
(e) the realisation of the Real Properties would have produced funds which
could have been used to satisfy QNI’s liabilities as and when they fell due
after 18 January 2016;

(f) By failing to sell the Real Properties, the GPLs:

(i)

breached their duties as Administrators in that by failing to realise the Real Properties they failed to exercise their powers and discharge their duty with the degree of care and diligence that a reasonable person would have exercised;

(ii)

contributed to QNI being placed into liquidation and to its removal as Manager;

Damages for breach of the Priority Deed

Z.	As against QNI, the GPLs and/or SPLs, damages for breach of the Priority Deed in the sum of $135 million.

CATCHWORDS:	CORPORATIONS – WINDING UP – CONDUCT AND INCIDENTS OF WINDING UP – PROCEEDINGS BY OR AGAINST THE COMPANY – LEAVE TO PROCEED – WHEN LEAVE GRANTED – where leave sought to proceed
against company in liquidation that was manager of joint
venture business – where counterclaim for failure to transfer
property to new manager as required alternatively by contract,
trust, agency or bailment – where causation of two billion
dollar loss alleged on basis that business ceased operations due
to failure to transfer property – where alleged particular leases, licences and contracts necessary for continued operation – where various other counterclaims – whether leave to proceed
against company in liquidation should be granted
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – PLEADINGS – STRIKING OUT –
DISCLOSING NO REASONABLE CAUSE OF ACTION OR
DEFENCE – OTHERWISE ABUSE OF PROCESS – where
plaintiffs apply for strike out of counterclaim and defence of
set-off – where no leave to proceed on counterclaim that forms
the basis of set-off – whether set-off should be struck out as
disclosing no reasonable defence
EQUITY – TRUSTS AND TRUSTEES – POWERS, DUTIES, RIGHTS AND LIABILITIES OF TRUSTEES – INDEMNITY, LIEN AND REIMBURSEMENT – RELEVANT PRINCIPLES – where statement of claim alleges
joint venture agreement contract gives rise to trust relationship
– where statement of claim alleges right to indemnity, lien and
right of retention for liability incurred in conducting joint
venture – where lien alleged as basis for proprietary relief throughout statement of claim – where defendants complain that lien cannot extend to all trust property – where no
allegation that at the time of payments or transfers the trust property was insufficient to meet right of indemnity should the
payment or transfer be made – whether lien allegations should
be struck out as disclosing no reasonable cause of action
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – PLEADINGS – FORM OF PLEADING – SHORT FORM MONEY COUNTS – where claims for money paid – where defendants complain that no allegation that the payments discharged relevant debts –
whether claims for money paid should be struck out as disclosing no reasonable cause of action
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – OVERRIDING PURPOSE OF
AND OBLIGATIONS UNDER RULES OR ACTS
REGULATING CIVIL PROCEEDINGS – where Uniform
Civil Procedure Rules 1999 (Qld) provide for overriding objective, undertaking to the court to proceed expeditiously
and sanctions for failure to comply – discussion of relevant
principles to be applied
Corporations Act 2001 (Cth), s 471B, s 588FE, s 588FF, s 1324 Trusts Act 1973 (Qld), s 72 Uniform Civil Procedure Rules 1999 (Qld), r 5, r 171, r 292, r 293
Agar v Hyde (2000) 201 CLR 552, cited Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570, cited Agusta Pty Ltd v Official Trustee in Bankruptcy (2008) 6 ABC (NS) 164, cited Agusta Pty Ltd v Official Trustee in Bankruptcy [2009] NSWCA 129, cited Alati v Kruger (1956) 94 CLR 216, cited
American Dairy Queen (Qld) Pty Ltd v Blue Rio Pty Ltd
(1981) 147 CLR 677, cited
Ancient Order of Foresters in Victoria Friendly Society
Limited v Lifeplan Australia Friendly Society Ltd [2018] HCA 43, cited
Aon Risk Services Australia Ltd v Australian National
University (2009) 239 CLR 175, considered
Australian Securities and Investments Commission v Letten
(No 17) (2011) 286 ALR 346, cited
Australian Securities Commission v Marlborough Gold
Mines Ltd (1993) 177 CLR 485, cited Basha v Basha [2010] QCA 123, cited
Batistatos v Roads & Traffic Authority of New South Wales
(2006) 226 CLR 256, considered
Birbilis Bros Pty Ltd v Chubb Fire and Security Pty Ltd
[2018] QSC 3, cited
Burness (as liquidator of Denward Lane Pty Ltd (in liq)) v
Byrnes v Kendle (2011) 243 CLR 253, cited Cherry v Boultbee (1839) 4 My & Cr 442, 41 ER 171, cited Commonwealth v Davis Samuel Pty Ltd (No 5) (2008) 164 ACTR 1, cited Denton v TH White Ltd [2014] 1 WLR 3926, cited Dey v Victorian Railways Commissioners (1949) 78 CLR 62, cited
Supaproducts Pty Ltd (2009) 259 ALR 339, cited cited
Expense Reduction Analysts Group Pty Ltd v Armstrong
Strategic Management and Marketing Pty Ltd (2013) 250 CLR 303, cited Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89, cited
General Steel Industries Inc v Commissioner for Railways
(NSW) (1964) 112 CLR 125, cited Graham & Linda Huddy Nominees Pty Ltd v Byrne [2016] QSC 221, cited
Hartglen Pty Ltd v Geoff Mitchell & Associates Pty Ltd
[2004] QSC 67, cited Hartnett v Hynes [2009] QSC 225, cited Hartnett v Hynes [2010] QCA 65, cited
Hendersons Automotive Technologies Pty Ltd (in liq) v
Flaton Management Pty Ltd (2011) 32 VR 539, cited Heperu Pty Ltd v Belle (2009) 76 NSWLR 230, cited Hewett v Court (1983) 149 CLR 639, cited
Kemtron Industries Pty Ltd v Commissioner of Stamp Duties
(Qld) [1984] 1 Qd R 576, considered cited
Lemery Holdings Pty Ltd v Reliance Financial Services Pty
Ltd (2008) 74 NSWLR 550, cited Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR
635, cited
Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286, cited Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (2013) 42 VR 27, cited Maritime Electric Co Ltd v General Dairies Ltd [1937] AC 610, cited Metropolitan Bank Ltd v Pooley (1885) 10 App Cas 210, cited Parbery & Ors v QNI Metals Pty Ltd & Ors (2018) 127 ACSR 582, related Park v Whyte (No 3) [2018] 2 Qd R 475, cited Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154, cited Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165, cited
Proactive Management & Ors v Over Fifty Funds & Ors
[2007] NSWSC 802, cited QNI Resources Pty Ltd & Ors v Park & Ors (2016) 116 ACSR 321, related
QNI Resources Pty Ltd & Ors v Queensland Nickel Pty Ltd
(in liq) [2017] QCA 167, related Quinlan v Rothwell [2002] 1 Qd R 647, cited
Re Nisbet and Potts’ Contract [1906] 1 Ch 386, cited
Re Siromath Pty Ltd (No 3) (1991) 25 NSWLR 25, cited Re Worldwide Specialty Property Services Ltd (in liq) [2017] NSWSC 1851, cited Ridolfi v Rigato Farms Pty Ltd [2001] 2 Qd R 455, cited Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516, cited
RWG Management Ltd v Commissioner for Corporate Affairs
[1985] VR 385, cited
Southern Cross Mine Management Pty Ltd v Ensham
Resources Pty Ltd [2004] QSC 457, cited Spencer v Commonwealth (2010) 241 CLR 118, cited Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245, cited Testel Australia Pty Ltd v KRG Electrics Pty Ltd [2013] SASC 91, cited
Trident General Insurance Co Ltd v McNiece Bros Pty Ltd
(1988) 165 CLR 107, cited UBS AG v Tyne [2018] HCA 45, cited Webster v Lampard (1993) 177 CLR 598, cited X v A [2001] 1 All ER 490, cited
COUNSEL:	G Gibson QC, with T Sullivan QC, C Curtis and A Rae for the plaintiffs M Condon SC, with N Kabilafkas and T March for the defendants except the fourth, twentieth and twenty-first defendants
SOLICITORS:	King & Wood Mallesons and HWL Ebsworth for the plaintiffs Alexander Law for the defendants except the fourth,
twentieth and twenty-first defendants

(b)	512AA – had the QN Business Property been delivered to the third defendant (“QN Sales”) “it would have attempted to conduct the Joint Venture”;
(c)	512AB – in March 2016 the GPLs identified $10 million as the amount required
to cover a cash flow shortfall to permit the continuation of the Joint Venture into the indefinite future;
(d)	512AC – on 7 March 2016 QNIM had the benefit of an indicative offer of a loan facility from Chifley Securities for $23 million “which it would have accepted,

(b)	Note 1(c) to the special purpose financial statements shows that the accounting for the value of plant, property and equipment was changed to the fair value method of valuation, based on a discounted cash flow forecast valuation methodology of the Joint Venture business operations;
(c)	however, Note 1(b) to the special purpose financial statements stated that the ability to generate sufficient net cash inflows from operations in order to meet

(d)	that note also stated that at 30 June 2015 the QN Group had minimal loans and borrowings payable to third parties totaling $25.3 million;
(e)	from at least 16 or 17 September 2015 onwards, Mr Palmer and Mr Mensink tried, no doubt using their best efforts, to borrow amounts for working capital for the Joint Venture business against the value of its assets (including the amount of the revaluation of the property, plant and equipment as at 30 June 2015) but were unable to do so;
(f)	on 13 November 2015, Mr Palmer advanced $US1.86 million to QNI to meet

31 October 2014	Pursuant to the Nickel Ore	$81,748,376.05
Transportation Agreement dated
31 October 2014

“(i)	bailee, by virtue of its possession and pursuant to pursuant to (sic) clause 5.2(a), (b) and (c) of the JVA, which required QNI to obey directions of the Joint Venturers, the terms of the bailment being subject to directions of the Joint Venturers from time to time, including to deliver up that property on request;
(ii)	in the alternative as agent, pursuant to clause 5.2(a), (b) and (c) of the JVA, which required QNI to obey directions of the Joint Venturers from time to time, including to deliver up that property on request; and
(iii)	in the further alternative, as bare trustee, by reason of paragraphs 37 and 108A hereof, its obligation to deliver up that property to the
Joint Venturers on request.” (emphasis added)

(c)	61(h) – QNI has and had no right of indemnity as a trustee of the Joint Venture
out of any of the property or assets of the Joint Venture in respect of any liabilities incurred by it; and
(d)	67 – in the circumstances and by virtue of clause 5.6(d) of the JVA, as from 7

(b)	512A – by reason of the termination of the employment of 550 employees of
QNI (presumably on or about 11 March 2016 as alleged in paragraph 104(f)(iv)), QNI incurred liabilities to those employees of $74,031,845.17;
(c)	512B – that liability would not have been incurred but for QNI’s alleged
breaches of contract in failing to deliver the QN Business Property to QN Sales or the Joint Venturers.

(b)	on 11 March 2016, when QNI terminated the 550 employees, QNI no longer had the business of operating the Joint Venture under the JVA;
(c)	the 9 October CDAC does not allege in the counterclaim, as prior iterations of the pleading did, that QNI was obliged to deliver the employees to QN Sales or

(b)	the Joint Venturers and China First entered into the Priority Deed in reliance on the representation and would suffer detriment of QNI or the GPLs were permitted to resile from them; and
(c)	the plaintiffs are precluded by estoppel from claiming the relief sought in paragraphs 504 and 505 of the CSOC.

caused: (a)	the Joint Venture to cease to operate;
(b)	the JVA and Administration Agreement to be discharged;

(a)	the lost opportunity to derive profits; and
(b)	the diminution of the value of QNIR’s assets and QNIM's assets, the

(a)	before their appointment, the GPLs and their staff carried out exhaustive due diligence of the affairs of QNI and were provided, inter alia, with the JVA and the Administration Agreement;
(b)	pursuant to the GPLs’ role as administrators appointed to QNI and
their exclusive rights under the Corporations Act 2001 (Cth) to control QNI, the GPLs were required to familiarise themselves with the records of QNI.

(a)	The particulars to paragraph 516B hereof are repeated.
(b)	have known, that clause 5.6(d) of the JVA (in so far as it related to the Joint Venture Property) and clause 8.3 of the Administration

(a)	any trust arises from the terms of the JVA and the Administration Agreement and cannot be inconsistent with the terms of those agreements;
(b)	the existence of any such right was excluded by the JVA and the Administration Agreement, which expressly imposed obligations on QNI(by clause 5.6(d) of the former and by clause 8.3 of the latter) to transfer property which obligations were inconsistent with such a right;
(c)	to the extent that money was held in an account in the name of QNI, it was absolutely obliged to transfer to the QNIR and QNIM the said monies in accordance with their respective entitlements;
(d)	clause 3.1 of the JVA was also inconsistent with the existence of any such right; and
(e)	the defendants otherwise rely upon paragraphs 91 – 121 hereof.

(a)	it was a condition precedent to the assertion of that security as a basis for refusing to comply with the Transfer Obligations, that QNI provide to QNIR and QNIM an account of the extent of the asserted indemnity;
(b)	at all times when QNIM and QNIR called upon QNI to fulfil the Transfer Obligations, QNI failed to provide such an account; and
(c)	by reason of (a) and (b) above, QNI had waived, or was estopped from, or had elected not to, assert any such security interest as a basis for refusing the Transfer Obligations.

(a)	the authorit y o f QN I’ s directors w as suspended;
(b)	management and control of QNI rested entirely with the GPLs; and
(c)	in the circumstances recorded in paragraph (g) of the particulars to paragraph 509 hereof, Ms Trenfield rejected the request made on behalf of QNIR and QNIM to release the Joint Venture Property

(a)	The defendants repeat and rely on the particulars to paragraph 501 to 503 above.
(b)	The price of nickel and the price of cobalt have substantially increased since 2016.
(c)	The cost of production for the Refinery would have remained substantially lower that the price of nickel and cobalt.
(d)	The estimate profits for 2017 would have been $60 million. The estimate profit to date for 2018 would have been $127 million.
(e)	The defendants will provide and rely upon an expert report as to the quantum of damages, which report will be provided in the course of interlocutory steps.

(a)	QNIR and QNIM repeat and rely on the particulars in paragraph 584 and 591 of this counterclaim.
(b)	QNIR and QNIM will provide and rely upon an expert report as to the quantum of damages, which report will be provided in the course

(c)	by reason of clause 6.6 of the Priority Deed, the GPLs and QNI, must do or cause to be done anything which more satisfactorily secures the rights of China First under the Priority Deed;
(d)	on a proper construction of clause 6.6 of the Priority Deed or pursuant to an implied term, the GPLs and QNI agreed not to do anything which would not more satisfactorily secure the rights of China First under the Priority Deed;

(g)	the GPLs and QNI have thereby breached the Priority Deed;
(h)

(c)	By failing to do so, QNI as manager breached its obligations as manager to sell the Real Properties;
(d)	the GPLs failed at all times from on or about 18 January 2016, or alternatively on every day thereafter, to 6 March 2016 to cause QNI to sell the Real Properties held by QNI on trust by it for the purposes of the Joint Venture;
(e)	the realisation of the Real Properties would have produced funds which