Park, in the matter of Queensland Nickel Pty Ltd (in liq) (No 3)
[2022] FCA 1301
•2 November 2022
FEDERAL COURT OF AUSTRALIA
Park, in the matter of Queensland Nickel Pty Ltd (in liq) (No 3) [2022] FCA 1301
File number(s): QUD 235 of 2021 Judgment of: DOWNES J Date of judgment: 2 November 2022 Catchwords: BANKRUPTCY AND INSOLVENCY – application for directions under s 90-15 of Schedule 2 of the Corporations Act 2001 (Cth) (Insolvency Practice Schedule) – debts incurred by corporate trustee while manager of joint venture – trustee went into administration and was replaced by new trustee – former trustee obtained funding pursuant to litigation funding agreement and brought successful proceeding to recover debt from related company – entry into funding agreement approved by committee of inspection – new trustee demanded payment of judgment sum – liquidators of former trustee seek advice that they would be justified in paying trust creditors from judgment sum along with expenses associated with recovery of debt and their remuneration before transferring any surplus to new trustee – new trustee and beneficiaries challenge payment to creditors on basis that debts were not properly incurred in the performance of the trust – new trustee and beneficiaries challenge payment of expenses associated with recovery of debt and remuneration on basis were improperly incurred – direction opposed on basis that former trustee failed to obtain court approval of litigation funding agreement prior to entering into it – direction opposed on basis of incomplete information – orders made
TRUSTS AND TRUSTEES – application for judicial advice under s 96 of the Trusts Act 1973 (Qld) – whether trust property confined to funds held in bank account or to joint venture property as defined in joint venture agreement – whether trust creditors should be paid from proceeds of judgment sum following successful recovery of debt – whether former trustee has obligation to get in trust property after being replaced – whether former trustee acted in breach of trust by bringing proceeding to get in trust property – whether former trustee was required to transfer trust property to new trustee – where any such transfer would place trust property at risk – advice given
Legislation: Bankruptcy Act 1966 (Cth) ss 178, 179
Corporations Act 2001 (Cth) ss 436A, 436E, 439A, 477(2B), Sch 2 s 90-15, Sch 2 Pt 3
Evidence Act 1995 (Cth) ss 76, 79
Fair Entitlements Guarantee Act 2012 (Cth) s 28
Limitation of Actions Act 1974 (Qld) s 10(1)
Property Law Act 1974 (Qld) s 199
Trusts Act 1973 (Qld) ss 15, 72, 96, 97
Cases cited: Apostolou v VA Corporation Aust Pty Ltd (2010) 77 ACSR 84; [2010] FCA 64
ASIC v Groundhog Developments Pty Ltd & Ors [2011] QSC 263
Australian Competition and Consumer Commission v Swishette Pty Ltd [2018] FCA 55
Australian Securities and Investments Commission v Letten (No 17) (2011) 87 ACSR 155; [2011] FCA 1420
Ban v The Public Trustee of Queensland [2015] QCA 18
Break Fast Investments Pty Ltd v Sclavenitis [2022] VSC 288
BrutonHoldings Pty Ltd (in liq) v Federal Commissioner of Taxation (2011) 193 FCR 442; [2011] FCAFC 79
Bruton Holdings Pty Ltd (in liquidation) v Commissioner of Taxation of the Commonwealth of Australia (2009) 239 CLR 346; [2009] HCA 32
Carter Holt Harvey Woodproducts Australia Pty Limited v The Commonwealth (2019) 268 CLR 524; [2019] HCA 20
CGU Insurance Limited v One.Tel Limited (in liquidation) (2010) 242 CLR 174; [2010] HCA 26
Chief Commissioner of Stamp Duties v Buckle (1998) 192 CLR 226; [1998] HCA 4
Clairs Keeley (a firm) v Treacy (2003) 28 WAR 139; [2003] WASCA 299
Clairs Keeley (a firm) v Treacy (2004) 29 WAR 479; [2004] WASCA 277
Cremin, in the matter of Brimson Pty Ltd (in liq) (2019) 136 ACSR 649; [2019] FCA 1023
Elfic Ltd v Macks [2003] 2 Qd R 125; [2001] QCA 219
IMF (Australia) Limited v Meadow Springs Fairway Resort Limited (in Liquidation) (2009) 69 ACSR 507; [2009] FCAFC 9
In Re Suco Gold Pty Ltd (in liquidation) (1983) 33 SASR 99
Innovateq Australia Pty Ltd v Barnes & Ors [2017] VSC 16
Jones v Matrix Partners Pty Ltd; Re Killarnee Civil & Concrete Contractors Pty Ltd (in liq) (2018) 260 FCR 310; [2018] FCAFC 40
Kelly, in the matter of Halifax Investment Services Pty Ltd (in liquidation) (No 8) (2020) 144 ACSR 292; [2020] FCA 533
Kemtron Industries Pty Ltd v Commissioner of Stamp Duties [1984] 1 Qd R 576
Lemery Holdings Pty Ltd v Reliance Financial Services Pty Ltd (2008) 74 NSWLR 550; [2008] NSWSC 1344
Lewis (liquidator), in the matter of Concrete Supply Pty Ltd (in liq) (2020) 145 ACSR 459; [2020] FCA 841
Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar the Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42
Marley v Mutual Security Merchant Bank and Trust Co Ltd [1991] 3 All ER 198
Nolan v Collie (2003) 7 VR 287; [2003] VSCA 39
Parbery & Ors v QNI Metals Pty Ltd & Ors [2019] QSC 207
Parbery & Ors v QNI Metals Pty Ltd & Ors [2020] QSC 143
Park v Whyte (No 3) [2018] 2 Qd R 475; [2017] QSC 230
Park, in the matter of Queensland Nickel Pty Ltd (in liq) [2022] FCA 667
Preston, in the matter of Sandalwood Properties Ltd [2018] FCA 547
QB4Capital Pty Limited v Guardian Securities Limited (2022) 159 ACSR 289; [2022] FCA 262
QNI Resources Pty Ltd & Ors v Park & Ors (2016) 116 ACSR 321; [2016] QSC 222
QNI Resources Pty Ltd & Ors v Queensland Nickel Pty Ltd (in liq) [2017] QCA 167
Queensland Nickel Pty Ltd (in liq) v QNI Metals Ltd & Ors [2021] QCA 138
Queensland Nickel Sales Pty Ltd v Queensland Nickel Pty Ltd (in liq) (No 3) [2022] FCA 564
Re Ansett Australia Ltd (No 3) (2002) 115 FCR 409; [2002] FCA 90
Re Octaviar Ltd [2020] QSC 353
Re Queensland Nickel (in liq) [2017] QSC 258
Robinson, in the matter of Reed Constructions Australia Pty Ltd (in liq) [2017] FCA 594
Seaman v Silvia [2018] FCA 97
Spatialinfo Pty Ltd v Telstra Corporation Ltd [2005] FCA 455
Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 7) [2020] FCA 1182
WLD Practice Holdings Pty Ltd, in respect of the WLD Practice Holdings Trust v Sara Stockham [2020] NSWSC 395
Young v Thomson (2017) 253 FCR 191; [2017] FCAFC 140
Division: General Division Registry: Queensland National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 418 Date of last submission/s: 1 August 2022 Date of hearing: 26–29 July 2022 Counsel for the Plaintiffs: Mr A Pomerenke KC w/ Mr N Derrington and Mr S Walpole Solicitor for the Plaintiffs: HWL Ebsworth Lawyers Counsel for the First Interested Person: The First Interested Person did not appear Counsel for the Second, Third and Fourth Interested Person: Mr P Zappia KC w/ Mr G Gee, Mr K Byrne and Ms S Gaussen Solicitor for the Second, Third and Fourth Interested Person: Robinson Nielsen Legal Counsel for the Fifth Interested Person: Mr M Hodge KC w/ Ms F Lubett and Mr P Kucharski Solicitor for the Fifth Interested Person: Corrs Chambers Westgarth
Table of Corrections 7 November 2022 In paragraph 125, “plaintiff fails” has been replaced by “plaintiffs fail”. 7 November 2022 In paragraph 376, “is” has been inserted after “Third, it”. ORDERS
QUD 235 of 2021 IN THE MATTER OF QUEENSLAND NICKEL PTY LTD (IN LIQUIDATION) ACN 009 842 068
BETWEEN: JOHN PARK AND KELLY-ANNE TRENFIELD IN THEIR CAPACITY AS JOINT AND SEVERAL LIQUIDATORS OF QUEENSLAND NICKEL PTY LTD (IN LIQUIDATION) ACN 009 842 068
First Plaintiff
QUEENSLAND NICKEL PTY LTD (IN LIQUIDATION) ACN 009 842 068
Second Plaintiff
AND: MINERALOGY PTY LTD
First Interested Person
QNI METALS PTY LTD
Second Interested Person
QNI RESOURCES PTY LTD
Third Interested Person
QUEENSLAND NICKEL SALES PTY LTD
Fourth Interested Person
VANNIN CAPITAL OPERATIONS LIMITED
Fifth Interested Person
ORDER MADE BY:
DOWNES J
DATE OF ORDER:
2 NOVEMBER 2022
In this Order, the following terms have these meanings:
Judgment Sum means the sum of $102,884,346.26 paid by the first interested person to the second plaintiff in satisfaction of the judgment of the Queensland Court of Appeal delivered on 25 June 2021, any further payment made in respect of interest on that sum, and any interest earned by the second plaintiff on that sum.
Trust Assets means the Judgment Sum and all other assets of the second plaintiff held by it as trustee for the second interested person and the third interested person.
THE COURT ORDERS THAT:
1.The claims by the second, third and fourth interested persons for the relief in the Amended Statement of Claim filed on 8 June 2022 are dismissed.
2.The plaintiffs are justified in refusing to pay to the fourth interested person the Judgment Sum, or any part thereof, until at least such time as it is established (if ever), during or following the completion of the steps contemplated in order 3 below and any further steps in the winding up of the second plaintiff, that the second plaintiff holds a surplus of Trust Assets over:
(a)liabilities (both present and future) for which it claims a right of indemnity or exoneration out of the Trust Assets; and
(b)the first plaintiffs’ costs, expenses and remuneration approved under Part 3 of Schedule 2 of the Corporations Act 2001 (Cth) (Insolvency Practice Schedule).
3.The first plaintiffs are justified in paying the following amounts from the Trust Assets:
(a)the liabilities that the second plaintiff has incurred under the Litigation Funding Agreement made between the plaintiffs and the fifth interested person dated 13 September 2016, being a priority debt within the meaning of s 556(1) of the Corporations Act 2001 (Cth);
(b)remuneration to themselves which is approved under Part 3 of the Insolvency Practice Schedule, being a priority expense within the meaning of s 556(1) of the Corporations Act 2001 (Cth);
(c)in respect of any proof of debt of a creditor which they have admitted (or where the decision has been varied by way of appeal so as to admit the claim), such amount as is admitted, following the expiry of any relevant time allowed for an appeal against that adjudication.
4.By 4.00pm (AEST) 4 November 2022, the plaintiffs shall file and serve any submissions (limited to three pages) and any affidavit material in relation to the issue of costs.
5.By 4.00pm (AEST) 4 November 2022, the fifth interested person shall file and serve any submissions (limited to three pages) and any affidavit material in relation to the issue of costs.
6.By 4.00pm (AEST) 8 November 2022, the second, third and fourth interested persons shall together file and serve any submissions (limited to five pages in total) and any affidavit material in relation to the issue of costs.
7.By 4.00pm (AEST) 10 November 2022, the plaintiffs and the fifth interested person shall each file and serve any submissions in reply (limited to two pages) and any affidavit material in reply.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
DOWNES J:
OVERVIEW
[1]
RELIEF SOUGHT BY PLAINTIFFS
[33]
RELIEF SOUGHT BY PALMER PARTIES
[38]
ISSUES
[49]
CHRONOLOGY
[50]
LEGAL PRINCIPLES CONCERNING DIRECTIONS SOUGHT BY PLAINTIFFS
[118]
Section 90-15 Insolvency Practice Schedule
[118]
Section 96 Trusts Act
[120]
PROPER CHARACTERISATION OF TRUST
[129]
WHETHER EXPENSES AND LIABILITIES WERE PROPERLY AND REASONABLY INCURRED
[152]
Whether QNI had power to bring Mineralogy proceeding
[159]
Whether improper for QNI to bring Mineralogy proceeding
[183]
Whether Mineralogy proceeding could and should have been pursued by special purpose liquidators
[207]
Proper construction of appointment order
[209]
Extension of powers under appointment order
[228]
Fundamental problems with the case advanced by Palmer Parties
[253]
Conclusion
[264]
Whether improper to enter into Vannin LFA
[268]
WHETHER BREACH OF TRUST BY QNI
[310]
The first alleged breach of trust
[311]
The second alleged breach of trust
[330]
The third alleged breach of trust
[336]
IMPACT OF SETTLEMENT DEED ON RELIEF SOUGHT
[355]
Whether claims by Palmer Parties have been released
[358]
Whether settlement deed prevents plaintiffs from obtaining relief
[369]
WHETHER PALMER PARTIES ENTITLED TO RELIEF SOUGHT
[378]
First declaration sought
[378]
Second declaration sought
[384]
Order sought that trust property be transferred to QNS
[389]
WHETHER DIRECTIONS SOUGHT BY PLAINTIFFS SHOULD BE MADE
[394]
Proposed order 2
[394]
Proposed orders 3(a) and 3(b)
[396]
Proposed order 3(d)
[412]
DISPOSITION
[416]
OVERVIEW
The second plaintiff, Queensland Nickel Pty Ltd (in liq) (QNI) is the former Manager of a joint venture between QNI Resources Pty Ltd and QNI Metals Pty Ltd (together, the JVCs).
Mr Clive Palmer was a director of QNI during various periods between 2009 and 2017, along with Mr Clive Mensink. Mr Palmer remains one of the secretaries of QNI. Mr Mensink is a former director and secretary of the JVCs. The sole shareholder of Resources is Palmer Resources Holdings Pty Ltd, and the sole shareholder of Metals is Palmer Metals Holdings Pty Ltd.
Along with two other agreements which are not presently relevant, the joint venture was governed by a joint venture agreement dated 17 September 1992 (JVA).
As Manager, QNI operated a business of importing, sourcing and processing nickel ore which was used to produce nickel and cobalt products for export overseas for sale to metal traders and industrial consumers. QNI received money from these sales which it deposited into bank accounts maintained by it as Manager.
QNI had employees and otherwise incurred debts in the course of operating its business.
Under the JVA, QNI was able to issue call notices to the JVCs for funds to meet all costs, liabilities and expenses of the joint venture.
QNI did not operate any other business.
On 18 January 2016, Mr Richard Park and Ms Kelly Trenfield were appointed as joint and several administrators of QNI pursuant to s 436A of the Corporations Act 2001 (Cth) together with Mr Quentin Olde and Mr Stefan Dopking (together, Administrators).
On 7 March 2016, the Administrators were served with notices which stated that on 3 March 2016, it had been resolved by the JVCs to appoint Queensland Nickel Sales Pty Ltd (QNS) as Manager of the joint venture.
The shareholders of QNS are the JVCs.
QNS, Metals and Resources have been referred to as the Palmer Parties in this proceeding, and that description will be used in these reasons.
On 22 April 2016, the creditors of QNI resolved at a creditor’s meeting that QNI be wound up and that Mr Park and Ms Trenfield (described as the general purpose liquidators or GPLs), together with Mr Olde and Mr Dopking, be appointed as liquidators of QNI.
On 18 May 2016, Mr Stephen Parbery, Mr Marcus Ayres and Mr Michael Owen were appointed special purpose liquidators (or SPLs, as they were described by the parties) of QNI by Dowsett J. The appointment order identified the particular tasks to be undertaken by the SPLs, who received funding from the Commonwealth to perform those tasks pursuant to a litigation funding agreement (Commonwealth LFA).
On 29 March 2017, proceedings were commenced by QNI (by the GPLs) against Mineralogy Pty Ltd in the Supreme Court of Queensland, which were described by the parties as the Mineralogy proceeding or Mineralogy claim. Mr Palmer is also a director of Mineralogy.
The foundation of the Mineralogy claim was that QNI had made payments to, for or at the request of Mineralogy, from funds held in a joint venture bank account by way of loans. The total amount of these payments was $102,884,346.26. The first payments were made on 25 February 2011. These proceedings were brought to recover those funds in circumstances where there were potential issues concerning the expiry of limitation periods by reason of s 10(1) Limitation of Actions Act 1974 (Qld).
Litigation funding to conduct the Mineralogy proceeding was obtained by QNI from Vannin Capital Operations Limited pursuant to a litigation funding agreement made on 13 September 2016 (Vannin LFA). Funding was also provided pursuant to that agreement to pursue what were described by the parties as the Voidable Transactions proceeding and the Martino proceeding.
The committee of inspection of QNI approved the entry into the Vannin LFA.
Following a trial in the Supreme Court of Queensland before Mullins J (as her Honour then was), the Mineralogy proceeding concluded when the Queensland Court of Appeal determined that QNI as trustee had made loans to Mineralogy, and QNI was entitled to have them repaid: Queensland Nickel Pty Ltd (in liq) v QNI Metals Ltd & Ors [2021] QCA 138 (Fraser and Morrison JJA and Burns J) at [173] (QCA decision).
An application for special leave to appeal from the QCA decision to the High Court was dismissed on 17 March 2022.
On 5 July 2021, the sum of $102,884,346.26 was paid to QNI by Mineralogy as a consequence of the QCA decision, with interest and costs yet to be determined. Interest on the judgment sum is estimated to be in the range of $13.915 million to $48.8 million and recoverable costs are estimated to be in the order of $3–4 million.
The term judgment sum will be used in these reasons to mean the sum of $102,884,346.26 which was paid to QNI by Mineralogy, any further payment made in respect of interest on that sum and any interest earned by QNI on that sum.
Vannin submitted, and it was not disputed by the Palmer Parties, that the objective benefit to the estate as a result of the Mineralogy proceeding was between approximately $74 million and $97 million after the payment of a funding premium to Vannin which is payable under the Vannin LFA but not costs.
On the same day that the sum of $102,884,346.26 was paid by Mineralogy, QNS demanded that the entire amount be paid to it, without deduction.
That demand was not complied with for the reasons explained by senior counsel for the plaintiffs:
[On] any view, the debt owed by Mineralogy to QNI was a just debt [which] was owing to QNI as at the date the administrators were appointed, that is, 18 January 2016. It should have been paid by then at the very latest. [Yet] the plaintiffs are being criticised for getting in that just debt. … The short point is that Mr Palmer and his companies really made us work for it yet he’s now complaining that too many resources were devoted to overcoming his scheming. The wrongdoer is complaining about the resources devoted to overcoming the wrongdoing in circumstances where the wrongdoer made it as hard and as expensive as possible. [There is] obvious injustice in what the Palmer parties are seeking to perpetrate. They seek all the spoils of the judgment sum, but only on the basis that the liabilities incurred in order to secure those spoils should go unpaid. They say the new trustee, Queensland Nickel Sales, should be left to decide whether to pay outstanding joint venture expenses even though they’re liabilities of Queensland Nickel and even though Queensland Nickel has a right of indemnity in respect of them.
The plaintiffs submit that they are entitled to use the judgment sum to discharge the liabilities which have been incurred to Vannin under the Vannin LFA, the remuneration and costs of the GPLs and the admitted proof of debt of any creditor of QNI.
The plaintiffs accept that, in due course, any surplus proceeds will be transferred to the replacement trustee, but say that such transfer should not occur until after these liabilities have been discharged and these costs and expenses have been paid from the judgment sum.
The Palmer Parties described the claim by the GPLs for remuneration and for disbursements such as legal fees, valuation fees and accounting fees as GPL Liabilities and, when combined with the funding premium as the Mineralogy Claim Expenses and Liabilities.
The Palmer Parties oppose the payment of these amounts from the judgment sum on the basis that they were not properly and reasonably incurred. This opposition is made on numerous bases, some pleaded and some not; some which contradict other arguments advanced in this or other proceedings; and some which have already been heard and determined elsewhere (but all are run without discrimination).
To the extent that arguments were advanced by the Palmer Parties in their written submissions which fell outside the scope of their pleaded case, these were often not developed orally and insufficient particulars were provided of these contentions. For these reasons, these arguments will be addressed briefly.
The overarching position of the Palmer Parties was and remains that, notwithstanding that the judgment sum has been recovered by QNI, QNI is not entitled to deduct any amount from the judgment sum in payment of its expenses associated with its recovery.
The Palmer Parties also challenge the ability of the plaintiffs to pay creditors in circumstances where those creditors claim payment for debts incurred by QNI when it was Manager of the joint venture. This challenge is made in circumstances where the JVCs did not answer calls by the Manager to make payments to enable those creditors to be paid.
The GPLs estimate that QNI’s liabilities, including to trade creditors, is in the range of approximately $137 million to approximately $215 million.
RELIEF SOUGHT BY PLAINTIFFS
On 15 July 2021, the plaintiffs commenced these proceedings by way of originating process and sought directions under s 90-15 of Schedule 2 of the Corporations Act (Insolvency Practice Schedule), and further or alternatively, s 96 of the Trusts Act 1973 (Qld).
By order dated 11 May 2022, a direction was made that the GPLs would be justified in taking steps to ascertain the outstanding claims by creditors in the liquidation of QNI, obtaining proofs of debt in respect of such claims, and adjudicating those claims. This had been the order originally sought in [3(c)] of the originating process. Orders were also made by consent that the GPLs be permitted to pay certain costs and expenses from the judgment sum, including their reasonable costs and expenses incurred in relation to the prosecution of this proceeding.
By the time of the hearing in this matter, the relief which continued to be sought by the plaintiffs was in these terms:
1. In this order, the following words have the following meaning:
Judgment Sum means the sum of $102,884,346.26 paid by Mineralogy Pty Ltd to Queensland Nickel Pty Ltd (in liq) (QNI) in satisfaction of the judgment of the Queensland Court of Appeal delivered on 25 June 2021, any further payment made in respect of interest on that sum, and any interest earned by QNI on that sum.
Trust Assets means the Judgment Sum and all other assets of QNI held by it as trustee for QNI Metals Pty Ltd and QNI Resources Pty Ltd.
…
2.A direction that the Plaintiffs are justified in refusing to pay to Queensland Nickel Sales Pty Ltd (QNS) the Judgment Sum, or any part thereof, until at least such time as it is established (if ever), during or following the completion of the steps contemplated in orders 3a to 3d below and any further steps in the winding up of QNI, that QNI holds a surplus of Trust Assets over:
a.liabilities (both present and future) for which it claims a right of indemnity or exoneration out of the Trust Assets; and
b.the First Plaintiffs’ costs, expenses and remuneration approved under Part 3 of the Insolvency Practice Schedule.
3. A direction that …:
a.the First Plaintiffs would be justified, in paying from the funds of QNI, the liabilities that QNI has incurred under the Litigation Funding Agreement made between the Plaintiffs and Vannin Capital Operations Limited dated 13 September 2016, being a priority debt within the meaning of s 556(1) of the Corporations Act;
b.the First Plaintiffs would be justified in paying to themselves, from the funds of QNI, the remuneration approved under Part 3 of the Insolvency Practice Schedule, being a priority expense within the meaning of s 556(1) of the Corporations Act;
…
d.the First Plaintiffs would be justified in paying from the funds held by QNI in respect of any proof of debt of a creditor which they have admitted (or where the decision has been varied by way of appeal so as to admit the claim), such amount as is admitted, following the expiry of any relevant time allowed for an appeal against that adjudication.
Other than the Palmer Parties, no person appeared at the hearing to oppose the relief sought by the plaintiffs. Vannin appeared and supported the relief sought by the plaintiffs.
For the reasons set out below, the orders sought by the plaintiffs will be made.
RELIEF SOUGHT BY PALMER PARTIES
In the interval between the filing of the originating process which commenced this proceeding and the dismissal of the special leave application, the Palmer Parties commenced two satellite proceedings in the Federal Court:
(1)QUD257/2021 – in which, in the final form of that proceeding, the Palmer Parties sought to contend that QNI had no right of indemnity or exoneration from the trust assets in respect of the expenses incurred in relation to pursuing the Mineralogy claim, on the basis that these were not properly or reasonably incurred, and also sought an order for the transfer of the trust assets to QNS; and
(2)QUD15/2022 – in which the Palmer Parties made allegations of accessorial liability against the GPLs, their instructing solicitors and Vannin.
On 17 May 2022, I refused to grant the Palmer Parties leave to proceed against QNI in QUD257/2021, and dismissed that proceeding.
Instead, directions were made in this proceeding for the proposed statement of claim of the Palmer Parties in QUD257/2021 to be treated as the Palmer Parties’ grounds of opposition to the directions sought by the plaintiffs in this proceeding, and as their own claims for relief: Queensland Nickel Sales Pty Ltd v Queensland Nickel Pty Ltd (in liq) (No 3) [2022] FCA 564.
On 27 May 2022, I made orders which stayed QUD15/2022 until the determination of this proceeding.
This matter was listed for hearing for four days to commence on 26 July 2022, being dates which suited the parties, as advised to chambers. As the parties had already filed and served affidavits in this proceeding and QUD257/2021, directions were made on 16 May 2022 about the filing and service of any further affidavit material upon which the parties intended to rely at the hearing. As part of these orders, the parties were permitted to rely upon affidavits filed in QUD257/2021. The end result is that the affidavit material relied upon by the parties exceeded 13,000 pages.
On 7 June 2022, following a contested application, leave was granted to the Palmer Parties to file an amended statement of claim (with some proposed amendments disallowed): Park, in the matter of Queensland Nickel Pty Ltd (in liq) [2022] FCA 667. The amended statement of claim was ordered to be treated as a concise statement of the grounds of opposition by the Palmer Parties to the orders sought in the originating process filed in this proceeding, as well as an application for the relief claimed in the prayer for relief in that document.
The amended statement of claim was filed on 8 June 2022.
During the course of the hearing, the Palmer Parties abandoned their complaint contained in [26]–[31] of the amended statement of claim, which related to an alleged failure by the GPLs to provide an account.
The Palmer Parties also abandoned their claim for the declaration in [2(c)] of the prayer for relief in the amended statement of claim.
The remaining substantive relief claimed by the Palmer Parties is as follows:
1.A declaration that QNI holds the Trust Property, including the Judgment Sum, on constructive trust for QNI Metals and QNI Resources according to their respective interests under the JVA and subject to the right of QNI to indemnity or exoneration from the Trust Property for expenses properly and reasonably incurred in capacity as trustee, such trust having arisen on or with effect from 3 March 2016.
2.A declaration that the right of QNI to indemnity or exoneration from Trust Property does not attach, on the basis that they were not properly or reasonably incurred as trustee and/or were incurred in breach of trust, in respect of:
(a)the GPL Liabilities;
(b)the Funding Premium;
…
3.An order that, subject to Queensland Nickel Sales not taking steps which would destroy, diminish or otherwise jeopardise any residual right of security held by QNI in the Trust Property, QNI transfer the Trust Property, including the Judgment Sum, to Queensland Nickel Sales forthwith, to be held on trust by Queensland Nickel Sales for QNI Metals and QNI Resources according to their respective interests under the JVA.
For the following reasons, the claims by the Palmer Parties for the relief in the prayer for relief will be dismissed.
ISSUES
The central questions which arise in this proceeding are as follows:
(1)whether QNI was trustee of the Joint Venture Property (as defined in the JVA and which property included the funds held in the joint venture bank account) or whether QNI was only the trustee of the funds held in the joint venture bank account (or the chose in action against the bank in relation to those funds);
(2)whether QNI was empowered to bring the Mineralogy proceeding;
(3)whether it was improper for QNI to bring the Mineralogy proceeding;
(4)whether QNI could have, or ought to have, brought the Mineralogy proceeding through the SPLs instead of the GPLs;
(5)whether it was improper for QNI to enter into the Vannin LFA;
(6)whether QNI was and is required to transfer the trust property to QNS;
(7)whether QNI committed the breaches of trust alleged in the amended statement of claim;
(8)the impact of the settlement deed on the application by the plaintiffs and the claims by the Palmer Parties;
(9)whether the Palmer Parties are entitled to the relief in the prayer for relief;
(10)whether the directions sought by the plaintiffs should be made.
CHRONOLOGY
Waratah Coal Pty Ltd had Mineralogy as its ultimate holding company and, prior to the issue of shares in China First Pty Ltd to QNI on 13 January 2016, China First was a wholly owned subsidiary of Waratah Coal. These entities are companies ultimately owned by Mr Palmer.
On 13 January 2016, QNI executed documents which effected a series of related transactions that purported to take effect that day (that is, five days before QNI was placed into voluntary administration). The parties to those transactions were QNI, Metals, Resources, Waratah Coal and China First.
Upon the appointment of the Administrators on 18 January 2016, the apparent effect of the transactions entered on 13 January 2016 was to crystallise a right of Waratah Coal and China First as secured creditors to be paid the amount of $235 million by QNI. Each lodged a proof of debt to this effect and thereby claimed an entitlement to $235 million in preference to the unsecured creditors of QNI.
On 29 January 2016, at the first meeting of creditors of QNI held pursuant to s 436E(1) Corporations Act, a Committee of Inspection was elected which was comprised of eleven creditors.
On 24 February 2016, the Administrators issued a call notice to the JVCs in the amount of $16,441,186 for the amount which QNI had incurred in relation to operational costs during the administration period. On the same day, the Administrators received an email from Mr Mensink requesting further details.
On 29 February 2016, the Administrators responded to Mr Mensink’s email; however, no amounts were subsequently paid by the JVCs in response to the 24 February 2016 call notice.
On 1 March 2016, the Administrators wrote to the JVCs about the call notice, to which a response was received on 3 March 2016 from Mr Mensink disputing the JVCs’ liability to pay. The letter stated, amongst other things, that “there is no budget that has been approved by the Joint Venture and the Joint Venture does not recognize the liability”.
On 7 March 2016, the Administrators were served with notices which stated that on 3 March 2016, it had been resolved by the JVCs to appoint QNS as Manager of the joint venture.
Minutes of a meeting of the “Joint Venture Owners Committee” which was held at 11.00am on 3 March 2016 were also provided to the Administrators which, in addition to referring to the appointment of QNS, referred to a resolution that all calls made by QNI in its former role as Manager be withdrawn.
The Administrators had received no notice of this meeting and did not consent to the resolutions.
On or about 30 March 2016, the Administrators issued a call notice in the sum of $73,903,271 to the JVCs for the employee entitlement obligations which QNI had incurred in the period up to and including 18 January 2016 (being the date of their appointment) and which were payable.
No amounts were received in respect of the 30 March 2016 call notice.
On or about 6 April 2016, the Administrators issued a further call notice in the sum of $116,181,175.46 to the JVCs for the balance of the pre-appointment liabilities which QNI had incurred prior to the administration period. The amount of the call notice was calculated on the basis of QNI’s records and the proofs of debt lodged with the Administrators following their appointment.
No amounts were received in respect of the 6 April 2016 call notice.
On or around 11 April 2016, the Administrators provided the creditors of QNI with their s 439A report. In that report, the Administrators estimated QNI’s liabilities to be in the range of $233.5 million to $622.1 million. Potential recovery actions which could be brought by QNI were identified, which included related party transactions.
As part of identified payments made by QNI to related parties totalling more than $224 million, an amount of more than $122 million was referred to in the s 439A report as having been transferred to Mineralogy, with the net position recorded in its loan account of more than $101 million.
On 14 April 2016, the Commonwealth Department of Employment wrote to the Administrators advising, amongst other things, that:
(1)the Department was likely to become the largest creditor of QNI once it made payments to the former employees of QNI pursuant to the Fair Entitlements Guarantee Scheme (FEG Scheme); and
(2)the Department was considering whether it would be appropriate for it to make an application to the Court that a special purpose liquidator be appointed to QNI should the company enter liquidation.
The Commonwealth subsequently became one of the largest creditors of QNI as it discharged most of QNI’s liabilities to its former employees under the FEG Scheme. A total of $66,862,313.99 was advanced pursuant to s 28 of the Fair Entitlements Guarantee Act 2012 (Cth).
On 15 April 2016, Resources, Metals and QNS commenced proceedings against the plaintiffs in the Supreme Court of Queensland. This became a proceeding in which various claims were pursued against QNI and the GPLs in relation to their alleged refusal to transfer assets to QNS. An application for leave to proceed against QNI was dismissed: see QNI Resources Pty Ltd & Ors v Park & Ors (2016) 116 ACSR 321; [2016] QSC 222 (leave to proceed decision).
On 22 April 2016, the creditors of QNI resolved to wind up QNI and appoint the Administrators as liquidators.
On 29 April 2016, the Commonwealth and others commenced a proceeding in the Federal Court seeking the appointment of the SPLs to QNI.
On 3 May 2016, a meeting of the Committee of Inspection was held to provide the Committee with an opportunity to receive information from the Department regarding the application to appoint the SPLs. The Department’s solicitors noted, amongst other things, that:
(1)a court appoints a special purpose liquidator over specific issues rather than general tasks and the GPLs remain in place and are responsible for the remaining issues and general administration of the liquidation;
(2)the reason for the Department’s application to appoint the SPLs is based on various issues, including a perceived conflict of interest with the GPLs;
(3)the Department had prepared a schedule of claims to submit to the Court detailing which claims will be pursued by the SPLs and the GPLs;
(4)the Department’s objective was to recover the $65 million of funds expected to be distributed under the FEG Scheme and that upon full repayment, the FEG Scheme would not advance any further funding, which may result in the SPLs being in a position to use residual funds held or seek funding from another source;
(5)a duplication might be the public examinations, however the SPLs and the GPLs were investigating different issues and would therefore be focusing on different aspects of their respective investigations.
The chairperson of the meeting, Mr Park, advised the Committee that the GPLs did not share the Department’s view with respect to the conflict issue.
On 9 May 2016, the GPLs lodged an application for funding with the Department, including for proceedings for debt recovery in relation to related party transactions and debt forgiveness.
On 16 May 2016, the Department declined the GPLs’ application for funding, on the stated basis that the Department:
(1)considered that the GPLs had an actual or perceived conflict of interest with performing a number of the tasks the subject of the application; and
(2)had sought the appointment of the SPLs to QNI and, if appointed, proposed to enter into a funding agreement with the proposed SPLs.
On 17 May 2016, the GPLs sent a letter to the Department which, amongst other things, disputed the Department’s assertion about perceived or actual conflict. The content of the letter was as follows:
I refer to the FEG Recovery Programme Funding Application dated 9 May 2016 (the Application) and your letter dated 16 May 2016.
I confirm the Application has been denied because the Department of Employment (the Department) considers [the GPLs have] an actual or perceived conflict of interest, and consequentially has sought the appointment of the Special Purpose Liquidators (SPLs). As you are aware, we consider that [the GPLs do] not have a conflict of interest. This issue, and the Department’s application for the appointment of the SPLs, is to be determined before the Court this week.
Please let us know whether, in the event the Court does not make orders for the appointment of SPLs, the Department will enter into a funding agreement on similar terms with this office as the General Purpose Liquidators and, if not, why not.
On the same day, the Department replied to the GPLs’ letter:
The Department is presently not minded to fund [the GPLs] in relation to any aspect of this administration.
The Department will however, consider any further applications for funding, that you may choose to make, on their merits.
On 18 May 2016, the SPLs were appointed to QNI pursuant to the appointment order.
In support of the application to appoint the SPLs, the Commonwealth of Australia agreed to fund both the appointment and activities to be conducted by the SPLs. The Commonwealth LFA was entered on 24 June 2016. That funding agreement was expressly confined to the limited purpose for which the SPLs were appointed.
In addition to seeking funding from the Commonwealth, the GPLs made a general approach to several of the larger creditors of QNI to ascertain whether any of those creditors would be willing to provide funding to the GPLs to further investigate and prosecute the claims identified in the s 439A report. No proposals for funding were forthcoming other than some interest being expressed by Aurizon Operations Limited, but from which nothing substantial eventuated.
There was no proposal for funding provided by the Commonwealth to the GPLs, other than limited funding for the verification and distribution of FEG payments to employees.
On 5 July 2016, QNI and the GPLs commenced the Voidable Transactions proceeding (being a proceeding to set aside the transactions entered on 13 January 2016). Without these transactions being set aside, the Mineralogy claim would not have been of benefit to the unsecured creditors of QNI.
Also on that date, the Committee of Inspection of QNI was provided with information summarising expressions of interest received from litigation funders.
After a period of negotiation and exchanges, the GPLs ultimately received offers for funding from:
(1)Vannin;
(2)IMF Bentham Limited; and
(3)International Litigation Partners Pte Ltd (ILP).
The offer from IMF was rejected as it was confined to funding public examinations only, whereas the GPLs were looking to fund recovery actions.
On 22 August 2016, the GPLs provided a confidential report to the Committee of Inspection in relation to the final proposals from Vannin and ILP. They recommended acceptance of the Vannin offer.
On 30 August 2016, a meeting of the Committee of Inspection was convened which discussed the litigation funding options available to the GPLs to pursue recovery actions and which sought the approval of the Committee to enter into the proposed funding agreement.
In this meeting, Mr Park noted that eight expressions of interests were received but only three formal proposals had been submitted by the various litigation funders. Mr Park recommended Vannin’s offer over that of ILP’s offer. It was resolved that the meeting be adjourned to a later date.
On 5 September 2016, the meeting of the Committee of Inspection was reconvened. The proxy for the Department suggested that the Commonwealth might be in a position to consider a further proposition from the GPLs for a funding agreement after the conclusion of the public examinations. Mr Park responded that while this was a prospect, there was no guarantee that funding would be approved by the Commonwealth and, for the benefit of the other creditors, there was a proposal from Vannin that was ready to be signed which would provide immediate funding to the GPLs in circumstances where, until an agreement was entered into, the GPLs were unable to proceed with any claims.
During the meeting it was resolved by majority vote that the liquidators had approval to enter into the proposed funding agreement with Vannin in their capacity as liquidators of QNI.
On 13 September 2016, QNI (by the GPLs) and the GPLs entered into the Vannin LFA.
In substance, the Vannin LFA contemplated that Vannin would pay the GPLs’ and QNI’s “Action Costs” (as defined, being solicitor and counsel fees and disbursements, expert fees and expenses, court filing fees etc), provide any security for costs ordered in the litigation and indemnify them in respect of adverse costs. To the extent that the litigation generated “Proceeds”, Vannin would be repaid the amount of Action Costs it funded, together with the funding premium. Depending on the circumstances, the funding premium would be an amount equal to the greater of between 15% to 35% of the proceeds or an amount calculated by reference to certain costs.
Under the Vannin LFA, Vannin funded multiple claims in addition to the Mineralogy claim, including the pre-existing Voidable Transactions proceeding. To date, Vannin has advanced funds totalling approximately $13,150,426 to the GPLs in connection with the Mineralogy claim. It has not yet been repaid $11.4 million of that sum.
On 27 February 2017, the liquidation of QNI was converted to a winding up in insolvency by the Supreme Court of Queensland.
On 29 March 2017, the Mineralogy proceeding was commenced by the GPLs in the Supreme Court of Queensland.
On 3 May 2017, Mr Palmer, on behalf of China First, signed a deed appointing Mr Domenic Martino as the agent of QNI pursuant to the China First charge. On the same day, Mr Martino, ostensibly on behalf of QNI, then entered into a deed dated 3 May 2017 with China First.
Under that deed, China First agreed to reduce the debt owed by QNI from $135m to $125m, in consideration for certain releases. On the following day, a substitute deed was prepared to similar effect but, on this occasion, Mineralogy was a party, and the reduction of the debt owed by QNI to China First was specifically said to be in consideration for QNI discontinuing the Mineralogy claim.
Mr Martino then filed a notice of discontinuance of the Mineralogy claim on behalf of QNI, so as to prevent the GPLs from causing QNI to continue to prosecute that claim.
QNI commenced the Martino proceeding in the Supreme Court of Queensland on 9 May 2017 and sought declaratory relief that Mr Martino’s appointment, and his subsequent conduct, was void and of no effect.
On 30 June 2017, the SPLs commenced proceedings in the Supreme Court of Queensland (SPL proceeding). That proceeding had 21 defendants (including Resources, Metals, Mr Palmer, Mr Mensink, Waratah Coal, China First and Mineralogy).
Contrary to the position taken in this proceeding by the Palmer Parties, Mr Palmer and entities associated with him (including Mineralogy) challenged the SPLs’ ability to bring claims against Mineralogy and attempted to have the SPLs removed from office. For example, in August 2017, in response to a freezing order sought by the SPLs, Mr Palmer submitted that the SPLs “do not have the authority to pursue their claims against the Non-JV Defendants and have therefore improperly commenced (and caused the second plaintiff to commence) this proceeding against them”. The ‘Non-JV Defendants’ included Mineralogy.
The SPLs and the Commonwealth did not at any point offer to pay out the liabilities that had accrued under the Vannin LFA and take over the Mineralogy claim and the Voidable Transactions proceeding.
On 19 April 2018, the Mineralogy proceeding, the Voidable Transactions proceeding, the Martino proceeding and the SPL proceeding were consolidated (consolidated proceeding).
In the two years between the commencement of the Mineralogy proceeding in March 2017 and the commencement of the trial of the consolidated proceeding in July 2019, the parties engaged in protracted interlocutory disputes, appeals and satellite proceedings.
By a settlement deed entered on 3 August 2019 during the course of the trial of the consolidated proceeding, QNI, the SPLs, and the Palmer Parties (together with other defendants), agreed to terms of settlement by which Metals and Resources agreed to pay certain amounts (including the sum of approximately $68.5 million to the Commonwealth), the SPL proceeding was to be discontinued and, other than in respect of the GPLs’ claims, there were mutual releases between the parties.
The settlement deed did not settle the remaining claims being pursued by the GPLs, including the Mineralogy claim.
After the settlement deed was entered, an application was brought by Metals, Resources, Mineralogy, Waratah Coal, China First and Martino to stay the consolidated proceeding, which application failed: see Parbery & Ors v QNI Metals Pty Ltd & Ors [2019] QSC 207 (stay decision).
Following the trial of the remainder of the consolidated proceeding, judgment was delivered on 3 June 2020 in which the Mineralogy claim was dismissed and judgment was otherwise given in favour of QNI and the GPLs in relation to the Voidable Transactions proceeding. It was also determined that Mr Martino did not have authority to act in the manner in which he did: Parbery & Ors v QNI Metals Pty Ltd & Ors [2020] QSC 143 (trial decision) at [316].
QNI (by the GPLs) appealed the dismissal of the Mineralogy claim, which resulted in the QCA decision dated 25 June 2021.
On 5 July 2021, the sum of $102,884,346.26 was paid to QNI by Mineralogy.
On 5 July 2021, QNS demanded that this sum be paid to it in its capacity as replacement trustee, without deduction.
On 15 July 2021, the plaintiffs commenced these proceedings.
The hearing of this proceeding commenced on 26 July 2022. On the day before the hearing was due to commence, a solicitor for the Palmer Parties was provided with a copy of a document which was entitled “Deed of Variation of the QN Cl 6.4(f) Trust and Replacement of Trustee”.
By that document, a company called “ACN 119 455 284 Pty Ltd”, defined as the New Trustee, was appointed as trustee of the “bank account trust” and QNS acknowledged that its appointment as trustee was “discharged”.
Mr Palmer is the sole director of the New Trustee and appears to have signed this document in his capacity as director. The document bore the date of 25 July 2022.
Another copy of a document was admitted into evidence which bore the date of 27 July 2022 which purported to be a deed of termination of the first deed ab initio.
A further document was admitted into evidence which purported to be a deed of variation made between the JVCs and QNS. That document contained clauses which “varied” the “terms of the trust” by terminating and removing the following powers:
(1)to use the funds (including the return on investing) to meet all costs, liabilities and expenses of the joint venture properly incurred, whether already payable or accrued, or to become accrued and be payable in the future; and
(2)to meet the costs, liabilities and expenses of the joint venture promptly.
The third purported deed also contained a direction by the JVCs to QNS to “forthwith get in all Trust property and upon receipt of the Trust property pay to Metals and Resources as beneficiaries in their respective proportions all property so obtained” which direction QNS “acknowledges and accepts”.
LEGAL PRINCIPLES CONCERNING DIRECTIONS SOUGHT BY PLAINTIFFS
Section 90-15 Insolvency Practice Schedule
Section 90-15 of the Insolvency Practice Schedule relevantly provides that the Court may make such orders as it thinks fit in relation to the external administration of a company.
The principles applicable to an application for directions under pursuant to s 90-15 of the Insolvency Practice Schedule were not in dispute, being as follows:
(1)the power to give directions is intended to facilitate the performance of the liquidator’s functions and should be interpreted widely to give effect to that intention: Lewis (liquidator), in the matter of Concrete Supply Pty Ltd (in liq) (2020) 145 ACSR 459; [2020] FCA 841 at [31] (White J);
(2)the power is available to give a liquidator advice as to the proper course of action to be taken in the liquidation: Concrete Supply at [31];
(3)the Court may give directions that provide guidance on matters of law and the reasonableness of a contemplated exercise of discretion but will usually not do so when the subject of the directions sought relates to the making and implementation of a business or commercial decision and when there is no particular legal issue raised and no attack on the proprietary or reasonableness of the decision: Concrete Supply at [31];
(4)the Court must be positively persuaded of the propriety of the course for which the liquidator seeks the Court’s sanction, before the Court will give the liquidator the protection of its sanction: Re Octaviar Ltd [2020] QSC 353 at [18];
(5)the effect of a direction is to sanction a course of conduct on the part of the liquidators so that, provided full disclosure has been made to the Court, the liquidator may adopt the course free from the risk of personal liability for breach of duty: Concrete Supply at [31]; and
(6)the directions do not bind third parties, and do not determine substantive matters in dispute between the liquidator and third parties: Concrete Supply at [31].
Section 96 Trusts Act
Section 96 of the Trusts Act relevantly provides that:
Any trustee may apply upon a written statement of facts to the court for directions concerning any property subject to a trust, or respecting the management or administration of that property, or respecting the exercise of any power or discretion vested in the trustee.
The following principles stated by Gummow ACJ, Kirby, Hayne and Heydon JJ in Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar the Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42, in respect of the cognate provision of the New South Wales legislation, are relevant to such an application:
(1)in order to engage the jurisdiction under s 96, “the applicant must point to the existence of a question respecting the management or administration of the trust property”: at [58];
(2)once this jurisdictional fact is established, the Court has a discretion as to whether to give the advice sought – with such discretion “confined only by the subject matter, scope and purpose of the legislation”: at [59];
(3)s 96 is not limited in its “application to ‘non-adversarial’ proceedings” – s 96 “does not provide that the adversarial nature of the proceedings about which the advice is sought, the tendency of the advice to foreclose an issue in those proceedings, or the fact that the trustees seeking the advice are being sued for breach of trust are of special significance”: at [59];
(4)accordingly, “the discretion of the court to consider applications brought under [s 96] should not be yoked to a general first principle that, where there is a contest or where there are adversaries, it is not appropriate to give advice”: at [60];
(5)an application under s 96 is “summary” in character: at [61];
(6)an application under s 96 “affords a facility for giving ‘private advice’” and “operates as ‘an exception to the Court’s ordinary function of deciding disputes between litigants’”: at [64]; and
(7)consequently, it is an error to treat interested parties as “being in a position of parity” with the trustee in such an application – and to conclude, from the fact that the trustee and such parties are adversaries in other proceedings, that judicial advice should generally not be given in such a context: at [66].
By s 97(1) Trusts Act, a trustee who acts in accordance with a direction of the Court is deemed to have discharged the trustee’s duty in respect of the subject matter of the direction. However, pursuant to s 97(2), this protection is not extended to a trustee who “has been guilty of any fraud or wilful concealment or misrepresentation in obtaining the direction or in acquiescing in the court making the order giving the direction.” There was no submission by the Palmer Parties that s 97(2) applied in this case.
In terms of the manner in which objections to judicial advice should be considered by the Court, it was stated by the Privy Council in Marley v Mutual Security Merchant Bank and Trust Co Ltd [1991] 3 All ER 198 at 201:
A trustee who is in genuine doubt about the propriety of any contemplated course of action in the exercise of his fiduciary duties and discretions is always entitled to seek proper professional advice and, if so advised, to protect his position by seeking the guidance of the court.
… it should be borne in mind that in exercising its jurisdiction to give directions on a trustee’s application the court is essentially engaged solely in determining what ought to be done in the best interests of the trust estate and not in determining the rights of adversarial parties. That is not always easy, particularly where, as in this case, the application has been conducted as if it were hostile litigation; but it is essential that the primary purpose of the application – indeed, its only legitimate purpose – be not lost sight of in academic discussion regarding the discharge of burdens of proof. Where beneficiaries oppose a proposal of a trustee with a host of objections of more or less weight, the court is, of course, inevitably concerned to see whether these objections are or are not well founded, but that must not be permitted to obscure the real questions at issue which are what directions ought to be given in the interests of the beneficiaries and whether the court has before it all the material appropriate to enable it to give those directions.
This decision was cited with approval by the Queensland Court of Appeal in Ban v The Public Trustee of Queensland [2015] QCA 18 at [56] (Morrison JA, with whom Holmes and Gotterson JJA agreed) and by Gleeson J in Kelly, in the matter of Halifax Investment Services Pty Ltd (in liquidation) (No 8) (2020) 144 ACSR 292; [2020] FCA 533 at [44]–[46].
The Palmer Parties submit that they can raise any fact or matter in opposition to judicial advice being given, that the onus is then on the plaintiffs to disprove those facts or matters and that if the plaintiffs fail to do so, then the judicial advice should not be given.
No authority was cited for this submission and it is not found in the legislation, which is expressed in broad terms. What authority there is does not support the stance taken by the Palmer Parties.
In Halifax at [46], Gleeson J observed that, “the application for judicial advice invokes a procedure for private advice to trustees … Thus, although the Court sought to hear any objection from the defendants concerning the liquidators’ decision … it was not obliged to give objections particular weight: Marley at 201.”
In circumstances where objections are taken on the basis, as in this case, that expenses were not properly incurred, it has also been said that trustees should not be deprived of their right of reimbursement unless they have clearly been shown to have acted improperly, with the onus resting on those who seek to deny the right: see Nolan v Collie (2003) 7 VR 287; [2003] VSCA 39 at [50] (Ormiston JA, with whom the Court agreed); QB4Capital Pty Limited v Guardian Securities Limited (2022) 159 ACSR 289; [2022] FCA 262 at [130] (Lee J).
PROPER CHARACTERISATION OF TRUST
The first issue is whether QNI was trustee of the Joint Venture Property (of which the funds held in the bank account were one part) (as contended by the plaintiffs) or whether QNI was only the trustee of the funds held in the joint venture bank account (or the chose in action against the bank in relation to those funds) (as contended by the Palmer Parties).
Both parties relied upon the QCA decision to support their position. The plaintiffs also relied upon the terms of the JVA.
In that decision at [41], the Court of Appeal referred to the general process of the joint venture as described at the trial below, and which had not been challenged on appeal, as follows:
The Yabulu refinery was operated by QNI by sourcing ore from overseas third parties to be used at the refinery. The ore was unloaded at QNI’s material handling facility at the Port of Townsville and then delivered by rail to the refinery. The joint venture also sourced ore from its own mine in central Queensland. The domestic ore and coal were also transported by rail to the refinery. The ore was processed at the refinery where nickel was separated from cobalt and nickel products and cobalt produced by the refinery were transported by rail to Townsville or Brisbane for export. QNI operated the bank accounts in its name into which it deposited the revenues generated by the refinery business and met the liabilities incurred in operating the refinery business from the revenues deposited into its bank accounts. During the period from the acquisition of the refinery by the Palmer interests until 18 January 2016, it was common ground that QNI did not receive any income for the services it provided as general manager to the joint venture …
(emphasis added)
Pursuant to clause 6.4(a) of the JVA, QNI as Manager was entitled to make calls on the JVCs for funds to meet Joint Venture Expenses (being all costs, liabilities and expenses of the joint venture properly incurred). In that respect, QNI was the “Calling Manager”.
Clause 6.4(f) of the JVA relevantly provided that:
The Calling Manager shall deposit Called Sums and other moneys received from or for the account of the Joint Venturers in a working capital bank account and shall not deposit any other moneys in such account. Such account shall be in the name of the Calling Manager but the moneys standing to the credit of the account shall belong to the Joint Venturers in proportion to the amounts respectively paid to such account by or on behalf of them and the Calling Manager shall keep sufficient records as will enable the respective entitlements of the Joint Venturers to such moneys (and to any interest or income accrued on those moneys) from time to time to be determined. Payments shall be made from such account to meet Joint Venture Expenses payable or accrued or to become payable or to be accrued in respect of the Joint Venturer concerned. Moneys standing to the credit of the account may be invested by the Calling Manager in a prudent manner for a term not exceeding one week (in the case of moneys paid pursuant to a weekly call and any interest thereon) or one month (in the case of moneys paid pursuant to a monthly call and any interest thereon). All bank interest and other income derived from the investment of the moneys paid by or attributable to a Joint Venturer shall be for the account of that Joint Venturer. Such moneys, bank interest and other income shall be applied promptly to meet Joint Venture Expenses to the intent that calls made under paragraphs (b) or (d) of this Clause 6.4 be reduced to the maximum extent possible.
(emphasis added)
At [42]–[44] of the QCA decision, the Court of Appeal stated that:
It was common ground at the trial that the money held in the QNI bank account did not come from calls made on the JVCs under clause 6.4(a). Rather, it came from QNI’s selling the product it made and collecting the proceeds. As with many joint venture arrangements, though the JVCs had the right to sell the products themselves and collect the revenue thus generated, they did not do so, and left that to the Manager, in this case QNI.
Once the money was deposited into the bank account QNI used it for joint venture purposes.
…
The learned primary judge held that the entitlement to the funds in the QNI bank account fell to be determined by applying clause 6.4(f) of the JVA. There was no challenge to that finding on appeal.
One of the issues before the Court of Appeal was whether QNI held the money in the bank account on a bare trust. QNI contended that the powers and duties conferred on it by clause 6.4(f) meant that the money held pursuant to that clause was held on trust, and that the JVA similarly intended to create an express or inferred trust in respect of the Joint Venture Property, being the balance of the property of the JVCs held in the name of QNI: see [9].
This contention had formed part of QNI’s pleaded case below. In their reply, it was pleaded that QNI, as part of acting as General Manager of the joint venture, acted as trustee of the Joint Venture Property for the purpose of carrying on the joint venture: [31A] and [31B] Second Further Amended Reply and Answer. It was also pleaded that the intention to create that trust is expressed in and was manifested by certain clauses of the JVA, including clauses 3.1, 3.2, 5.2 and 6.4(f): [31D] Second Further Amended Reply and Answer.
Mullins J addressed the issue of whether QNI was trustee of the Joint Venture Property, as claimed by QNI, at [44]–[60] of the trial decision. Her Honour did not accept that QNI was trustee of the Joint Venture Property, finding in particular at [58] that, “It defies the clear language and purpose of the JVA and the structure and mode of operation of the joint venture under the JVA to strain to find that the JVA created the express trust of the joint venture property asserted by the plaintiffs”.
On appeal, the first error which was the subject of complaint by QNI was identified in the following way in the QCA decision at [9]:
The first error (reflected in Ground 1 of the appeal) was her Honour’s finding that the money held in the bank account pursuant to clause 6.4(f) of the JVA was held on a bare trust, such that payment by QNI out to Mineralogy collapsed the trust. The essential contention was that the powers and duties conferred on QNI by clause 6.4(f) meant that finding was not open. Her Honour should have found that the money held pursuant to that clause was held on trust, and that the JVA similarly intended to create an express or inferred trust in respect of the “Joint Venture Property”, being the balance of the property of the JVCs held in the name of QNI.
(emphasis added; footnotes omitted)
In the context of considering the first error, the Court of Appeal referred to the definition of Joint Venture Property at [19] in these terms:
Clause 1.1 of the JVA sets out a comprehensive definition of “Joint Venture Property”. It includes specified mining leases and other rights and titles pursuant to the Agreement Act or the Mineral Resources Act 1989 (Qld), specified land, the Yabulu treatment facilities, all technology and know-how developed or to be developed on behalf of the joint venture, and all other rights, titles, interests or property of whatsoever kind held, constructed or acquired for the purpose of the joint venture.
The Court then analysed the clauses of the JVA which related to the Joint Venture Property and the issue of whether there was a trust in relation to that property. As part of this analysis, the funds in the bank account were identified as being one part of the Joint Venture Property. The relevant extract of the reasons is as follows:
[49]The learned primary judge found that QNI held the money in the bank account on a “bare trust”. That was the position urged below by the corporate defendants, and again before this court.
…
[57]Ultimately the parties before this court accepted that the question of whether QNI was a “bare trustee” depended upon the proper construction of the JVA.
[58]Clauses 3.1 and 3.2 of the JVA has an impact on this issue. In our view, the language used in them is that of trustee and beneficiary.
[59]Clause 3.1 relevantly provides:
“All the Joint Venture Property shall at all times be made available for the purpose and duration of the Joint Venture and during such duration shall not be used for any other purpose. All the Joint Venture Property and, subject to Clause 3.3, all estate and interest in Products produced at the Treatment Facilities shall be beneficially owned by the Joint Venturers as tenants in common and all liabilities of the Joint Venture shall be severally borne by such Joint Venturers, in the following percentages (such percentages being the parties’ respective Participating interests as at the Effective Date) …”
[60] There are a number of features about clause 3.1 that should be noted.
[61]First, the term “Joint Venture Property” includes the chose in action constituted by the rights against the bank holding the Manager’s account: clause 1.1. Broadly put the money in the bank account is Joint Venture Property.
…
[64]Thirdly, the Joint Venture Property is not to be used for any other purpose. As holder of the funds in the bank the Manager was therefore obliged to resist any effort to use the funds for a purpose which was not a joint venture purpose.
[65]Fourthly, the Joint Venture Property is stipulated to be “beneficially owned by the Joint Venturers as tenants in common … in the following percentages (such percentages being the parties’ respective Participating Interests …)”. On its face that has the effect that Joint Venture Property is held for the JVCs in proportion to their interest in the joint venture (Resources, 80: Metals, 20).
[66]In so far as the legal title to Joint Venture Property was held in the name of QNI as Manager, this part of clause 3.1 points plainly to the relationship between QNI and the JVCs. In our view, it makes it clear that there is a trust relationship in that case. The legal title is held by QNI, but the beneficial ownership lies with the JVCs.
[67]However, other provisions in the JVA stipulate that those percentages do not apply to all Joint Venture Property. The funds in the Manager’s bank account is the prime example for present purposes.
[68]Where the Manager is required to establish and maintain a bank account into which funds from the joint venture are deposited, the rights against the bank are a chose in action that comes within paragraph (h) of the definition of Joint Venture Property, which relevantly provides:
“all other property of whatsoever kind and wheresoever situate (including, without limitation, … choses in action … from time to time hereafter held, … or acquired for the purposes of the Joint Venture …”
[69]In the case of the funds held in the bank account required to be brought into existence and maintained under clause 6.4(f) the chose in action constituting the rights as between the Manager and the bank is held by the Manager, who has legal title. The beneficial ownership, however, rests with the JVCs, according to the proportion of the amounts paid into the account. That proportionate beneficial ownership may not reflect the percentages of the Participating Interests in the joint venture overall.
[70]In our view, the use of language distinguishing between the legal title on the one hand, and the beneficial title on the other, points clearly to an intention on the JVCs’ part that the relationship is one of trustee and beneficiary.
[71]Clause 3.2 deals with how Joint Venture property was to be held, providing that if the JVCs requested it, title to any of the Joint Venture property may be solely in the name of the Manager. It then relevantly provides:
“If at any time any of the Joint Venture Property is not vested at law in the names of the Joint Venturers in proportion to their Participating Interests, the Joint Venturer or Joint Venturers in whose names such Joint Venture Property is vested shall hold such Joint Venture Property for the use and benefit of the Joint Venturers.”
[72]The highlighted words are the language of trusts, distinguishing between legal title which is vested in one party while beneficial title resides with someone else.
[73]One of the factors taken into account by her Honour in reaching the conclusion that the JVA did not create the trust for which the appellants contended, under which QNI had the powers and duties conferred upon it by clause 6.4(f), was that the word “trust” is not used in the JVA. However, as her Honour recognised, the absence of such a term is not decisive. Rather, what is called for is the construction of the document (here, the JVA) in order to discern if the parties’ intention was to create a trust. In our respectful view, the absence of the term “trust” is not determinative when one has regard to the use of words making a distinction between legal ownership and beneficial ownership of Joint Venture Property, particularly in clause 3.1 and 3.2.
…
[76]Her Honour also considered that clauses 3.1 and 3.2 were equally consistent with there being no express trust, because clause 3.2 contemplated that one JVC might hold property for the other JVC. However, that concerns the relationship between the JVCs and says nothing as to the position of the Manager, particularly in light of clauses 3.1 and 6.4(f).
[77]Clause 5.2 does not, in our view, alter the position. …
[78]As to that, whilst the words [in clause 5.2] say “management and control of the Joint Venture Property and all operations hereunder as agent”, the clause also stipulates that in doing so the Manager “shall act subject to … the provisions of this Deed”. If the JVA provides that in respect of certain Joint Venture Property the Manager shall be trustee, there is no inconsistency. Further, “management and control” applies no matter who holds legal title to the Joint Venture Property. In other words, even where the legal title is vested in the Manager as trustee the management and control is assigned to the Manager. It is thus a different concept to the question of whether certain property is held on trust. And, finally, there are specific provisions of clause 3.1 and 3.2 which resolve the question of title to property.
(emphasis original, footnotes omitted)
Following that analysis, the Court of Appeal then turned its attention to the funds in the bank account, stating that:
[96]In our view, there can be no doubt that the legal title to the funds in the QNI bank account was held by QNI as Manager, and that the chose in action against the bank in respect of the funds was held by QNI. But, equally clear is the fact that those interests were held beneficially by the JVCs.
[97] Under clause 6.4(f) the obligations on QNI as holder of the bank account were:
(a)to maintain the account;
(b)to deposit sums into the account which came from the JVCs or were paid to the account of the JVCs;
(c)not to deposit any other funds in the account;
(d)hold those funds for the JVCs in proportion to the amount paid by the particular JVC, whether by the JVCs themselves or on their behalf;
(e)to invest the funds in the bank account in a prudential manner;
(f)to hold the returns on investment of the funds paid by or attributable to a particular JVC to the account of that JVC;
(g)keep sufficient records to enable the JVCs’ respective entitlements to be determined;
(h)use the funds (including the returns on investing) to meet all costs, liabilities and expenses of the Joint Venture properly incurred, whether already payable or accrued, or to become accrued and be payable in the future; and
(i)to meet the costs, liabilities and expenses of the Joint Venture promptly.
[98]Once that is understood it becomes evident, in our view, that QNI holds the funds in the bank account on trust for the JVCs. Legal title remains with QNI but the beneficial interest remains with the JVCs.
The Court of Appeal continued at [103]:
Further, it cannot be said that QNI is in a position where it holds the funds without any interest therein, other than that existing by reason of the office of Manager and the legal title as trustee, and without any duty or further duty to perform, except to convey it upon demand to the JVCs or as directed by them. QNI’s duties included: (i) investing the funds; (ii) determining for that purpose what moneys were call moneys, and what were not; (iii) determining which investment returns belonged to which JVC; (iv) determining where the differential interests of the JVCs lay; (v) promptly applying the accrued funds in the account to meet all costs, liabilities and expenses of the Joint Venture, both currently accrued and to accrue in the future; and (vi) maintaining records that would permit the JVCs’ differential interests to be determined.
The Court of Appeal relevantly concluded that:
(1)QNI had a duty to hold the funds to meet properly incurred joint venture expenses: at [104];
(2)accordingly, QNI was obliged to resist any effort by the JVCs to direct payment of the funds to meet expenses which were not properly incurred joint venture expenses: at [104];
(3)the fact that the bank account funds were impressed with the trust to pay the (present and future) expenses of the joint venture necessarily meant that, whilst those expenses remained unpaid, the trust could not be defeated or collapsed by the JVCs, as the beneficiaries, calling the money back to them or by directing it to another party such as Mineralogy: at [108];
(4)the loans were made to Mineralogy by QNI as trustee and QNI was entitled to have them repaid, together with interest: at [173]–[174].
By their amended statement of claim in this proceeding, the Palmer Parties describe the trust of which QNI was trustee as the Bank Account Trust or the Chose in Action Trust. As to this, they submitted that:
Accordingly, the trustee’s right to repayment of the Mineralogy Loan, and the Mineralogy Claim (ie, the trustee’s claim against Mineralogy) were necessarily choses in action held by QNI on trust for the JVCs. They may be viewed as the traceable proceeds of the original trust property bound with trust obligations. In this way the Mineralogy Claim can be regarded as property of the Bank Account trust found by the Court of Appeal or as a separate Chose in Action Trust.
(footnotes omitted)
However, as submitted by senior counsel for Vannin, the flaw in this submission is that there is no basis for the suggestion that the so-called Bank Account Trust or Chose in Action Trust are separate and distinct from the trust constituted by QNI’s joint venture activities. Nor is there any suggestion that QNI traded or had assets or liabilities in a personal capacity. Rather, all of its trading, assets and liabilities were in furtherance of the joint venture and as trustee. And by cl 5.5(b) of the JVA, QNI agreed not to “directly or indirectly carry on or be interested in any other business or activity or other operation”. There was therefore only one trust and one pool of creditors.
Further, the attempt to characterise the trust of which QNI was trustee as being a trust confined to the funds held in the joint venture bank account is contrary to (rather than in accordance with) the findings of the Court of Appeal in the QCA decision as well as the proper construction of the JVA itself, which did not create a separate trust confined to the funds held in the bank account.
Rather, the funds held in the bank account formed part of the Joint Venture Property, and the Joint Venture Property (which included but was not confined to these funds) was stipulated to be beneficially owned by the JVCs with the legal title held by QNI. The Court of Appeal considered that the language of clause 3.1 of the JVA “makes it clear that there is a trust relationship” in relation to the Joint Venture Property. The existence of that trust relationship was recognised by the Court of Appeal in [58]–[61], [65], [66], [68]–[73] of the QCA decision, and, with respect, these findings accord with the proper interpretation of the JVA in any event.
Further, Metals and Resources were parties to the proceeding resulting in the QCA decision. Not only did they not advance submissions to the Court of Appeal of the kind which are now sought to be made, they are bound by the findings of the Court of Appeal in relation to the proper construction of the JVA and the manner in which the trust operated, including the finding that the bank account funds were impressed with the trust to pay the Joint Venture Expenses (the payment of which they now seek to challenge).
For these reasons, the proposition advanced by the Palmer Parties that the property of the trust of which QNI was trustee was confined to the funds held in the joint venture bank account was not established. There was no Bank Account Trust or Chose in Action Trust as alleged.
To the extent that the objections by the Palmer Parties are premised on the existence of the Bank Account Trust or Chose in Action Trust, these objections must fail for this reason alone.
Further, the claims for breach of trust advanced by the Palmer Parties in this proceeding were premised or relied upon the existence of the so-called Bank Account Trust or the Chose in Action Trust. This encompasses the claims pleaded in [46]–[61] of the amended statement of claim. That such a trust does not exist as alleged provides the first basis to dismiss these claims and to refuse to make the declaration sought in [2] of the prayer for relief.
WHETHER EXPENSES AND LIABILITIES WERE PROPERLY AND REASONABLY INCURRED
The primary submission by the Palmer Parties is to the effect that the Mineralogy Claim Expenses and Liabilities were not properly and reasonably incurred. This submission underlies their assertions that QNI did not have the power, or that it was improper for QNI, to bring the Mineralogy proceeding; that QNI ought to have brought the Mineralogy proceeding through the SPLs so as to avoid incurring the Mineralogy Claim Expenses and Liabilities; and that QNI ought not to have entered into the Vannin LFA with the result that it became liable to pay the funding premium.
At [48]–[49] of Matrix Partners, Allsop CJ continued:
… The right of the trustee to reach into the trust assets is not a personal right devoid of connection with the purposes and working of the trust; it inheres in, and arises out of, the trust relationship that exists for a purpose – to pay the creditors and thus to exonerate the trustee. It is without doubt a right of the trustee (and in that sense personal), but one that is constrained in its content by its purpose – the payment of trust creditors. In Re Johnson at 552, Sir George Jessel MR with his customary clarity and unequivocality expressed the character of the right with its attendant obligation in equity to use the funds produced by the exercise of the right of exoneration to pay the creditors of the trust. His Lordship said:
I understand the doctrine to be this that where a trustee is authorised by a testator, or by a settlor … to carry on a business with certain funds which he gives to the trustee for that purpose, the creditor who trusts the executor has a right to say, “I had the personal liability of the man I trusted, and I have also a right to be put in his place against the assets; that is, I have a right to the benefit of indemnity or lien which he has against the assets devoted to the purposes of the trade.” The first right is his general right by contract, because he trusted the trustee or executor: he has a personal right to sue him and to get judgment and make him a bankrupt. The second right is a mere corollary to those numerous cases in Equity in which persons are allowed to follow trust assets. The trust assets having been devoted to carrying on the trade, it would not be right that the cestui que trust should get the benefit of the trade without paying the liabilities; therefore the Court says to him, You shall not set up a trustee who may be a man of straw, and make him a bankrupt to avoid the responsibility of the assets for carrying on the trade: the Court puts the creditor, so to speak, as I understand it, in the place of the trustee….
At the core of what Jessel MR said was the proposition that the right (in a sense personal in that it was distinct from and superior to the interests of cestuis que trust) of the trustee to use trust assets to exonerate itself arises to meet a trust liability, and can be exercised only for that purpose. The property in the hands of the trustee remains trust property, but subject to the trustee’s proprietary interest that exists for the purpose of paying the creditors. The property is not held on trust for the beneficiaries alone; the proprietary interest of the trustee is preferential to the interests of the beneficiaries, but that interest of the trustee is shaped by its purpose and origins in the trust relationship – to pay trust creditors in order to exonerate itself from those debts. The character and limits of the interest are shaped by its purpose and origins. The obligation of the trustee to use the trust assets to pay trust creditors is reflected by, and provides the foundation for, the creditors’ right of subrogation.
For these reasons, the claim by the Palmer Parties for the third alleged breach of trust, as referred to in [58]–[61] of the amended statement of claim, fails.
This has the consequence that the declaration sought by the Palmer Parties in [2] of the prayer for relief, to the extent that it is premised on this claimed breach of trust, will not be made.
IMPACT OF SETTLEMENT DEED ON RELIEF SOUGHT
Each side relies upon the settlement deed.
The plaintiffs rely upon the settlement deed to contend that the Palmer Parties released QNI from claims premised upon the proposition that the expenses incurred in advancing the Mineralogy claim were not properly or reasonably incurred. For the reasons given below, the plaintiffs’ contention is accepted.
The Palmer Parties rely upon the settlement deed to contend that QNI released the Palmer Parties from all SPL Claims, which they say included any claim advanced by QNI premised on a right of indemnity or exoneration. They contend that the relief sought by the plaintiffs in this proceeding is premised on the Mineralogy Claim Expenses and Liabilities having been properly incurred in exercise of a right of indemnity and exoneration by QNI and that the grant of the relief sought on any such basis is barred by clause 4.1 of the settlement deed. However, for the reasons given below, the settlement deed does not prevent the plaintiffs from seeking the relief which is sought by them in this proceeding.
Whether claims by Palmer Parties have been released
By cl 6.1 of the settlement deed, QNI was released from “the QN Party Claims”. In the settlement deed, QNI was described as “QN”.
QN Party Claims were defined in the settlement deed to mean:
a claim by a QN Party [which relevantly included each of the Palmer Parties] against or in respect of QN, the SPL and the Commonwealth (whether all or any of them and for the avoidance of doubt includes any Claim in respect of the Mareva Undertaking).
Claims was in turn relevantly defined to mean:
all existing or future claims, counter claims, actions or demands, rights to claim, appeals or reviews, claims for interest or claims for costs (including any costs orders) whether arising at equity or law or through subrogation or any other means and whether known or unknown at the time this Deed was entered into and includes any proceeding in a court and any action, subpoena, warrant, summons, investigation or legal process of any kind or type whatsoever and which arise out of or in relation to the QN Proceeding. …
(emphasis added)
The QN Proceeding was defined to mean Supreme Court of Queensland Proceeding BS6593/17 – being the consolidated proceeding, the trial of which was part heard at the time of entry into the settlement deed.
The contention that the expenses incurred by QNI in bringing, and continuing, the consolidated proceeding were not reasonably incurred is a claim in relation to that proceeding. It therefore falls within the scope of the definition of Claims within the settlement deed.
As the QN Parties included the Palmer Parties, the Palmer Parties thereby released QNI from claims premised upon the proposition that the expenses incurred in advancing the Mineralogy proceeding were not properly or reasonably incurred.
Such a release was granted in circumstances where the relevant background facts, as known to the Palmer Parties when they executed the settlement deed, were that:
(1)QNI by the GPLs had brought the Mineralogy proceeding, and continued to prosecute it, notwithstanding the appointment of the SPLs;
(2)QNI had engaged separate legal representation to the SPLs;
(3)QNI had entered the Vannin LFA and obtained litigation funding to pursue the Mineralogy claim;
(4)the pursuit of the Mineralogy claim had been the subject of complex and protracted litigation;
(5)QNI and the GPLs were therefore likely to have incurred significant expenses to bring the Mineralogy claim to trial.
For these reasons, the settlement deed provides a complete answer and an additional reason to refuse the claim by the Palmer Parties for the declaration sought in [2] of the prayer for relief in the amended statement of claim, which relief is premised on acceptance of its claim that QNI is not entitled to indemnity from the judgment sum for the Mineralogy Claim Expenses and Liabilities, including the claims by the Palmer Parties of breach of trust: see [23], [24(d)], [40], [41], [45], [51], [55], [57] and [61] amended statement of claim.
Further, by way of counterclaim in the consolidated proceeding (which was brought also by QNS), Metals and Resources alleged that:
(1)QNI had an obligation to transfer all property (including funds from the sale of nickel products) to QNS upon the appointment of QNS as manager under the JVA;
(2)QNI had no right to assert a lien or charge over that property, because such a right was excluded by the terms of the JVA and because of various challenges as to whether liabilities were properly incurred;
(3)in breach of trust, QNI retained the property and did not transfer it to QNS, or in the alternative, QNI retained property without quantifying the right of indemnity that it had; and
(4)they were entitled to orders requiring QNI to transfer the property that it had to QNS.
Accordingly, the claims in this proceeding for the transfer of the trust property to QNS, or premised upon a failure to comply with that alleged obligation, are claims that were either expressly advanced in, or arise out of, or are in relation to, the consolidated proceeding. Having regard to the terms of the settlement deed set out above, those claims have been released such that the claim for the order in [3] of the prayer for relief in the amended statement of claim is barred.
For these reasons, the settlement deed provides a complete answer and an additional reason to refuse the claim by the Palmer Parties for the order sought in [3] of the prayer for relief in the amended statement of claim.
Whether settlement deed prevents plaintiffs from obtaining relief
The Palmer Parties submit that, in executing the settlement deed, QNI released the Palmer Parties from all “SPL Claims”, which were defined by the settlement deed in a manner which included claims by QNI to the trust property premised on a right of indemnity or exoneration.
The Palmer Parties submit that:
By cl 4.1, QNI: (a) released the QN Parties (being the Palmer Parties) from the “SPL Claims”; (b) undertook not to commence or maintain any Claim or action against the QN Parties relating to the QN Party Claims, and (c) undertook to ensure that any person over whom they had responsibility or control did not commence or maintain any Claim or action against the QN Parties or their Associates relating to the SPL Claims.
The “SPL Claims” were defined to mean a Claim by QN, the SPL either by himself or on behalf of QN (whether jointly or alone) against or in respect of a QN Party, other than the GPL Claims.
The Palmer Parties submit that the SPL Claims as defined in the settlement deed which were the subject of the explicit release in clause 4.1 included those claims being prosecuted by the SPLs on behalf of QNI in the QN Proceeding (as defined). They submit that those claims included claims by QNI that it had rights of indemnity and exoneration as trustee over assets held by it (including monies in the joint venture bank account).
For the following reasons, the settlement deed does not prevent the plaintiffs from bringing this proceeding.
First, the application brought by the plaintiffs in this proceeding (including by the GPLs, who were not parties to the settlement deed) is not a claim against the Palmer Parties within the meaning of clause 4.1(b) and 4.1(c) of the settlement deed. It is an application for judicial advice, and is a proceeding in which the Palmer Parties are being heard as interested persons but against whom no relief is sought or claim is made.
Second, the orders sought by the plaintiffs in this proceeding do not fall within the SPL Claims, as defined in the settlement deed. SPL Claims was defined to include a Claim by QNI against or in respect of a QN Party, other than the GPL Claims.
The particular SPL Claims which are relied upon by the Palmer Parties to assert that the plaintiffs cannot bring this proceeding are contained in the second further amended statement of claim filed in the consolidated proceeding as follows:
(1)Part J – in this section, QNI claimed that it was contractually entitled to indemnity or exoneration from the JVCs in relation to the debt claimed by the Commonwealth in the amount of $66,862,313.99. No such claim is made by the plaintiffs in this proceeding;
(2)Part K – in this section, QNI pleaded, as a material fact, that it was entitled to an indemnity and exoneration out of all of the trust assets QNI held on trust in respect of all of the unpaid liabilities reasonably incurred by QNI in acting as trustee. It also pleaded that the JVCs were indebted to QNI for the “Expenditure Amount” which totalled $204,007,832.07. By the prayer for relief, QNI claimed payment of that debt from each of Resources and Metals, and also sought a declaration that the Expenditure Amount is secured by an equitable lien over the trust assets. No such claims are made by the plaintiffs in this proceeding whether against or in respect of the Palmer Parties. Further, the fact that a material fact was pleaded by QNI in the SPL proceeding which refers to QNI’s entitlement to indemnity or exoneration from the trust assets does not mean that, by bringing an application for judicial advice in connection with different expenditure, and which is also premised on an entitlement to indemnity, this proceeding is an SPL Claim within the meaning of the settlement deed;
(3)Part L – in this section, QNI pleaded as a material fact that it had a right of indemnity or exoneration arising from its position as trustee which was secured in the form of an equitable lien over the trust assets. It then pleaded that this lien secured particular employment entitlements which QNI had incurred and particular contractual obligations which QNI had incurred. Declarations were sought in the prayer for relief that identified debts and amounts were secured by an equitable lien. No such claims are made by the plaintiffs in this proceeding whether against or in respect of the Palmer Parties. Further, the fact that a material fact was pleaded by QNI in the SPL proceeding which refers to QNI’s entitlement to indemnity or exoneration from the trust assets does not mean that, by bringing an application for judicial advice in connection with different debts and amounts, and which is also premised on an entitlement to indemnity, this proceeding is an SPL Claim within the meaning of the settlement deed.
Third, it is likely to be contrary to public policy for clause 4.1 to preclude a trustee from approaching a court for judicial advice, even if, contrary to the above reasons, that clause has that effect: see WLD Practice Holdings Pty Ltd, in respect of the WLD Practice Holdings Trust v Sara Stockham [2020] NSWSC 395 at [24]–[31] (Sackar J).
It follows that, even if QNI released the Palmer Parties from any claim which was premised on its entitlement to indemnity as trustee over the trust assets, this was ineffective to preclude QNI from approaching this Court for judicial advice.
WHETHER PALMER PARTIES ENTITLED TO RELIEF SOUGHT
First declaration sought
The first declaration sought is that QNI holds the Trust Property, including the judgment sum, on constructive trust for Resources and Metals according to their respective interests under the JVA and subject to the right of QNI to indemnity or exoneration from the Trust Property for expenses properly and reasonably incurred in its capacity as trustee, such trust having arisen on or with effect from 3 March 2016.
Trust Property is not defined in the proposed orders but it was defined in the amended statement of claim as being “the chose in action against each bank and the funds comprising the JV Bank Accounts [which] were held on trust for the benefit of the JVCs”, that is, the Bank Account Trust or Chose in Action Trust.
For the reasons already given, a declaration would not be made by reference to such a trust.
Further, neither QNI nor the GPLs dispute that the moneys held by QNI constitutes trust property (in the sense that they do not dispute that, subject to the payments which they propose to make as identified in their application, any surplus is trust property and should be paid to the new trustee). They also agree with the Palmer Parties that QNI has a right to indemnity or exoneration from that trust property for expenses properly and reasonably incurred in its capacity as trustee.
The real issues in dispute between the parties are whether the expenses sought to be paid by the plaintiffs from the trust property were properly and reasonably incurred, and whether the trust property should be transferred to QNS as replacement trustee prior to the payment of those expenses. However, those disputes are relevant to other relief sought by the Palmer Parties and have no bearing on the declaration sought in [1] of the prayer for relief.
It follows then that the first declaration sought by the Palmer Parties has no utility and will not be made for this reason.
Second declaration sought
The second declaration sought is to the effect that the right of QNI to indemnity or exoneration from Trust Property does not attach to the GPL Liabilities and the funding premium on the basis that they were not properly or reasonably incurred as trustee and/or were incurred in breach of trust.
As already observed, Trust Property was defined in the amended statement of claim as being, in effect, the Bank Account Trust or Chose in Action Trust.
For the reasons already given, a declaration would not be made by reference to such a trust.
Further, for the reasons already given, the claims made by the Palmer Parties in support of this claimed declaration have failed and therefore there is no basis for this declaration to be made.
Finally, an additional reason to refuse to make this declaration is because the claim for this relief was released by the settlement deed.
Order sought that trust property be transferred to QNS
The Palmer Parties also seek an order in these terms:
[Subject] to [QNS] not taking steps which would destroy, diminish or otherwise jeopardise any residual right of security held by QNI in the [trust property], QNI transfer the [trust property, including the judgment sum] to [QNS] forthwith, to be held on trust by [QNS] for [Metals] and [Resources] according to their respective interests under the JVA.
The order sought will not be made because, for the reasons given above, QNI is not obliged to transfer the trust property to QNS at present.
An additional reason that the order will not be made is that, having regard to the apparent (although not certain) execution of a deed which contained provisions removing QNS as trustee and then the reversal of that purported removal by the apparent (although not certain) execution of a further deed, QNS might not be the current Manager and trustee.
Further, even if QNS is the current trustee, such conduct demonstrates that, even if an order is made against QNS in the terms sought, there is a strong prospect that steps will be taken by the JVCs and Mr Palmer to undermine the order, whether that be by replacing QNS as trustee or causing QNS to distribute the trust property in accordance with the third purported deed notwithstanding the terms of the order.
Finally, an additional reason to refuse to make this order is because the claim for the transfer of the trust property to QNS was released by the settlement deed.
WHETHER DIRECTIONS SOUGHT BY PLAINTIFFS SHOULD BE MADE
Proposed order 2
The first direction sought is that the GPLs are justified in causing QNI to refuse to pay the judgment sum to QNS until such time as it is established that QNI holds a surplus of trust assets over trust liabilities (both present and future), including the GPLs’ costs, expenses and remuneration: proposed order 2.
For the reasons given above and in circumstances where the Palmer Parties contend that QNS is entitled to have the whole of the judgment sum (and other trust property) paid to it immediately, I am satisfied that that this is an appropriate case for the direction in proposed order 2 to be made as sought by the plaintiffs. That is, I am persuaded of the propriety of the course of action which is contained in proposed order 2 and that advice should be given to the GPLs and to QNI to the effect that they are justified in proceeding with that course of action.
Proposed orders 3(a) and 3(b)
The next direction sought is that the GPLs would be justified, in paying from the funds of QNI, the liabilities that it has incurred under the Vannin LFA: proposed order 3(a).
A further direction which is sought is that the GPLs would be justified in paying their approved remuneration from the funds of QNI: proposed order 3(b).
In this case, the uncontested evidence is that QNI did not carry on any business other than the business under the JVA. This means that its only expenses were Joint Venture Expenses, being trust liabilities.
Accordingly, the remuneration and expenses, including the liabilities to Vannin under the Vannin LFA, are able to be paid from the trust property.
There is no suggestion that there are any expenses which have been incurred that are not in fact related to the winding up.
Further, Ms Trenfield gave unchallenged evidence that she is not aware of any reason why the directions should not be given.
As to the proposed order 3(a) and for the reasons already given, the liabilities incurred by QNI under the Vannin LFA were properly and reasonably incurred in relation to the winding up.
As to the proposed order 3(b), which relates to the remuneration payable to the GPLs, it is relevant to observe that:
(1)the remuneration which is the subject of the direction either has been or will be approved by the Committee of Inspection in accordance with Part 3 of the Insolvency Practice Schedule;
(2)although the Palmer Parties seek to challenge the GPL Liabilities in their entirety on the basis that they are associated with the Mineralogy proceeding, the quantum of the GPL Liabilities which related to the conduct of the Mineralogy proceeding is only a proportion of the GPL Liabilities.
Further and for the reasons already given, the GPL Liabilities were properly and reasonably incurred in relation to the winding up.
In addition to their various objections dealt with earlier these reasons, the Palmer Parties also oppose advice being given as sought on the basis that the plaintiffs have provided the Court with “incomplete information, including inadequate and incomplete evidence regarding the cost of funding obtained and available to [QNI] through the SPLs”.
Having regard to the only example which is provided in the written submissions, it was not explained by the Palmer Parties how the failure by the plaintiffs to adduce such evidence has the consequence, if it is the case, that there has not been full and fair disclosure of all relevant facts and circumstances, which is the relevant question in relation to an application brought under s 90-15 Insolvency Practice Schedule: see Re Ansett at [44], which was cited with approval by Middleton J in Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 7) [2020] FCA 1182 at [29].
During the hearing, senior counsel for the Palmer Parties sought to identify other documents which were not in evidence, but without developing a submission that the documents were both relevant (and why that was) and required to be disclosed to achieve full and fair disclosure.
The plaintiffs relied upon three affidavits of Mr Park and five affidavits of Ms Trenfield. Those affidavits were detailed and comprehensive, and the content of these affidavits was not, for the most part, the subject of any challenge under cross-examination (with both liquidators being made available for cross-examination).
The requirement that there be full and fair disclosure does not require the plaintiffs to adduce every document in their possession or control in connection with the advice sought, however remote the relevance to the advice being sought: see generally ASIC v Groundhog Developments Pty Ltd & Ors [2011] QSC 263 at [27] (Dalton J, as her Honour then was).
For these reasons and where the propriety of the proposed payment to Vannin and of remuneration to the GPLs has been challenged by the Palmer Parties, I am satisfied that this is an appropriate case for the direction in proposed orders 3(a) and 3(b) to be made as sought by the plaintiffs.
That is, I am persuaded of the propriety of the course of action which is contained in proposed orders 3(a) and 3(b) and that advice should be given to the GPLs and to QNI to the effect that they are justified in proceeding with the course of action referred to in those proposed orders.
Proposed order 3(d)
The final direction sought is that the GPLs would be justified in paying from the funds of QNI in respect of any proof of debt of a creditor which has been admitted in the circumstances identified in the originating process: proposed order 3(d).
A direction has already been made that the GPLs would be justified in taking steps to ascertain the outstanding claims by creditors in the liquidation of QNI, obtaining proofs of debt in respect of such claims and adjudicating those claims. While the Palmer Parties consented to that direction being made, they oppose a direction that the GPLs would be justified in making the payments to the creditors as a consequence of the adjudication process. This is in circumstances where all of the presently known claims outlined in Ms Trenfield’s affidavits appear to relate to the operation of the joint venture. Further, for the reasons given above, the objections by the Palmer Parties to the payment of trust creditors have been rejected.
For these reasons and where the propriety of the proposed payment of admitted proofs of debt of creditors by the GPLs has been challenged by the Palmer Parties, I am satisfied that this is an appropriate case for the direction in proposed order 3(d) to be made as sought by the plaintiffs.
That is, I am persuaded of the propriety of the course of action which is contained in proposed order 3(d) and that advice should be given to the GPLs and to QNI to the effect that they are justified in proceeding with that course of action.
DISPOSITION
The claims by the Palmer Parties for the relief identified in the prayer for relief contained in the amended statement of claim will be dismissed.
The remaining orders sought by the plaintiffs in paragraphs 2 and 3 of the originating process (with minor modifications) will be made.
The parties will be invited to make submissions as to costs and the issue of costs will be determined on the papers.
I certify that the preceding four hundred and eighteen (418) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Downes. Associate:
Dated: 2 November 2022
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