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Parbery v QNI Metals Pty Ltd

 

[2018] QSC 107

SUPREME COURT OF QUEENSLAND

CITATION:

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

PARTIES:

STEPHEN JAMES PARBERY AND MICHAEL ANDREW OWEN IN THEIR CAPACITIES AS LIQUIDATORS OF QUEENSLAND NICKEL PTY LTD (IN LIQ)
ACN 009 842 068
(first plaintiffs)
QUEENSLAND NICKEL PTY LTD (IN LIQ)
ACN 009 842 068
(second plaintiff)
JOHN RICHARD PARK, KELLY-ANNE LAVINA TRENFIELD & QUENTIN JAMES OLDE AS LIQUIDATORS OF QUEENSLAND NICKEL PTY LTD (IN LIQUIDATION)
ACN 009 842 068
(third plaintiffs)
v
QNI METALS PTY LTD
ACN 066 656 175
(first defendant)

QNI RESOURCES PTY LTD
ACN 054 117 921
(second defendant)
QUEENSLAND NICKEL SALES PTY LTD
ACN 009 872 566
(third defendant) 

CLIVE FREDERICK PALMER
(fourth defendant)
CLIVE THEODORE MENSINK
(fifth defendant)
IAN MAURICE FERGUSON
(sixth defendant)
MINERALOGY PTY LTD
ACN 010 582 680
(seventh defendant)
PALMER LEISURE AUSTRALIA PTY LTD
ACN 152 386 617
(eighth defendant)
PALMER LEISURE COOLUM PTY LTD
ACN 146 828 122
(ninth defendant)
FAIRWAY COAL PTY LTD 
ACN 127 220 642
(tenth defendant)

CART PROVIDER PTY LTD
ACN 119 455 837 
(eleventh defendant)
COEUR DE LION INVESTMENTS PTY LTD
ACN 006 334 872
(twelfth defendant) 
COEUR DE LION HOLDINGS PTY LTD
ACN 003 209 934
(thirteenth defendant)
CLOSERIDGE PTY LTD 
ACN 010 560 157
(fourteenth defendant)
WARATAH COAL PTY LTD
ACN 114 165 669
(fifteenth defendant)
CHINA FIRST PTY LTD
ACN 135 588 411
(sixteenth defendant)
COLD MOUNTAIN STUD PTY LTD 
ACN 119 455 248
(seventeenth defendant) 
EVGENIA BEDNOVA 
(eighteenth defendant) 
ALEXANDER GUEORGUIEV SOKOLOV
(nineteenth defendant)
ZHENGHONG ZHANG
(twentieth defendant)
SCI LE COEUR DE L’OCEAN 
(twenty-first defendant)
DOMENIC MARTINO
(twenty-second defendant)
MARCUS WILLIAM AYRES
(first defendant added by counterclaim)
STEFAN DOPKING
(second defendant added by counterclaim)

FILE NO/S:

SC No 6593 of 2017

DIVISION:

Trial Division

PROCEEDING:

Application 

DELIVERED ON:

25 May 2018

DELIVERED AT:

Brisbane

HEARING DATE:

23 August 2017;

14 September 2017;

15 September 2017;

17 October 2017;

18 October 2017;

19 October 2017;

30 October 2107;

21 December 2017;

6 March 2018

JUDGE:

Bond J

ORDER:

The orders of the Court are as follows:

  1. Order as set out in annexure A to these reasons, amended as identified in paragraph [321] of these reasons.
  2. The plaintiffs are directed to draw up a form of order embodying the order made by [1] above and to file that order in Court by 4:00pm on 28 May 2018.

CATCHWORDS:

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

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – DETENTION, INSPECTION AND PRESERVATION – FREEZING ORDERS – where company in liquidation – where liquidators commenced proceedings against former directors and certain companies within the corporate group – where liquidators brought an application for freezing orders and ancillary orders – whether the plaintiffs have a good arguable case

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – DETENTION, INSPECTION AND PRESERVATION – FREEZING ORDERS – where company in liquidation – where liquidators commenced proceedings against former directors and certain companies within the corporate group – where liquidators brought an application for freezing orders and ancillary orders – whether there is a risk to the integrity of the prospective Court processes of execution and enforcement 

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – DETENTION, INSPECTION AND PRESERVATION – FREEZING ORDERS – where company in liquidation – where liquidators commenced proceedings against former directors and certain companies within the corporate group – where liquidators brought an application for freezing orders and ancillary orders – whether the interests of justice favours the granting of the orders sought

Uniform Civil Procedure Rules 1999 (Qld) Ch 8 Pt 2 Div 2,  r 260, r 260A, r 260B, r 260C, r 260D, r 260E

Architecture HQ Pty Ltd v Propertylinc Pty Ltd [2015] FCA 686, applied

BGC Contracting Pty Ltd v WA Construction Hire Pty Ltd [2010]

WASC 25, applied

Candy v Holyoake [2016] EWHC 970 (Ch), cited

Candy v Holyoake [2017] EWCA Civ 92, not applied

Cardile v LED Builders Pty Ltd (1999) 198 CLR 380, applied Consolidated Constructions Pty Ltd v Bellenville Pty Ltd [2002] FCA

1513, cited

Curtis v NID Pty Limited [2010] FCA 1072, applied

Dotcom v Twentieth Century Fox Film Corporation [2014] NZCA 509, applied

Fletcher v Fortress Credit Corporation (Australia) II Pty Ltd (2011) 82 ACSR 352,

cited

Frigo v Culhaci [1998] NSWCA 88, cited

Glenwood Management Group Pty Ltd v Mayo [1991] 2 VR 49, cited

Hayden v Teplitzky (1997) 154 ALR 497, cited

Hua Wang Bank Berhad v Deputy Commissioner of Taxation [2010] FCAFC 140, cited

Lakatamia Shipping Co Ltd v Su [2014] EWCA Civ 636, cited

LPH Developments Pty Ltd v Jameson Moore Pty Ltd [No 3] [2017] WASC 284, cited

Newcastle City Council v Caverstock Group Pty Ltd [2008] NSWCA 249, applied

Ninemia Maritime Corporation v Trave GmbH & Co KG (the Niedersachsen)

[1984] 1 All ER 398, applied

Northcorp Limited v Allman Properties (Australia) Pty Ltd [1994] 2 Qd R 405, followed

Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319, applied

Perdaman Chemicals & Fertilisers Pty Ltd v Griffin Coal Mining Co Pty Ltd [2011] WASC 188, applied

PT Bayan Resources TBK v BCBC Singapore Pte Ltd (2015) 258 CLR 1, applied

RHG Mortgage Corporation Ltd v Morgan Kelly [2016] WASC 169, cited

Samimi v Seyedabadi [2013] NSWCA 279, applied

SDW2 Pty Ltd v JLF Corporation Pty Ltd [2017] QSC 1, applied

Severstal Export GmbH v Bhushan Steel Ltd [2013] NSWCA 102, cited

Skyworks NSW Pty Ltd v 32 Drummoyne Pty Ltd [2017] NSWSC 343, applied

Taylor v Diamand & Zikos Developments Pty Ltd (1997) 6 NTLR 164, applied

Third Chandris Shipping Corporation v Unimarine SA [1979] QB 645, cited

Victoria University of Technology v Wilson [2003] VSC 299, cited

COUNSEL:

S Doyle QC (23 August 2017, 14-15 September 2017),

T Sullivan QC (17-19 October 2017, 30 October 2017, 21 December 2017, 6 March 2018), with M Hickey and A Rae, for the first and second plaintiffs

D O’Sullivan QC, with T March, for the first defendant, second defendant, seventh defendant and fifteenth defendant

The fourth defendant appeared on his own behalf

K Barlow QC, with K Byrne, for the eighth to fourteenth defendants

SOLICITORS:

King & Wood Mallesons for the first and second plaintiffs

Alexander Law for the first defendant, second defendant, seventh defendant and fifteenth defendant

The fourth defendant appeared on his own behalf

Robinson Neilsen for the eighth to fourteenth defendants

CONTENTS

INTRODUCTION................................................................

THE COURSE OF THE APPLICATION................................................

THE CONSIDERATIONS WHICH INFORM THE EXERCISE OF THE JURISDICTION............

THE INHERENT JURISDICTION

The juridical basis for the making of freezing orders......................................

The strength of the case.........................................................

The risk to the integrity of the prospective Court processes of execution and enforcement..............

The interests of justice..........................................................

Summary of the matters to be proved to justify an exercise of the inherent jurisdiction to make a freezing order 

JURISDICTION UNDER THE UCPR.....................................................

Freezing orders under the UCPR...................................................

Ancillary orders under the UCPR...................................................

THE PROPER APPROACH TO THE EVALUATION OF THE EVIDENCE......................

DO THE PLAINTIFFS HAVE A GOOD ARGUABLE CASE?.................................

INTRODUCTION

THE JOINT VENTURE AGREEMENT

QNI METALS, QNI RESOURCES AND QUEENSLAND NICKEL BECOME PART OF THE PALMER BUSINESS EMPIRE

MR PALMERS ACTUAL INFLUENCE OVER QUEENSLAND NICKEL

Mr Palmer as a director of Queensland Nickel even when not formally appointed...................

The significance of the green notebook...............................................

THE IMPLICATIONS OF THE WAY QUEENSLAND NICKEL ACTUALLY CONDUCTED ITS OPERATIONS

QUEENSLAND NICKEL MAKES PAYMENTS TO MR PALMER AND/OR HIS ENTITIES AND ASSOCIATES

QUEENSLAND NICKEL ENCOUNTERS CASH FLOW PROBLEMS

UNPAID LIABILITIES OF QUEENSLAND NICKEL

ALLEGED VOIDABLE TRANSACTIONS ENTERED INTO WHEN ADMINISTRATION WAS IMMINENT

The Waratah Coal transaction.....................................................

The China First transaction......................................................

QUEENSLAND NICKEL IS PLACED INTO ADMINISTRATION AND THEN LIQUIDATION

EVALUATION OF THE STRENGTH OF THE VOIDABLE TRANSACTIONS CASE

MR PALMER ACTS UNDER THE ALLEGED VOIDABLE TRANSACTIONS

THE GOOD ARGUABLE CASE AGAINST MR PALMER

Breach of duty...............................................................

Insolvent trading..............................................................

THE GOOD ARGUABLE CASE AGAINST THE CORPORATE DEFENDANTS

DOES THE RELEVANT RISK EXIST?................................................

THE QUESTION SHOULD BE ANSWERED IN THE AFFIRMATIVE

SOME FURTHER ISSUES

DO THE INTERESTS OF JUSTICE FAVOUR THE MAKING OF THE ORDERS SOUGHT?.........

PREJUDICE CAUSED BY FAILING TO MAKE ORDERS WHICH SHOULD HAVE BEEN MADE

THE SIGNIFICANCE OF DELAY

WHETHER AN UNDERTAKING TO ENSURE THE DUE EXPEDITION OF THE PROCEEDING IS OFFERED

THE AVAILABILITY OF ALTERNATIVE PROCEEDINGS OR REMEDIES

IMPACT ON THE DEFENDANTS AND ON INNOCENT THIRD PARTIES

CONCLUSION

OVERALL EVALUATION.........................................................

THE APPROPRIATE ORDERS......................................................

ANNEXURE A – FORM OF ORDERS SOUGHT BY PLAINTIFFS.............................

ANNEXURE B – ALTERNATIVE FORM OF ORDERS SOUGHT BY PLAINTIFFS................

ANNEXURE C – FORM OF UNDERTAKINGS...........................................

Introduction

  1. Queensland Nickel Pty Ltd (Queensland Nickel) managed a nickel mining and refining joint venture on behalf of QNI Resources Pty Ltd (QNI Resources) and QNI Metals Pty Ltd (QNI Metals).  The relationship between the three companies was regulated by two important instruments, namely a joint venture agreement and an administration agreement.  
  2. The joint venture formed (and still forms) part of the business empire of Mr Clive Palmer.  He is the ultimate beneficial owner of Queensland Nickel, QNI Resources and QNI Metals.  Indeed, he is the ultimate beneficial owner of all of the corporations who are defendants in the present proceeding and who were respondents to the plaintiffs’ application.[1]  Mr Palmer is alleged to have been a director of Queensland Nickel at all material times, including the times when he was not formally appointed as such.[2]    
  3. Queensland Nickel was placed into voluntary administration on 18 January 2016.  On 22 April 2016, it became subject to a creditors’ voluntary winding up and its administrators were appointed as its liquidators.  It is convenient to refer to them as the general purpose liquidators.  
  4. On 18 May 2016, the Federal Court appointed three additional liquidators to Queensland Nickel as special purpose liquidators to pursue particular claims specified in the order.  One special purpose liquidator has since resigned.  On 27 February 2017, the creditors’ voluntary winding up was converted into a winding up in insolvency.[3]
  5. On 30 June 2017, the present proceeding was commenced.  The two remaining special purpose liquidators are the first plaintiffs in this proceeding.[4]  Queensland Nickel is the second plaintiff.  Since this proceeding was commenced, a consolidation order has been made which consolidated this proceeding with certain other related proceedings, with the result that the consolidated proceeding now includes the general purpose liquidators as the third plaintiffs.  However, the general purpose liquidators were not party to the application with which these reasons deal.  Accordingly when, in these reasons, I refer to “the plaintiffs”, I refer only to the special purpose liquidators and Queensland Nickel.
  6. The defendants to this proceeding include:   
  1. Mr Palmer.
  2. One group of companies, of which Mr Palmer is both a director and the ultimate beneficial owner, namely:
  1. the first defendant, QNI Metals;
  2. the second defendant, QNI Resources;
  3. the third defendant, Queensland Nickel Sales Pty Ltd; and
  4. the sixteenth defendant, China First Pty Ltd.
  1. A second group of companies, of which Mr Palmer is also both a director and the ultimate beneficial owner, namely:
  1. the seventh defendant, Mineralogy Pty Ltd;
  2. the eighth defendant, Palmer Leisure Australia Pty Ltd;
  3. the ninth defendant, Palmer Leisure Coolum Pty Ltd;
  4. the tenth defendant, Fairway Coal Pty Ltd;
  5. the eleventh defendant, Cart Provider Pty Ltd;
  6. the twelfth defendant, Coeur De Lion Investments Pty Ltd;
  7. the thirteenth defendant, Coeur De Lion Holdings Pty Ltd;
  8. the fourteenth defendant, Closeridge Pty Ltd; and
  9. the fifteenth defendant, Waratah Coal Pty Ltd.
  1. The plaintiffs and each of the two groups of companies have solicitors on the record and were separately represented before me by senior and junior counsel.  Mr Palmer represented himself.  
  2. Although I will return to the detail of the allegations advanced in the plaintiffs’ statement of claim[5] later in this judgment, it suffices presently to note that, amongst other things, the proceeding will involve the resolution of: 
  1. claims for indemnity for liabilities Queensland Nickel incurred in its capacity as trustee for or agent of the joint venturers while acting as the appointed general manager of the joint venture;
  2. debt claims and claims for moneys having received; 
  3. insolvent trading claims and breach of duty claims against Queensland Nickel’s directors, including its alleged shadow director, Mr Palmer; and
  4. claims challenging the validity of certain security instruments entered into on the eve of the voluntary administration of Queensland Nickel. 
  1. I have before me an application by the plaintiffs for freezing orders and ancillary orders against Mr Palmer and certain of the corporate defendants I have identified above.  The plaintiffs contend that there is a risk (indeed a likelihood) that the defendants’ assets will be dealt with in such a way that a prospective judgment in the plaintiffs’ favour will be wholly or partially unsatisfied.  
  2. The orders ultimately sought by the plaintiffs fall into essentially two alternatives.  First, the form of order which represents their primary case, namely an order which contains freezing orders and ancillary orders.  That form of order is annexure A to these reasons.[6]  Second, the form of order which represents their alternative case, which they would advance in the event that I was not persuaded to make freezing orders.  That form of order would not freeze assets but would require parties subject to it to notify the plaintiffs before undertaking transactions of a particular character.  That form of order is annexure B to these reasons.  

The course of the application

  1. The application before me was advanced by hearings which took place as follows:
  1. 23 August 2017:  This was an application for an interim freezing order.  It was resolved by my order of 23 August 2017.  Upon –
  1. undertakings being given by some of the defendants; and
  2. the usual undertaking as to damages being given by the special purpose liquidators and the Commonwealth of Australia,

the oral application was dismissed and a timetable was set for evidence and further submissions.

  1. 14 and 15 September 2017: These were the first two days of hearing of the plaintiffs’ application for interlocutory freezing orders.  After brief argument I rejected an application for an interim freezing order, and, upon similar undertakings as those given on 23 August 2017, the application was adjourned to 17 and 18 October 2017.
  2. 17, 18 and 19 October 2017: These were the next three days of the hearing of the plaintiffs’ application for interlocutory freezing orders.  On 17 October 2017, Mr Palmer advanced a recusal application in relation to my continued involvement in the application.  He also advanced an application for adjournment.  I refused both applications: see Parbery v QNI Metals Pty Ltd [2017] QSC 231.  The hearing proceeded but was not finalized, and, on 19 October 2017, the application was adjourned until 30 October 2017.
  3. 30 October 2017:  This was the (then) final day of the hearing of the plaintiffs’ application for interlocutory freezing orders.  Again, upon similar undertakings to those previously given, the plaintiffs’ application was adjourned to a date to be fixed for the delivery of judgment.  The undertakings so given are set out in annexure C to these reasons.  
  1. The fact that the application took place over the range of dates identified in the previous paragraph was a function of the availability of the court and of the parties and the need to permit the parties to examine and respond to the extent of the material which had been filed.
  1. The next steps were
  1. on 21 December 2017, by consent –
  1. I gave Mr Palmer, QNI Metals, QNI Resources and Mineralogy leave to re-open their case to adduce evidence of the successful outcome on 24 November 2017 of certain litigation in the Supreme Court of Western Australia and to adduce other evidence and permitted reliance on further submissions addressing that material; and
  1. I permitted the plaintiffs to file and serve written submissions on the question whether a notification injunction order should be made in the alternative to the order which had been formulated thus far; set a timetable for further submissions addressing that question; and listed 6 March 2018 as the day for receiving submissions on that question.
  1. 6 March 2018: This was the final day of the hearing of the plaintiffs’ application for interlocutory freezing orders. By that time, the form of undertaking offered by the Commonwealth had slightly changed as set out in a document filed on 2 March 2018.  The undertakings offered are set out in annexure C to these reasons. 
  1. The material before me is voluminous.  Indeed, even by the day of the application for an interim freezing order, I had received over 7,000 pages of evidentiary material.  So extensive was the material that, at the outset, I advised the parties that if they wanted me to take particular evidence into account they would need to take me to it specifically during argument or have it specifically footnoted in their written submissions.  The extent of the material did not improve after the first day.  By 6 March 2018, I had received over 13,000 pages of evidentiary material from the parties.  There was no index to that material.  

The considerations which inform the exercise of the jurisdiction

  1. I am invited to make the orders sought in exercise of the Court’s powers pursuant to Chapter 8, Part 2, Division 2 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR) or pursuant to the Court’s inherent jurisdiction.  I will consider the latter first.

The inherent jurisdiction

The juridical basis for the making of freezing orders

  1. The Supreme Court has an inherent power to make orders to protect the integrity of its processes once they have been set in motion.[7]  The power is to be exercised when necessary for the protection of those processes.[8] Keane and Nettle JJ put it this way in PT Bayan Resources TBK v BCBC Singapore Pte Ltd:[9]

When it is demonstrated to a superior court that there is a likelihood that its processes will be abused or frustrated, it is within the court’s power to make orders considered to be appropriate to prevent that from occurring.

  1. The Court may mould orders to protect the integrity of its processes according to the exigencies of the case and, because the schemes which a debtor subject to the Court’s processes might devise to frustrate their effective operation are legion, novelty of form is no objection to the validity of the order.[10]
  2. The inherent power to protect the integrity of court processes is regarded as providing the juridical foundation for a particular type of order, the form of which is no longer novel,[11]  namely a freezing order.  Typically, such an order “has the effect, subject to exceptions, of freezing the assets of a defendant or proposed defendant to ensure that a judgment of the court that a plaintiff might obtain will not be frustrated”.[12]  Such orders were previously known as Mareva orders or injunctions,[13] but, for the most part, I will use the current terminology.  The inherent jurisdiction would undoubtedly also permit the making of ancillary orders, similar to those which are so defined under the UCPR.[14] 
  3. Freezing orders are regarded as the paradigm example of orders formulated to protect the integrity of court process,[15] that protection being regarded as extending to preserving the efficacy of the execution which would lie against an actual or prospective judgment debtor.[16]  In a real sense, the purpose of granting such relief is to facilitate (or more properly to protect) the prospective Court processes of execution and enforcement.[17]
  4. In PT Bayan Resources TBK v BCBC Singapore Pte Ltd[18] Keane and Nettle JJ observed,  The power to make a freezing order is one which is to be exercised judicially, having regard to the considerations which inform the exercise of the power.
  1. Three broad considerations inform the judicial exercise of the inherent jurisdiction to make an order protective of the prospective Court processes of execution and enforcement.  I will address them under separate headings below.

The strength of the case

  1. The first relevant consideration is whether the plaintiff’s underlying cause of action has the requisite strength.
  2. McMurdo J observed in Fletcher v Fortress Credit Corporation (Australia) II Pty Ltd (2011) 82 ACSR 352, the requisite strength of the cause of action relied upon for a freezing order has been described variously in the authorities as either –
    1. the need for a “prima facie case”; or
    2. the need for a “good arguable case”.
  3. His Honour also observed that although the latter phrase is also used in UCPR r 260D, its use in the Mareva injunction authorities pre-dates the rule.  For example, in Ninemia Maritime Corporation v Trave GmbH & Co KG (the Niedersachsen) [1984] 1 All ER 398 where Mustill J said (at 404, emphasis added):

In these circumstances, I consider that the right course is to adopt the test of a good arguable case, in the sense of a case which is more than barely capable of serious argument, and yet not necessarily one which the judge believes to have a better than 50% chance of success.

  1. In Samimi v Seyedabadi [2013] NSWCA 279, McColl JA observed at [68] that “established principles developed in relation to Mareva injunctions require that the applicant for such an order, at least at first instance, demonstrate a good arguable case on a justiciable cause of action”.  Her Honour also referred with approval[19] to the observation by Mustill J in Ninemia that “the court should not be drawn into a premature trial of the action, rather than a preliminary appraisal of the plaintiff’s case”.[20]
  2. The Ninemia test is the test which should be applied.  It has been said that the threshold set by the Ninemia is a “very low one”: see Curtis v NID Pty Limited [2010] FCA 1072 per Edmonds J at [6].[21]

The risk to the integrity of the prospective Court processes of execution and enforcement

  1. The second relevant consideration is whether the relevant risk to the integrity of the Court’s processes exists.
  2. The particular type of risk to the integrity of the Court’s processes with which freezing orders are concerned is the risk posed to the prospective Court processes of execution and enforcement in respect of any judgment in the plaintiff’s favour.
  3. Accordingly, what is generally at issue is whether there is a danger that steps might be taken with the result that the Court’s execution and enforcement process would be frustrated, in the sense that any judgment of the court will be wholly or partly unsatisfied.  In Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319, Gleeson CJ (with whom Meagher JA and Rogers A-JA broadly agreed) said as follows (at 321–322, emphasis added):

[A] plaintiff will need to establish … a danger that, by reason of the defendant’s absconding, or of assets being removed from the jurisdiction or disposed of within the jurisdiction or otherwise dealt with in some fashion, the plaintiff, if he succeeds, will not be able to have his judgment satisfied.

  1. The latter observation (namely “or otherwise dealt with in some fashion”) is significant.  The exercise of the jurisdiction is not limited to the simplistic case in which evidence suggests there is a risk of a defendant absconding or taking assets offshore.
  2. It is not necessary for a plaintiff to establish on the balance of probabilities that the risk will actually come to pass.  In Patterson v BRT Engineering, Gleeson CJ observed (at 325) that “[i]t is not difficult to imagine situations in which justice and equity would require the granting of an injunction to prevent dissipation of assets pending the hearing of an action even though the risk of such dissipation may be assessed as being somewhat less probable than not”.  In the same case, Meagher JA observed (at 327, emphasis added):

What degree of proof is, then, required?  Different judges have decided it in different ways.  Without wishing to drown in a sea of semantics, I should have thought that the plaintiff is required to prove, on a balance of probabilities, that there is a real risk of the dissipation of assets.

  1. The defendants submitted that “real risk of dissipation” was an insufficient description of the required degree of proof.  They invited me to follow Candy v Holyoake [2017] EWCA Civ 92 per Gloster LJ (with whom Jackson LJ agreed) at [34], to conclude that, in every case (emphasis added):

There must be a real risk, judged objectively, that a future judgment would not be met because of an unjustifiable dissipation of assets. But it is not every risk of a judgment being satisfied which can justify freezing order relief. Solid evidence will be required to support a conclusion that relief is justified...

  1. I decline to take that course.  
  1. Expressing the matter in a way which required the plaintiff to establish a risk of an “unjustifiable” dealing with assets would invite an enquiry into the defendant’s purpose or motivation in embarking on an actual or apprehended dealing with assets, with a view to establishing a purpose that can be impugned as “unjustifiable”.  The weight of authority in Australia (including authority binding on me[22]) supports the view that a plaintiff seeking a freezing order does not have to show that the purpose of the defendant’s conduct, occurring or apprehended, is to prevent recovery of the amount of any judgment which might be obtained in the plaintiff’s action.  Rather, it will suffice if the plaintiff can demonstrate that that would be the effect of the conduct: see Glenwood Management Group Pty Ltd v Mayo [1991] 2 VR 49 per Young CJ at 53; Northcorp Limited v Allman Properties (Australia) Pty Ltd[1994] 2 Qd R 405 per Pincus JA, Ambrose and White JJ at 407; Hayden v Teplitzky (1997) 154 ALR 497 per Lindgren J at 505-507; Consolidated Constructions Pty Ltd v Bellenville Pty Ltd [2002] FCA 1513 per Carr J at [17]-[26]; Victoria University of Technology v Wilson [2003] VSC 299 per Redlich J at [24]; BGC Contracting Pty Ltd v WA Construction Hire Pty Ltd [2010] WASC 25 per Le Miere J at [11]-[14]; Perdaman Chemicals & Fertilisers Pty Ltd v Griffin Coal Mining Co Pty Ltd [2011] WASC 188 per Beech J at [135].  
  1. It is appropriate to make some (non-exhaustive) observations as to the way in which a plaintiff may go about demonstrating the existence of the relevant risk.
  2. First, although it is not essential to prove that a defendant’s purpose or intention is to frustrate any potential judgment against the defendant, that is not to say that the question of purpose or intention is irrelevant.  If a plaintiff adduced evidence which shed light on the likely actual intentions of a defendant, that evidence might well prove to be extremely relevant.  In his text Freezing and Search Orders,[23] Biscoe observes (at [6.19]):

However, if there is evidence of a positive intention to frustrate a judgment, that should almost certainly lead the court to exercise its discretion to grant a freezing order.  Thus the respondent’s own boasts were held sufficient evidence of the necessary danger in A/S D/S Svendborg v Wansa [1997] 2 Lloyd’s Rep 183 at 1889; and in Ausbro Forex Pty Ltd v Mare (1986) 4 NSWLR 419 evidence of a threat by the defendant to close up his companies and take his money and himself overseas led Young J to grant a Mareva order.

  1. Second, mere assertion of the existence of the risk is not sufficient: Frigo v Culhaci [1998] NSWCA 88 per Mason P, Sheller JA and Sheppard AJA at 8 and Severstal Export GmbH v Bhushan Steel Ltd [2013] NSWCA 102 per Bathurst CJ (with whom Beazley P and Barrett JA agreed) at [57].  There must be solid evidence which justifies the conclusion: see Ninemia per Mustill J at 406, and LPH Developments Pty Ltd v Jameson Moore Pty Ltd [No 3] [2017] WASC 284 per Banks-Smith J at [30].
  2. Third, the evidence which establishes the underlying strength of the plaintiff’s case may have a bearing on the assessment of the risk which exists to the integrity of the Court processes.  Where the underlying case involves allegations of serious dishonesty, they may be relied on in considering the second element: cf Patterson v BRT Engineering per Gleeson CJ at 325.  However there is no reason in principle to confine this proposition to cases of serious dishonesty: see RHG Mortgage Corporation Ltd v Morgan Kelly [2016] WASC 169 per Pritchard J at [38].  
  3. Finally, the conclusion that there is a real risk of steps being taken which would have the effect of frustrating the prospective Court processes of execution and enforcement in respect of any judgment in the plaintiff’s favour is often, perhaps even usually,[24] a matter of inference rather than direct proof.  If so, there must be facts from which a prudent, sensible commercial person could properly infer the existence of the relevant risk of frustration: see Third Chandris Shipping Corporation v Unimarine SA [1979] QB 645 per Lawton LJ at 671, referred to with approval in Hua Wang Bank Berhad v Deputy Commissioner of Taxation [2010] FCAFC 140 per Lander, Middleton and Nicholas JJ at [21]-[23] and in Severstal Export GmbH v Bhushan Steel Ltd [2013] NSWCA 102 per Bathurst CJ (with whom Beazley P and Barrett JA agreed) at [59].

The interests of justice

  1. The final relevant consideration is whether it is in the interests of justice that the power be exercised.
  2. The first matter which must be emphasised in any discussion of the interests of justice in this area of discourse is that the onus of proof is on the party seeking the order and, importantly, high authority establishes that the jurisdiction to make freezing orders is one which must be exercised with a high degree of caution and with proper consideration for the nature of the impact on the persons affected.  The leading authority in this regard is the High Court decision of Cardile v LED Builders Pty Ltd, in which the judgment of the plurality stated (emphasis added):[25]

… It has been truly said that a Mareva order does not deprive the party subject to its restraint either of title to or possession of the assets to which the order extends.  Nor does the order improve the position of claimants in an insolvency of the judgment debtor.  It operates in personam and not as an attachment.  Nevertheless, those statements should not obscure the reality that the granting of a Mareva order is bound to have a significant impact on the property of the person against whom it is made: in a practical sense it operates as a very tight “negative pledge” species of security over property, to which the contempt sanction is attached.  It requires a high degree of caution on the part of a court invited to make an order of that kind.  An order lightly or wrongly granted may have a capacity to impair or restrict commerce just as much as one appropriately granted may facilitate and ensure its due conduct.

We agree with the tenor of what was said with particular respect to Mareva relief before judgment by the Court of Appeal of New South Wales (Mason P, Sheller JA, Sheppard A-JA) in Frigo v Culhaci:

“[A Mareva order] is a drastic remedy which should not be granted lightly....

A [Mareva order] is an interlocutory order which, if granted, imposes a severe restriction upon a defendant’s right to deal with his or her assets.  It is granted at the suit of a plaintiff whose status as a creditor is in dispute and who need not be a secured creditor.  Its purpose is to preserve the status quo, not to change it in favour of the plaintiff.  The function of the order is not to ‘provide a plaintiff with security in advance for a judgment that he hopes to obtain and that he fears might not be satisfied; nor is it to improve the position of the plaintiff in the event of the defendant's insolvency’ ... Many authorities attest to the care with which courts are required to scrutinise applications for [Mareva orders]…”

  1. There are other reasons for caution.  First, there may be difficulties associated with the quantification and recovery of damages pursuant to the usual undertaking as to damages if it should turn out that the order should not have been granted.[26]  Second, difficulties arise in relation to the identification of the events which will trigger the dissolution of the order or the entitlement to damages.[27]
  2. Discretionary considerations must be carefully weighed before an order is made.[28]  Such considerations may include:
    1. the degree of expedition with which the plaintiffs have proceeded;
    2. whether an undertaking to ensure the due expedition of the proceeding is offered;
    3. the availability of alternative proceedings or remedies; 
    4. the potential damaging effect which the order might have on the defendant’s reputation or business; and
    5. the effect of the proposed orders on innocent third parties.
  3. It may also be noted that, whilst the strength of a plaintiff’s underlying case may ultimately be fully litigated at a trial, the question of whether there ever actually was a danger to the Court’s processes as contended may only ever get explored in the context of the interlocutory application, with all of the disadvantages which that entails.[29]

Summary of the matters to be proved to justify an exercise of the inherent jurisdiction to make a freezing order

  1. There are three broad considerations which inform the exercise of the inherent jurisdiction to make a freezing order.  The same considerations would necessarily inform the exercise of the inherent jurisdiction to make an ancillary order. 
  2. First, whether the plaintiff has a good arguable case, in the sense of a case which is more than barely capable of serious argument, and yet not necessarily one which the Court believes to have a better than 50% chance of success.
  3. Second, whether there is a real risk of steps being taken which would have the effect of frustrating the prospective Court processes of execution and enforcement in respect of any judgment in the plaintiff’s favour.
  4. Third, whether it is in the interests of justice that the power be exercised, in particular bearing in mind that the jurisdiction must be exercised with a high degree of caution and with proper consideration for the nature of the impact on the persons affected. 
  5. It should be emphasised that the judicial exercise of the inherent jurisdiction to make freezing or ancillary orders does not involve merely a mechanical exercise of sequentially inquiring whether the plaintiffs have established each of the three matters which I have identified.  The strength of the plaintiffs’ case, the danger of frustration of a prospective judgment, the interests of justice and any other relevant discretionary factors are all considered together in the exercise of  the discretion: see Perdaman Chemicals & Fertilisers Pty Ltd v Griffin Coal Mining Co Pty Ltd [2011] WASC 188 per Beech J at [142] (citing Perth Mint v Mickelberg (No 2) [1985] WAR 117 per Burt CJ at 119; Glenwood Management Group Pty Ltd v Mayo [1991] 2 VR 49 per Young CJ at 54-55) and see also RHG Mortgage Corporation Ltd v Morgan Kelly [2016] WASC 169 per Pritchard J at [24].  

Jurisdiction under the UCPR

  1. In 2004, the Council of Chief Justices of Australia and New Zealand appointed a committee of judges representing the Federal Court of Australia, all State Supreme Courts and the Family Court of Australia to investigate and, if thought fit, make recommendations for the harmonization of court rules, practice notes and precedents relating to Mareva orders and Anton Piller orders.
  2. The fruits of the committee’s work included harmonized rules, harmonized practice directions and model orders which were adopted in almost identical form in the various States and Territories and in New Zealand.  In Queensland, the provisions of Chapter 8 Part 2 Division 2 of the UCPR were inserted in 2007.[30] 
  3. Notably, the continued undiminished existence of the Court’s inherent jurisdiction to make freezing or ancillary orders is acknowledged by r 260E.
  4. The relevant[31] provisions of the Uniform Civil Procedure Rules are these:

260 Definitions for div 2 In this division— ancillary order has the meaning given by rule 260B.

another court means a court outside Australia or a court in Australia other than the court.

applicant means a person who applies for a freezing order or an ancillary order.

freezing order has the meaning given by rule 260A. judgment includes an order. respondent means a person against whom a freezing order or an ancillary order is sought or made.

260A Freezing order

  1. The court may make an order (a freezing order) for the purpose of preventing the frustration or inhibition of the court’s process by seeking to meet a danger that a judgment or prospective judgment of the court will be wholly or partly unsatisfied.  
  2. A freezing order may be an order restraining a respondent from removing any assets located in or outside Australia or from disposing of, dealing with, or diminishing the value of, those assets.
260B Ancillary order
  1. The court may make any order (an ancillary order) ancillary to a freezing order or prospective freezing order it considers appropriate.
  2. Without limiting subrule (1), an ancillary order may be made for either or both of the following purposes— 
    1. obtaining information about assets relevant to the freezing order or prospective freezing order;
    2. deciding whether the freezing order should be made.  

260C Respondent need not be party to proceeding

A freezing order or an ancillary order may be granted whether or not the respondent is a party to an existing proceeding.

260D Order against … or prospective judgment debtor or third party

  1. ….
  2. This rule also applies if an applicant has a good arguable case on an accrued or prospective cause of action that is justiciable in—
    1. the court; or
    2. … (i) …; and (ii)  ….
  3. The court may make a freezing order or an ancillary order or both against a … prospective judgment debtor if the court is satisfied, having regard to all the circumstances, that there is a danger that a … prospective judgment will be wholly or partly unsatisfied because— (a)                the … prospective judgment debtor or another person might abscond; or
  1. the assets of the … prospective judgment debtor or another person might be—
    1. removed from Australia or from a place inside or outside Australia; or
    2. disposed of, dealt with or diminished in value.
  1. The court may make a freezing order or an ancillary order or both against … a third party if the court is satisfied, having regard to all the circumstances, that—
    1. there is a danger that a … prospective judgment will be wholly or partly unsatisfied because—
      1. the third party holds or is using, or has exercised or is exercising, a power of disposition over assets (including claims and expectancies) of the … prospective judgment debtor; or
      2. the third party is in possession of, or in a position of control or influence concerning, assets (including claims and expectancies) of the … prospective judgment debtor; or
    2. a process in the court is or may ultimately be available to the applicant as a result of a judgment or prospective judgment, under which process the third party may be obliged to disgorge assets or contribute toward satisfying the judgment or prospective judgment.
  2. This rule does not affect the power of the court to make a freezing order or ancillary order if the court considers it is in the interests of justice to do so.

260E Jurisdiction

This division does not diminish the inherent, implied or statutory jurisdiction of the court to make a freezing order or ancillary order.

Freezing orders under the UCPR

  1. Rule 260A confers on the Court a wide jurisdiction to make freezing orders.  A freezing order is an order made for the purpose of preventing the frustration or inhibition of the court’s process by seeking to meet a danger that a judgment or prospective judgment of the court will be wholly or partly unsatisfied.  
  2. The type of order which can be made pursuant to r 260A is not specified.  The order is called a freezing order, but the definition of that term is circular.  Obviously orders of the nature of those which have been made in the exercise of the inherent jurisdiction may be made and such orders appear in the pro-forma freezing order which is an appendix to Practice Direction 1 of 2007.  But the wording of the rule admits of no particular limit other than the order be an appropriate response to the specified purpose.  I could see no reason, for example, why it would not admit of making an order in “notification injunction” form, for example:
    1. the injunction considered in Candy v Holyoake [2017] EWCA Civ 92 in which the restraint was “from disposing, dealing or otherwise engaging in transactions with their assets in the sum of or to the value of more than £1m without first giving the Claimants’ solicitors 7 days advance notice in writing”;[32] or 
    2. the more specific orders considered in Lakatamia Shipping Co Ltd v Su [2014] EWCA Civ 636 in which the restraint was that a particular nominated asset “may not be disposed of, charged or otherwise dealt with by [the respondent] without 14 days’ notice being given to the solicitors for the claimant”.
  3. Rule 260A does not specify any particular matters of which the Court must be satisfied before exercising the jurisdiction.  However, it is implicit in the text of r 260A that the Court would have to be satisfied that it was appropriate that the order be made for the purpose specified in r 260A(1).  And it is implicit in the nature of the jurisdiction itself that the power be exercised only if the Court considers it is in the interests of justice to do so.  
  4. Some judges have expressed the view that the considerations identified in r 260D are the considerations of which the Court must be satisfied before exercising the jurisdiction conferred on rr 260A and 260B.[33]  The issue may not have any practical operation in most cases, however for these three reasons, I do not think that it is appropriate to construe the link with r 260D as anything more than illustrative:
    1. The terms of r 260A, r 260B and r 260D do not set out that link.  To the contrary, each reads as a separate grant of power.
    2. The terms of r 260D(5) are antithetical to the notion that r 260D would, by force of its terms, constrain (or even define) the power granted by rr 260A or 260B.
    3. The jurisdiction to make ancillary orders granted by r 260B includes the standalone jurisdiction of making an order ancillary to a prospective freezing order and, quite apart from the terms of r 260D(5), it would not make sense to require an applicant for such an order to prove the same things as would need to be established for an actual freezing order.  I will return to the question of this particular jurisdiction.
  5. What then are the matters of which, on the proper construction of r 260A, a Court must be satisfied before exercising the jurisdiction conferred by r 260A?  
  6. I think two points can be made.
  7. First, a narrow or technical approach to r 260A is not appropriate.  In Newcastle City Council v Caverstock Group Pty Ltd [2008] NSWCA 249 per Spigelman CJ (with whom Bell JA and Handley AJA agreed) at [43], in a passage also cited with approval by McColl JA in Samimi v Seyedabadi at [61]:

The [NSW rule which was the equivalent of r 260A] is a formulation of the Mareva injunction jurisprudence, which is a comparatively recent development of the common law, based upon the power of a court to prevent the frustration of its process and to ensure that its judgments are not without value.  I accept that a narrow or technical approach to such a power is not appropriate.

  1. Second, it would be wrong to regard the jurisdiction to be completely unfettered.  The language of the rule suggests at least the two considerations mentioned at [56] above, namely the Court would have to be satisfied that (1) it was appropriate that the order be made for the purpose specified in r 260A(1); and (2) it was in the interests of justice to make the order.  Further, since the Mareva jurisprudence is the context within which r 260A (and the other provisions in the Chapter 8, Part 2, Division 2 of the UCPR) was formulated, then it must be appropriate to have regard to that jurisprudence.  The language of the rule certainly permits of that approach.  Accordingly, notwithstanding the fact that r 260A does not specify any particular matters of which the Court must be satisfied before exercising the jurisdiction, it is appropriate to conclude that the Court ought to have regard to the three considerations which are relevant to the exercise of the inherent jurisdiction to make such orders.[34]  
  2. The result is that I think that there is one overall question governing the exercise of power under r 260A, namely is a freezing order necessary for the purpose of preventing frustration or inhibition of the Court’s process by seeking to meet a danger that a judgment or prospective judgment of the Court will be wholly or partly unsatisfied.  In seeking to answer that question the Court should address the three considerations which have been identified as relevant to the grant of freezing orders in the exercise of the inherent jurisdiction.  I should also remark that r 260A is not worded in a way which would suggest any departure from the inherent jurisdiction’s focus on the effect rather than the purpose of the defendant's conduct, occurring or apprehended.
  3. What then of r 260D?  I make the following observations:
    1. Rule 260D confers on the Court a power to make freezing orders and ancillary orders which is specifically constrained.  
    2. Putting to one side orders sought in aid of judgments from other courts, or against third parties, the constraints are (1) the applicant has the good arguable case referred to in  r 260D(2), and (2) the court is satisfied, having regard to all the circumstances, of the matters referred to in r 260D(3).  Those matters cover the same ground as the first two considerations which are relevant in the exercise of the inherent jurisdiction.  No mention is made of the third (interests of justice) consideration, but it could hardly be thought that the discretion conferred by the rule was intended to be exercised without having regard to that subject matter.
    3. It is notable that r 260D(3)(b) is also not worded in a way which would suggest any departure from the inherent jurisdiction’s focus on the effect rather than the purpose of the defendant's conduct, occurring or apprehended.

Ancillary orders under the UCPR

  1. Rule 260B confers on the Court a wide jurisdiction to make ancillary orders.  
  2. It is appropriate to consider what is meant by “ancillary” in the context of the phrase “order ancillary to a freezing order or prospective freezing order”.  I make the following observations:
    1. The word is used in an adjectival sense.
    2. The Macquarie Dictionary definition defines the word, relevantly as “accessory; auxiliary”, with “auxiliary” being defined as “giving support; helping; aiding; assisting”.
    3. The Oxford English Dictionary defines the word, relevantly, as “subservient, subordinate, ministering (to).”
    4. I think the Macquarie Dictionary definition is more apposite.  The result is that an order which is ancillary to a freezing order or a prospective freezing order is an order which gives support, helps, aids or assists a freezing order or a prospective freezing order.
  3. The jurisdiction to make an order which is ancillary to a freezing order is easy to understand.  The cases are replete with examples of orders which would be so regarded.  Biscoe cites the following:[35]
    1. a disclosure of assets order;
    2. an order for the cross-examination of a respondent about asset disclosure;
    3. an order requiring the delivery up of specified assets; 
    4. an order that a respondent direct its bank to disclose information;
    5. an order that a respondent pay money into court or a designated account;
    6. an order restraining a respondent from leaving the jurisdiction;
    7. an order appointing a receiver to the respondent’s assets;
    8. an order for the transfer of assets from one foreign jurisdiction to another;
    9. a freestanding disclosure order along the lines of that mentioned in Norwich Pharmacal Co v Customs & Excise Commissioners [1974] AC 133;
    10. a search order.
  4. The jurisdiction to make an order ancillary to a “prospective” freezing order does not appear to have a clear analogue within the cases in which orders have been made in exercise of the inherent jurisdiction.  
  5. It is appropriate to consider what is meant by a “prospective” freezing order.  I make the following observations:
    1. The word is used in an adjectival sense.
    2. The Macquarie Dictionary defines the term, relevantly as “1. of or in the future. 2.potential; likely; expected”.
  1. The Oxford English Dictionary defines:
    1. the term “prospective” as, relevantly – 

“5. Expected or expecting to be (the object or thing specified) in the future; that is in prospect; proposed, likely, potential. (Now the usual sense.)”. 

  1. something as being “in prospect”, when it is “within the bounds of expectation; expected, or to be expected; within view”.
  1. Having regard to these definitions, I think the reference to prospective freezing order, should be taken to be a reference to a freezing order which is “in prospect”, in the sense that it is within the bounds of expectation that it will be made in the future.  In other words the jurisdiction to make an “order ancillary to a … prospective freezing order” will exist when it is within the bounds of reasonable expectation[36] that a freezing order will be made in the future.  This suggests the need for at least some examination of the prospects of a freezing order being made in the future.  
  1. I note that r 260B does not specify any particular matters of which the Court must be satisfied before exercising the power to make orders ancillary to a prospective freezing order.  However, it is implicit in the text of r 260B that the Court would have to be satisfied that it was “appropriate” that the order be made.  Obviously enough, an applicant would not have to prove that a freezing order would inevitably be granted on the future occasion, but the language suggests a broad discretion to be exercised judicially and to which many considerations might be relevant, including those which are regarded to be relevant in relation to the exercise of the inherent jurisdiction, namely the existence of a good arguable case, evidence of the relevant risk, and the interests of justice. 
  2. There is not a great deal of authority touching upon applications for orders on the basis that they are ancillary to a prospective freezing order.  However, such authority as there is supports the view which I have expressed that there must be some examination at the time the ancillary order is sought of the sufficiency of the prospects that a freezing order will be made in the future.  Thus:
    1. In Perdaman Chemicals and Fertilisers Pty Ltd v the Griffin Coal Mining Company Pty Ltd [2011] WASC 188, Beech J wrote (emphasis added):

[151] The order sought by Perdaman might be characterised as an ancillary order to preserve the position to enable Perdaman to apply for a freezing order, if so advised, following receipt of notice from Griffin pursuant to the injunction.  Insofar as it is characterised in this way, it will be relevant to assess, in this application, the prospects of Perdaman obtaining a freezing order at that later time, to take into account whether those prospects are sufficient to warrant the imposition of the notice requirement on Griffin.  I will return to this point.

  1. I have found that, apart from under cl 2.3 of the Negative Pledge Deed, the evidence does not establish a real threat or danger of execution by Griffin of an ICICI Charge.  The only threat or danger of execution of an ICICI Charge is under cl 2.3.
  2. I have identified the likely prejudice to Griffin by the grant of an injunction restraining the execution of an ICICI Charge under cl 2.3 without notice to Perdaman.
  3. The injunction sought restrains execution of a charge (of a particular kind) without notice. The purpose of requiring notice before execution is to enable Perdaman to apply for a substantive freezing order in the form of an injunction restraining the execution of an ICICI Charge. The question arises whether, on the evidence before me, there is sufficient prospect of a substantive freezing order being made at the second stage (after notice to Perdaman pursuant to the injunction sought in this application), restraining execution by Griffin of an ICICI Charge pursuant to cl 2.3, to justify the imposition of the notice requirement on Griffin.
  4. Perdaman submits that the question of whether such an injunction might be granted at the second stage should be left to be assessed at the time of any application, on the basis of all the facts and circumstances then revealed.  There is some force in this argument.  However, on balance, I am not persuaded by it. In my view, there must be a sufficient foundation for the prospect of a substantive freezing order at the second stage to justify the imposition of the injunction to restrain execution without notice. In the circumstances of this case, unless there is some reasonable prospect of a substantive freezing order being made at the second stage, I think it would be inappropriate to require notice before execution of a relevant charge. What is a sufficient foundation, and what is a reasonable prospect, must take into account the limited extent of the prejudice to Griffin that I have found in the preceding section of these reasons. All the circumstances are to be weighed in the exercise of the discretion.
  5. For the reasons that follow, subject to one qualification, I am unable to identify circumstances in which there is any sufficient or reasonable prospect that I would, at the second stage, restrain execution, pursuant to cl 2.3, of an ICICI Charge.
  1. In BGC Australia Pty Ltd v Minspec Pty Ltd [2015] WASC 134, Mitchell J observed:

[11] As a freezing order is not contemplated at this stage, I do not need to determine whether the criteria for making a freezing order are satisfied.  It is sufficient that there is a proper basis for apprehending that there might be grounds for making such an application in the future.

  1. In JSC Mezhdunarodniy Promyshlenniy Bank v Pugachev [2015] EWCA Civ 139 at [50][52], Lewison LJ approved a suggestion in an earlier case that what was requisite was that the applicant establish at least that there were “credible grounds for making [the prospective freezing order application] if so advised”.

The proper approach to the evaluation of the evidence

  1. My task is to have regard to all the evidence before me and to form a view on whether the plaintiffs have sufficiently discharged their burden on the matters requisite to the making of orders sought – bearing in mind the degree of caution that I must exercise – as to justify the making of the orders. 
  2. The application before me is an application for alternative forms of interlocutory orders.[37]  Its determination will not finally dispose of the rights of the parties.  I am not making findings of fact at a trial or other hearing in which final relief is sought.  In Skyworks NSW Pty Ltd v 32 Drummoyne Pty Ltd [2017] NSWSC 343, McDougall J described the task as involving a “qualitative evaluation” of the evidence.  He wrote (at [24], emphasis added):

The Court is to undertake a qualitative evaluation of all the evidence that is available, to see if there is a sufficiently serious risk of frustration to justify the making of a freezing order. Further, the two considerations [namely, (1) whether there is a good arguable case and (2) whether there is a real risk of judgment frustration] should be analysed together (as each may impact on the other), and with an appreciation of both the underlying purpose of the rule and the relative risks of granting or withholding relief – the customary discretionary calculus.

  1. It follows that an application for a freezing order is not, in general, an occasion to determine contested questions of fact and conflicts in affidavit evidence.  Rather, the approach which should be taken to the process of the qualitative evaluation of the evidence is analogous to the approach to be taken in applications for interlocutory injunctions.  As to that, see SDW2 Pty Ltd v JLF Corporation Pty Ltd [2017] QSC 1 in which I observed (at [56], emphasis added):

[W]hen evaluating whether the applicant has demonstrated a prima face case, it is a trite proposition that an application for an interlocutory injunction is not the trial of the cause of action.  Such an application is not, generally speaking, the occasion to resolve disputed questions of fact.  Especially is that so where, as is the case with most applications for interlocutory injunctions, and as was the case here, the application is argued on affidavit material with no cross-examination of any deponents.  I agree with the following observations by Chaney J in Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 12) [2016] WASC 335 at [15]:

While the court takes into account the apparent strength of the plaintiff's case, the court does not undertake a preliminary trial or attempt a forecast of the ultimate result.  Moreover, an application for interlocutory injunction is not an occasion to determine contested questions of fact and conflicts in affidavit evidence. In a passage recently cited with approval by the Full Federal Court in Warner-Lambert Company LLC v Apotex Pty Ltd [2014] FCAFC 59 [72], Mahoney JA (with whom Glass & Samuels JJA agreed) made observations in Shercliff v Engadine Acceptance Corporation Pty Ltd [1978] 1 NSWLR 729 about the use to which the defendant's evidence can be put in determining an application for an interlocutory injunction:

But there are limitations upon the extent to which a judge is to take into account such evidence as the defendant may tender upon an interlocutory application. It is not his function to conduct a preliminary trial of the action, nor is it, in general, to resolve the conflict between the parties’ evidence, and grant or refuse the application upon the basis of such findings. Where there is conflict of evidence, the use which may be made of the defendant’s evidence in determining whether the plaintiff has made out a prima facie case is a limited one.  For example, the plaintiff’s evidence, considered alone, may be such a prima facie case as would be acceptable if submitted to a jury in a trial.  But, when considered in the light of the defendant’s evidence, it may be explained away so as no longer to be such.  Or the defendant’s evidence, when juxtaposed to that of the plaintiff may show that there is in reality no such case, no real question between the parties, appropriate to warrant preserving the status quo until the hearing (734).

  1. Although the parties to the present application did have the benefit of cross-examination of some witnesses, it nevertheless remained the fact that they did not have the benefit of the full cross-examination, or the capacity to deploy all other relevant evidence, that they would have had at a trial.  Neither the fact that there was some cross-examination, nor the comparative abundance of material before me, alters the applicability to my present task of the observations made in Shercliff; Warner-Lambert; Mineralogy; SDW2 and Skyworks NSW.  The approach which I will take to evaluating the evidence (and, in particular, the way in which I should take into account evidence tendered on behalf of the defendants) is that which I have identified. 
  2. Also, it would not follow that, on an application such as the present, I should accept the truth of a statement in an affidavit before me, simply because it was not the subject of crossexamination.  The defendants in particular invited me to take that course.  So far as the defendants’ evidence is concerned, the first answer to that submission is the point I have just made concerning the use to be made of defendants’ evidence on an application such as this.  But there is another point to be made – equally applicable to the plaintiffs’ evidence as to that of the defendants – namely that made in a different context by Lord Diplock[38] in Eng Mee Yong v Letchumanan [1980] AC 331 at 341 – that in performing my task, I am not “bound to accept uncritically … every statement on an affidavit however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself it may be”.  In Taylor v Diamand & Zikos Developments Pty Ltd (1997) 6 NTLR 164, Martin CJ, Angel and Priestley JJ put it this way (at 170, emphasis added):

Although the court’s function is not to make findings of fact, nevertheless it is to take into account the apparent strength or weakness of the respective cases in order to decide whether a plaintiff’s principal claim for monetary relief is sufficiently strong on the merits. So too, when considering whether a plaintiff is sufficiently at risk to warrant relief by way of Mareva injunction. The task includes assessing the apparent plausibility of statements in affidavits and, if necessary and warranted, drawing adverse inferences. The court is entitled to look at the credibility of affidavit evidence just as on an application for summary judgment: see Eng Mee Yong v Letchumanan [1980] AC 331 at 341; National Westminster Bank v Daniel [1995] 1 WLR 1453. The function of the judge hearing an application for Mareva relief upon affidavits is to make a realistic assessment of the merits.

Do the plaintiffs have a good arguable case?

Introduction

  1. Mr Palmer submitted that the plaintiffs had not established a good arguable case against him.  I reject Mr Palmer’s submission.  My evaluation of the evidence before me leads me to conclude that the plaintiffs do have a good arguable case for such relief against Mr Palmer as would justify the amounts sought to be made the subject of freezing orders against him.  Indeed, some parts of that case are matters in respect of which I am prepared to say the plaintiffs’ case is a strong arguable case.  I explain my reasons for reaching the various evaluations below.  
  2. The corporate defendants – all of whom were represented by senior counsel – did not dispute the proposition that the plaintiffs had established a good arguable case against the corporations against whom freezing orders were sought, for remedies which would justify the amounts sought to be made the subject of freezing orders.  Nevertheless, and so as to understand the concession made, after I have dealt with the case against Mr Palmer, I will identify briefly under appropriate headings the nature of the case which has been advanced against each of the corporate defendants and on which the plaintiffs rely so as to justify the amounts sought to be made the subject of freezing orders.
  3. As will appear, the evidence which establishes the underlying strength of the plaintiffs’ case is also relied upon by the plaintiffs as having a bearing on the assessment of the risk which exists to the integrity of the Court processes.  

The Joint Venture Agreement

  1. In about 1971, a nickel mining and refining project was established in North Queensland pursuant to the Queensland Nickel Agreement Act 1970 (Qld) and an agreement executed by the State of Queensland and others. 
  2. By 17 September 1992, the project had become owned and operated by two joint venturing companies, whose relationship inter se was governed by the terms of a deed bearing that date (the Joint Venture Agreement).  That agreement also recorded the appointment of Queensland Nickel as the “General Manager” of the Joint Venture and expressed the parties’ agreement on a number of matters concerning the role of the General Manager and its relationship with the Joint Venturers.  The role of General Manager was Queensland Nickel’s sole concern because it was obliged not to carry on or be interested in any other business or activity or other operation, whether directly or indirectly: cl 5.5(b).
  3. Interests in the Joint Venture changed hands from time to time, but as from 31 January 1995 the interests in the project had become held in the manner they now are, namely by QNI Resources and QNI Metals as the two Joint Venturers, holding as to 80% and 20% respectively.  The Joint Venture Agreement continued to govern the relationship inter se of QNI Resources and QNI Metals as the Joint Venturers and also the role of Queensland Nickel as General Manager and its relationship with the Joint Venturers.  Each of the Joint Venturers and Queensland Nickel was a party to the Joint Venture Agreement.
  4. There was also an Administration Agreement bearing the same date as the Joint Venture Agreement, the function of which was to govern the way in which Queensland Nickel as the General Manager provided Management Services to the Joint Venturers.  
  5. Amongst other things, the Administration Agreement obliged Queensland Nickel to provide Management Services, a term defined to include its obligations set out in the Administration Agreement –
    1. to manage the debtors of the Joint Venturers deriving from the sale of nickel products, including by collecting payment of those debts and crediting payment to such bank account of the Joint Venturer as the Joint Venturer might direct; and 
    2. the preparation of annual consolidated profit and loss statements and cash flow budgets for each Joint Venturer, including estimates of –
      1. the costs and expenses payable by the Joint Venturer to Queensland Nickel for acting as General Manager and for providing management services;
      2. the capital expenditure and other joint venture expenses payable by the Joint Venturer; and
      3. the proceeds of sale of the Joint Venturer’s products.
  6. The Administration Agreement also provided that all costs, liabilities and expenses properly incurred by Queensland Nickel in the performance of its obligations under the agreement would be paid or reimbursed by each Joint Venturer in proportion with its interest in the Joint Venture and that all such costs, liabilities and expenses would be deemed to be Joint Venture Expenses and would accordingly be subject to the funding call process provided for by cl 6.4 of the Joint Venture Agreement: cl 6.
  7. The salient features of the Joint Venture Agreement included those set out in the following paragraphs. 
  8. The Joint Venturers agreed to continue the Joint Venture which had been formed for the purposes of mining, developing and exploiting the nickel mine and related mining, processing, research and marketing activities: cl 2.1.  The Joint Venture would be limited to those purposes unless both Joint Venturers otherwise agreed in writing: cl 2.3.  Those purposes would affect Queensland Nickel as General Manager because it was obliged to act subject to and consistently with the Joint Venture Agreement (cl. 5.2(a)) and it was obliged not to use Joint Venture Property for any other purpose than the purpose of the Joint Venture (cl. 3.1).
  1. Queensland Nickel as General Manager was in charge of and responsible for (amongst other things, emphasis added):
    1. the overall management, operation and administration of the Joint Venture: cl 5.2(a)(i);
  1. managing the funds of the Joint Venture: cl 5.2(a)(ii);
  2. maintaining the accounting records of the Joint Venture: cl 5.2(a)(iii); 
  3. preparing and maintaining complete books and accounting records describing each Joint Venturer’s financial involvement in the Joint Venture: cll 5.2(a)(iii) and 5.2(b)(xvii); 
  4. the management and control of the Joint Venture Property (a term which was defined, to which I will shortly turn) and all operations under the Joint Venture Agreement as agent for and for the account of the Joint Venturers: cl 5.2(a)(vii); 
  5. the performance of “Management Services” as described in the Administration Agreement: cl 5.2(a); and
  6. the doing of all other acts and things as may be necessary or advisable for efficient and economic operation of the Joint Venture: cl 5.2(b)(xxiv).
  1. As to the Joint Venture Property (the management and control of which was the responsibility of Queensland Nickel as just recorded):
    1. Clause 3.1 of the Joint Venture Agreement recorded the agreement of the Joint Venturers (and Queensland Nickel) that (emphasis added) – 
All the Joint Venture Property shall at all times be made available for the purpose and duration of the Joint Ventureand during such duration shall not be used for any other purpose. …
  1. The expression “Joint Venture Property” is comprehensively defined in cl 1.1 of the Joint Venture Agreement to include relevant real property and mining titles, relevant technology and know-how and “all other rights, titles, interests, claims and benefits held or acquired from time to time, directly or indirectly, for the purposes of the Joint Venture”.  However, products produced at the nickel refinery did not fall within the definition of Joint Venture Property: cll 3.1 and 3.3 and the definition of “Products” in cl 1.1.  
  2. All the “Joint Venture Property” and, subject to cl 3.3, all Products, were beneficially owned by the two Joint Venturers as tenants in common in proportion to their participating interest in the Joint Venture and all liabilities of the Joint Venture were to be severally borne by the two Joint Venturers in that proportion: cl 3.1.  By cl 3.3 “Each of the Joint Venturers shall have the right to, and shall, receive in kind its Subject Products on production thereof at the Treatment Facilities and separately dispose of or market such share.”
  3. Notwithstanding the statement concerning beneficial ownership of Joint Venture Property, the Joint Venture Agreement expressly contemplated that (with the exception of real property and mining titles) legal title to any Joint Venture Property could, for purposes of convenience and at the request of the Joint Venturers, be held solely in the name of Queensland Nickel: cl 3.2.  If that occurred, the Joint Venture Property would be held “for the use and benefit of the Joint Venturers in proportion to their Participating Interests”.  Thus the possibility that Queensland Nickel might hold Joint Venture Property on trust was obviously contemplated.
  4. The Joint Venture Agreement imposed restrictions on the ability of the Joint Venturers and a Joint Venture Owners Committee (“the JVOC”, as to which see [89] below) to create “Encumbrances” over Joint Venture Property, but in terms which contemplated that “Permitted Encumbrances” might be created.  Thus:
    1. “Encumbrance” was defined in cl 1.1 to mean mortgage, hypothecation, pledge lien or charge or anything analogous to any of those things;
    2. “Permitted Encumbrance” was defined in cl 1.1 to include various liens arising in the ordinary course of business, including –
      1. (a)any mechanics’ workmen’s or other like lien arising in the ordinary course of business securing obligations which are not yet overdue or which are being contested or litigated in good faith; and
      2. (b)any Encumbrance in respect of deposits of money or property by way of security for the performance of any contractual or statutory obligations arising in the ordinary course of business other than obligations for borrowed moneys or the deferred purchase price of goods or services;
    3. other than a Permitted Encumbrance, the creation of any Encumbrance over all or any part of the Joint Venture Property was regarded as a decision required to be made by the approval of each Joint Venturer: cl 4.10; and
    4. without the prior consent of the other Joint Venturer, no Joint Venturer could create or suffer to subsist any Encumbrance of its interest except a Permitted Encumbrance.
  5. Queensland Nickel was constrained (except for liens arising in the normal and ordinary course of business) against creating any mortgage, pledge, charge, encumbrance, lien over, or trust in respect of Joint Venture Property or any of it: cl 5.5(i). 
  1. In performing its role, Queensland Nickel was subject to the directions of the JVOC: cl 5.2(a) and (b).  The JVOC had the responsibility and authority for the conduct of the Joint Venture: cl 4.1.  It was to be set up to consider and determine general policy and strategic matters for the Joint Venture so as to achieve the aims and objectives of the Joint Venture: cl 4.1.  Amongst other things, the JVOC was to provide Queensland Nickel with directions in respect of its duties and responsibilities and to monitor the performance of those duties and responsibilities in accordance with directions given: cl 4.1(a).  
  2. The Joint Venture Agreement contemplated that Queensland Nickel could incur personal liabilities to third parties consequent upon performing the various Joint Venture activities, which Queensland Nickel would pay by disbursing funds provided to it by the Joint Venturers to carry out the operation of the Joint Venture: cl 5.2(b).  But it also contemplated that Queensland Nickel might itself pay Joint Venture liabilities which might be directly payable by the Joint Venturers: cl 5.2(b)(xiv) and (xvi).  
  3. The Joint Venture Agreement contemplated that the Joint Venturers would share in the benefits and assume the obligations arising out of the actions taken by Queensland Nickel in the performance of its duties and responsibilities in the proportions in which they held their respective Participating Interests: cl 5.5(s).
  4. The Joint Venture Agreement contained provisions which set out mechanisms for Queensland Nickel to prepare budgets and financial plans in relation to the Joint Venture: cll 6.1 and 6.2.  Related provisions enabled Queensland Nickel to make “calls” on the Joint Venturers to meet “Joint Venture Expenses”, namely “all costs, liabilities and expenses of the Joint Venture properly incurred”, and obliged each of the Joint Venturers to contribute its share of the required funds once the call was made: cl 6.4.  
  1. Once monies were received consequent upon the implementation of the call process, cl 6.4(f) provided that Queensland Nickel was to put the monies into a working capital bank account in its own name, but (emphasis added) –

… 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 concernedMoneys 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. 

  1. The contemplation of this clause was that the moneys provided to Queensland Nickel in response to a call would be placed in Queensland Nickel’s bank account, and Queensland Nickel’s legal rights as against the Bank holding the funds would be held on trust by Queensland Nickel to be dealt with (and accounted for) in the manner specified in the clause.  
  1. Provision was also made for Queensland Nickel to make certain unbudgeted operating expenditures not exceeding 5% of the total amount of such expenditures provided for in the annual financial plan: cl 6.5.  Queensland Nickel was authorized to make unbudgeted operating expenses not subject to that constraint for rail freight charges, purchase of ore for processing, and purchase of fuel oil: cl 6.5.
  2. Queensland Nickel’s appointment as General Manager would continue until terminated: cl 5.6(a).  Appointment was terminable in a number of specified ways including forthwith upon notice being given by each of the Joint Venturers (cl 5.6(a)(ii)) and forthwith upon an order being made for Queensland Nickel’s winding up (cl. 5.6(a)(iii)).  Provision was made for the appointment of a successor in the event of termination: cl 5.6(b) and (c).  In the event that Queensland Nickel’s appointment as General Manager ceased, it would become obliged to deliver all Joint Venture Property to the successor and, if any Joint Venture Property was held in its name, it was obliged transfer the title to the successor: cl 5.6(d).
  3. The Joint Venture Agreement was governed by the law of Queensland: cl 20.

QNI Metals, QNI Resources and Queensland Nickel become part of the Palmer business empire

  1. Queensland Nickel was the General Manager of the project from 1992 until, as will appear, steps were taken by the Joint Venturers to terminate its position in March 2016.[39]  
  2. Since at least 2009, the relationship between the Joint Venturers inter se and between them and Queensland Nickel, has not been an arm’s length relationship.  
  3. In about 2009, entities controlled by Mr Palmer acquired a 100% interest in QNI Resources and QNI Metals.  QNI Resources and QNI Metals in turn owned Queensland Nickel, holding the shares in Queensland Nickel in the same proportions as they owned their interests in the Joint Venture.  
  4. Mr Palmer –
    1. had been a director of QNI Metals for periods in 2013, 2014, and 2015; 
    2. had been a director of QNI Resources for periods in 2013, 2014, and 2015; 
    3. had been a director of Queensland Nickel from –
      1. 31 July 2009 to 30 January 2013:
      2. 17 April 2013 to 5 April 2014;
      3. 22 January 2015 to 16 February 2015: and
      4. 8 February 2017 to 4 May 2017.
  5. Mr Clive Mensink –
    1. had been a director of QNI Metals for periods in 2013 and 2015; 
    2. had been a director of QNI Resources for periods in 2013 and 2015; 
    3. had been a director of Queensland Nickel for periods in 2012, 2013, 2014 and 2015; 
    4. was, by the beginning of 2016, the sole director of QNI Resources, QNI Metals and Queensland Nickel;
    5. ceased being a director of Queensland Nickel on 8 February 2017. 

Mr Palmer’s actual influence over Queensland Nickel

Mr Palmer as a director of Queensland Nickel even when not formally appointed

  1. Mr Mensink’s testimony on 20 April 2016 before Burns J on an interlocutory application suggested that in performing its role as General Manager of the Joint Venture at all material times up to the appointment of administrators in January 2016, Queensland Nickel in fact acted in accordance with the directions of Mr Palmer, even when he was not formally appointed as a director.  Mr Wolfe, who was Queensland Nickel’s chief financial officer, also gave evidence during his public examination that throughout 2015 (and including after Mr Palmer ceased formally to be a director) Mr Palmer commonly gave instructions to him about the operations of Queensland Nickel, maintained a tight control on his approval of expenditure by Queensland Nickel and retained to himself the ability to approve new contracts entered into by Queensland Nickel.  
  2. The plaintiffs contended I should conclude there was a good arguable case that Mr Palmer fell within the definition of director even when he was not formally appointed as such, either because he acted in the position of director or because the formally appointed director(s) of Queensland Nickel were accustomed to act in accordance with his instructions or directions.  That contention was supported by –
    1. the evidence referred to in the previous paragraph;
    2. Mr Parbery’s evidence of Mr Palmer’s position as an authorized signatory for Queensland Nickel and of particular actions and correspondence by Mr Palmer which betoken the requisite degree of control;[40]
    3. the background of Mr Palmer’s ownership position in relation to the Joint Venturers, which in turn owned Queensland Nickel; and
    4. evidence which suggests that Mr Palmer regards the assets of private companies which are wholly (or virtually wholly) owned directly or indirectly by him as sufficiently within his control to be regarded broadly as his with which to deal.[41]
  3. The contrary argument, advanced by Mr Palmer, was that he was validly appointed as chair of the JVOC (which I have explained was the committee which, on behalf of the two Joint Venturers, had very extensive powers over Queensland Nickel as General Manager of the Joint Venture) and that instructions he provided to Queensland Nickel were merely to be regarded as instructions provided to Queensland Nickel by the Joint Venturers in exercise of their contractual rights, and with which Queensland Nickel was contractually obliged to comply.  He relied on observations by Hodgson JA in Buzzle Operations Pty Ltd (in liq) v Apple Computer Australia Pty Ltd [2011] NSWCA 109 that influence exercised on directors of a company by a mortgagee acting in its own interests, particularly if supported by contractual rights in its mortgage documents, would not generally constitute the mortgagee a shadow director.  He sought to equate the relationship between he and Queensland Nickel’s directors with the relationship to which Hodgson JA referred. 
  4. The evidence to which I have referred thus far suggests there is a good arguable case that Mr Palmer was to be regarded as Queensland Nickel’s director during the periods in which he was not formally appointed as its director.  As Hodgson JA also observed in Buzzle Operations Pty Ltd (in liq) v Apple Computer Australia Pty Ltd (at [10]) “… a mortgagee could satisfy the statutory formula if it appeared that, at least for some decisions, the directors were treating the mortgagee’s instructions or wishes as themselves being a sufficient reason so to act”.  The evidence supports the conclusion that there is a good arguable case that the director(s) of Queensland Nickel so regarded Mr Palmer’s instructions or wishes.  My present qualitative evaluation of the strength of the case is that it is a strong case.  

The significance of the green notebook

  1. There was another section of evidence before me, namely that touching on the creation and contents of the so-called “green notebook” with which I should deal separately.   
  2. In September 2016, during the public examinations conducted by the special purpose liquidators, Mr Palmer produced a small green notebook which contained a number of entries handwritten in pencil by Mr Palmer apparently covering a period from 1 August 2009 to 1 May 2016.  The notebook records notes from and resolutions made at meetings of the JVOC during that period, on some occasions, apparently, when Mr Palmer was the only person present at the meeting.  It also records amendments to the Joint Venture Agreement made by Mr Palmer reaching an agreement with himself acting in separate capacities, and recording and signing those agreements in the notebook.  The notebook was physically kept by Mr Palmer on or near his person.
  3. Mr Palmer was publicly examined on many of the entries in the notebook and a copy of the notebook and the transcript of the public examination was in evidence before me.  He was the subject of cross-examination before me on some of the entries in the notebook.  The contents of the green notebook are summarised in the following table, emphasis being added by me.  The page references are a reflection of handwritten pagination on the document.

Page

Date

Entry

1

1 August

2009

  • Notice by QNI Resources appointing Mr Palmer as its representative on the JVOC pursuant to cl 4.2 of the Joint Venture Agreement.
  • Signed by Mr Palmer for QNI Resources.
  • Received and accepted by QNI Metals, signed by Mr Palmer as its director

2

1 August

2009

  • Appointment by Queensland Nickel of Mr Palmer as secretary of the JVOC pursuant to cl 4.3 of the Joint Venture Agreement.
  • Signed by Mr Palmer as director of Queensland Nickel.

3

1 August

2009

  • Notice by QNI Metals appointing Mr Mensink as its representative on the JVOC pursuant to cl 4.2 of the Joint Venture Agreement.
  • Signed by Mr Palmer for QNI Metals.
  • Received by QNI Resources, signed by Mr Palmer as its director

4

1 August

2009

Agreement in writing between QNI Resources, QNI Metals and Queensland Nickel varying the terms of the Joint Venture Agreement

  • to delete cl 22 (which provided that any variation of the Joint Venture Agreement would not be of any force or effect unless in writing executed by or on behalf of both the Joint Venturers and the Queensland Nickel)
  • to replace it with a new cl 22 which provided that a quorum for a meeting of the JVOC will consist of a single representative with a right to vote a minimum of 60% of the participating interest in the Joint Venture Property.

The agreement was signed in 3 places by Mr Palmer for, respectively, QNI Resources, QNI Metals and Queensland Nickel

5,6

3 August

2009

Notes concerning JVOC meeting attended by Mr Palmer for QNI Resources and Mr Mensink for QNI Metals. Records following resolutions:

  • a quorum was present and appropriate notices had been given to permit the meeting to proceed
  • Mr Palmer was appointed as chair of the JVOC with “full authority of [the JVOC] to exercise all powers of the JVOC to direct [Queensland Nickel] and any manager for and on behalf of [the JVOC]”
  • Mr Palmer was appointed as chair of the JVOC with “full authority of [the JVOC] to exercise all powers of the JVOC to direct [Queensland Nickel] and any manager for and on behalf of [the JVOC]”
  • directions by the JVOC in respect of all its powers and rights in the Joint Venture Agreement could be made orally or in writing
  • Queensland Nickel was not required to attend the JVOC meetings unless it specifically so requested in writing
  • Queensland Nickel must include Mr Palmer on any relevant committee that approved capital expenditure from time to time

Notes were intitialled 3 times by Mr Palmer

7

3 August

2009

Agreement in writing between QNI Resources, QNI Metals and Queensland Nickel varying the terms of the Joint Venture Agreement

  • to delete cl 10 which provided for the term of the deed, including a perpetuity clause;
  • to insert a new cl 10 which provided “the term of this agreement shall be until the 31st of December 2070”
  • certain procedural requirements in cl 4.9 of the Joint Venture Agreement would not apply to all meetings of the JVOC

The agreement was signed in 4 places by Mr Palmer for, respectively, QNI Resources,

QNI Metals and Queensland Nickel and as chair of the JVOC

 

Page

Date

Entry

8

8 August

2009

Notes of JVOC meeting attended by Mr Palmer. Records resolution that Mr Palmer as chair of the JVOC could call meetings as and when he wished notwithstanding any provision of the Joint Venture Agreement

Notes were signed in 3 places by Mr Palmer for, respectively, QNI Resources, QNI Metals and Queensland Nickel

9,10

25

December

2009

Notes of JVOC meeting attended by Mr Palmer and Mr Mensink. Amongst other things, records resolutions that

  • approved minutes of the JVOC meeting 3 August 2009;
  • approved the budget for the year to end 30 June 2010;
  • all directions given by a member of the JVOC in accordance with the policy of the Queensland Nickel Joint Venture, or the joint venture objectives, and all acts done and carried out in accordance with those objectives or policy be classed as a direction of the JVOC
  • It was further resolved, pursuant to clause 4.4(e) of the Joint Venture Agreement, that the parties below agree that representation of each of the joint venturers are not required to attend the joint venture owners committee meeting.

Notes were signed in 4 places by Mr Palmer for, respectively, QNI Resources, QNI Metals and Queensland Nickel and as chair of the JVOC

11

1 July 2010

Notes of JVOC meeting. Amongst other things

  • approved minutes of previous JVOC meeting;
  • approved budge for the year ending 30 June 2011 prepared by BHP Billiton;
  • records the budget was discussed and needed to be carefully considered and reviewed by Queensland Nickel management prior to submission to the JVOC;
  • records resolution that “The chairman was authorized [to] exercise all powers of the JVOC committee under clause 4.1 of the Queensland Nickel Joint Venture agreement on behalf of the JVOC.”

Notes signed by Mr Palmer as chair

12

1

September

2010

Notes of JVOC meeting. Amongst other things –

  • records discussion of a review of operating procedures
  • records resolution that “Resolve to direct [Queensland Nickel] to appoint [Mr Palmer] to a level of authority and maintain that level to approve joint venture expenditure and maintain joint venture property.”

Notes signed by Mr Palmer as secretary/chairman

13

26 March

2011

Notes of JVOC meeting.

  • Records that Budget for financial year 1 July 2011 to 30 June 2012 was considered
  • records decision not to approve the budget and to consider further matters in respect

of it

Notes signed by Mr Palmer as secretary/chairman

14

1 August

2011

Notes of JVOC meeting

Records approval for the Budget and plans to June 2012 and approval given to the budget for 1 July 2011 to 30 June 2012

Notes signed by Mr Palmer as secretary/chairman

 

Page

Date

Entry

15, 16

25

December

2011

Notes of JVOC meeting. Amongst other things, it:

  • approved minutes of JVOC held 1 August 2011;
  • records resolution “to direct [Queensland Nickel] to place [Mr Palmer] as a signatory on the board manager accounts dealing with the joint venture property and at a high level of approval in manuals and authorities required to approve joint venture activity as to monitor and allow the achievement of production and cost targets
  • records that “Clive Palmer declared he is the beneficial owner of all the companies making up the Queensland Nickel joint venture by virtue of his holding in their ultimate shareholders.”

Notes signed by Mr Palmer as Chair

17

4 April

2012

Notes of JVOC meeting. Amongst other things, it records resolution:

  • to approve minutes of JVOC meeting held 25 December 2011;
  • It was decided to extend the joint venture beyond its current purposes and the joint venture parties need to agree the said extension. It was resolved that such agreement between the joint venture parties should be recorded in writing. It was noted that it was in the interests of the joint venture parties that they shall provide support and … [illegible] … for all companies in the Palmer Group … [illegible] … ultimate shareholder Clive Palmer” Notes signed by Mr Palmer as Chair.

18, 19

5 April 2012

Agreement in writing between QNI Resources, QNI Metals and Queensland Nickel that in accordance with cl 2.3 of the Joint Venture Agreement (which permitted the Joint Venturers to agree in writing to extend what would otherwise be a limit on the purposes of the Joint Venture) that Joint Venture purposes and objectives shall include the following purposes in respect of entities of which [Mr Palmer] has a minimum of 50% beneficial interest (Palmer companies):

  • to make loans and receive loans to and from Palmer companies
  • to forgive loans;
  • to invest in Palmer Companies or projects they propose;
  • to support [Mr Palmer] and his activities as he may direct or require from time to time;
  • to provide guarantees and or security for or to Palmer Companies;
  • to make political donations directed by [Mr Palmer];
  • to direct [Queensland Nickel] to do all things necessary to support any activity of Palmer Companies;
  • To second staff and provide support to all Palmer companies from the joint venture;
  • Giving oral and/or written support to provide oral and every assistance to the Palmer companies.
  • doing any matter act or thing requested or required by [Mr Palmer] to assist the Palmer Companies or any other party [Mr Palmer] may direct

Each page on which the agreement was handwritten was signed in 3 places by Mr

Palmer for, respectively, QNI Resources, QNI Metals and Queensland Nickel

20

30 June

2012

Notes of JVOC meeting.

  • records resolution to approve minutes of JVOC meeting 4 April 2012;
  • records that the budget and plan for the year commencing 1 July 2012 and finishing 30 June 2013 was considered and it was resolved to approve the budget and plan for the year. The business plan shall be that adopted for previous year.

 

Page

Date

Entry

 

 

Notes signed by Mr Palmer as Chair.

21

8 July 2012

Notes of JVOC meeting. Records resolutions

  • to approve minutes of JVOC meeting held 30 June 2012;
  • That the [JVOC] directs [Queensland Nickel] to abide at all times the purposes and objects of the [Joint Venture] and that [Queensland Nickel] acknowledge this direction and that [Queensland Nickel] at all times deals with and follows the directions of the JVOC chairman in dealing with Joint Venture Property.”

The resolution was “agreed and acknowledged” by Queensland Nickel signed by Mr Palmer, and also signed by Mr Palmer as chair of the JVOC.

22, 23

 

4 August

2013

Notes of JVOC meeting.

Records resolutions

  • “to approve all JVOC meetings held prior to the date of this meeting”;
  • to approve the budget and plan for the year commencing 1 July 2013 to 30 June 2014.

Records resolution to do all the Joint Venture could do to remove the carbon tax

Noted need to reduce costs

Records “JVOC member to implement and direct [Queensland Nickel] to put [in] place procedures suitable to the chairman of the JVOC to

  • control and reduce the cost spare parts [illegible] and consumables;
  • control all dealings with joint venturers property
  • improve authorizations be in compliance with JVOC directions”

Notes initialled by Mr Palmer as chairman and secretary

24

10 August 2014

Notes of JVOC meeting

Records it was resolved

  • to approve the JVOC meeting held on 4 August 2013
  • to approve the budget and plan for the joint venture for the year 1 July 2014 to 30 June 2015

Notes signed by Mr Palmer as Secretary/Chairman

25

16 August

2015

Notes of JVOC meeting

Records

  • resolution to approve minutes of previous meeting held 4 August 2013.
  • it was resolved not to approve the plan and budget for the joint venture for the period 1 July 2015 to 30 June 2016
  • As the budget had been prepared in December 2015 and that was nearly 9 months ago. [Queensland Nickel] was directed to prepare an updated plan and budget for consideration of the JVOC by end September 2015.

Notes signed by Mr Palmer as Chairman and Secretary

26

1 October

2015

Notes of JVOC meeting

Noted the nickel price had dropped.

Resolved

   to approve minutes of JVOC for 16 August 2015;

Page

Date

Entry

 

 

to allow [Queensland Nickel] to borrow any debt he might need, and to provide the joint venture assets as security to any loan facility entered into within the next 90 days. to support [Queensland Nickel] seeking loans

Notes signed by Mr Palmer as Chairman and secretary

27

15 January

2016

Notes of JVOC meeting

Resolved to approve JVOC meeting 1 October 2015

Discussion about [Queensland Nickel] considering administration. Need to consider Joint Venture position.

[Queensland Nickel] to [illegible] administrator to work out problems and provide a line of credit.

Notes signed by Mr Palmer.

28, 29,

30

3 March

2016

Notes of JVOC meeting

  • resolution that only representatives of the JVOC shall attend.
  • waiver of procedural requirements by consent. Unanimous resolution that adequate notice given
  • resolution that “if for any reason Queensland Nickel has not been removed as general manager of the joint venture pursuant to cl 5.6 of the Joint Venture Agreement, it be removed forthwith.”
  • resolution that Queensland Nickel Sales be appointed as manager and General Manager of the Joint Venture
  • Calls made by Queensland Nickel in its former role as manager be withdrawn.

Notes signed by Mr Palmer

Page after 30

1 May 2016

Notes of JVOC meeting.

Records it was agreed to support the manager in recovering joint venture assets.

Notes signed by Mr Palmer.

Last 2 pages

8 April

2012

Agreement in writing between QNI Resources, QNI Metals and Queensland Nickel to vary the Joint Venture Agreement in a miscellany of respects.

Each page of the agreement was signed in 3 places by Mr Palmer for, respectively, QNI Resources, QNI Metals and Queensland Nickel

  1. On the assumption that the green notebook is genuine, then at least the following matters are significant.
  2. On 1 August 2009, Mr Palmer had been appointed the representative of QNI Resources on the JVOC.  QNI Resources had 80% of the participating interest in the Joint Venture.  Mr Mensink was the representative of QNI Metals on the JVOC.  The quorum requirements for meetings of the JVOC had been altered in such a way that the only way a quorum could be established was if Mr Palmer was present.  Moreover a quorum would be established if he was the only person present.  Two days later, on 3 August 2009, Mr Palmer was appointed as chairman of the JVOC and given the full authority of the JVOC to direct Queensland Nickel for and on behalf of the JVOC and whether orally or in writing.  On 8 August 2009, it was confirmed that Mr Palmer could call JVOC meetings as and when he wished.
  3. The effect of those resolutions appeared to confirm the effective plenary power conferred on Mr Palmer on behalf of the JVOC to give oral or written directions to Queensland Nickel for the purposes of the Joint Venture, whenever he wanted.  Of course, as I have already mentioned, the Joint Venture business was Queensland Nickel’s sole concern because it was obliged not to carry on or be interested in any other: cl 5.5(b).  During his public examination, Mr Palmer conceded that the various resolutions ceded to him the ability to fully direct what was done by Queensland Nickel in relation to the Joint Venture.  That power was confirmed by resolutions made on 1 July 2010 and again on 8 July 2012.
  1. Importantly, the purposes of the Joint Venture were apparently fundamentally altered.  As to this:
    1. The Joint Venture Agreement contained an express statement and confirmation that the purposes of the Joint Venture were purposes expressly associated with the nickel mining nature of the joint venture: cl. 2.1.  Indeed in cl. 2.3 there was an express statement that the Joint Venture would be limited to those purposes unless both Joint Venturers otherwise agreed in writing.  That limitation also constrained Queensland Nickel, which was obliged to act subject to and consistently with the Joint Venture Agreement.  
    2. But on 5 April 2012, by an agreement said to have been struck between those three entities, by conduct of Mr Palmer acting by himself but in 3 separate capacities, any constraint on either the Joint Venturers or Queensland Nickel was fundamentally altered by the explicit addition of the following purposes:
      1. to make loans and receive loans to and from Palmer companies;
      2. to forgive loans;
      3. to invest in Palmer Companies or projects they propose;
      4. to support [Mr Palmer] and his activities as he may direct or require from time to time;
      5. to provide guarantees and or security for or to Palmer Companies;
      6. to make political donations directed by [Mr Palmer];
      7. to direct [Queensland Nickel] to do all things necessary to support any activity of Palmer Companies;
      8. to second staff and provide support to all Palmer companies from the joint venture;
      9. giving oral and/or written support to provide oral and every assistance to the Palmer companies; and
      10. doing any matter, act or thing requested or required by [Mr Palmer] to assist the Palmer Companies or any other party [Mr Palmer] may direct.
    3. Putting to one side the question whether that could have been a proper exercise of power by Mr Palmer in each of those capacities, I agree with the plaintiffs’ submission that the amendments sought to enable Mr Palmer, with no oversight at all, to require Queensland Nickel to transfer Joint Venture Property (including monies held in Queensland Nickel’s bank accounts) to almost any recipient on his whim.  And, importantly, that was so regardless of whether or not he was formally appointed as a director of Queensland Nickel at the time.
    4. For his part, Mr Palmer’s explanation at his public examination was that the change was made in anticipation of the expiry of certain terms in the agreement pursuant to which his companies had initially acquired the Joint Venture in 2009 from BHP, namely terms by which BHP required that he provide a personal solvency guarantee in relation to the Joint Venturers for three years, which he did do, and BHP required that the assets of those companies stay together for that period of time.
    5. In his public examination, Mr Palmer conceded that he acted in accordance with the powers which he had been given under the Joint Venture Agreement.
  2. On the assumption that the green notebook is genuine, the notebook provides further support for the conclusion which I would reach without taking it into account, namely that the plaintiffs have a good arguable case that Mr Palmer was to be regarded as Queensland Nickel’s shadow director during the periods in which he was not formally appointed as its director.  
  3. The plaintiffs submitted that there were good reasons to doubt the reliability of the green notebook as a contemporaneously-created record of the matters with which it purports to deal.  However, they did not invite me to make a finding as to whether it was entirely genuine or fabricated in some particular respect, as they contended the evidence assisted their case either way.  
  4. In their submissions, the defendants were strongly critical of the suggestion by the plaintiffs that the green notebook might not be genuine.  They challenged the propriety of the plaintiffs making any submission at all which cast doubt on the genuineness of the green notebook.  They observed, correctly, that no allegation of fraud has been pleaded by the plaintiffs.  They observed, correctly, that I would not make any finding of fraud unless I was persuaded to the level commensurate with the seriousness of such an allegation.  They complained that no suggestion of fabrication was put squarely to Mr Palmer in cross-examination, except in relation to p 25, and that otherwise the possibility of fabrication was left at the level of insinuation.  They contended that in an application such as the present, where the possibility of dishonesty is said to be relevant “the plaintiffs need to identify actual dishonest conduct, and the conduct must be of a kind that persuades a court that a risk of dissipation now exists”.
  5. As to these complaints, I observe:
    1. No occasion for pleading fraud had yet arisen.  That occasion may later arise in the event that the defendants plead reliance on the alleged agreements recorded in the green notebook, and the plaintiffs dispute the validity of those agreements.
    2. It should have been obvious to the defendants from the terms of the second affidavit of Ms Costello filed 11 August 2017[42] that a challenge to the genuineness of the notebook formed part of the plaintiffs’ case on the application for a freezing and ancillary orders. 
    3. The plaintiffs do not seek a finding of fraud or actual dishonesty on the present occasion.  They make submissions which may or may not affect the qualitative evaluation of evidence on which I am presently embarked.  I do not conclude that on a case such as the present there is any impropriety involved in making a submission that there are good reasons to doubt the reliability of the green notebook as a contemporaneously-created record of the matters with which it purports to deal.  
  6. The more important considerations are, however, the extent to which I accept the submission concerning the existence of doubt as to the genuineness of the document, and, if I do, what use I should make of it in determining the questions before me.
  7. After making the qualitative evaluation of the present state of the evidence concerning the green notebook, in the manner I have previously described, I conclude that plaintiffs have shown that there are good reasons to doubt the reliability of the green notebook as a contemporaneously-created record of the matters with which it purports to deal.  Those reasons are as follows:
    1. First, it may be thought to be inherently unlikely that on matters of such moment, Mr Palmer, an experienced businessman and company director, would have thought it appropriate to keep records and agreements written in pencil on a notebook.  Especially might that be thought to be so when some of the agreements and minutes seem to have been agreements and meetings at which he was the only person involved.
    2. Second, when executing a “US$ Aircraft Loan Facility Agreement” with GE Capital in June 2012, Queensland Nickel provided a copy of the Joint Venture Agreement and wrote a signed letter verifying it to be true and complete, without mentioning the purported amendments in the green notebook having the effect of the very significant alteration to the purposes to which Joint Venture property could be applied or Mr Palmer’s own power to direct such transfers.[43]  If the green notebook is genuine, that verification would have been incorrect.  That would be surprising in light of the fact that, if it was genuine, the amendments to the Joint Venture Agreement were made only 2 months earlier. 
    3. Third, Mr Palmer did not disclose the notebook or the amendments in it to the administrators appointed to Queensland Nickel.  Indeed, it seems that the first time it was produced to the liquidators of Queensland Nickel was in the third quarter of 2016.
    4. Fourth, Mr Palmer conceded in the public examination that he had not disclosed to anyone – except possibly to Mr Mensink – either the existence of the green notebook or the purported Joint Venture Agreement amendments recorded in it.  That proposition may be thought to be at odds with the notion that the JVOC actually had the intentions recorded in the green notebook.  For example, how might the JVOC have contemplated that Queensland Nickel would abide the fundamentally amended purposes of the Joint Venture (recorded at pp 18 and 19), as the resolution recorded at p 21 contemplated that it should, if the fact and nature of the amendments were not disclosed to the directors and executive officers of Queensland Nickel (other than Mr Palmer)?
    5. Fifth, that the fact of the amendments had not been disclosed by Mr Palmer to others finds some corroboration in evidence which Mr Wolfe gave when publicly examined, that the first time he had seen the green notebook was in the days before the public examination.  It also finds corroboration in these facts:
      1. Mr Wolfe, Mr Mensink, and other persons had all sworn affidavits exhibiting or referring to the Joint Venture Agreement without mentioning amendments, in circumstances where, if they had known of amendments, it seems likely they would have done so; and
      2. the Joint Venture Agreement (including the terms governing the purposes of the Joint Venture) had been pleaded in proceedings by the Joint Venturers before me in terms which were inconsistent with the fact that there had been amendment to those terms.
    6. Sixth, there were discrepancies in the dates in the entries on pp 24 and 25 dealing with the financial plan and budget for the year ended 30 June 2016, namely (1) a reference to approving the minutes of the previous meeting on 4 August 2013, when according to the notebook the previous meeting was 10 August 2014; and (2) a reference to the budget having been prepared nine months earlier in December 2015, when 9 months earlier would have been December 2014.  Mr Palmer explained these matters as merely the handwritten equivalent of a typographical error, but it was suggested to him that  p 25 was in fact prepared in 2016 at about the time the document was produced in the public examination.[44]
    7. Seventh, on its face, the entry on p 25 concerning the JVOC meeting on 16 August 2015 suggests that one reason the JVOC decided not to approve the budget for the year ended 30 June 2016 was the fact that the budget had been prepared 9 months earlier.  However Mr Parbery’s second affidavit filed 8 September 2017[45] exhibits internal Queensland Nickel documents which gainsay the proposition that the budget had been prepared at a time 9 months before 16 August 2015.  Thus:
      1. Queensland Nickel’s Finance Director, Ms Crouch, sent a memorandum dated 28 January 2015 to all directors and managers identifying the work which had to be done for the preparation of the budget for the year ended 30 June 2016 with a view to submitting a budget to Mr Palmer for approval in April 2015.  It seems the budget had not yet been prepared.
      2. Queensland Nickel Chief Financial Officer, Mr Wolfe, sent Mr Palmer a memorandum dated 12 November 2015, which stated that the budget for the year ended 30 June 2016 had been finalized on 11 August 2015.  The memorandum also stated that the budget had been prepared using nickel and cobalt price estimates made at the end of July 2015.
      3. Consistently with that information, it seems from the name of the attachment subsequently sent by Mr Wolfe to Mr Palmer’s email (via his usual email pseudonym “Terry Smith”), the budget presentation document prepared by Queensland Nickel was a document dated 11 August 2015.
  8. How, if at all, is it legitimate to use the matters to which I have referred at [119] above in the context of the resolution of an application like the present?
  9. So far as the question of whether there is a good arguable case that Mr Palmer was to be regarded as Queensland Nickel’s director during the periods in which he was not formally appointed as its director, I think that the question whether regard should be had to the doubts is of little moment.  If the document was a fabrication, then the likely point of the fabrication would have been – as the plaintiffs contend – to provide post-hoc justification for Mr Palmer having done the things sought to be authorized.  In turn that would support the conclusion of a good arguable case that he was a director even when he was not formally appointed.  
  10. The more significant question is the extent to which the doubts are relevant to the question whether a prudent, sensible commercial person could properly infer the existence of the relevant risk of frustration of the court’s process.  On that question, I think that it would be to put the proposition too strongly to contend, as the defendants do, that the plaintiffs would need to identify “actually dishonest conduct” before it might be relevant to the assessment of the risk.  I see no reason, in principle, why something less than proof of actual dishonest conduct might not still have some relevance to the assessment which a prudent, sensible commercial person might properly make on the question of risk of frustration of the court’s process.  The matters to which I have referred at [119] above are relevant to the question of risk.  I will return to the nature of that relevance when I embark on the evaluation of the evidence concerning risk of frustration.  

The implications of the way Queensland Nickel actually conducted its operations

  1. Mr Parbery’s affidavit evidence revealed that, consistently with its obligations under the Joint Venture Agreement, Queensland Nickel’s only role was acting as General Manager for the Joint Venture and it did not carry on a separate business in its own capacity.  Its employees were engaged for the purpose of operating and managing the Joint Venture property which primarily consisted of the Refinery.  
  2. The Refinery and the associated Townsville Port facilities together comprised a large, relatively complex production facility and associated infrastructure. The Refinery had an overall site footprint of approximately 220 hectares and was approximately 1 km in length.  The report of the administrators revealed that the refinery property was comprised of numerous lots of real property, four of which were registered in the name of Queensland Nickel and the remainder of which were owned either jointly or solely by the Joint Venturers. Even at this basic level, Queensland Nickel necessarily conducted the Joint Venture using Joint Venture Property, some of which was legally held by the Joint Venturers and some of which was legally held by Queensland Nickel.
  1. It will be recalled that the Administration Agreement obliged Queensland Nickel to manage the debtors of the Joint Venturers deriving from the sale of nickel products, including by collecting payment of those debts and crediting payment to such bank account of the Joint Venturer as the Joint Venturer might direct.  Mr Parbery deposed that Queensland Nickel had bank accounts in its own name into which it deposited the proceeds of sales of the Refinery’s product, and from which it discharged its liabilities.  Mr Parbery’s investigations did not reveal the existence of any bank accounts in the name of either Joint Venturer into which receipts were deposited or from which Joint Venture expenses were paid. 
  2. I have mentioned that the Joint Venture Agreement contained provisions which set out mechanisms for Queensland Nickel to prepare budgets and financial plans in relation to the Joint Venture (cll 6.1 and 6.2) and also provisions which enabled Queensland Nickel to make “calls” on the Joint Venturers to meet “Joint Venture Expenses”, namely “all costs, liabilities and expenses of the Joint Venture properly incurred”, and obliged the Joint Venturers to contribute its share of the required funds once the call was made: cl 6.4.  The nature of the liabilities which Queensland Nickel incurred in running the Refinery included the costs of employees (including wages and the need to make provision for incidental matters such as annual leave, long service leave and redundancy payments); costs of obtaining ore suppliers; costs of freight, power, haulage and the like.
  3. However Mr Parbery deposed that although budgets and financial plans were prepared and approved for the financial years ended 30 June 2010 to 2016,[46] Queensland Nickel had not since 2009 followed the mechanisms available to it under the Joint Venture Agreement to issue call notices to ensure it was in funds before incurring liabilities.  Rather, Queensland Nickel generally met its liabilities when necessary from funds which Queensland Nickel obtained by operating the nickel refinery and which it deposited into its own bank accounts.  In other words, it met its liabilities necessarily from funds which it obtained by the use of the assets which formed part of Joint Venture Property and from the sale of the product produced by the refinery (which product was not to be regarded as Joint Venture Property: see [88](b) and [88](c) above).  Mr Parbery’s evidence found corroboration in Mr Mensink’s testimony before Burns J and in an affidavit of Mr Wolfe.[47]
  4. Bearing in mind the relationship between the Joint Venturers inter se and between them – via the JVOC – and their General Manager, Queensland Nickel, since at least 2009, an obvious inference, at least on the present state of the evidence, is that the circumstances described in the previous paragraph (including the extent of departure by Queensland Nickel of compliance with the Joint Venture Agreement funding terms and what Queensland Nickel did with monies obtained from sale of Product) must have been known to and accepted by the Joint Venturers.  To put it another way – and in terms which are material to the resolution of this application – on the case as presently framed and given the evidence presently before me, the plaintiffs have a good arguable case that the manner of Queensland Nickel’s relevant performance of its role under the Joint Venture Agreement (including the manner by which it funded its operations) at all material times up to January 2016 was in accordance with instructions provided to it by the Joint Venturers and, it would follow, satisfactory to them.  Given the composition of the JVOC, there is a good arguable case that that also meant Mr Palmer personally.
  5. Two further points should be made.  
  6. First, I have already noted that the Joint Venture Agreement provided that Products produced at the nickel refinery were the property of the Joint Venturers according to their respective shares and were not Joint Venture Property.  But if there is a good arguable case that the Joint Venturers in fact permitted Queensland Nickel to take monies which were obtained by the sale of Products and to place those monies into a bank account in the name of Queensland Nickel to be used for Joint Venture purposes, including meeting liabilities as and when necessary, then there is also a good arguable case that the proper analysis of the respective rights as between Queensland Nickel and the Joint Venturers in relation to the monies derived from sale of Product could no longer admit of the proposition that the Joint Venturers had legal ownership of the monies in the same proportions as they had owned the Products which had been converted into the monies.  Instead there would be a good arguable case that the Joint Venturers must be taken to have accepted that Queensland Nickel should treat the monies obtained from the sale of their products in the same way as other property which did fall within the definition of Joint Venture Property set out in the Joint Venture Agreement, title to which was permitted to inhere in Queensland Nickel.  On that case, the result would be that Queensland Nickel would have legal title to a chose in action against the relevant Bank(s) for the balance of the accounts and Queensland Nickel would hold that chose in action on trust for the purposes of the Joint Venture.  This seems to be a rough analogue of what would have happened if calls had been made and the monies provided in response to calls: cf. cl 6.4(f).
  7. Second, if Queensland Nickel conducted its operations in the way I have described, then there are a number of implications as to the personal and proprietary rights which Queensland Nickel might have as against the Joint Venturers.  I examined the relevant legal principles in QNI Resources Pty Ltd v Park [2016] 116 ACSR 321 and I do not understand that examination to have been rejected by the Court of Appeal to the extent that they were examined in the appeal from my decision: see QNI Resources Pty Ltd v Queensland Nickel Pty Ltd (in liq) [2017] QCA 167.  
  8. In QNI Resources Pty Ltd v Park I wrote that:
    1. On the material presently before me, the applicants’ case seems to involve the Court accepting the following propositions:
      1. the Joint Venturers could place a General Manager in charge of the management, operation and administration of their Joint Venture and of the management and control of the Joint Venture Property, which they had agreed to make available to the General Manager for the purpose and duration of the Joint Venture (and solely for that purpose);
      2. the Joint Venturers could knowingly allow their General Manager to incur tens of millions of dollars of liability in relation to Joint Venture Expenses for matters as apparently proper and fundamental to the conduct of the Joint Venture business by the General Manager as its employees, its freight handler and its ore supplier; 
      3. the Joint Venturers could knowingly allow their General Manager not to follow the formal mechanisms for financial reporting and budgeting set out in the Joint Venture Agreement as the means by which they could be required to provide funds to the General Manager, expecting that the General Manager would be able to generate sufficient funds to meet the Joint Venture Expenses by the use of Joint Venture Property to conduct the Joint Venture business; and
      4. by the simple expedient of terminating the relationship and appointing a new General Manager, the Joint Venturers could, without making any provision for the discharge of the former General Manager’s liabilities for Joint Venture Expenses properly incurred, establish an entitlement to compel the former General Manager to transfer all the Joint Venture Property to the new General Manager, but to keep all of the liability.
    2. Acceptance of such a case would be a startling affront to justice.
    3. I have already mentioned there are a number of well-recognized legal principles, the application of which would enable the law to avoid such an affront.  Thus it could be concluded that the General Manager had a right of indemnity which would be regarded as secured by a lien over the Joint Venture Property because –  
      1. (by application of the legal principles discussed at [56] to [58] above) to the extent that the Joint Venturers had permitted the General Manager to hold legal title to the Joint Venture Property such that the General Manager must be regarded as holding it as trustee for the Joint Venturers, the General Manager would have a trustee’s right to indemnity in respect of such liabilities, which right would be regarded as secured by an equitable charge or lien over the Joint Venture Property; and
      2. (by application of the legal principles discussed at [59] to [67] above) to the extent that the General Manager held Joint Venture Property but legal title to the Joint Venture Property remained in the Joint Venturers, the General Manager would have an indemnity in respect of the Joint Venture Expenses properly incurred, which right would be regarded as secured by an equitable lien over the Joint Venture Property, such a lien being created by the court, regardless of the intent of the parties, as a remedial device to protect the General Manager against inequitable loss.    
  9. As to the present relevance of that passage I observe:
    1. I will shortly come to the evidence presently before me which will explain the observations which I made at [130]-[131].  
    2. The legal principles cross-referred to at [132](a) were those explaining the trustee’s statutory[48] and equitable[49] rights to indemnity out of trust property in respect of liabilities incurred in the execution of the trust and the way that right is secured by the law.
    3. The legal principles cross-referred to at [132](b) were –
      1. the equitable lien or charge discussed by the High Court in Hewett v Court (1983) 149 CLR 639; and
      2. an analogy with a manager’s lien on the estate managed for the costs of management, where the persons interested in the estate know that he is incurring expenditure and do not interfere: see Bertrand v Davies (1862) 31 Beav 429; (1862) 54 ER 1204 per Romilly MR at 1207 cited in Hill v Venning (1979) 4 ACLR 555 per Connolly J at 557.
  1. My observations at [132] identified only a possible conclusion that had not been properly negated in a pleading which had then been advanced by the Joint Venturers.  However, the evidence presently before me suggests that Queensland Nickel does have a good arguable case for the existence of such rights in relation to expenses and liabilities properly incurred by it on behalf of the Joint Venturers. Although the defendants reject that case, the rejection seems to be founded solely on the terms of the Joint Venture Agreement and without either (1) regard to the evidence from the plaintiffs addressing how the Joint Venture was actually operated; or (2) the presentation of any countervailing evidence as to how the Joint Venture was actually operated.  My present qualitative evaluation of the strength of the plaintiffs’ case is that it is a strong case.

Queensland Nickel makes payments to Mr Palmer and/or his entities and associates

  1. The plaintiffs impugn 27 categories of payments and transfers made by Queensland Nickel to entities controlled by Mr Palmer, to associates of Mr Palmer or to Mr Palmer himself.  The plaintiffs have established a good arguable case that the dates of the relevant payments or transfers, and the circumstances of them were as identified in the table below.  

Item

Date of payment / transfer

Amount

Circumstances 

1

30 June 2011 - 30 September

2012

$8,761,835.73

Between 30 June 2011 to 30 September 2012. Queensland Nickel lent to Fairway Coal the sum of $8,761,835.73 as detailed in Schedule H to the Statement of Claim.  The payments to Fairway Coal were Styx Basin Joint Venture expenses.  The monies lent have not been repaid.

 

Item

Date of payment / transfer

Amount

Circumstances 

2

6 July 2011

$8,100,000.00

Coeur de Lion Holdings is the sole shareholder of Coeur de Lion

Investments, which is the owner of the land on which Palmer

Coolum Resort is located.  Queensland Nickel lent $8,100,000.00 to Palmer Leisure Coolum to fund the purchase of 98% of the shares in Coeur de Lion Holdings.  Queensland Nickel has not been repaid.

3

31 July 2011 -4 January 2016

$57,807,342.70

Palmer Leisure Coolum is the ultimate owner of the Coolum Resort.  The books and records of Queensland Nickel show that expenses and working capital contributions were paid in respect of the Coolum resort as set out in Schedule G to the statement of claim, totalling $6,927,342.70 for expenses and $50,880,000.00 for working capital contributions.  Those amounts have not been repaid.

4

2 August 2011

$40,000,000.00

Payment to Palmer Leisure Australia on behalf of the Joint Venturers as the purchase price for shares in Palmer Leisure Australia acquired by the Joint Venturers.  The Joint Venturers have not repaid the monies paid on their behalf.

5

March 2012

$1,238,251.57

Queensland Nickel provided Palmer Leisure Coolum with

$1,238,251.57 by payments of $474,000, $368,100 and $1,132,351.57 on 5 March 2012, 5 March 2012 and 13 March 2012 respectively.[50]  The monies were provided to fund purchase of 14 villas at Palmer Coolum Resort and not repaid.

6

11 September

2012

$500,000.00

Payment was made to Mr Palmer and no repayment has been received.

7

11 September

2012

$50,000.00

In response to direction from Mr Palmer, this payment and a

$50,000 payment on 30 November 2012 were made to Cold

Mountain Stud.  No repayment has been received

8

11 September

2012

$1,800,000.00

In response to direction from Mr Palmer, this payment and a

$200,000 payment on 30 November 2012 were made to Waratah Coal.  No repayment has been received

9

30 November

2012

$200,000.00

In response to direction from Mr Palmer, this payment and a

$1,800,000 payment on 11 September 2012 were made to Waratah Coal.  No repayment has been received

10

30 November

2012

$50,000.00

In response to direction from Mr Palmer, this payment and a

$50,000 payment on 11 September 2012 were made to Cold

Mountain Stud.  No repayment has been received

11

30 November

2012

$9,251,459.76

Mr Palmer has owned the Bora Bora report since 16 July 2012.  This sum represents unpaid balance of a $14,380,212.83 loan made to Sci Le Coeur de L 'Ocean at Mr Palmer’s request for operating the resort.  No payment of the balance has been received.

 

Item

Date of payment / transfer

Amount

Circumstances 

12

30 November

2012

$14,380,212.83

On 29 November 2012, Mr Palmer requested $USD15,000,000 be paid to him and that payment was made on 30 November 2012.  The amount not repaid is $14,380,212.83.

13

30 November

2012

$4,500,000.00

On 29 November 2012, Mr Palmer requested $4,500,000 be paid to

Ms Zhenghong Zhang and that payment was made on 30 November 2012 by payments of $4,000,000 and $500,000.  The amount of $4,500,000.00 has not been repaid.

14

30 November

2012

$7,669,446.84

On 29 November 2012, Mr Palmer requested $USD8,000,000 be paid to his father in law, Mr Sokolov, and that payment was made on 30 November 2012.  The amount not repaid is $7,669,446.84.

15

3 December

2012

$959,727.00

On 29 November 2012, Mr Palmer requested $USD1,000,000 be paid to Ms Evgenia Bednova, and that payment was made on 3 December 2012.  The amount not repaid is $959,727.00.

16

9 September

2012 - 24

February

2014

$37,039.34

Between 9 September 2013 and 24 February 2014, QNI made payments totalling $37,039.34 at Mr Palmer’s request for his use and benefit to cover Mr Palmer’s personal expenses for medical items, props and clothing.  Mr Palmer has not repaid that sum.

17

4 October

2013

$5,007,000.00

Vintage Cars were sold to Mr Palmer for an invoice in this amount.  But the amount has never been received from Mr Palmer.

18

1 November

2013

$7,900,000.00

Transfer of Avica Resort to Mr Palmer, with consideration never received from Mr Palmer. Loan recorded and unpaid.

19

1 April 2014

$300,000.00

Mr Palmer owns real property referred to as Palmer Sea Reef.  Monies were paid on his behalf as “working capital contributions – Sea Reef”.  Mr Palmer has not repaid those monies.

20

14 April 2014

$600,000.00

Payment in this amount was paid to Mr Palmer on 14 April 2014.  Mr Palmer has not repaid the monies.

21

1 June 2014-31

January 2016

$16,425,535.54

On 19 May 2014, a payment of $12,000,000 was made to

Mineralogy.  Mr Parbery has also identified that $4,425,535.54 was paid for legal and other expenses in respect of Mineralogy.  The broad purposes were for expenses relating to Mineralogy’s mining tenements set out in Schedule I of the statement of claim and expenses relating to choses in action under two Mining Right and Site Lease Agreements.  The amounts have not been repaid.

22

30 June 2014

$20,000,000.00

On 30 June 2014 $20,000,000 was credited by Queensland Nickel to Mr Palmer’s loan account.  The amount has not been repaid

23

28 July 2014

$300,000.00

On 28 July 2014, Queensland Nickel paid to Mr Ferguson, pursuant to an agreement titled “Deed of Financial Assistance” entered into by QNI and Mr Ferguson, the sum of $500,000.00.  Pursuant to cll 5(c) and 7, $300,000.00 was repayable immediately upon Mr Ferguson leaving the employ of Queensland Nickel for any reason whatsoever.

Item

Date of payment / transfer

Amount

Circumstances 

 

 

 

Mr Ferguson has left the employ of QNI and, despite demand, Queensland Nickel has not received repayment from Mr Ferguson in discharge of the $300,000.00 debt obligation which is due and owing.

24

19 February

2015

$375,000.00

At Mr Palmer’s request, on or about 19 February 2015, Queensland Nickel paid to Palmer Leisure Australia $375,000.00.  The amount has not been repaid

25

23 March

2015

$77,800.00

Monies were paid to Mercedes Benz Gold Coast for purchase price of a vehicle for either Mr Palmer personally or Closeridge.  The monies have not been repaid.

26

12 May 2015

$324,999.68

On or about 12 May 2015, Queensland Nickel made a payment of

$324,999.68 to Yamaha for Cart Provider's purchase of 65 Golf Carts which Cart Provider had contracted to buy.  The amount has not been repaid. 

27

30 June 2015

$401,231.00

On 30 June Queensland Nickel lent to Fairway Coal the sum of $401,231.00.  The payment related to the Styx Basin Joint Venture. 

The monies lent have not been repaid. 

Total  

$207,016,881.99

 

  1. In summary the table reveals that over the period from 30 June 2011 to 30 June 2015, Queensland Nickel made payments or transfers totalling $207,016,881.99 to entities controlled by Mr Palmer, to associates of Mr Palmer or to Mr Palmer himself.  Those payments were made out of Queensland Nickel’s monies obtained in the way previously described.
  2. Mr Parbery deposed that based on his and his staff’s investigation of the books and records of Queensland Nickel, the payments and transfers did not appear to have been made for the purpose of the Joint Venture.  Prima facie, the circumstances I have recorded in the table support that conclusion.  On the evidence presently before me, I would conclude that the plaintiffs have a good arguable case as to the correctness of Mr Parbery’s conclusion.  In expressing that view, I have not overlooked the fact of the purported agreement extending the Joint Venture purposes recorded in the green notebook.  As will appear, the fact and circumstances of these payments underlie debt, restitutionary and equitable claims made by Queensland Nickel, and contentions of breach of directors’ duties on the part of Mr Palmer.
  1. Many of the above payments which were characterized as loans were the subject of deeds of forgiveness by the Joint Venturers.  Mr Parbery’s first affidavit[51] exhibits many such documents which were entered into on 30 June 2015, although it does not relate the deeds back to the above payments with any specificity.  The statement of claim alleges that at least the payments for items 1-5, 11, 17-19, 21, 22 and 25-26 of the schedule above were purportedly forgiven (because those items are the particular items referenced by the statement of claim at [288]), but contends that the plaintiffs deny that the obligations arising from the payments and transfers were effectively forgiven.  
  2. For their part, the defendants say that all the loans (but not necessarily all the payments identified above) were the subject of forgiveness by the Joint Venturers.  Mr Wolfe, for example, deposed that the Joint Venturers forgave a total of $115.132 million in loans in the financial years ended 30 June 2013 to 30 June 2015.
  3. The plaintiffs criticize the history of the execution of deeds of forgiveness on the basis that they were done without any apparent regard to the commerciality of the transactions from Queensland Nickel’s point of view.  They submit Queensland Nickel was not a party to, nor was it bound by, the deeds of forgiveness.  In particular, the deeds purported to release amounts owed to the forgiving party, not amounts owed to Queensland Nickel.  But, in any event the plaintiffs contend, such was the knowledge which must be attributable to each of the forgiving party and the forgiven party, that the releases would be ineffective to defeat Queensland Nickel’s claims. 
  4. The defendants’ case in relation to the forgiveness of the loans was as follows:
    1. On 1 July 2012 Mr Palmer established a policy that 100% of profit made by the Joint Venturers be distributed to shareholders at the end of each financial year from I July 2012, unless the Joint Venturers decided to make any loan forgiveness to loans owing by commonly owned companies, and then and in such circumstances no dividends would be distributed to shareholders by the Joint Venturers.  The policy was based on advice he obtained from PriceWaterhouse Coopers (PwC) in June 2012.
  1. The justification for the decisions to make the loans giving rise to the debts, and then to forgive the debts, was that they were a more tax effective way of distributing value in the way that the Joint Venturers (at the behest of their ultimate owner, Mr Palmer) wanted to distribute that value, than could have been achieved by the declaration and payment of dividends by the Joint Venturers. 
  2. In the relevant years, based on the signed audited accounts for the relevant years, both Joint Venturers should have been able to comply with the requirements of the Corporations Act 2001 (Cth) for the payment of dividends.  In the special purpose accounts of each of the Joint Venturers, loan forgivenesses were treated as deductions from the owner’s equity.
  3. The practice was not done in any clandestine way.  It was known to, and approved by, PwC and the auditors, Ernst & Young (the latter as evidenced by the unqualified audit report).  Any criticism of the fact of the policy or of its implementation cannot be reconciled with the Ernst & Young audited accounts or with the opinion of PwC.
  1. It is not appropriate at this time to attempt to resolve the factual and opinion disputes which arise in relation to the respective arguments on this issue.  
  2. I make the following observations as to the defendants’ explanation for the payments.
  3. First, there is certainly substantial evidence which supports the defendants’ proposition that the policy was not clandestine.  Intercompany loans and forgivenesses were disclosed in the audited accounts and not the subject of any audit qualification by Enrst & Young.  Further, the evidence presently before me does suggest that the proper implementation of a policy such as that outlined may have given rise to real tax advantages. 
  4. Second, before me the defendants’ justification of the practice turns on the evidential value and correctness of the audited accounts of each of the Joint Venturers and the audited consolidated accounts of the Queensland Nickel Group.  But none of these documents separately considered the separate position of Queensland Nickel and for that reason were arguably not suitable for the purposes to which they were being put.  Thus:
    1. According to Mr Wolfe, they all proceed by reference to the notion that Queensland Nickel had no assets, no liabilities, and no cash flows.  The problem with that is the proposition that Queensland Nickel, as a separate legal person, had no assets, no liabilities and cash flow is, on the evidence before me, wrong.  
    2. Mr Parbery deposed that the Ernst & Young audited reports did not address the financial position and performance of Queensland Nickel as a stand-alone entity and that it was not possible from Ernst & Young audited reports to determine the financial wellbeing of Queensland Nickel from time to time.
  5. Third, the capacity to regard the loans to various parties by Queensland Nickel out of bank accounts which it legally held and then the subsequent forgiveness of any obligation to repay (even assuming that the decision to forgive was a decision which bound Queensland Nickel) as the lawful analogue of the Joint Venturers lawfully paying dividends out of their own profits seems to me to be a matter of significant complexity not adequately addressed by the defendants at present.
  6. Fourth, the legitimacy of the decision to forgive debts – justified in the way posited and viewed from the position of the Joint Venturers – would necessarily require (amongst other things) assessments made, as at the time of each forgiveness and referable to the amounts then forgiven, of –
    1. the then state of the forgiving Joint Venturer’s net asset position; and
    2. whether the forgiveness materially prejudiced the forgiving Joint Venturer’s ability to pay its debts, each of which assessments would have to pay proper regard to the separate legal position of Queensland Nickel, the assets and liabilities which it had and the legal and equitable incidents of the forgiving Joint Venturer’s relationship with Queensland Nickel, including the obligation to indemnify for liabilities properly incurred.
  1. Fifth, the legitimacy of the decision to forgive debts – justified in the way posited and viewed from the position of Queensland Nickel – would necessarily require (amongst other things) assessments made, as at the time of each forgiveness and referable to the amounts then forgiven, of the matters referred to in my fourth point but also of –
  1. (a)
    the then state of the Queensland Nickel’s net asset position; and
  2. (b)
    whether the forgiveness materially prejudiced Queensland Nickel’s ability to pay its debts, each of which assessments would have to pay proper regard to the separate legal position of Queensland Nickel, the assets and liabilities which it had and the legal and equitable incidents of its relationship with the Joint Venturers, including its ability to ensure that the Joint Venturers could and would indemnify Queensland Nickel in respect of its liabilities properly incurred.
  1. Sixth, I am not presently satisfied that the evidence relied on by the defendants demonstrates that such assessments were made either at all or adequately at the time the alleged forgivenesses occurred.  Especially concerning is the fact that, on the evidence presently before me, the relevant decision makers for both Queensland Nickel and the Joint Venturers[52] seemed to act on the hypothesis that Queensland Nickel had no assets and the Joint Venturers owed Queensland Nickel no indemnity obligations (whether personal or proprietary) in respect of liabilities which Queensland Nickel had properly incurred on behalf of the Joint Venturers. 
  2. Seventh, although I am conscious that the defendants did adduce opinion evidence from PwC which stated:

… we consider that in the relevant years both QNI Resources Pty Ltd and QNI Metals Pty Ltd should have been able to comply with the requirements of Section 254T for the payment of dividends. This is supported by the signed audited accounts for those companies for the relevant years,

that opinion suffered from its reliance on the audited accounts of each of the Joint Venturers and the audited consolidated accounts of the Queensland Nickel Group.  Further, it was not demonstrated to me that the facts or assumptions on which the opinion relied paid proper regard to the fourth, fifth and sixth points I have made.  And, finally, the opinion was subject to restrictions not expressed in it; stated that it had been prepared “solely for Mr Palmer’s internal use”; stated that the authors did not accept any responsibility for losses occasioned by any contrary use; and stated that the authors “do not accept any responsibility or liability arising from the inaccuracy or incompleteness of any information provided to us”.

  1. Eighth, I am also conscious that the defendants did adduce opinion evidence from Mr Dinoris which suggested that his review of the financial statements suggested that “profit distributions were effectively achieved in accordance with debt forgiveness to the related parties totalling $115m … [and] … analysis indicates, that over the period, the entities could have at least paid the amount of debt forgiveness as dividends”.  But, again, that expression of opinion suffered from its reliance on the audited accounts of each of the Joint Venturers and the audited consolidated accounts of the Queensland Nickel Group and because it was not demonstrated that the facts or assumptions on which the opinion relied paid proper regard to the fourth, fifth and sixth points I have made.
  2. Presently, I do not regard the case which the defendants have identified to be such as would explain away the case presented by the plaintiffs which is adverse to the decisions made, and certainly not to the extent as would reduce its strength below that of being a good arguable case.

Queensland Nickel encounters cash flow problems

  1. By September 2015, the nickel price was at a 6-year low and Queensland Nickel had identified that it was facing short term pressure on its cash flow in the form of an estimated cash shortfall between October 2015 and April 2016 of varying amounts up to $20 million.  Indeed, as at 30 September 2015, it had incurred losses of $30.7 million dollars for the quarter year. 
  2. As at 9 October 2015, Queensland Nickel was certainly missing the monies which it had paid away over the previous few years.  It had cash available to pay its creditors of $506,165.84 and $USD2,430,406.90, but it had creditors due for payment of $30,346,034 and $USD674,444.  
  3. Whilst the Joint Venture Agreement provided it with a mechanism to call for payment from the Joint Venturers, in October 2015, the assets of the Joint Venturers were not sufficient for Queensland Nickel to obtain sufficient cash to pay its debts as they fell due.  If Queensland Nickel was to survive, it needed to obtain funds from some other source.  
  4. Queensland Nickel made significant attempts to obtain that funding during the last quarter of 2015.  Direct approaches were made to domestic and international banks and to State and Federal government.  Consultants were engaged.  Support or accommodation was sought from its single largest creditor, Aurizon.  Mr Palmer was intimately involved in these efforts.  The evidence before me contained a lengthy chronology which had been prepared by Mr Wolfe for his public examination which details these efforts.  
  5. One aspect of those efforts should be mentioned, namely the efforts which were made to obtain accommodation from Aurizon.  I identify some parts of that chronology below because they are material to an evaluation of subsequent transactions now impugned by the plaintiffs:
    1. On 12 October 2015, there was a meeting with Aurizon between James Moutafis of Aurizon and Mr Palmer and Mr Wolfe for Queensland Nickel. They presented the 2015 annual report, nickel price forecast, discussed cash flow position and requested a commercial facility for $25 million at commercial interest rate and no repayments before April 2016.  Mr Moutafis advised he would consider and respond within two days.
    2. On 20 November 2015, Aurizon identified the amounts outstanding as at that date and required payment by 27 November 2015.  On 26 November 2015, Queensland Nickel rejected that proposal and suggested a meeting on 2 December 2015.
    3. On 27 November 2015, Aurizon issued notices of default demanding immediate remedy of default by paying all outstanding amounts within 28 days.
    4. On 8 December 2015, the meeting which Queensland Nickel had earlier requested occurred.  Mr Palmer and Mr Wolfe attended for Queensland Nickel and proposed a deferred payment plan until May 2016 with Queensland Nickel offering security over various assets.  On 9 December 2015, Queensland Nickel proposed as security land holdings in Central Queensland; coal tenements held by Queensland Nickel; and any other security which could be agreed between the parties.
    5. On 10 December 2015, Aurizon rejected Queensland Nickel’s proposal and advised that any security proposed must be “provided by entities external to the QNPL group of companies, unencumbered and capable of liquidation by Aurizon at a time of its choosing and at least equivalent in value to the amounts overdue and proposed to be deferred by QNPL”.  
    6. On 14 and 15 December 2015, further communications clarified that a loan from Aurizon was not possible; that a deferred payment plan with acceptable security was possible; and that Aurizon would consider a proposal using Waratah Coal as security.
    7. By 17 December 2015, Queensland Nickel had made a proposal that Waratah Coal could provide its main coal deposit on a particular mining tenement as security.  The tenement was an exploration permit for coal.
    8. On 18 December 2015, Aurizon rejected Queensland Nickel’s proposed deferred payment plan and rejected the security to be provided by Waratah Coal.  Aurizon advised that it would extend the deadline to comply with its default notice issued on 27 November 2015, until 18 January 2016.
    9. On 6 January 2016, Aurizon reiterated its rejection of the notion of security being provided by Waratah Coal and the unacceptability of coal assets as security.  Mr Wolfe’s chronology stated:

[Aurizon advised] that the security suggested by Waratah Coal is not acceptable despite removal of caveats, and that Aurizon is not interested in having payment of outstanding money tied to any potential sale of coal assets. The letter advised that “... focus on proposing unencumbered security by entities external to the QNPL group of companies. Unencumbered means security not restricted by registrations or agreements that prevent dealing with the asset. Acceptable security is preferably real property ...” The letter further advised that “... A proposal that meets this criteria should be submitted to Aurizon no later than 12 January 2016 to allow Aurizon sufficient time to consider it before 18 January 2016 ... If all the amounts due and owing pursuant to the Notice are not paid on or before 18 January 2016, Aurizon reserves all of its rights under the agreements, including but not limited to a) the suspension of rail haulage in the week commencing 18 January 2016.

  1. By this time, Aurizon had made it clear that any accommodation with Aurizon would require Aurizon to be provided security which met the following criteria:
    1. it was unencumbered;
    2. it was provided by entities external to the Queensland Nickel group of companies;
    3. it was of a nature that was easy to understand and easy to realize, preferably real property; and
    4. the realization of the security was not tied to any potential sale of coal assets.
  2. On 13 January 2016, Aurizon advised that it did not acquiesce in any payment plan and reiterated its intention to suspend rail services on 19 January 2016 if Queensland Nickel failed to comply with the default notices by 18 January 2016.
  1. All of the efforts made to obtain funding were to no avail and on 18 January 2016, Queensland Nickel went into administration.
  2. Mr Parbery expressed the view that Queensland Nickel could not raise funds from its own assets, from the Joint Venturers or any other source, sufficient to pay its debts as and when they fell due, and was insolvent from 9 October 2015 up to and including 18 January 2016.  On the material presently before me, I think the plaintiffs have a good arguable case that that was so.  
  3. That conclusion is material to the insolvent trading case against Mr Palmer.  In the period after 9 October 2015 and up to the date of the administration,[53] Queensland Nickel incurred the further debts listed in Schedule K to the statement of claim, which total $13,434,793.85.

Unpaid liabilities of Queensland Nickel

  1. At the time Queensland Nickel was placed into administration on 18 January 2016, Mr Mensink provided the administrators with a report as to the affairs of Queensland Nickel which recorded the following position as at 18 January 2016: 
    1. Queensland Nickel had no assets.
    2. Queensland Nickel had liabilities of at least $226,390,547 comprising:

Amounts owing for employees entitlements ($14,123,276 for current employees and $16,167,492 for separated employees)

$30,291,768

Preferential creditor (China First Pty Ltd for share subscription agreement)

$135,000,000

Partly secured creditor (Vale New Caledonia for coal and ore inventory)

$7,178,713

Unsecured creditors (invoices and accruals)

$53,920,066

Total

$226,390,547

  1. That statement was not a correct statement of the pre-administration asset position, not least because it ignored the fact that Queensland Nickel had legal title to real property and that bank accounts were in its name.  Even if Queensland Nickel held those assets in trust, the assets were still assets which it held at law: Queensland Nickel had the legal title under the Land Titles Act 1994 (Qld), and Queensland Nickel had the legal title to the chose in action against a bank which flowed from having a bank account with a positive balance in its name.   It is also notable that the statement pays no regard to the value of any rights of indemnity which Queensland Nickel might have as against the Joint Venturers or property owned by them. 
  2. Mr Mensink’s report did cast at least some light on his view of the component parts of the pre-administration debts, the great bulk of which were not discharged in the period of the administration and before Queensland Nickel was placed into liquidation:
    1. The $16,167,492 for separated employees represented total redundancy entitlements for 237 employees who had been made redundant on 15 January 2016, prior to the appointment of administrators.
    2. The $53,920,066 owed to unsecured creditors was an admitted amount and there was a further amount claimed by unsecured creditors of $6,819,580 which was disputed.
    3. One major pre-administration debt was the amount owed by Queensland Nickel to Aurizon for rail freight services.  In November 2015, after negotiations for a revised payment plan failed, Aurizon issued a notice of default for non-payment under a service contract for the amount of $11.9 million.  Presumably the amount owed to Aurizon formed a large part of what Mr Mensink had recorded as the amount admitted to be due to unsecured creditors.  In Mr Mensink’s testimony on 20 April 2016 before Burns J, Mr Mensink conceded that as at November 2015, the amount of $7.8 million was owed.
  3. However the evidence before me was not limited to Mr Mensink’s statement.  Rather, the results of the plaintiffs’ investigation of the liability position is set out in their statement of claim and verified in affidavits sworn by Mr Parbery and his partner Mr Owen.  That evidence revealed a position considerably more bleak than had Mr Mensink’s report.  For the reasons which follow, the plaintiffs have a good arguable case that the true position was as they expressed.
  4. The plaintiffs’ statement of claim asserts that from on about 31 January 1995 up to and including the appointment of administrators on 18 January 2016, Queensland Nickel acted as General Manager solely for the benefit of the Joint Venturers.  In so doing, Queensland Nickel contends that it incurred liabilities including contingent liabilities solely for the benefit of the Joint Venturers and that it did so to the knowledge of, and at the request of, or alternatively the acquiescence of, the Joint Venturers.  It pleads that the unpaid liabilities so incurred were those set out in Schedule E to the statement of claim.
  5. Schedule E set out details of a total amount of unpaid liabilities of $209,965,603.71, comprising –
    1. employee entitlements totaling $74,031,845.17, comprising in respect of some 758 employees identified by numerical employee identifier numbers the following amounts:
      1. unpaid wages totaling $190,946.96;
      2. annual leave totaling $7,266,475.30;
      3. PILN (presumably, payment in lieu of notice) totaling $6,205,922.30;
      4. redundancy, totaling $50,705,163.79; and
      5. long service leave, $9,663,336.82; and
    2. a number of identified third party creditors totaling $135,933,758.54, ranging from the $88,197,831.55 amount claimed by Aurizon to a creditor claiming $52.80.
  6. Mr Parbery’s first affidavit[54] deposed to having verified the debts (which were the debts which also formed part of calls which were made on the Joint Venturers after Queensland Nickel was placed into administration) as amounts which were “prima facie due and owing” and which had not been paid by the Joint Venturers.  His affidavit was made based on the books and records of Queensland Nickel and investigations and inquiries which he and his staff had made into that information.  Further verification of those liabilities was set out in Mr Owen’s affidavit[55] and in a second affidavit by Mr Parbery.[56]  
  7. Mr Owen’s affidavit was also informed by investigations and inquiries which he had made into the books and records of Queensland Nickel.  He explained that – 
    1. as to the liability in respect of employee entitlements totaling $74,031,845.17 –
      1. $65,691,588 was owed to the Commonwealth of Australia for unpaid employee entitlements as at 18 January 2016, which was further verified by a signed proof of debt asserting that claim; and
      2. the remaining amounts consisted of unpaid employee entitlements with respect to employees terminated by Queensland Nickel during the course of the voluntary administration; and
    2. as to the liability for third party creditors totaling $135,933,758.54 –
      1. all of those claims are supported by signed proofs of debt having been lodged by the claimant creditor;
      2. he exhibited the signed proof of debt for the 15 highest value creditors, which together accounted for $132,895,427.42; and
      3. he said that the special purpose liquidators had in their custody copies of the remaining proofs of debt for the other creditors listed in Schedule E to the statement of claim, together with the supporting documents attached to them.
  8. Whilst the amounts thus referred identified the position which ultimately obtained, many of the liabilities derived from obligations which had been entered into in previous financial years.  For example, employment agreements for 753 out of the 758 employees had been entered into in previous financial years than the financial year ended 30 June 2016.  Obviously enough, a significant part of the ultimate liability in respect of those employees must have been contingent until the employees were terminated.  And, the proofs of debt exhibited reveal that the amount owing to the largest third party creditor (Aurizon) was $88,197,831.55 and the agreements giving rise to this amount were entered into in the financial year ended 30 June 2015.  The amounts claimed in respect of the second and third largest third party creditors also derive from commitments entered into in previous financial years. 
  9. Although the foregoing material is presented at a high level of generality at present, I am satisfied that the plaintiffs have established a good arguable case as to the matters they plead in relation to the incurrence of the debts they have identified.  When he was cross-examined by Mr Palmer, Mr Parbery conceded that there had not yet been any formal adjudication on the debts claimed by the proving creditors, because that was the role of the general purpose liquidators.  But I did not think the fact that that has not yet occurred adversely affected the conclusion I have expressed.

Alleged voidable transactions entered into when administration was imminent

  1. On 8 January 2016, Queensland Nickel engaged PwC on a short term consultancy (to end on 15 January 2016) to advise about restructuring options and stakeholder management in the short term.  
  2. On 12 January 2016, PwC emailed Queensland Nickel’s Mr Wolfe and advised:
    1. they had made calls to targeted alternative debt funds / financiers to ascertain potential appetite for provision of funding to the Queensland Nickel operations; 
    2. they believed there was sufficient interest to approach some or all of these parties with more detailed information at meetings which would –
      1. enable Queensland Nickel and PwC to determine quickly the parameters of a potential transaction, timing and key risks to completion; and 
      2. enable the financiers to get a better understanding of the proposed restructuring plan and robustness of the forecast cash flows post-implementation of the plan;
    3. they had met that morning with Aurizon, and Aurizon had conveyed to them:
    1. Aurizon was only interested in security provided by a source outside Queensland Nickel;
    2. Aurizon would expect that any security provided would cover both past debts and any future debts;
    3. Aurizon’s attitude was that negotiations had gone on too long; it was too late to negotiate new terms or be creative; and they required external security the worth of which was of a nature that was easy to understand and easy to realize;
  1. they had conveyed to Aurizon that if Aurizon removed rail access it would likely force Queensland Nickel into administration;
  2. Aurizon conveyed that the terms of any agreement that Aurizon was prepared to proceed with Queensland Nickel had already been robustly debated and it was too late to change that now;
  3. PwC suggested that key points to be explored with some urgency were:
    1. what assets could be pledged which would meet both Aurizon’s requirements (an easy asset to determine value and to realize) and which Mr Palmer would be comfortable in providing security over; and
    2. obtaining legal advice and proceeding to documentation;
  4. PwC concluded (emphasis added):

Based upon the feedback from the debt providers there is genuine interest in proceeding to the next stage of due diligence. For this to proceed [Queensland Nickel] needs to remain out of Voluntary Administration.  Based on Aurizon’s stance it would appear necessary to provide them with the security they require else they may well stop supply.

  1. On the evidence presently before me there is a good arguable case that as at 12 January 2016 it must have been obvious to Queensland Nickel (including Mr Palmer, Mr Mensink and Mr Wolfe) that:
    1. if Queensland Nickel was to remain out of voluntary administration, it would be necessary to reach an accommodation with Aurizon before 18 January 2016 which met Aurizon’s requirements for securing past and future debt; 
    2. staying out of voluntary administration was necessary to proceed further with the financiers identified by PwC; and
    3. any accommodation with Aurizon would require Aurizon to be provided security which met the requirements Aurizon had already communicated, namely –
      1. it was unencumbered;
      2. it was provided by entities external to the Queensland Nickel group of companies;
      3. it was of a nature that was easy to understand and easy to realize, preferably real estate; and
      4. the realization of the security was not tied to any potential sale of coal assets.
  2. The following day, on 13 January 2016, two transactions were entered into which it is convenient to refer to as the “China First transaction” and the “Waratah Coal transaction”.  Although Mr Palmer gave evidence that some decisions were made in relation to the transactions whilst he was not present, I think that it is highly improbable that the transactions would have proceeded as they did had he not approved of them beforehand.  As will appear, although the transactions were explicitly framed as transactions which could place Queensland Nickel in the position of having access to additional assets to secure further external borrowing with a view to staving off administration, the evidence presently suggests that they did not meet the requirements of what would have appeared to have been the precondition of achieving that outcome, namely making a deal with Aurizon.  That was  because –
    1. for the Waratah Coal transaction, the security was over Waratah Coal’s coal tenements and Aurizon had already rejected that security; and
    2. for the China First transaction, the security would be shares in China First which would be owned by Queensland Nickel and would, accordingly, not be external security, and would, in any event, not meet Aurizon’s requirements because China First had no assets other than contractual rights in relation to carrying out the China First Coal Project, which was at that time undeveloped and speculative in nature, and, obviously enough, a coal asset.
  1. To explain that last point, it is appropriate first to set out some background about the China First Coal Project.
    1. Waratah Coal owned two exploration permits for coal (EPCs), namely EPC1040 and EPC1079 near Kia Ora, about 13 km west and 35 km north of Alpha in Central Queensland, an area known as the Galilee Basin.  The China First Coal Project involved a proposal for a coal mining operation and associated transport facilities to be conducted within the area covered by those two EPCs.  EPC1040 covered the main coal deposit.  This was the tenement which was offered to and rejected by Aurizon as security for an accommodation with it. 
    2. China First and Waratah Coal had entered into a Mining Right Agreement dated 8 July 2009.  Notably:
      1. That agreement gave China First rights to mine coal within the EPCs or any future title which Waratah Coal might obtain. 
      2. China First’s mining rights were conditional upon Waratah Coal being granted a right under the Mineral Resources Act 1989 (Qld) which would permit the actual conduct of mining activities and would also terminate if Waratah Coal was not able to renew its tenements.
      3. China First’s mining rights were subject to discretionary termination by Waratah Coal if within 5 years of the date of the agreement, China First had not prepared and submitted a development plan.
      4. China First’s mining rights were subject to discretionary termination by Waratah Coal if within 7 years of the date of the agreement (i.e. by 8 July 2016) it had not commenced development operations within the mining area.
    3. As at January 2016, it would have been obvious that China First’s contractual rights would become vulnerable to discretionary termination by Waratah Coal in July 2016 because China First would not have commenced development operations by that date.  
    4. Mr Palmer exhibited a written report prepared by a consultant, Mr King, in January 2016, which explained that the proposed project was designed to extract coal sufficient to produce about 40 million tonnes per year of saleable processed thermal coal over an operating period of 25 years of commercial-scale production.  The contemplated total capital cost for the project exceeded $8 billion, and the forecast return on equity capital before tax was 20.2% per year.
    5. Waratah Coal engaged BDO Corporate Finance (Qld) Limited (BDO) to calculate an indicative range of value for its coal resources for the project based on the implied resources multiples observed for the most recent comparable transactions identified only.  The results of BDO’s analysis, which BDO described as an “indication of thermal coal resources values on a non-reliance basis”, were presented in a letter to Waratah Coal dated 8 January 2016.  BDO specifically stated that its letter did not provide a valuation because a valuation would require further work to be done and might result in materially different values.  No one other than Waratah Coal could rely on the letter unless BDO’s express consent had been obtained.  BDO’s letter went on to warn that “readers of this letter should conduct their own due diligence” and “engage appropriate advisors to assess the merits of the assets of Waratah Coal”.
  1. BDO noted that the China First Assets were comprised of coal deposits that were “undeveloped and speculative in nature”.  BDO calculated an indicative value range for the China First Assets of $51.6 million to $246.8 million for a 3.684 billion tonne resource.  That expression of view was expressly qualified by reference to –
    1. the degree of comparability of the identified comparable transactions;
    2. the amount of capital expenditure needed before the China First coal assets could be developed; and
    3. the reliability of the estimate of quantity of the coal deposits.
  2. In a separate letter on the same date containing the same qualifications to which I referred, BDO did a different calculation based on the implied multiples for the most recent comparable transactions identified on a reserves basis only, arriving at an indicative value of $198.2 million.  The difference between the two letters was that the first letter was calculated by reference to the total resource of 3.684 billion tonnes, that resource comprising both “measured”, “indicated” and “inferred quantities” and the second letter expressed a calculation by reference to 1.105 billion tonnes of certified reserves.  The former letter had a range of indicative values because there was a wide variation in comparable transactions.  The latter letter came up with only one figure because there was only one comparable transaction.
  1. It is appropriate at this juncture to identify the salient features of the Waratah Coal transaction and the China First transaction.

The Waratah Coal transaction

  1. The Waratah Coal transaction was implemented by the following:
    1. an agreement titled “Agreement” dated 13 January 2016 and entered into between Queensland Nickel, QNI Metals, QNI Resources and Waratah Coal (the Waratah Coal Agreement);
    2. an agreement titled “Security Deed” dated 13 January 2016 and entered into between Queensland Nickel, QNI Metals, QNI Resources and Waratah Coal (the Security Deed); and
    3. an undated charge (entered into on about 13 January 2016) executed by Queensland Nickel, granting a fixed and floating charge to Waratah Coal up to an amount of $USD100,000,000 together with interest and costs (the Waratah Coal charge).
  2. The Waratah Coal Agreement provided as follows:
    1. by its recitals:
      1. Queensland Nickel had been requested by Aurizon that it arrange for a security to secure payments by Queensland Nickel to Aurizon and/or the QN Parties [which was a term defined to mean Queensland Nickel, QNI Metals, and QNI Resources] or any other party;
      2. during discussions with Banks for credit, Banks had requested Queensland Nickel to have property available outside the QN Group to lend against;
      3. Waratah Coal had agreed to provide certain specified mining tenements to any party nominated in writing by Queensland Nickel or for any of the QN Parties to Waratah Coal as security for any borrowings or transaction;
    2. by cl 1, certain terms were defined, including:
      1. the term “Deed” was defined to mean “a deed between the parties whereby Waratah had agreed to provide the Tenements for as security for borrowings or for any other QN Parties”, thereby encompassing the Security Deed;
      2. the term “Palmer Parties” was defined to mean “all companies or entities ultimately owned by Clive F Palmer now or in the past and Clive Palmer and Related Parties”;
      3. the term, “the QN Parties” to which reference has already been made;
      4. the term “Release” was defined to mean “all loan forgiveness made by Queensland Nickel and/or any of the QN Parties to the Palmer Parties or any of them up to the date of execution of this Agreement”;
  1. by cl 2: “the Consideration for Waratah entering into the Deed is the Release”;
  2. by cl 6:

Each of the QN Parties indemnifies Waratah [Coal] and the Palmer Parties against all claims, proceedings, expenses, costs (including legal costs on a solicitor and own client basis), damages, losses and other liabilities of any kind incurred in connection with:

  1. Any breach by any of the QN Parties of this Agreement; or
  2. Any act or omission by any employees, agents or advisers of any of the QN Parties or acting in place of or for any QN Party which, if done or omitted to be done by any of the QN Parties, would be a breach of QN’s obligations under this Agreement.
  1. It may be observed that the wording of cl 6 contemplated an operative promissory term which might be capable of being breached.  A problem of interpretation is that the only candidate for such a clause was cl 2, yet it was not promissory in terms.  Further, the definition of “Release” was expressed in a way which seemed to contemplate loan forgiveness made other than by the terms of the agreement in which it appeared.  The result was that cl 2 was not entirely apposite as an operative term making a release.  On the other hand, what other function did the Waratah Coal Agreement have?  Mr Palmer gave evidence before me which suggested that he thought the Waratah Coal transaction did provide for the granting of such releases.
  2. The Security Deed provided as follows:
    1. by its recitals:
      1. the QN Group (defined to encompass, jointly and severally, Queensland Nickel and the Joint Venturers) had been informed by one or more creditors (or potential creditors) (predominantly Aurizon and the NAB) that such creditors would be more commercially disposed to extend credit to the QN Group if security for such credit could be provided by entities outside of the QN Group;
      2. Waratah Coal, at the request of the QN Group, had agreed to make certain assets available to be taken as security by select creditors, subject to the terms of the Security Deed;
      3. the QN Group acknowledged that Waratah Coal was required to take security over each of the QN Group companies if and when Waratah Coal is called upon to provide its property as security for any credit provided to, or facilities made available to, select creditors of the QN Group;
    2. by cl 1.1, Waratah Coal agreed to provide two EPCs, namely EPC1040 and EPC1074, as security for credit or facilities provided by creditors of the QN Group approved by Waratah Coal under cl 1.2;
    3. by cl 1.2, Waratah Coal was under no obligation to make any part of the security available as security for the QN Group’s creditors unless it was reasonably satisfied that the terms of any such facility:
      1. were in the best interests of the QN Group;
      2. were reasonably necessary to protect the legitimate commercial interests of the creditor, QN Group and Waratah Coal;
      3. did not unreasonably diminish the value of the security provided by Waratah Coal or any part of it;
      4. did not extend beyond the ordinary business operations of the QN Group; and 
      5. were not unduly onerous or harsh, having regard to the nature of the facility or the type of credit to be provided;
    4. by cl 1.3, Waratah Coal must be provided with copies of:
      1. any credit application made by or on behalf of the QN Group, letters of offer or acceptance of finance given by or on behalf of a creditor; and
      2. security or facility documents relative to the proposed facility or credit submitted by a creditor, within seven days of an application or receipt of such documents;
  1. by cl 2.1, subject to cl 1, Waratah Coal agreed it would make the security available for mortgage or charge as security for credit facilities to be made available to the QN Group for the purposes of its day to day business operations and otherwise on terms and conditions reasonably required by such credit provider or lender.
  2. by cl 2.2, the QN Group acknowledged, inter alia, that the pledge by Waratah Coal to provide security was in the best interests of the QN Group having regard to the fact that the QN Group may not otherwise have access to credit to facilitate its day to day business operations;
  3. by cl 3.1, in consideration of Waratah Coal pledging its security the QN Group, agreed to provide a fixed and floating charge in favour of Waratah Coal, such charge to remain in place until all facilities were repaid and any charge or mortgage granted to a creditor over the security over Waratah Coal’s mining tenements had been fully discharged and released.
  1. The Waratah Coal charge was a more complex document than the previous two.  The following observations may be made:
    1. The “Chargor” was defined as Queensland Nickel and the two Joint Venturers, jointly and severally: cll 1.1(7) and 1.4.  Waratah Coal was the “Chargee”.
    2. By cl 2.1, the Chargor charged all the Secured Property in favour of the Chargee to secure the punctual payment of the Secured Money and to secure the punctual performance of the other Obligations.  Each of the capitalized terms in cl 2.1 were very broadly defined in cl 1.1:  
      1. “Secured Property” encompassed the Chargor’s interest in all its present and future real and personal property.  
      2. Amongst other things, “Secured Money” was defined to include “all money the payment or repayment of which from time to time forms part of the Obligations”. 
      3. “Obligations” was defined to encompass prospective or contingent liabilities.
    3. The Charge operated as a fixed or floating charge.  Clause 2.9 provided that “For the purposes of fixing priorities between the Charge and any other charge registrable under the Personal Property Securities Act 2009, the Charge secures a prospective liability of the nature specified in Item 5 of the Schedule”.  Item 5 provided that the nature of prospective liabilities were “amounts for which the Chargee may become liable under a security deed between the Chargee and the Chargors.  Maximum prospective liability: $USD100,000,000 together with interest and costs”.
    4. On the occurrence of an “Insolvency Event” (a term widely defined, and including the appointment of an administrator), the floating charge would become a fixed charge:  cl 2.5(1).  More significantly, the Secured Money would become immediately payable at the Chargee’s option and the charge would become immediately enforceable: cl 8.1.  
  2. The last point is notable.  At the time Queensland Nickel entered into the Waratah Coal charge, an insolvency event was likely in the immediate future, absent reaching an accommodation with Aurizon, and the transaction did not advance the likelihood of such an accommodation.  Yet if an insolvency event occurred, cl 8.1 would apparently render immediately payable at Waratah Coal’s option the whole of a $USD100,000,000 liability, which at that stage could only be regarded as at best prospective.  As will appear, within weeks, Waratah Coal in fact lodged a proof of debt to the administrators claiming that amount, notwithstanding that it had not yet provided any of its assets as security for any borrowing by the QN Group.

The China First transaction

  1. The China First transaction was implemented by the following:
    1. an agreement titled “Share Subscription Agreement” dated 13 January 2016 and entered into between Queensland Nickel, QNI Metals, QNI Resources and China First whereby Queensland Nickel  agreed to obtain shares in China First for a total amount of $135,000,000, payable in two instalments on 31 December 2017 and 31 December 2018 (the Share Subscription Agreement); and
    2. an agreement dated 13 January 2016 between Queensland Nickel, QNI Metals, QNI Resources and China First as chargee granting a fixed and floating charge in favour of China First for the amounts due and owing under the Share Subscription Agreement for a total amount of $135,000,000 together with interest and costs (the China First charge).
  2. The Share Subscription Agreement contained the following terms: 
    1. by its recitals:

[Queensland Nickel] agrees to subscribe for the Subscription Shares and [China First] agrees to issue and allot the Subscription Shares to [Queensland Nickel] on the terms and conditions of this Agreement.

  1. by cl 1:
  1. “QN Parties” was defined to mean Queensland Nickel[57] and the Joint Venturers;
  2. “Subscription Shares” was defined to mean 2,000,000 fully paid ordinary shares in the capital of China First;
  3. “Total Subscription Share Price” was defined to mean $135,000,000.00;
  1. by cl 2.1, Queensland Nickel agreed to subscribe for the Subscription Shares and China First agreed to allot and issue the Subscription Shares for the Total Subscription Share Price on the terms set out in the agreement;
  2. by cl 3.2, on the execution of the agreement, the Total Subscription Share Price would be payable by Queensland Nickel to China First in instalments as follows:
    1. $67,500,000 on or before 31 December 2017; and
    2. $67,500,000 on or before 31 December 2018;
  3. by cl 6.14:

Each of the QN Parties shall on execution of this agreement forthwith execute a Charge in favour of the Company [China First] securing their payment obligations under this Agreement.

  1. The China First charge was similar in form to the Waratah Coal charge.  The following observations may be made:
    1. The “Chargor” was defined as Queensland Nickel and the two Joint Venturers, jointly and severally: cll 1.1(7) and 1.4.  China First was the “Chargee”.
    2. By cl 2.1, the Chargor charged all the Secured Property in favour of the Chargee to secure the punctual payment of the Secured Money and to secure the punctual performance of the other Obligations.  Each of the capitalized terms in cl 2.1 were very broadly defined in cl 1.1:
      1. “Secured Property” encompassed the Chargor’s interest in all its present and future real and personal property.  
      2. Amongst other things, “Secured Money” was defined to include “all money the payment or repayment of which from time to time forms part of the Obligations”.
      3. “Obligations” was defined to encompass prospective or contingent liabilities.  The definition would seem to extend to encompass the $135,000,000 liability created by the Share Subscription Agreement.  
    3. The Charge operated as a fixed or floating charge.  Clause 2.9 provided that “For the purposes of fixing priorities between the Charge and any other charge registrable under the Personal Property Securities Act 2009, the Charge secures a prospective liability of the nature specified in Item 5 of the Schedule”.  Item 5 provided that the nature of prospective liabilities were “amounts due and owing under a Share Subscription Agreement between the Chargee and Queensland Nickel Pty Ltd on behalf of the chargors. Maximum prospective liability: $135 million together with interest and costs”.
    4. On the occurrence of an “Insolvency Event” (a term widely defined, and including the appointment of an administrator), the floating charge would become a fixed charge:  cl 2.5(1).  More significantly, the Secured Money would become immediately payable at the Chargee’s option and the charge would become immediately enforceable: cl 8.1.  
  2. As it was with the Waratah Coal charge, the last point is notable.  At the time Queensland Nickel entered into the China First charge, an insolvency event was likely in the immediate future, absent reaching an accommodation with Aurizon, and the transaction did not advance the likelihood of such an accommodation.  Yet if an insolvency event occurred, cl 8.1 would apparently render immediately payable at China First’s option the whole of a $135,000,000 liability.  As will appear, within weeks, China First in fact lodged a proof of debt to the administrators claiming that amount.

Queensland Nickel is placed into administration and then liquidation

  1. Queensland Nickel was placed into voluntary administration on 18 January 2016.  
  2. Prior to accepting their appointment, the administrators obtained a number of indemnities and securities to protect their position.  Their second report to creditors summarised them in this way:

Description

Definition

Nature of Indemnity

QNI Resources and QNI Metals have each given a guarantee and unlimited indemnity in favour of the Administrators on account of amounts owing to the Administrators by QN and that remain unpaid.  The indemnity extends to all liabilities incurred by QN during the Administration, the Administrators on behalf of QN, as well as our remuneration and disbursementsThe obligations of QNI Resources and QNI Metals are supported by a General Security Deed All Property, given by each of those entities in favour of the Administrators.

General Security

Deed – All

Property

Both QNI Resources and QNI Metals have granted to the Administrators a security interest over all of its present and after acquired property to secure amounts owed by QN and each of QNI Resources and QNI Metals to the Administrators under the Act. This security interest has been registered on the Personal Property Securities Register (PPSR).

The appointment of the Administrators to QN does not of itself constitute an Event of Default under this document.

Priority Deed

Waratah Coal Pty Ltd (Waratah Coal) and China First Pty Ltd (China First) have taken a security interest over all the present and after acquired property of each of the QN, QNI Resources and QNI Metals (prior Securities).  These securities pre-date the securities given in favour of the Administrators and are registered on the PPSR.  The purpose of the Priority Deed is to regulate the competing priorities as between the Prior Securities and the securities granted in favour of the Administrators, including to provide that the securities granted in favour of the Administrators rank in priority to the Prior Securities.

Description

Definition

Other Documents

– Power of

Attorney

An irrevocable Power of Attorney has been granted by each of QNI Resources and QNI Metals (each a Principal) and provides the Administrators with all the rights of a natural person to deal with any assets of a Principal from time to time. In addition, each document incorporates certain undertakings to be given by the Principal to the effect that the Principal must not deal with the Assets without the prior written consent of the Attorney.

Other

Documents: Joint

Venture

Agreement

The Joint Venture Agreement contains restrictions on the provision of security and also the rights of QNI Resources and QNI Metals in any assignment or sale of its interest in the Joint Venture. A Side Letter provided by QNI Resources and QNI Metals addresses certain of these restrictions and requirements.

  1. After their appointment, the administrators issued calls which purported to be a calls under cl 6.4 of the Joint Venture Agreement calling upon the Joint Venturers to pay monies to Queensland Nickel as follows:
    1. on 24 February 2016, requiring payment of $16,441,186 on or before 4 March 2016;
    2. on 30 March 2016, requiring payment of  $73,903,271 or before 5 April 2016; and
    3. on 6 April 2016, requiring payment of $116,181,175.46 on or before 12 April 2016.
  2. The debts which were the subject of the calls were the great bulk of the unpaid pre-administration liabilities to which I have earlier referred.
  3. However, in between the first and the second of those calls the following events happened:
    1. On 3 March 2016, Mr Mensink wrote to the administrators and asserted “[t]here is no budget that has been approved by the Joint Venture and the Joint Venture does not recognize the liability”.
    2. On 3 March 2016, the JVOC met and resolved to remove Queensland Nickel as Manager and General Manager for the Joint Venture; to appoint Queensland Nickel Sales as manager for the Joint Venture; and to withdraw all calls made by Queensland Nickel in its former role as manager.  
    3. On about 7 March 2016, the Joint Venturers notified Queensland Nickel (by its administrators) of its termination as Manager and General Manager and the appointment of Queensland Nickel Sales.  Demand was made that all Joint Venture Property and all documents, books, accounts and records of the Joint Venture be provided to Queensland Nickel Sales and title to any Joint Venture Property held in Queensland Nickel’s name be transferred to Queensland Nickel Sales.
    4. On 22 March 2016, QNI Resources and QNI Metals lodged proofs of debt with the administrators, respectively claiming $246,433,255.00 and $61,608,313.80, which proofs were stated by them to be on the basis that as Queensland Nickel did not have an approved budget in place during the financial year ended 30 June 2016, it was not authorised to incur debts on behalf of the Joint Venturers. 
    5. On 29 March 2016, Queensland Nickel Sales, and the Joint Venturers jointly wrote to the administrators.  Amongst other things the letter –
      1. stated that the Joint Venturers had a claim of $308 million against Queensland Nickel, approximately $50 million of which related to expenditure which was not authorized, and China First had an outstanding claim of $135 million against Queensland Nickel;
      2. enquired whether the administrators would be agreeable to a mutual release of all claims, to move matters ahead more commercially;
      3. requested that Queensland Nickel provide $3 million to Queensland Nickel Sales to attend to safety issues in relation to the refinery, failing which they would hold the administrators personally liable for any damage suffered and would commence appropriate court proceedings;
      4. stated that assets of the Joint Venture parties were held pursuant to the Joint Venture Agreement and could not be used under any circumstances to pay creditors of Queensland Nickel; 
      5. requested that the administrators provide a comprehensive list of all creditors of Queensland Nickel and claims, as well as a detailed statement of position and cash flow;
      6. directed that no funds realized by the sale of Joint Venture Property was to be applied for any purpose other than as authorized in writing by the Joint Venturers;
      7. advised that the Joint Venturers were disappointed that the assets of the Joint Venture had not been transferred to the new manager as required by the Joint Venture Agreement and that they held the administrators personally liable for that failure.
  4. The positions of, on the one hand, Queensland Nickel, and, on the other hand, the Joint Venturers and Queensland Nickel Sales were then crystallized in correspondence and in the administrators’ report to creditors dated 11 April 2016.  Queensland Nickel maintained its stance that the monies had to be paid and that it would not hand over the assets it held.  For their part, the Joint Venturers and Queensland Nickel Sales contended that – 
    1. after 7 March 2016, Queensland Nickel was obliged to comply with the demand which had been given to it to return all Joint Venture Property (including any cash at bank) but it had wrongly refused so to do; 
    2. Queensland Nickel was not entitled to use any part of the Joint Venture Property to discharge any of the debts which it had incurred whilst General Manager of the Joint Venture; and
    3. the Joint Venturers had no liability to Queensland Nickel in relation to the debts which Queensland Nickel had incurred whilst General Manager of the Joint Venture.  
  5. The thinking behind the Joint Venturers’ positioning was subsequently further elucidated –
    1. by Mr Mensink (during his cross-examination before Burns J[58]):

Q: Do you believe that under the joint venture agreement to which the three companies, of which you are sole director, are parties, it is permissible for the nickel refinery to be run by Queensland Nickel as general manager - for that company to incur debts to employees, suppliers and suppliers of products and services, and for the two co-venturers, at a point of time upon which they determine, to remove Queensland Nickel as manager to appoint a new manager, and for the co-venturers then, and the new manager, to be free of all liability to creditors which preceded the removal and appointment of the manager? Is that how you see this joint venture agreement working?

 A:   Yes. Those debts were accumulated pre-appointment.

Q: In the world in which you believe you live, it’s possible for somebody to get all of the profit out of a business and to leave all of the debts behind if they enter into a contract like this one. Is that right?

 A:  Well, no. I’m just telling you how the …joint venture … document works.

Q: …Your belief is that this document allows Mr Palmer to take all the money that he’s taken, however much it was, out of the revenue stream from the business of Queensland Nickel while it incurred obligations that were necessary to incur in order to generate that revenue, and then at a time of his choosing to sack that manager, appoint a new one and leave the old manager with no assets from which to meet its obligations. Do you think that’s how the joint venture agreement operates?

Q: Well, in regards to what you’ve stated, the assets don’t belong to Queensland Nickel and the employees … would have continued operation

Q: … Is that how you think this agreement operates - that it allows Mr Palmer to do that?

Q: The agreement does permit it to happen, yes.

Q: All right. Do you want to qualify that or expand on that in any way? 

A: No, I was just stating and reaffirming that the idea was the employees and liabilities, as I said, would have transferred to the new company Queensland Nickel Sales as to the use of the assets.

Q: Right. And the debts get left behind?

A: The pre-appointment debts.

Q: Yes, yes, yes. Let’s not get into the disputed area. I mean, the pre-appointment debts?

A: That’s right.

Q: which are, am I right, tens of millions of dollars?

A: Yes.

Q: Mr Mensink, before lunch you explained that you believe that the way the joint venture agreement is that if a new manager is appointed by the joint venturers, who are entitled to appoint such a new manager, then the debts accrued by the former manager remain with that former manager and the joint venturers and the new manager don’t have to answer for them.

Do you remember giving that explanation?

A: I did, yes.

  1. by Mr Palmer, in a letter which he wrote on behalf of the Joint Venturers to the liquidators of Queensland Nickel on 27 June 2017 in response to a new round of call notices which had been issued in June 2017, in which he advanced the following propositions (amongst other things):
  1. none of the expenses for which Queensland Nickel claimed reimbursement were properly incurred because the expenditure had not been properly budgeted for in compliance with the requirements of the Joint Venture Agreement;
  2. Queensland Nickel could only ever recover monies if the amount was an amount on which there had been a valid call on the Joint Venturers under the Joint Venture Agreement; 
  3. Queensland Nickel could not issue call notices under the Joint Venture Agreement because it had been terminated; and
  4. the Joint Venturers therefore disputed any liability to make payments to Queensland Nickel in the amounts set out in the schedules to the call notices, or at all.
  1. During his oral evidence before me, Mr Palmer gave a version of his personal attitude which differed from that exhibited in the documents to which I have referred.  It proceeded in this way:
    1. He said in cross-examination that “We repeatedly asked the [general purpose liquidators] for accounts, so that we could pay them. At the time it went into administration, we’d met with them; in three meetings, requested accounts; if there was money to be paid, we wanted to pay it.  We needed to have the assets given to the new manager so we could inject cash in the new manager and keep operating”.[59]  This evidence seemed to be referencing the same period in which letters were being written on behalf of the Joint Venturers in March 2016, referred to above.
    2. He was cross-examined further on his earlier deposed evidence as to his personal agreement with my observations in QNI Resources Pty Ltd v Park at [131], which I have quoted at [132] above.  In cross-examination he said that “Well, I agreed basically with the proposition that if one party’s incurring costs for another party, the other party’s receiving the benefits of it, then the party who’s receiving the benefits should pay for those benefits.  That’s basically what I agree with.”
    3. He said that in March 2016 his position as the ultimate owner of the Joint Venturers and Queensland Nickel Sales was not that the Joint Venturers had no liability to Queensland Nickel in relation to the debts which Queensland Nickel had incurred whilst General Manager of the Joint Venture.  He said that there would be expenses or costs incurred by the General Manager of which QNI Metals and QNI Resources had got a benefit; and if that was the case and if they were proper expenses and they did get a proper benefit for them, then they would have the liability to pay them to the General Manager.
    4. He referred to having implored the administrators in March 2016 that they give the Joint Venturers an account, and said that, in his mind at the time that request for an account, he was thinking of the same thing as the request which had been made in the letter of 29 March 2016 (although he said that he had not seen that letter before).  
    5. He explained to me that he thought that, upon reflection, the communications with the administrators in March 2016 may have reflected decisions made by persons who did not have the knowledge or understanding or capability to do what needed to be done.
  2. I observe that it was not made clear to me during Mr Palmer’s evidence how he would reconcile the views which he said he had in March 2016 and again when he was crossexamined before me in September 2017, with the views expressed by him on behalf of the Joint Venturers in the letter of 27 June 2017.  He seemed to accept that it could not be reconciled with the actual conduct of the Joint Venturers at the time, but contended that mistakes were made.  However, whatever might have been Mr Palmer’s internal views of the justice of the position in March 2016 and whatever might be his personal views now, the critical consideration is what positions were actually expressed to the administrators.  The present objective evidence suggests that the administrators responded to the positions which had been made explicit by the Joint Venturers, by refusing to comply with the written demands for unconditional return of the Joint Venture Property and by continuing to press their contention that the Joint Venturers ought to pay monies to Queensland Nickel as requested.  I observe that if Queensland Nickel had the proprietary rights in relation to the Joint Venture Property, which would derive from the matters I have discussed at [123]-[133] above, then the administrators would have been entitled to take that course.  
  3. Indeed, it is difficult to see why someone in their position with a good arguable case as to the existence of those rights would not take that course absent an offer which secured Queensland Nickel’s entitlement to be paid for all the liabilities which it had properly incurred during the course of acting as the General Manager of the Joint Venture.  I have not seen any suggestion from Mr Palmer or any of the defendants that any such offer was made at any relevant time, let alone an offer at an appropriate quantum.  I observe:
    1. Mr Palmer submitted that he “obtained a loan of $23,000,000 to give to the new manager and to maintain operations and ensure that legitimate creditors were paid and that the employment of the workforce maintained”.
    2. However that is not quite accurate.  What was in fact obtained was an indicative offer of $23 million finance from “Chifley Securities” dated 7 March 2016 which was conditional on –
      1. guarantees from “directors of the borrowing entity, associated entities, companies and trusts as appropriate”;
      2. “Security to be negotiated with Lender”;
      3. “Due diligence to be completed to [Chifley Securities’] full satisfaction”; and 
      4. valuation for all security properties by a valuer acceptable to Chifley Securities sufficient to achieve a loan to value ratio of 65%, and there is no evidence before me that the conditions could be met either at all or within any particular time frame.
  1. Moreover, the quantum of the “loan” was well below the figure which the evidence suggests was needed.  It will be recalled (see [160]-[162] above) that Mr Mensink had on 18 January 2016 reported to the administrators that Queensland Nickel owed, amongst other debts –
    1. $16,167,492 for total redundancy entitlements for 237 employees who had been made redundant on 15 January 2016, prior to the appointment of administrators; and
    2. an admitted amount of $53,920,066 to unsecured creditors.
  2. Finally it was evident that Mr Palmer’s intention did not include any intention of securing Queensland Nickel’s entitlement to be paid for the liabilities which it had incurred.  Mr Palmer intended that any monies he obtained from the “loan” would be given to the new manager, not to Queensland Nickel.
  1. The administrators’ report to creditors made on 11 April 2016 recommended that Queensland Nickel be wound up.  The administrators indicated that if that occurred, further investigations could be undertaken to determine the potential of any recoveries in respect of voidable transactions and insolvent trading.  Amongst other things the report noted –  
    1. China First had lodged a proof of debt claiming $135 million as the subscription price for 2 million shares in China First, payable in two instalments of $67.5 million on or before 31 December 2017 and 31 December 2018; 
    2. Waratah Coal had lodged a proof of debt against Queensland Nickel claiming $100 million on the basis that Waratah Coal proposed to offer its coal tenements as security to assist Queensland Nickel in obtaining funding for general trading requirements, and reported that the administrators were of the opinion the claims lodged by Waratah Coal and China First were invalid for the purposes of voting at the second meeting of creditors.
  1. At the second meeting of creditors on 22 April 2016, the creditors resolved that Queensland Nickel should be wound up.  As I have already mentioned, ultimately, the administrators were appointed as the general purpose liquidators. 
  2. Mr Owen’s affidavit described how the Commonwealth of Australia had paid out significant sums to employees of Queensland Nickel for unpaid employee entitlements under a scheme known as the Fair Entitlements Guarantee.  The Commonwealth applied to the Federal Court of Australia to have “special purpose liquidators” appointed to pursue claims against the Joint Venturers and other companies ultimately owned by Mr Palmer to recover those amounts.  
  3. On 18 May 2016, orders were made in the Federal Court appointing three additional liquidators, Messrs Parbery, Ayres and Owen (of the firm PPB Advisory) as special purpose liquidators to Queensland Nickel.  By those orders: 
    1. the scope of the special purpose liquidators duties’ were, for present purposes, limited to investigating: 
      1. all dealings or transactions between Queensland Nickel, the Joint Venturers and their directors and officers;
      2. all potential claims arising against the Joint Venturers and their directors and officers; and
      3. any potential insolvent trading claims;
    2. the special purpose liquidators were entitled to: 
      1. pursue any claim that may be available to Queensland Nickel in relation to the above matters; and
      2. take any steps to preserve or protect the assets of Queensland Nickel, whether or not in the possession of Queensland Nickel;
    3. the general purpose liquidators were restrained from doing any of the above matters, other than with the prior written consent of the special purpose liquidators or further order of the Court; and
    4. the special purpose liquidators were granted leave to enter into a funding agreement and funding participation deed on their own behalf and on behalf of Queensland Nickel.

Evaluation of the strength of the voidable transactions case

  1. At the time of the argument before me on the present application, the present proceeding was one of 10 proceedings on the commercial list, each of which was related in some way to the liquidation of Queensland Nickel and to claims of recovery by it and its liquidators.  I summarized those proceedings for a different purpose in Re Queensland Nickel (in liq) [2017] QSC 258.  
  2. For present purposes, it suffices to observe that by 3 May 2017, two events had occurred.
  3. First, on 5 July 2016, Queensland Nickel and the general purpose liquidators had commenced a proceeding against China First, Waratah Coal, QNI Metals and QNI Resources in which they sought –
    1. a declaration that the Waratah Coal transaction and the China First transaction are voidable under s 588FE of the Corporations Act on the grounds that they are:
  1. uncommercial transactions within the meaning of s 588FB of the Act;
  2. insolvent transactions of Queensland Nickel within the meaning of s 588FC of the Act;
  1. orders under s 588FF of the Act voiding the Waratah Coal transaction and the China First transaction; and
  2. further, or in the alternative, a declaration that the Waratah Coal charge and the China First charge are void as against the general purpose liquidators pursuant to s 588FJ of the Act because they created circulating security interests during the six months ending on the relation-back day.
  1. Second, on 29 March 2017, Queensland Nickel, at the instance of the general purpose liquidators had commenced a proceeding against Mineralogy (the Mineralogy proceeding) in which Queensland Nickel sought an order that Mineralogy pay Queensland Nickel the amount of $105,981,599.81.  Parts of that sum were said to be recoverable because they were unpaid loans by Queensland Nickel to Mineralogy.  Other parts were said to be recoverable as moneys had and received.  And finally some parts were said to be recoverable on the basis that from 7 March 2011 onwards there was an agreement between Mineralogy and Queensland Nickel that amounts paid by Queensland Nickel at the direction of Mr Palmer and Mr Mensink and recorded in the Mineralogy Loan Account would be recoverable as loan amounts. 
  2. I interpolate that in my view there is a good arguable case that the Waratah Coal and China First transactions may be set aside on one or other of the bases suggested in the proceeding commenced on 5 July 2016.  It suffices to deal with the propositions that the transactions were uncommercial transactions and insolvent transactions.  
  3. I have already explained my conclusions that –
    1. There is a good arguable case that Queensland Nickel was insolvent from 9 October 2015 up to and including 18 January 2016.
    2. There is a good arguable case that as at 12 January 2016 it would have been obvious to Queensland Nickel that:
      1. if Queensland Nickel was to remain out of voluntary administration, it would be necessary to reach an accommodation with Aurizon before 18 January 2016 which met Aurizon’s requirements for securing past and future debt; 
      2. any accommodation with Aurizon would require Aurizon to be provided security which met the requirements Aurizon had already communicated, namely it was unencumbered; it was provided by entities external to the Queensland Nickel group of companies; it was of a nature that was easy to understand and easy to realize, preferably real estate; and the realization of the security was not tied to any potential sale of coal assets.
    3. Although the transactions were explicitly framed as transactions which could place Queensland Nickel in the position of having access to additional assets to secure further external borrowing, they did not meet the requirements which Aurizon had communicated.  
  1. There is a good arguable case that a reasonable person would have thought that neither transaction advanced the prospects of reaching an accommodation with Aurizon and, absent such accommodation, Aurizon would carry through with foreshadowed actions which would, in turn, force Queensland Nickel into an insolvency event (namely voluntary administration) within a few days of the entry into the transactions.  An insolvency event would apparently put Waratah Coal and China First in the position of accelerating Queensland Nickel’s obligations to pay $USD100,000,000 to Waratah Coal and $135,000,000 to China First.  From that point of view alone, there is a good arguable case that the requirements of s 588FB for an uncommercial transaction would be met because a reasonable person in Queensland Nickel’s circumstances would not have entered into the transactions.   
  2. But there are other reasons why there is a good arguable case that that test is met.
  3. As to the Waratah Coal transaction:
    1. The promise by Waratah Coal to make its security available was highly conditional and uncertain and in context not commercially beneficial to Queensland Nickel.
    2. There is some evidence that China First had a caveat over Waratah Coal’s EPC tenements.  Although Mr Palmer suggested in his oral evidence before me that there was a letter by which China First said that it would remove the caveat, no obligation to do that was expressed in any of the instruments by which the China First and Waratah Coal transactions were implemented.
    3. If the effect of the Waratah Coal Agreement was to release loans made by Queensland Nickel, then to release those assets would be commercially detrimental to Queensland Nickel.
    4. The security provided by Queensland Nickel apparently charged its equitable lien over assets of the Joint Venturers (themselves also charged to Waratah Coal) and postponed that lien until after the security given to Waratah Coal, which was also commercially detrimental to Queensland Nickel in light of the imminence of an insolvency event.  
  4. As to the China First transaction:
    1. China First’s assets were comprised of the value of its contractual rights to develop Waratah Coal’s tenements.  If the shares had any value then the value existed because of those rights.  However, under the contract between China First and Waratah Coal the contractual rights would become vulnerable to discretionary termination by Waratah Coal in July 2016.  Mr Palmer said he contemplated that because he owned the companies, the rights could be extended at any time, but no obligation to do that was expressed in any of the instruments by which the China First and Waratah Coal transactions were implemented.  
    2. In one affidavit Mr Palmer suggested that the $135 million price was based on BDO having concluded that the total value of the project was $245 million.  But BDO did not reach that conclusion.  As I have indicated at [174](e) to [174](g) above, only a few days before the China First transaction, BDO had, in a highly qualified way, expressed in a letter to Waratah Coal an indicative value range for the China First Assets of $51.6 million to $246.8 million, on a “non-reliance” basis.  Mr Palmer’s $245 million figure seemed to be based on the high range of the BDO indicative value.  It seemed to pay no regard to the qualified nature of that figure or to the fact that the low range was $51.6 million.
  1. In a subsequent affidavit, Mr Palmer deposed to a different explanation for reaching the $135 million price: 

Further, I understood the Total Subscription Share Price was calculated on the basis of an independent assessment of the value of the Waratah Tenements by BDO that:

  1. For the Waratah tenements, BDO had recorded an ‘Indicative value using resource multiples’ of $51.6M (see page 193 of the Fourth Affidavit) and an ‘Indicative value using reserve multiples’ of $198.2M, the sum of those two values being approximately $250M. BDO’s values are calculated by multiplying the quantity of minerals estimated to be in the tenements by the value per tonne of mineral.

Two values are calculated: using ‘resource multiples’ and ‘reserve multiples’.

  1. Queensland Nickel was to obtain approximately 49% of the issued share capital in China

First.

  1. 49% of $250 M is approximately $125M. The value was then increased to $135 M to for interest charges and risk.
  1. But there are many problems with that as a justification of price which a reasonable person would accept, and those problems are not presently answered by Mr Palmer’s evidence.  First, BDO expressly stated that they did not express a valuation.  BDO not only expressed a highly qualified non-reliance estimate but went so far as to suggest that “readers of this letter should conduct their own due diligence” and “engage appropriate advisors to assess the merits of the assets of Waratah Coal”.  Second, the addition of the $51.6 million figure (which was the low range for an indicative assessment based on a total resource of 3.684 billion tonnes taking into account “measured”, “indicated” and “inferred quantities”) and the $198.2 million figure (which was a calculation by reference to 1.105 billion tonnes of certified reserves) is not logical and confuses two different bases of approaching even the highly qualified indication of value that BDO was expressing.  Third, although 2,000,000 shares in China First would be a minority shareholding in that company, it would not be a 49% minority share. The Share Subscription Agreement reveals Queensland Nickel acquired 2 million shares, but a current ASIC search records it as having 2 billion shares out of a total 4.7 billion shares on issue, with the remaining 2.7 billion shares being held by Mineralogy.[60]  That proportion would be a 42.5% minority share.  Despite his affidavit evidence, Mr Palmer acknowledged the correctness of a 42% figure during his cross-examination before me. 
  2. On the evidence presently before me, the way in which the $135 million price was reached is unclear.  Based on the present evidence, it is difficult to see how a reasonable person could have concluded that accepting an obligation to pay $135 million for the China First shares was a reasonable price for the shares acquired.  A fortiori, if that person realized that China First’s rights in relation to the coal project would, within months, become vulnerable to discretionary termination by the grantor of those rights and the transaction did not oblige the grantor of those rights to extend them. 
  3. But whether it was a reasonable price or not, the evidence presently before me suggests Queensland Nickel had no present capacity to meet an obligation to pay $135,000,000 for the Subscription Shares and any capacity to meet the future instalments would depend both on its ability to continue to trade and on the nickel price increasing, both of which propositions were uncertain, even bearing in mind the assessments of the way in which the nickel price might move in the future, which had been considered in material to which Queensland Nickel had access, namely a KPMG report prepared on behalf of the Queensland Government.  The prospect of continuing to trade was especially uncertain in light of the explicit attitude of the major creditor, Aurizon.
  4. There is a good arguable case that a reasonable person would have concluded that the acquisition of the shares as an asset at the price paid and on the terms applicable was not – in the then context of an imminent insolvency event – commercially beneficial to Queensland Nickel.  
  5. Further, as was the case with the Waratah Coal transaction, the security provided by Queensland Nickel apparently charged any proprietary rights it had over assets of the Joint Venturers (themselves also charged to China First) and postponed those rights until after the security given to China First, which was also commercially detrimental to Queensland Nickel in light of the imminence of an insolvency event.
  1. If the transactions were uncommercial transactions, then because they happened at a time when Queensland Nickel was insolvent, they would also be insolvent transactions within the meaning of s 588FC.  They would be voidable transactions under s 588FE and jurisdiction to make orders under s 588FF would be enlivened.
  2. The defendants relied on evidence from Mr Palmer which was to the effect that the purpose of entering into the transactions was to make assets available to be used as security for an external borrowing to avoid having to enter into voluntary administration.  He pointed to evidence that the China First project (and therefore the shares in it) might be worth a very considerable amount.  His evidence was essentially that the documents were simply another step in a series of good faith attempts which had been going on for the previous months to put Queensland Nickel in a position to overcome the difficulties in which it had found itself.    
  3. There is certainly a substantial body of evidence which suggests that there was a series of good faith attempts made by Mr Palmer, and other directors and executives of Queensland Nickel and the Joint Venturers to obtain funding to overcome Queensland Nickel’s cash flow problems.  Whether the Waratah Coal transaction or the China First transaction can be so characterized depends on questions of fact not suitable to be determined in this application.  For present purposes, the important considerations are that there are many difficulties with the defendants’ case not presently answered by their evidence; and the juxtaposition of the defendants’ evidence against the case presented by the plaintiffs does not explain it away.  My present qualitative evaluation of the strength of the case against those transactions is that it is a strong case.
  4. It remains to note that the defendants advanced a suggestion that the administrators of Queensland Nickel knew about the transactions and embraced them.  Certainly they did know about them by the time of their appointment, because they were referred to in the Priority Deed (as to which see [187] above) and, having been appointed, gave some consideration as to how the charges could be dealt with in the media.  But there is no evidence that they knew about the transactions before they were entered into.  But, more importantly, even if it was proved that they did, that fact would not be an answer to the case that the transactions were uncommercial or insolvent transactions and therefore voidable.  There is evidence that during the administration, and presumably when the administrators and not yet decided to recommend that Queensland Nickel be wound up, the administrators actually explored the possibility of seeking finance and to that end sought and obtained the consent of China First and Waratah Coal that any new security which Queensland Nickel might enter into would be a permitted security interest within the meaning of their charges.  Again, that conduct does not seem to me to be an answer to the case that the transactions were uncommercial or insolvent transactions and therefore voidable.

Mr Palmer acts under the alleged voidable transactions.

  1. Mr Martino was a financial adviser based in Sydney with whom prior to May 2017 Mr Palmer had done business on several occasions.  Indeed, the evidence reveals that for a short period in late 2011 and early 2012, he had been a director of China First.  
  2. On 3 May 2017, at 8:27am Mr Palmer’s PA emailed to Mr Martino a Deed of Appointment bearing that date and signed by Mr Palmer on behalf of China First.  The document recorded that, pursuant to the China First charge, China First appointed Mr Domenic Martino as an agent and authorized officer of China First as chargee and as controller of Queensland Nickel (the Martino appointment). The document referred to Mr Martino as a registered liquidator.  After Mr Martino pointed out that that was an error, a corrected version of the deed was signed on behalf of China First, emailed to Mr Martino at 2:41pm, and was signed by him and emailed back to Mr Palmer at 3:50pm on that day.   
  3. On 3 May 2017 (minutes after the apparent perfection of his appointment) at 4:25pm, Mr Palmer’s PA sent to Mr Martino an “attached scanned document” for signing.  The document took the form of a deed between China First and Queensland Nickel and was described as a “Deed of Settlement, Claims, Release, Discharge, Indemnity and Confidentiality”.  It had been signed on behalf of China First by Mr Palmer and contained provision for Mr Martino to sign on behalf of Queensland Nickel.  Seven minutes later, at 4:32pm, Mr Martino’s PA emailed a scan of the document as executed by Mr Martino to Mr Palmer’s PA, with copies being sent to Mr Palmer and to his lawyer. 
  4. It is convenient to refer to the deed so executed as the “first version of the Martino settlement deed”.  Amongst other things it provided as follows:
    1. The parties were China First and Queensland Nickel.
    2. The parties agreed that the debt of $135 million was presently due and payable by Queensland Nickel to China First.
    3. In consideration of the releases made by the deed, China First agreed to reduce the debt owed to it from $135,000,000 to $125,000,000.
    4. Queensland Nickel agreed to discontinue the Mineralogy proceeding, and not to make future claims against Mineralogy.  
    5. Queensland Nickel and China First agreed that, upon confirmation that the Mineralogy proceeding had been discontinued, they mutually released and discharged each from all claims which each might have against the other concerning the Mineralogy proceeding. 
    6. Queensland Nickel released:

… all directors and related parties as defined under the Corporations Act 2001 (of [China First]) from all claims, actions, suits, causes of action, demands, complaints, damages and costs that have accrued to the date hereof.

  1. Queensland Nickel indemnified China First against loss which it might suffer from a breach of the deed by Queensland Nickel, but did not obtain a corresponding indemnity from China First.
  1. Notwithstanding the conduct which occurred on 3 May 2017 (which created an apparently binding deed), the following day steps were taken to create what was apparently intended to be a replacement version of the deed entered into on 3 May 2017.
  2. On 4 May 2017 at 12:39pm, Mr Palmer’s PA sent a scan of a second version of the deed of settlement to Mr Martino “Per instructions from [Mr Palmer’s lawyer], please sign the attached and scan back to us as soon as you can”.  The document took the form of a deed between China First, Queensland Nickel and Mineralogy and was also described as a “Deed of Settlement, Claims, Release, Discharge, Indemnity and Confidentiality”.  It had been signed on behalf of China First and Mineralogy by Mr Palmer and contained provision for Mr Martino to sign on behalf of Queensland Nickel.  A scan of the document, as signed by Mr Martino on behalf of Queensland Nickel, was returned by email at 10:30pm that night.   
  3. It is convenient to refer to the deed as the “second version of the Martino settlement deed”.  As to the second version of the Martino settlement deed:
    1. Mineralogy had been added as a party and Mineralogy became party to the mutual releases and discharges earlier expressed, but otherwise the obligations to which I have earlier referred were not materially altered.
    2. Queensland Nickel’s release was expanded as follows:

… of all directors and related parties of [Mineralogy] and [China First] as defined under the Corporations Act 2001 (of [China First]) from all claims, actions, suits, causes of action, demands, complaints, damages and costs that have accrued to the date hereof.

  1. Mineralogy provided no monetary consideration for the release of claims against it.
  2. Mineralogy was added to the indemnity given by Queensland Nickel to China First against loss which it might suffer from a breach of the deed by Queensland Nickel, but Queensland Nickel did not obtain a corresponding indemnity from Mineralogy.
  1. Neither Queensland Nickel nor its liquidators were informed of the Martino appointment or the Martino settlement deeds, until after they had occurred.
  2. Mr Martino purported to take steps on behalf of Queensland Nickel to discontinue the Mineralogy proceeding.  
  3. On the evidence before me, the foregoing recitation of events was not controversial. 
  4. I heard an urgent application for injunctive relief on 9 May 2017 by Queensland Nickel and the general purpose liquidators, who had not been consulted by Mr Martino before he took the steps described above.  (At that time, the evidence concerning the first version of the Martino settlement deed was not before me and it appeared that the Martino settlement deed had been sought and obtained on 4 May 2017.)  I made interim orders restraining China First and Mr Martino from, respectively, taking any steps pursuant to the China First charge and the Martino appointment, including filing any documents in court proceedings on behalf of Queensland Nickel and purporting to deal with its property or executing any instrument purporting to bind it: see Queensland Nickel Pty Ltd (in liq) v Mineralogy Pty Ltd [2017] QSC 90.  An originating application was filed on 11 May 2017, and on 18 May 2017 I granted interlocutory injunctions: see Queensland Nickel Pty Ltd (in liq) v Martino [2017] QSC 95.
  1. The material presently before me justifies the conclusion that there is a good arguable case as to the invalidity of the appointment of Mr Martino, and it would follow, as to the invalidity of either version of the Martino settlement deed for the following reasons:
    1. the good arguable case as to the invalidity of the China First charge to which I have earlier adverted; and
    2. the reasons I identified in Queensland Nickel Pty Ltd (in liq) v Martino.
  2. During the hearing of the present application, Mr Martino and Mr Palmer placed evidence before me which sought to explain their conduct in relation to the Martino appointment and the successive Martino settlement deeds.  It is appropriate to consider that evidence.
  3. Amongst other things, Mr Martino deposed to the following matters:
    1. He was a qualified chartered accountant and had during the period 1986 to 2003 been a partner, Managing Partner and Chief Executive Officer of the accountancy and consultancy firm Deloitte Touche Tohmatsu and its predecessor firms. 
    2. He had over 40 years’ experience in the profession and in his role as Managing Partner and Chief Executive of Deloitte had a direct responsibility for ensuring strong governance in all areas of the profession including auditing.
    3. He had been “aware” of the operations of the Joint Venture since 2010.  
    4. He had assisted Mr Palmer in seeking to obtain funding for the Joint Venture in February and March 2016.  He had “reviewed” the administrators’ report in April 2016.  He had formed an adverse view of steps which the general purpose liquidators had taken in 2016.  
    5. Mr Palmer provided him with a copy of the China First charge in February 2017.  
    6. In April 2017, Mr Palmer told him that China First had decided to enforce its security rights over Queensland Nickel to retrieve the shares it had issued to Queensland Nickel.  Mr Palmer told him that Queensland Nickel owed China First $135,000,000 and was concerned that the liquidators might sell the shares.  
    7. In April 2017, Mr Palmer asked Mr Martino if he could act as a controller of Queensland Nickel and Mr Martino said he would have to do a detailed review of the charge.  Mr Palmer told him that his lawyers had advised that a controller was able to be appointed.
    8. He knew that the Queensland Nickel group had accounts that had been audited by a reputable auditor.  To the best of his knowledge that auditor had not made any report adverse to Queensland Nickel or any of its directors.
    9. He said that on or around 2 May 2017 he agreed to be appointed by China First as controller of Queensland Nickel.
    10. During the morning of 3 May 2017, Mr Martino had a telephone call with Mr Palmer in which Mr Palmer asked Martino if he was prepared to settle a proceeding which the general purpose liquidators had commenced against Mineralogy.  He says that he told Mr Palmer that he was prepared to consider it and if Mr Palmer had a proposal he should send it down to Mr Martino in writing capable of acceptance.  He says (as does Mr Palmer) that that was the first time he ever discussed the settlement of the Mineralogy proceeding with Mr Palmer.
  1. After Mr Martino hung up the phone on the morning of 3 May 2017, he considered the Mineralogy proceeding based on what he knew about it.  He deposed that he gained his knowledge “from discussions with Mr Palmer about what claims were made and reading newspapers, the knowledge I had about the Group and the audited accounts of the various entities”.  He formed the view that the claims advanced in the Mineralogy proceeding were baseless.  
  2. As to the actual decision, he deposed:

Late in the afternoon on the 3 May I received a document.  The main thing I was interested in was what was in it for QN and how much money QN would get.  I could not believe that QN could reduce the debt it owed for the shares by $10,000,000 dollars by settling a baseless claim.  The commercial aspect of the deal looked good to me and I quickly executed the document and told my secretary to send it back.  I was concerned the offer may be withdrawn it before I had accepted it.

  1. The explanation for the second version of the Martino settlement deed was that on 4 May 2017, his secretary told him that, based on China First’s legal advice, the documents he signed on 3 May 2017 were not valid because Mineralogy had to be included.  His secretary brought the revised document to him in hospital; he checked that it obtained “the $10,000,000 benefit for QN”; signed the document and asked his secretary to return it.
  1. Mr Palmer’s version of events may be summarized in this way:
    1. In about February 2017, after obtaining legal advice, he formed the view that the administrators’ expression of view that claims lodged by Waratah Coal and China First were invalid for the purposes of voting were in substance rejection of the proofs of debt which had been lodged by those entities and therefore inconsistent with their promises as expressed in the Priority Deed entered into as at 18 January 2016 (as to which see [187] above) “to do or cause to be done anything which more satisfactorily secures the rights of that Creditor under this Deed in a manner not inconsistent with any provision of this Deed including the execution of any document and the delivery of documents of title”.  He caused his legal adviser to send a letter stating that the Priority Deed had been repudiated and that China First accepted the repudiation.
    2. Based on that conduct and from about 19 April 2017 he formed the view that China First was released from its promise contained in the same Deed not to attempt to enforce any rights under the China First charge without the prior written consent of the administrators.  He said he was concerned that the general purpose liquidators or the special purpose liquidators might, as part of the liquidation, sell the China First shares that Queensland Nickel had not paid for.  He formed the view that it was desirable and in China First’s commercial interests to act on its security instruments in order to seek to obtain control over the shares.  To that end, he thought that China First was permitted to act to appoint a controller over Queensland Nickel.  He said that in reaching that view he acted upon legal advice.  
    3. He had in early February 2017 given the China First charge to Mr Martino “in his role as our corporate advisor to consider and advise me”.  The option of appointing a receiver was first considered.  In late April 2017, having considered the appointment of other insolvency practitioners, Mr Palmer discussed with Mr Martino the possibility of his appointment as controller.  
    4. On or around 2 May 2017, Mr Martino told him that he agreed to be appointed by China First as a controller of Queensland Nickel and on 3 May 2017 the requisite appointment was made.
    5. In his sixth and eighth affidavits he gave a detailed explanation of the Martino settlement deeds,[61] the eighth affidavit correcting the version of events recorded in the sixth affidavit.  I set out the version of events there expressed below by tracking the relevant changes which the eighth affidavit made to the sixth.  Mr Palmer deposed to this:

80. On or about the 4 May 2017, after receiving advice I telephoned Mr Martino. I cannot recall the exact words used however the effect of the conversation was as follows:

  1. Me: Queensland Nickel has commenced a proceeding against Mineralogy. Mineralogy would like to make an offer to Queensland Nickel to compromise that proceeding.
  2. Mr Martino: If you’ve got an offer to make put it in writing and send it down to me.
  3. Me: I will.
  1. Prior to the telephone call above, I had not discussed with Mr Martino any compromise of any legal proceeding involving Queensland Nickel.
  2. By email dated 4 May 2017, Sarah Mole of Mineralogy sent to Mr Martino a draft deed of settlement. The deed was drafted by Alexander Law and sent to him based on their advice. …. In respect of the matters set out above, when the settlement offer was sent to Mr Martino, I did not expect it to be agreed that day. By email at 4.25pm dated 3 May 2017, my secretary Sarah Mole of Mineralogy sent to Mr Martino a settlement deed. The deed was drafted by JW Smith and Associates, my normal lawyer Alexander Law that had been advising me on this matter was dealing with another matter at the time. Exhibited hereto and marked CFP-64 is a copy of the email from Ms Mole to Mr Martino. In respect of the matters set out above, when the deed was sent to Mr Martino, I thought at the time that the proposed Settlement Deed was sent to Mr Martino the possibilities were:
    • That Martino may send back a counter offer.
    • That Martino may reject the offer.
    • That he may accept it after further investigation.
    • That he may require amendments.
    • That he may enter into further discussion.

I was surprised when the document was sent back signed by Mr Martino.  Exhibited hereto and marked as exhibit CFP-64A is a copy of the letter that was sent back.  The document however was not a settlement deed as Mineralogy the party to the proceedings being released was not a party to the deed. On the evening of the 3 May 2017 I decided to withdraw instructions from JW Smith & Associates in acting in the matter. I resolved to instruct Alexander Law to deal with the matter.  I met with Sam Iskander of Alexander Law and expressed my concern. Mr Iskander advised me that the document drafted by JW Smith & Associates was null and void.  I then asked Mr Iskandar to draft a settlement deed that I could execute and send to Mr Martino as an offer to settle the proceedings. I had no way of knowing whether Mr Martino would return the deed executed, or use the opportunity to make an increased counter offer.  I was concerned that Mr Martino would take the opportunity to make amendments.  I suspected because of the stuff up with my former solicitor that he may want further discussion or reject the offer.  I thought it was best to minimalize matters and contact until he executed a settlement deed. So when Alexander Law finished drafting the Settlement Deed around midday I gave it to my secretary Sarah Mole with simple instructions to liaise with Mr Martino’s secretary and get the Settlement Deed signed.

82A. By email dated 4 May 2017, Sarah Mole of Mineralogy sent to Mr Martino a new deed of settlement. The deed was drafted by Alexander Law and sent to him on their advice. Exhibited hereto and marked CFP-65 and CFP-65A are copies of the emails from Ms Mole to Mr Martino.

  1. By email dated 4 May 2017, sent approximately 10 hours after it was forwarded, Mr Martino (through an employee) returned to Mineralogy a fully executed deed of settlement. …
  2. At all material times in my dealing with China First since being appointed as a director in January 2017, I took time to obtain legal advice and acted on that advice.
  1. He thought the primary purpose of the proposed settlement was to obtain a release in favour of Mineralogy, although he acknowledged that the release contained in the deed executed granted a much broader release than that.
  1. On the present state of the evidence, the plaintiffs have a good arguable case that the conduct of Mr Martino may be impugned on at least the bases which I set out below.  
  2. First, Mr Martino acted in a way which attributed no value to the Mineralogy proceeding which claimed in excess of $105 million from Mineralogy –
    1. apparently without obtaining or reading the legal process by which the proceeding was commenced;
    2. without making any enquiries of Queensland Nickel’s liquidators or the lawyers who had been acting for Queensland Nickel as to the facts and law on which they relied; 
    3. without conducting his own diligent investigations into the merits of the claim; and
    4. without obtaining his own legal advice on that question.
  3. Second, Mr Martino executed a deed recording the debt purportedly owed by Queensland Nickel to China First was immediately due and payable –
    1. without making enquiries of Queensland Nickel’s liquidators or the lawyers who had been acting for Queensland Nickel as to whether there were any reasons to form a contrary view; 
    2. without conducting his own diligent investigations on that question; and
    3. without obtaining his own legal advice on that question.
  4. Third, Mr Martino acted as though he had formed a positive view on the merits of the settlement contained in the first version of the Martino settlement deed within 7 minutes of receiving it for the first time on 3 May 2017 and without –
    1. making any enquiries of Queensland Nickel’s liquidators or the lawyers who had been acting for Queensland Nickel as to whether in the context of the liquidation, a reduction in the debt owed to China First had any value at all;
    2. making any enquiries of Queensland Nickel’s liquidators or the lawyers who had been acting for Queensland Nickel as to the nature, merits or value of any of the claims released; 
    3. without conducting his own diligent investigations on those questions; and
    4. without obtaining his own legal advice on those questions.
  5. Fourth, the same points can be made in relation to Mr Martino’s actions in entering into the second version of the Martino settlement deed within hours of receiving it on 4 May 2017.  And, further, because he did so without –
    1. making any enquiries of Queensland Nickel’s liquidators or the lawyers who had been acting for Queensland Nickel as to the nature, merits or value of the extension to the claims released which was created by the alteration to the first version; 
    2. conducting his own diligent investigations on those questions; and
    3. obtaining his own legal advice on those questions.
  6. Fifth, Mr Martino made his decisions about the benefit of the transaction to Queensland Nickel on the basis of information provided to him (whether directly or indirectly) from parties whose interests were opposed to Queensland Nickel and obviously aligned with the parties who obtained advantage from the releases given by the deeds (namely China First, Mineralogy and Mr Palmer).
  7. Sixth, Mr Martino’s acts and omissions give rise to the inference that Mr Martino did not act in good faith and that he wilfully or recklessly acted to sacrifice the interests of Queensland Nickel.  
  8. As to the evidence placed before me by Mr Martino and Mr Palmer which sought to explain their conduct, I express the following conclusions:
    1. As the evidence presently stands, both their explanations strike me as apparently implausible.  
    2. The problems with the apparent plausibility of Mr Martino’s evidence are relatively obvious.  Even on the face of his affidavit, it is difficult to reconcile the way in which he deposed that he conducted himself with a good faith exercise of power, especially given the qualifications and experience that he says he had.   
    3. And, for the following reasons, the apparent plausibility of Mr Palmer’s explanation of his conduct as a good faith exercise of power on behalf of China First is low.  
    4. First, Mr Palmer said that the motivating factor for the appointment of a controller was his concern as to the possibility that the liquidators of China First would sell the shares in China First.  But, if that were so, it might be thought to be surprising that the first thing which Mr Palmer would ask the controller to do was something else entirely, namely to strike a settlement the apparent goal of which was to manufacture a complete defence to all the proceedings which could or might be brought against he and his companies by Queensland Nickel.  
    5. Second, and in any event –
      1. my attention has not been drawn to any evidence that the liquidators had even considered selling the shares, much less threatened to do so;
      2. further, by that time, it was clear that the validity of the transaction by which the shares were acquired was disputed by the general purpose liquidators and Mr Palmer and his lawyer must have known that;
      3. how Mr Palmer and his lawyer might have concluded, given the liquidators’ position in relation to the transactions, there could sensibly be said to have been any risk that the liquidators would act in a manner inconsistent with that position is unclear;
  1. there is no material which suggests either of them ever considered taking what might be thought to be the orthodox course of communicating with the liquidators to see if an undertaking could be obtained, failing which a threat could be established sufficient to authorize approaching the court for injunctive relief.
  1. Third, I am conscious that Mr Palmer has deposed that he sought, obtained and acted on legal advice and the legal advice should be regarded as independent legal advice.  But, the manner in which the lawyer was briefed and the assumptions and instructions on which he was asked to act were not contained in the material.  Further, despite giving multiple affidavits on other aspects of the application, the lawyer concerned did not address those questions or address the advice which he is said to have given.  Absent that detail, I am not presently prepared to accept the proposition at face value.
  2. The plaintiffs invited me to find that the Martino Appointment and the Martino settlement deeds were all part of a concocted charade, which attempted to give the appearance of independence to a scheme over which Mr Palmer retained control.  No such finding of fact should be made at this juncture, because (for reasons I have already explained) the present application is not the occasion for making anything other than a qualitative evaluation of the current state of the evidence, in advance of a full trial.  
  3. For present purposes it suffices to say that I conclude that the plaintiffs’ case passes the threshold of being a good arguable case.  My present qualitative evaluation of the strength of the case in favour of that relief is that it is a strong case.  
  1. It would follow that the plaintiffs have a good arguable case for final relief of the following nature:
    1. an order pursuant to s 418A of the Corporations Act that the Martino appointment was invalid and that Mr Martino did not validly assume control over Queensland Nickel’s property on about 3 or 4 May 2017;
    2. a declaration that the Martino settlement deed and the documents by which Mr Martino purported to take steps to discontinue the Mineralogy proceeding were not legally effective to bind Queensland Nickel or to discontinue the proceeding and orders setting them aside;
    3. declarations that Mr Martino’s conduct amounted to breaches of his various duties;
    4. declarations that China First’s conduct was in breach of various obligations it owed;
    5. orders restraining Mr Martino from taking any steps pursuant to his purported appointment; and
    6. orders restraining China First from taking any step pursuant to the China First charge.
  2. During the course of the present application, Mr Palmer made it clear that his intention (and his instruction to the corporate defendants)[62] was (1) to assert the validity of the China First and Waratah Coal security transactions which the liquidators impugn as voidable or void on grounds I have already mentioned; and (2) to rely on the Martino appointment of 3 May 2017 and subsequent deed of release of 4 May 2017 to contend that he and his various companies have a complete defence to the claims advanced against him. 
  3. The plaintiffs have a good arguable case against each of those propositions, for reasons I have already identified.

The good arguable case against Mr Palmer

Breach of duty

  1. Mr Parbery explained in his second affidavit:
    1. 19QNI was at all times reliant on the co-operation of the Joint Venturers to meet its liabilities.
    2. 20It broadly only had three potential sources of funds as discussed below.
    3. 21The first source of funds, were funds derived from the operation of the Refinery, which were paid into bank accounts in the name of QNI. These funds were held by QNI, and could be (and indeed, were) used by QNI to meet its obligations.
    4. 22The second source of funds was its rights of indemnity, including the call notice mechanism under clause 6.4(a) of the Joint Venture Agreement (JVA) (exhibited at pages 265 to 375 of SJP-1 of my previous affidavit) by which QNI could require the Joint Venturers to contribute funds to meet liabilities. These rights of indemnity were of course dependent on the willingness of the Joint Venturers to meet their obligations and the ability of the Joint Venturers to have access to liquid funds to meet those obligations. Whilst there was a call mechanism under the JVA, I am unaware that at any time from when Mr Palmer obtained an interest in the Joint Venturers up until the appointment of administrators on 18 January 2016 that the call mechanism was ever used by QNI. Its subsequent exercise is disputed.
    5. 23The third source of funds was an ad hoc cash injection from the Joint Venturers, Mr Palmer himself or other related entities. There is evidence of such an injection being made by Mr Palmer on or about 13 November 2015, when Mr Palmer advanced US$1,860,000.00 for the purpose of meeting certain employment obligations of QNI.
    6. 24Because the only function of QNI was as General Manager of the Joint Venture, it was limited in its ability to obtain funds in any other way.
    7. 25QNI was at all times dependent upon the willingness and ability of the Joint Venturers to ensure that it continued to have access to funds with which to meet its liabilities, both current and contingent, including by being willing to meet its indemnity obligations and having the liquid funds available to meet those obligations.  In the circumstances where the Joint Venturers might deny the right to indemnity, as has happened to QNI, and where the call notice mechanism under the JVA was not utilised by QNI, in my opinion it was not possible to assure the financial health of QNI (in the sense of being able to meet its obligations as they became due) without the, directors of QNI requiring some enforceable, positive commitment by the Joint Venturers to provide it with financial support including for contingent liabilities.
  2. The plaintiffs contend that it is against this context that the question of breach of duty by Mr Palmer must be assessed.  Duties said to have been arguably breached include both statutory and fiduciary duties owed by Mr Palmer in light of the good arguable case that he was to be regarded as Queensland Nickel’s director at all times, even when he was not formally appointed as such.  
  3. The plaintiffs contend that the payments identified at [165]-[167] above were payments and transfers which must be regarded as made in breach of his duties, because they were made not for the purposes of the Joint Venture, but were made to benefit Mr Palmer personally or other corporate entities which he controls.  I have already said that they have a good arguable case in relation to that contention.  
  4. Moreover, the plaintiffs contend, and I agree, that there is a good arguable case that there may have been other relevant interests of the company than the interests of its shareholders which the directors of Queensland Nickel were obliged to consider.  A financial state short of insolvency can trigger the obligation to consider the interests of creditors, including where the company is “of doubtful solvency”; or where prejudice is caused to creditors or to one group of creditors: see Bell Group (in liq) v Westpac Banking Corporation (No 9) [2008] WASC 239 per Owen J at [4445], [6035]-[6037], [6064]-[6065] and [9743].  In this case, the plaintiffs contend that the payments and transfers were made in circumstances in which Queensland Nickel had – 
    1. significant employment entitlement liabilities, including contingent liabilities, where those liabilities were to be met by available funds or other realisable assets held by Queensland Nickel for the purposes of the joint venture; and
    2. significant contingent liabilities to creditors,  and the payments and transfers removed from Queensland Nickel’s realisable assets otherwise available to meet them.
  5. As I have identified, Mr Palmer has contended that, absent compliance with the procedure for budgets and for formal calls and obtaining of funds from the Joint Venturers, Queensland Nickel has no right to require the Joint Venturers to pay it any monies in respect of the unpaid liabilities it has incurred.  I have indicated that I think that the plaintiffs have a good arguable case that they nevertheless have personal and proprietary claims against the Joint Venturers despite the failure of its directors to ensure it complied with the strict procedure of the Joint Venture Agreement.  But if Mr Palmer’s contention were to be correct (which the plaintiffs deny), then the plaintiffs say (and I agree) that they have a good arguable case that the directors would have failed in their duty towards Queensland Nickel to ensure that it put itself in the position of having some enforceable secure positive commitment to provide it with the funds necessary to meet its debts.  
  6. The plaintiffs submit and I agree that it would not avail Mr Palmer to contend that Queensland Nickel acted with the consent of its shareholders because it is not possible for a company to consent to, waive, or ratify breaches of a director’s statutory duties under the Corporations Act, owing to the public interest in the observance of those norms of conduct: see Australian Securities and Investments Commission v Cassimatis (No 8) [2016] FCA 1023 per Edelman J at [457], [499]-[503], [508].  
  7. I agree with the plaintiffs’ submission that there is ample evidence to support the plaintiffs’ argument that it has a good arguable claim against Mr Palmer for damages for breach of duty.

Insolvent trading.

  1. I have observed at [158]-[159] above that there is a good arguable case that Queensland Nickel was insolvent from 9 October 2015, but that in the period after 9 October 2015 and up to the date of the administration, Queensland Nickel incurred the further debts listed in Schedule K to the statement of claim, which total $13,434,793.85.  
  2. The entirety of the plaintiffs’ submission supporting the proposition that there was a good arguable case against Mr Palmer to recover the $13,434,793.85 sum on the basis of insolvent trading was contained in this paragraph:[63]

Mr Parbery’s evidence is that despite the fact that QNI was insolvent by no later than 9 October 2015[64], Mr Palmer permitted QNI to continue to incur liabilities after that date – in particular, the $13 million in liabilities identified in Schedule K to the Statement of Claim, all of which remain unpaid by QNI[65]

  1. However neither that submission nor the evidence which it footnoted addressed with any rigour the elements of a cause of action to recover compensation for loss resulting from insolvent trading pursuant to s 588M of the Corporations Act.   
  2. Other evidence sufficiently establishes – 
    1. a good arguable case that Mr Palmer was a director at the requisite time;
    2. a good arguable case that the creditors in respect of those debts suffered loss because of the insolvency and their debts were unsecured;
    3. the company is being wound up.
  1. But it is also necessary to demonstrate that Mr Palmer has contravened s 588G(2) or (3) in relation to the incurring of the debts concerned.  The possibility of s 588G(3) may be put aside because no case of dishonesty is advanced.  To establish breach of s 588G(2) it would be necessary also to establish for each of the debts comprising the $13,434,793.85 that at the time of Mr Palmer’s failing to prevent Queensland Nickel from incurring the debt –
    1. he was aware that there were reasonable grounds for suspecting that Queensland Nickel was insolvent; or
    2. a reasonable person in his position would be aware that there were such grounds.
  2. I have received no submission from the plaintiffs addressing the question of Mr Palmer’s awareness in this regard.  On the other hand, I also received no submission from Mr Palmer negating the proposition.  In light of the evidence concerning Mr Palmer’s extensive involvement in the urgent seeking of finance to address Queensland Nickel’s cash flow problems (which involvement started well before 9 October 2015) and his role as chair of the JVOC, and the objective circumstances, I am prepared to conclude that the plaintiffs’ case meets the good arguable case threshold.

The good arguable case against the corporate defendants

  1. As to the Joint Venturers:
    1. The amount sought to be the subject of the freezing order against QNI Metals was $49,993,120.74.  That sum was comprised of –
      1. $41,993,120.74 being QNI Metals’ 20% participating interest in the $209,965,603.71 total unpaid liabilities of Queensland Nickel referred to at [165] above; and
  1. $8,000,000 being QNI Metals’ 20% participating interest in the $40 million payment to Palmer Leisure Australia on behalf of the Joint Venturers as the purchase price for shares in Palmer Leisure Australia acquired by the Joint Venturers as referred to in item 4 of the table at [134] above.  
  1. The amount sought to be the subject of the freezing order against QNI Resources was $199,972,482.97.  That sum was comprised of–
    1. $167,972,482.97 being QNI Resources’ 80% participating interest in the $209,965,603.71 total unpaid liabilities of Queensland Nickel referred to at [165] above; and
    2. $32,000,000 being QNI Resources’ 80% participating interest in the $40 million payment to Palmer Leisure Australia on behalf of the Joint Venturers as the purchase price for shares in Palmer Leisure Australia acquired by the Joint Venturers as referred to in item 4 of the table at [134] above.
  2. The claim against the Joint Venturers for their respective proportions of the amounts Queensland Nickel paid to Palmer Leisure Australia, in respect of shares it issued to the Joint Venturers, but for which Queensland Nickel has not been repaid, is a debt claim.  The claim for the proportion of the Queensland Nickel’s unpaid liabilities is put as – 
    1. a claim for an indemnity for liabilities Queensland Nickel incurred as general manager of their joint venture;
    2. a claim for indemnity for liabilities Queensland Nickel incurred as trustee on behalf of them;
    3. a claim for an equitable lien; and
    4. a claim in debt, for their respective participating shares in respect of debts incurred by Queensland Nickel on its behalf.
  3. The proposition that the plaintiffs had established a good arguable case for remedies which would justify the amounts sought to be made the subject of freezing orders was conceded.
  1. As to Mineralogy:
    1. The amount sought to be the subject of the freezing order against Mineralogy was $16,425,535.54.  That sum is only a small proportion of the total claim which is advanced against that company by Queensland Nickel, but for present purposes it is the only amount which is relevant.
    2. That sum was comprised of the total amount paid by Queensland Nickel to Mineralogy for expenses relating to Mineralogy’s mining tenements set out in Schedule I of the statement of claim and expenses relating to choses in action under two Mining Right and Site Lease Agreements, as referred to in item 21 of the table at [134] above.  It was put as a claim in debt or for monies had and received or for monies knowingly received by Mineralogy in circumstances where they had been paid away from QNI in breach of duties and in breach of trust.
    3. The proposition that the plaintiffs had established a good arguable case for remedies which would justify the amounts sought to be made the subject of freezing orders was conceded.
  2. As to Palmer Leisure Australia:
    1. The amount sought to be the subject of the freezing order against Palmer Leisure Australia was $375,000.00.  
    2. That sum was comprised of the $375,000.00 paid to Palmer Leisure Australia at Mr Palmer’s request, as referred to in item 24 of the table at [134] above.  It was put as a claim in debt or for monies had and received.
    3. The proposition that the plaintiffs had established a good arguable case for remedies which would justify the amounts sought to be made the subject of freezing orders was conceded.
  3. As to Palmer Leisure Coolum:
    1. The amount sought to be the subject of the freezing order against Palmer Leisure Coolum was $67,145,594.27.  That sum was comprised of – 
      1. $8,100,000.00 which Queensland Nickel lent to Palmer Leisure Coolum to fund the purchase of 98% of the shares in Coeur de Lion Holdings, as referred to in item 2 of the table at [134] above;
      2. $57,807,342.70 which is the total amount of expenses and working capital contributions paid in respect of the Coolum resort, as referred to in item 3 of the table at [134] above; and
      3. $1,238,251.57 which is the total of the payments which Queensland Nickel provided to fund the purchase of 14 villas at Palmer Coolum Resort, as referred to in item 5 of the table at [134] above.
    2. The claims for those amounts are put as claims in debt or for monies had and received or for monies knowingly received in circumstances where they had been paid away from Queensland Nickel in breach of duties and in breach of trust.
    3. The proposition that the plaintiffs had established a good arguable case for remedies which would justify the amounts sought to be made the subject of freezing orders was conceded.
  4. As to Fairway Coal:
    1. The amount sought to be the subject of the freezing order against Fairway Coal was $9,163,066.73.  That sum was comprised of the total amount which Queensland Nickel lent to Fairway Coal were Styx Basin Joint Venture expenses as referred to in items 1 and 27 of the table at [134] above.  
    2. The claims are put as claims in debt or for monies had and received or for monies knowingly received in circumstances where they had been paid away from Queensland Nickel in breach of duties and in breach of trust.
    3. The proposition that the plaintiffs had established a good arguable case for remedies which would justify the amounts sought to be made the subject of freezing orders was conceded.
  5. As to Cart Provider:
    1. The amount sought to be the subject of the freezing order against Cart Provider was $324,999.68.  That sum was comprised of the payment made for Cart Provider’s purchase of 65 Golf Carts which Cart Provider had contracted to buy, as referred to in item 26 of the table at [134] above.  
    2. The claim is put as a claim in debt or for monies had and received or for monies knowingly received in circumstances where they had been paid away from Queensland Nickel in breach of duties and in breach of trust.
    3. The proposition that the plaintiffs had established a good arguable case for remedies which would justify the amounts sought to be made the subject of freezing orders was conceded.
  6. As to Coeur de Lion Investments and Coeur de Lion Holdings:
    1. The amount sought to be the subject of the freezing order against Coeur de Lion Investments and Coeur de Lion Holdings was $67,145,594.27.  That sum is a reflection of the claim against Palmer Leisure Coolum described above and founded on those parties’ knowing receipt of monies paid away from Queensland Nickel in breach of duties and in breach of trust.
    2. The proposition that the plaintiffs had established a good arguable case for remedies which would justify the amounts sought to be made the subject of freezing orders was conceded.
  7. As to Closeridge:
    1. The amount sought to be the subject of the freezing order against Closeridge was $77,800.00.  That sum was comprised of monies paid for purchase of a Mercedes Benz motor vehicle for either Mr Palmer personally or Closeridge, as referred to in item 25 of the table at [134] above.  
    2. The claim is put as a claim in debt or for monies had and received or for monies knowingly received in circumstances where they had been paid away from Queensland Nickel in breach of duties and in breach of trust.
    3. The proposition that the plaintiffs had established a good arguable case for remedies which would justify the amounts sought to be made the subject of freezing orders was conceded.
  8. As to Waratah Coal:
    1. The amount sought to be the subject of the freezing order against Waratah Coal was $2,000,000.00.  That sum was comprised of the total of payments of $200,000.00 and $1,800,000.00 paid to Waratah Coal at Mr Palmer’s direction, as referred to in items 8 and 9 of the table at [134] above.  
    2. The claims are put as a claims in debt or for monies had and received or for monies knowingly received in circumstances where they had been paid away from Queensland Nickel in breach of duties and in breach of trust.
    3. The proposition that the plaintiffs had established a good arguable case for remedies which would justify the amounts sought to be made the subject of freezing orders was conceded.

Does the relevant risk exist?

  1. The question here is whether there is a real risk of steps being taken which would have the effect of frustrating the prospective Court processes of execution and enforcement in respect of any judgment in the plaintiffs’ favour.  To the extent that the answer to the question turns on inference rather than direct proof, are there facts from which a prudent, sensible commercial person might properly infer the existence of the relevant risk?

The question should be answered in the affirmative

  1. The plaintiffs’ case that the question should be answered in the affirmative is not that there is a risk of the occurrence of particular identified dealings with assets which would have the requisite effect.  Rather –
    1. they advance the truism that the schemes which a debtor subject to the Court’s processes might devise to frustrate their effective operation are legion; 
    2. they contend that Mr Palmer has, by previous conduct to which they point, demonstrated himself to be the sort of person who would, faced with the prospect of judgments of the nature of those sought in this proceeding, devise and implement such schemes; and
    3. accordingly, they contend I should conclude the requisite risk exists.
  2. The justification of freezing orders by reference to such a personal and general attack might in a different case be seen as fraught with difficulty.  I have already explained that the law requires solid evidence justifying the assessment of the requisite risk.  Mere assertion of concern or speculation about a person’s character would not be sufficient.
  3. But the plaintiffs’ case does not rely on mere assertion or speculation.  In this case, there are particular aspects of Mr Palmer’s previous conduct which would lead a prudent, sensible commercial person to infer that there is a real risk that he would take, or cause to be taken, steps outside court processes to attempt to frustrate or inhibit the prospects of enforcement or execution of any significant judgment against him or any of his companies.  
  4. The evidence does not support the conclusion that there is a real risk that Mr Palmer would abscond, but it does support the conclusion that there is a real risk of Mr Palmer entering into colourable transactions which, when discovered, would operate to inhibit or to frustrate enforcement or execution processes.  I do not think that it is any answer to this concern to say that if the transactions were colourable, they might, or even should, be capable of being unwound by lengthy and expensive insolvency processes, in which evidentiary difficulties might abound.  Nor am I troubled by the failure of the plaintiffs to identify particular transactions which might be entered into, because the point they make as to the ingenuity of schemes which a potential judgment debtor might devise is correct.
  5. The relevant aspects of Mr Palmer’s previous conduct which justify this conclusion have either been proved before me in this application, or to the extent that the facts or their proper characterization are disputed, my qualitative evaluation of the evidence as a whole supports the conclusion I have expressed.  In my view, this is a case in which the evidence which justifies the evaluations which I have expressed in the previous section of these reasons as to the underlying strength of some aspects of the plaintiffs’ case should be taken to have a strong bearing on the assessment of the risk which exists to the integrity of the Court’s processes: cf. [38] above.
  6. First, there is evidence which suggests that Mr Palmer’s relationship to all of the corporate defendants against whom a freezing order is sought is such that he regards himself as the person who can make decisions on their behalf, including in relation to this proceeding.  That much is clear from the fact and terms of exhibit 5, referred to at [238] above.  Further, his ownership position and his directorships support the argument that he has both de facto and de jure control over the companies and their assets.  They are effectively assets which he owns and the protection of their wealth is the protection of his wealth.  Regard should also be had to the evidence which justified my conclusions as to the extent of Mr Palmer’s actual influence over Queensland Nickel: see [103]-[121] above.  I think a prudent, sensible commercial person would regard it to be legitimate to draw inferences about the risk of how the corporate defendants would conduct themselves, by reference to an assessment of the risk of how Mr Palmer would conduct himself. 
  7. Second, I have explained why I have concluded that the plaintiffs’ case in relation to the Martino appointment and the Martino settlement deeds is a good arguable case and why my qualitative evaluation of that case is that it is a strong case: see [214]-[239] above.  A prudent, sensible commercial person informed by the evidence presently before me would be gravely concerned about what Mr Palmer’s involvement in the Martino appointment and the Martino settlement deeds reveals concerning the risks of his future behaviour.  A prudent, sensible commercial person could properly infer that the evidence suggested Mr Palmer had, and acted on, a positive intention to frustrate the possibility of any judgment against himself, Mineralogy and any of the other natural and corporate defendants within the ambit of the releases contained in the Martino settlement deeds and that he had, and acted on, a willingness to do so by illegitimate means.  
  8. In my view those considerations alone are sufficient to justify a conclusion that the plaintiffs have demonstrated the existence of the requisite risk, assessed by reference to the conclusion which a prudent, sensible commercial person would reach.  It will be recalled that whilst it is not essential to prove that a defendant’s purpose or intention is to frustrate any potential judgment against the defendant, evidence of intention might well be very significant: see [36] above.  
  9. The plaintiffs submitted that the conclusion as to the existence of the relevant risk is further supported by reference to the evidence concerning:
    1. the Waratah Coal transaction and the China First transaction; 
    2. the way in which the Joint Venturers responded to Queensland Nickel’s demands that it be indemnified for liabilities which it had incurred on their behalf; and (c) the green notebook.
  10. As to the Waratah Coal transaction and the China First transaction:
    1. I have explained my conclusion that there is a strong case that Mr Palmer was a director of Queensland Nickel at all material times, including when he was not appointed as such: see [103]-[121] above. 
    2. I have addressed at length the nature of the transactions and the context in which they were entered into: see [173]-[185] above.
    3. I have addressed at length my reasons for concluding there is a strong case that the transactions were uncommercial transactions and insolvent transactions within the meaning of the Corporations Act: see [204]-[212] above.
    4. In my view a prudent, sensible commercial person would infer that these matters support a conclusion as to the existence of the relevant risk, especially when taken with the evidence of the subsequent conduct concerning the Martino appointment and the Martino settlement deeds.  It would be legitimate for such a person to reason from the revealed conduct and decision making of Mr Palmer in this respect, that there was a real risk that in the future he would behave in the way that the plaintiffs suggest.
  11. As to the way in which the Joint Venturers responded to Queensland Nickel’s demands that it be indemnified for liabilities which it had incurred on their behalf:
    1. I have referred to the evidence at [188]-[194] above.
    2. The conduct there identified was informed by a particular argument as to the operation of the Joint Venture Agreement.  That view is either right or wrong, but it is the argument on which the Joint Venturers rely.  If it is wrong, then the conduct adverted to will have had no effect on Queensland Nickel’s rights.     
    3. By itself, that aspect of the evidence ought not be regarded as a secure basis from which to draw the inference of the existence of the relevant risk to the integrity of the court’s processes in respect of any judgment in the plaintiffs’ favour.
    4. On the other hand, a prudent, sensible commercial person might well infer that Mr Palmer’s support for the conduct of the Joint Venturers suggested that he may not be a responsible commercial actor, and that would tend to support the conclusion of the existence of the risk demonstrated by other matters.  
  12. The evidence concerning the green notebook (as to which see [107]-[122] above) is less easily employed by the plaintiffs.  Evidence that demonstrated or permitted of the inference on the balance of probabilities that Mr Palmer fabricated the green notebook would obviously be very cogent evidence on the question of risk.  But no such submission has been made.  Nevertheless, as I have said, I think that something less than proof of actual dishonest conduct might still have some relevance to the assessment which a prudent, sensible commercial person might properly make on the question of risk of frustration of the court’s process.  If – as I have concluded – there is other evidence from which a prudent, sensible commercial person might properly infer the existence of the relevant risk, the fact that such a person harboured real doubts of the nature of those I have referred to in relation to the green notebook, would make it easier to draw the conclusion that a real risk existed.  As I have explained, one does not have to be satisfied on the balance of probabilities that the risk will come to pass: see [31] above.  
  13. The plaintiffs also placed reliance on four other matters to which I now turn, namely:
    1. the nature of certain sworn evidence given by Mr Palmer said to reasonably justify an inference that he is prepared to mislead lawful enquiry into his conduct;  
    2. evidence of Mr Palmer’s dealings with certain property; 
    3. evidence of inadequately explained transfers of significant sums of money overseas; and
    4. evidence of the support that has been given to Mr Mensink, allegedly to assist him in avoiding compliance with Federal Court orders.
  14. As to the submission of Mr Palmer’s alleged preparedness to mislead lawful enquiry:
    1. The plaintiffs’ submission was that the nature of certain sworn evidence given by Mr Palmer reasonably justifies an inference that he is prepared to mislead lawful enquiry into his conduct.  
    2. In particular, Mr Palmer was cross-examined concerning an alleged inconsistency between what he had said about his intentions concerning selling assets, in particular Mineralogy House, and the fact that it was in fact sold.  As to this:
    1. Mineralogy House was a commercial building located at 380 Queen Street, Brisbane and owned by Mr Palmer personally.
    2. Mr Palmer’s evidence in the public examination on 16 September 2016 was that it was not “generally for sale”; “we’ve had approaches from people to buy it – expressions of interest”.  He was asked whether he had listed it with any real estate agents and said that it was not formally listed “we’ve just had discussions with people that said, ‘Would you sell?  And what price?’”.  
    3. Before me, Mr Palmer was shown an email he had sent to a real estate agent on 31 August 2016 formally confirming that agent’s “appointment to approach the adjoining owners and for any other genuine purchaser of 380 Queen Street to negotiate an acceptable sale price on our property” and requesting the agent to inform such persons that the vendor was working to a 21 day expression of interest period after which time the vendor would make a decision on the sale.
    4. He rejected the suggestion that the email demonstrated that his evidence on 16 September 2016 was untruthful.  He explained that, on his view, the appointment differed from what a real estate agent would regard to be a formal listing.  It seemed that he would regard something as “generally for sale” only if it was being advertised at a particular price.  
  1. The plaintiffs’ submissions also compared and contrasted these two passages:
    1. Mr Palmer’s evidence during a public examination on 17 May 2017 (less than a month before Mineralogy House was transferred), in which he gave the following evidence :

[I]f you consider them in light of the review that’s presently underway and in your judgment it’s a good time to sell them, it’s possible that you will decide to sell them at that time?   Well, I doubt it.  I think – I don’t normally sell anything        All right?    but really, I just keep things.

Yes?   I’m a collector.  I like to amass wealth and keep it.  You never know when a rainy day is coming, when the liquidator could be knocking on your door, do you?

Very good?   You’ve got to be able to satisfy.

  1. Mr Palmer’s statement to me on 3 August 2017, during the return of this application:

DEFENDANT PALMER: Well, I think I can inform the court of certain things. I’ve got personal knowledge, and I seek your leave to be able to do that. 

HIS HONOUR: Yes, Mr Palmer. 

DEFENDANT PALMER: First of all, going to paragraph 196 – well, first of all, I should say that in my business dealings in Australia, all of the time something’s for sale has been for the last 10 or 12 years. That’s the activity of commerce and business, and I’ve got a variety of interests that that – that always happens…

  1. I do not think that it is appropriate in an interlocutory application of this nature to seek to make a finding of fact of the nature of that which the plaintiffs seek, especially when the basis for the finding sought is evidence which took place before another judicial officer in respect of which I have only the transcript.  Even if I was of a different view, I would not be persuaded that I should regard Mr Palmer’s evidence on the sale of Mineralogy House in the way that the plaintiffs suggest.  Whilst there may be thought to be some merit in a criticism of the extent to which Mr Palmer’s answer was forthcoming in the public examination, I am not presently prepared to find that the manner of his answers justifies the generality of the plaintiffs’ proposition.  Mr Palmer has been both literally and figuratively an advocate for his case that he and his companies have done nothing wrong.  Presently I would be inclined to conclude that the matters to which the plaintiffs point are examples of his lapsing into the combative hyperbole of an undisciplined advocate rather than examples of his determining positively to mislead lawful enquiry.
  1. As to the submission that evidence as to some property dealings supported the inference:
  1. The plaintiffs presented what may be thought to be a more orthodox case in which the existence of the relevant risk of frustration was said to be demonstrated by some particular dealings with assets.  The evidence was said to be evidence that Mr Palmer may already have embarked upon the dissipation of assets.
  2. Part of that argument was misconceived.  It was suggested that Mr Palmer was selling “his” super yacht, Maximus.  But it transpired that this was the same yacht which Mr Palmer had notoriously and publicly given to his daughter as a present many years ago.  There were other assets about which some evidence was led, but in respect of which no submission was eventually pressed.  
  3. Ultimately, the only submissions about property dealings which were pressed as being relevant to the risk of frustration, were dealings concerning the Sovereign Island Property, Mineralogy House and the Avica Resort (a wedding facility and resort at the Gold Coast).  As will appear, some of the evidence does provide some support for the plaintiffs’ contention, and some does not.
  4. As to the Sovereign Island Property:
    1. At the special purpose liquidators’ public examinations on 16 September 2016, Mr Palmer gave evidence that his property at Sovereign Mile had been sold or transferred to a Mr Martino (the man later purportedly appointed as controller), five or six years previously.
    2. On the next business day after having given that evidence, Mr Palmer transferred that property to Sovereign Paradise Pty Limited as trustee for Paradise Point Trust, for a consideration of $1.75 million.
    3. Mr Palmer’s explanation was that five or six years before the administration, his company purchased the property but as part of a deal in which Mr Martino would be the beneficial owner, and the legal title to the property would be transferred to him when the value of fees for services provided by him as a corporate advisor to Mr Palmer’s group of companies reached a total of $1.75 million.  
    4. Mr Palmer said that the amount of fees owed to Mr Martino reached that level just before the public examination and it was at that stage that the property was transferred to a company sufficiently related to Mr Martino that Mr Palmer regarded transferring the title of the property to that company to be tantamount to transferring it to Mr Martino.
    5. The evidence touching upon Mr Palmer’s justification for the transaction is presently imprecise.  No documentation of the alleged deal was produced.  The fact and timing of the disposition of the asset might be thought to be surprising and not in the ordinary course of business.  It is a small transaction (relative to the scale of Mr Palmer’s holdings), however I agree with the plaintiffs’ submission that a prudent, sensible commercial person would conclude that the evidence to which I have referred provides some support for the conclusion as to the existence of the relevant risk.   
  1. As to the sale of Mineralogy House itself:
    1. Mr Palmer was the registered proprietor of the land on which the building was situated.  Mr Palmer said that he had ascribed a value of approximately $20 million to the building.
    2. He was identified as the transferor of the land in the registered transfer to The Trust Company (Australia) Limited and ICPF Nominees Pty Ltd on about 16 June 2017.  The consideration was $25,300,000.
    3. He explained the decision to sell as essentially the response of a good businessman faced with an offer which he regarded as a good price for an asset, which gave him a good profit.  I do not regard there to be any reason not to accept that explanation.  It is supported by affidavit evidence from a finance manager employed by Mineralogy, namely Mr Mashayanyika.
    4. Of greater concern is the evidence concerning the disposition of the proceeds of sale, and Mr Palmer’s explanation for it.  
    5. On 15 August 2017, Mr Mashayanyika deposed to the way in which the proceeds of the sale were applied; that evidence being that, after some monies were used to retire debt and pay certain corporate expenses, as at 7 August 2017 all proceeds were held in either Mr Palmer’s bank account or that of Mineralogy.  On 21 August 2017, Mr Palmer swore to the correctness of Mr Mashayanyika’s details of the disposition of the proceeds of sale. 
    6. This evidence presented an unremarkable picture of a prudent sale of a commercial asset in response to a good offer and a subsequent use of funds to retire debt, pay GST and commission on the sale, with the balance being retained on term deposits in Mr Palmer’s name and advanced to his companies to operate their business in Australia.
    7. However in cross-examination on 15 September 2017, it was established that that evidence did not take account of a $500,000 transfer to Mr Palmer’s wife on 1 August 2017 or a $100,000 transfer to Mr Palmer’s brother-in-law on 7 August 2017.  And a further $4,000,000 was transferred to Mr Palmer’s wife on 22 August 2017.  
    8. Mr Palmer said that Mrs Palmer was entitled to half the proceeds of sale of Mineralogy House because she “owns half the building”.  That proposition is contrary to the objective evidence of Mr Palmer being the sole registered proprietor of the real property and of the transfer which names only Mr Palmer as the transferor.  When challenged that he had not previously put before the Court his assertion that his wife was entitled to half the profits on sale, Mr Palmer did not maintain that assertion, instead responding “it’s my money” and “it’s between me and my wife, basically… I don’t see her as a chattel”.
    9. I agree with the plaintiffs’ submission that a prudent, sensible commercial person would conclude that the evidence to which I have referred adds further weight to the conclusion as to the existence of the relevant risk.   
  2. As to the Avica Resort:
    1. The evidence tends to negate the proposition that there is any present intention to sell, but rather supports the idea that the value of the property lies in its future development and that Mr Palmer’s intentions towards the property are consistent with that.
    2. I do not find any support for the making of freezing orders in the evidence which touches upon what is being done or proposed to be done in relation to the Avica Resort.
  1. As to alleged evidence of inadequately explained transfers of significant sums of money overseas:
    1. On or about 29 November 2012, Mr Palmer sent a memorandum signed in his own name to Mr Wolfe, requesting him to “immediately arrange the transfers for the attached schedule”.  Those transfers included the following:
      1. to Evgenia Bednova – $USD1 million for “representation fees”;
      2. to Sci Le Coeur De L’Ocean – $USD15 million for “resort operational funding”;
      3. to Zhenghong Zhang – $AUD4.5 million for “representation fees”;
      4. to Clive Frederick Palmer – $USD15 million for “representation fees";
      5. to Alexander Sokolov – $USD8 million for “representation fees”.
    2. Those amounts were items 15, 11, 13, 12 and 14, respectively, in the schedule at [134] above. 
    3. To my mind, the significance of those transactions and any perceived inadequacy of the explanation as to the expenditure, lies primarily in the extent to which they are relevant to whether the plaintiffs’ breach of duty case is a good arguable case, and not as evidence which supports the formation of view on whether there is a real risk to the integrity of the Court’s processes.
    4. They do demonstrate, if demonstration is necessary in relation to modern commerce, how easy it is for cash to be disposed of in a way which would frustrate enforcement of judgment.  That certainly adds to the view that a prudent, sensible commercial person would take of the risk concerned. 
  2. As to the submission that an adverse inference should be drawn from the extent of support given to Mr Mensink:
    1. Mr Mensink embarked on an overseas holiday in mid-2016 despite knowing that he was to be served with an examination summons by the special purpose liquidators.   Despite being served with that summons, via orders for substituted service, Mr Mensink failed to appear to be examined and has failed to comply with orders to produce documents.  Two warrants were issued for his arrest in March 2017.
    2. The contention here was that Mr Palmer has caused support that has been given to Mr Mensink, allegedly to assist him in avoiding compliance with Federal Court orders.  
    3. In his oral evidence, Mr Palmer explained that all that had occurred was that Mr Mensink had continued to have his normal entitlements met as someone who was working for the Palmer group of companies.  There was an existing arrangement that once he retired he was entitled to draw his salary for a 3 year period.  That arrangement has continued.  
    4. I am not persuaded that the plaintiffs have demonstrated any reason to disbelieve that explanation.  I do not consider this aspect of the evidence provides support to their case.

Some further issues

  1. There were a miscellany of other arguments advanced by the defendants which I should address specifically, but which I have not found to be persuasive reasons not to form the views which I have expressed.
  2. First, Mr Palmer had directly sworn to the absence of the requisite intention to frustrate any potential judgment and, indeed, to a positive intention that he would ensure that he and his companies discharged their lawful obligations pursuant to Court orders.  As further support for that proposition, he relied on evidence that on 9 October 2017 Mineralogy became the subject of a judgment requiring payment of $USD17,629,673.68 and in fact paid that sum on 20 November 2017.  I did not find that evidence to be a good reason not to reach the assessments recorded under the previous heading.  I think a prudent, sensible commercial person seeking to assess risk would be more inclined to regard the conduct to which I have referred as a better indication of risk, than the general assertion made or the payment of a particular debt during the currency of a threat of freezing orders of much greater consequence being made. 
  3. Second, in relation to the Joint Venturers, a contention was advanced that there was no risk of any relevant adverse dealing with the assets of the Refinery without the co-operation of the general purpose liquidators and the special purpose liquidators.  As to this:
    1. The contention was that –
      1. security interests held by the general purpose liquidators, China First and Waratah Coal are registered on the Personal Property Securities Register; and
      2. the proprietary rights in Joint Venture Property asserted in this proceeding by or on behalf of Queensland Nickel,

would have the practical effect of preventing a sale of the Refinery or its use as security for borrowings without the co-operation of the general purpose liquidators and the special purpose liquidators.  

  1. There is a flaw in the logic of this proposition.  If existing security interests actually prevented the possibility of disposition, or use as security for borrowing, then why would the Joint Venturers or Mr Palmer have withdrawn the undertaking which was originally offered and now oppose the giving of an undertaking?[66]  That must be because it is commercially valuable to them not to be bound in the way which an undertaking or a freezing order would bind them.  On the other hand, if the proposition were to be accepted, then no particular harm would be caused by creating the additional protection for the plaintiffs of binding the Joint Venturers and Mr Palmer by order, not to deal with the assets.  Presumably the co-operation of the liquidators could be obtained to support the sale at an appropriate value (and with requisite security concerning the disposition of proceeds pending the determination of the present proceeding). 
  2. There is merit in the defendants’ suggestion that the notoriety of this proceeding, this particular application, and of the proprietary rights asserted in relation to the Joint Venture Property would tend to indicate that a bona fide purchaser for value (or lender for that matter) would either know about the claimed proprietary rights or quickly discover them consequent upon the conduct of a due diligence investigation.  But the risk which has been demonstrated is not necessarily confined to risk of dealings conducted at least directly with a bona fide purchaser in good faith.  And any constraints which might be thought to derive from claims made by Mr Palmer or any of his companies (including China First and Waratah Coal) are capable of being dealt with by him so that they would not impact on any proposed disposition of Joint Venture Property.
  3. A submission was advanced that there would be no prospect that Mr Palmer would do something which would undermine the Court’s confidence in him prior to the resolution of this complicated proceeding.  But that is no answer, because the risk about which the plaintiffs are concerned is a risk which would not come to light until after they had obtained and sought to recover on a judgment.  See also the evidence concerning the green notebook (at [107]-[122] above).
  4. I agree with the plaintiffs that these considerations do not eliminate the risk of the nature of that which I have identified above.
  1. Third, it was submitted that fresh evidence which I permitted to be adduced in relation to Mineralogy had particular significance.  On 24 November 2017, judgment was delivered in Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 16] [2017] WASC 340, which confirmed the right of Mineralogy to receive the payment of hundreds of millions of dollars in royalties over the life of an iron ore mine, and in January 2018, Mineralogy in fact received some $USD278 million ($AUD350 million) as an initial payment of the royalty stream.  A statement of financial position of Mineralogy as at 28 November 2017 suggested that it has a net asset position of in excess of $275 million.  An appeal has been lodged but not yet argued.  If the judgment stands, the long term financial position of Mineralogy in terms of its capacity to meet any judgment in favour of the plaintiffs is strong.  But the risk to which the plaintiffs point is not that of conduct by a hypothetical diligent and responsible director of Mineralogy aimed at protecting Mineralogy from threat posed to it by judgments sought against it.  Rather, the risk concerns what Mr Palmer might cause to be done by Mineralogy, to protect his wealth, of which Mineralogy’s wealth must form a part.  That risk justifies orders against Mr Palmer, but also Mineralogy.   I do not see the demonstration of Mineralogy’s wealth as a weighty negation of the existence of the relevant risk.
  1. Fourth, in relation to Mineralogy it was suggested that, again, there was an external consideration which eliminated the relevant risk because there was a statutory constraint on Mineralogy assigning, charging or dealing with its valuable mining tenements in Western Australia without the consent of the State Minister.  As to this:
    1. Absent a freezing order, there would be no obligation constraining Mineralogy from applying for, or the State Minister from, granting such consent.
    2. The evidence revealed that the enormous cash flow which the tenements provide to Mineralogy derives from contractual royalty rights which Mineralogy has as against certain Chinese mining companies.  These are the rights which gave rise to the judgment referred to in the previous paragraph.
    3. There was no contractual constraint against Mineralogy assigning or charging those contractual rights.   There was a suggestion that the way in which the agreement with the State would operate would be such as would require Ministerial consent.  I express no view on that, but even if it were so, that would not constrain some form of dealing with the fruits of the right even if the right itself could not be assigned without consent. 
  1. I agree with the plaintiffs that these considerations do not eliminate the risk of the nature of that which I have identified above.
  1. Fifth, a proposition which seemed to be advanced on behalf of Mr Palmer, and on behalf of many of the corporate defendants, was that the value of Mr Palmer’s assets and those of his companies was such as to suggest that there was no real risk of dealings with assets which would have the effect of inhibiting or frustrating judgments of the nature of those sought in this proceeding.  As a general proposition I did not find that argument to be compelling.  As to this:
    1. So far as the corporate defendants other than the Joint Venturers and Mineralogy were concerned, although I had information about the value of their assets, I did not have information as to the value of their liabilities and, accordingly, their net assets.  
    2. The position was different in relation to Mineralogy (which I have already discussed) and also the Joint Venturers.  I was provided with financial statements for the Joint Venturers and I also had a great deal of confidential information about the value of the Refinery, even though it had effectively been mothballed since April 2016.  As to this:
      1. I had received conflicting opinion evidence which addressed the value of the Refinery.  Much of that evidence was confidential and all parties see value in preserving that confidentiality so as to advantage any possible sale of the Refinery.  Accordingly, it is appropriate to be circumspect in this part of my reasons.
      2. Opinion evidence adduced by the defendants ascribed a value which tended to support the defendants’ submission.  Opinion evidence adduced by the plaintiffs was to the contrary.
      3. This application is not the occasion to making findings resolving that conflict of opinion.  As a general proposition, I would not be prepared to rely on the estimate advanced by the opinion evidence adduced by the defendants, so as to accept the defendants’ hypothesis concerning risk.  My qualitative evaluation of the competing merits of the two opinions favoured that of the plaintiffs, generally for the reasons advanced in the confidential written submissions filed by the plaintiffs.
    3. Confidential exhibit 3 was Mr Palmer’s rough estimate of his net worth.  The amount was an amount which would have given some weight to the submission.  But there was no detail given by Mr Palmer as to how the figure was reached.  I do not know, for example, the extent to which the estimate may be informed by treating assessments of the value of mining tenements in the same way as Mr Palmer was prepared to treat the BDO “valuation” of China First’s coal project.  Nor do I have any information as to the extent of his personal liabilities.  Nor do I have any information, for example, as to the whether he is likely to experience any cash flow pressures either now or in the future.  I am not prepared to reach the conclusion which I am invited to reach by the defendants, based on Mr Palmer’s rough estimate of his net worth.  
    4. In any event, I think a prudent, sensible commercial person seeking to assess risk would be more inclined to regard the conduct to which I have referred as a better indication of risk of future conduct, than the suggestion that Mr Palmer is so wealthy that any risk could be discounted for that reason alone. 
  1. Sixth, it was submitted on behalf of many of the group of corporate defendants identified at [6](c), that the evidence did not descend to demonstrating a particular intention by those defendants to deal with their assets at all.  The response to that argument is that I think a prudent, sensible commercial person would regard it to be legitimate to draw inferences about the risk of how the corporate defendants would conduct themselves, by reference to an assessment of the risk of how Mr Palmer would conduct himself.  And the risk being addressed is what Mr Palmer might cause to be done by those defendants, to protect his wealth, of which their wealth must form a part.  
  2. Seventh, Mr Palmer submitted that the whole application was embarked upon by the plaintiffs for a collateral purpose.  He submitted that it should be regarded as an abuse of process.  There is no evidence which supports that submission.  It may be disregarded.  A submission was also made that, upon a proper assessment, the application should be regarded as improperly and merely aimed at obtaining security for an eventual judgment, there being no other explanation for it.  I reject that submission.  I have explained that there is a proper basis to conclude the existence of a real risk of the requisite nature.  

Do the interests of justice favour the making of the orders sought?

  1. The question here is whether it is in the interests of justice that the power be exercised, in particular bearing in mind that the jurisdiction must be exercised with a high degree of caution and with proper consideration for the nature of the impact on the persons affected.  

Prejudice caused by failing to make orders which should have been made

  1. Like any order of this nature, as well has considering the risk of harm which might be caused by making an order which it might turn out should never have been made, one must also consider the risk of harm which might be caused by not making an order which it might turn out should have been made.
  2. Queensland Nickel had conducted a project of real significance to its local community and the State.  The manner of its operation left behind many unpaid creditors, including former employees.  The Commonwealth of Australia had provided some $70 million to guarantee the entitlements of the former employees of Queensland Nickel, for which no provision had been made by its directors (and the Joint Venturers).  
  3. The costs of prosecuting this proceeding to a judgment will undoubtedly be enormous.  
  4. I conclude that there is a significant public interest in protecting the plaintiffs against the risk to the integrity of the court’s processes which I have identified.  And, obviously, there are significant private interests also to be protected.

The significance of delay

  1. The defendants point out that the plaintiffs were appointed by the Federal Court of Australia on 18 May 2016, but delayed bringing the application until 2 August 2017.  But the complaint about delay is unpersuasive.  True it is that the plaintiffs must have known about the alleged voidable transactions and the case against them from an early time, but they rely on many other matters, including –
    1. the testimony of Mr Palmer in the public examinations in September 2016;
    2. the Martino Appointment and the Martino deeds of settlement in May 2017; and
    3. the Mineralogy asset sale in June 2017.
  2. In any event, the special purpose liquidators would have in the first instance necessarily devoted their energies to ensuring the preparation of the detailed claim which they filed on 30 June 2017.  Given the breadth and complexity of the matters there addressed, and the fact that any application for a freezing order must first demonstrate a good arguable case, the time that passed between the conclusion of the public examinations and the commencement of the proceeding does not evidence inappropriate delay.  The present application was commenced within a month of the commencement of the proceeding.
  3. Mr Palmer also criticised the delay by the plaintiffs in the prosecution of this application.  I reject that criticism.  As I noted earlier, the fact that the application took place over the range of dates which it did was a function of the availability of the court and of the parties and the need to permit the parties to examine and respond to the extent of the material which had been filed.
  4. I am not prepared to regard delay as a discretionary consideration sounding against the application.  

Whether an undertaking to ensure the due expedition of the proceeding is offered

  1. No undertaking to ensure due expedition was offered.  But neither was any point taken by the defendants about its absence.
  2. In my view no such express undertaking was required.  All parties to litigation in this Court are subject to the implied undertaking to the Court and to the other parties to proceed in an expeditious way: see UCPR r 5.  
  3. Moreover, as this proceeding is on the commercial list being managed by me, expedition is an expectation.  In the event that any defendant was concerned about prejudice caused by any perceived failure of the plaintiffs to proceed with due expedition, appropriate sanctions could be sought, including if necessary, discharge of any freezing orders made.  The orders sought reserve liberty to apply.

The availability of alternative proceedings or remedies.

  1. The defendants submitted that an available alternative remedy was the ability of the plaintiffs to protect themselves by interlocutory injunction in the event of their becoming aware at any point that the Joint Venturers were taking steps to sell, mortgage or otherwise dispose of assets, in a way that they considered to be prejudicial to their rights.  That is, that the plaintiffs are entitled to seek appropriate undertakings from the Joint Venturers, and failing undertakings, to come to Court to seek ordinary interlocutory injunctive relief, if the facts supported such an order.
  2. I reject that submission.  It would depend on the plaintiffs becoming aware of threatened conduct before it became implemented, without any guarantee that they would become so aware.  
  3. However it was that notion which caused me to raise with the parties whether it was possible to consider granting a notification injunction as an alternative and less intrusive remedy than a freezing order, if otherwise I was persuaded that the plaintiffs were entitled to a remedy.  A notification injunction might have been a mechanism by which the defendants could be required to identify to the plaintiffs any proposed transaction, thereby giving the plaintiffs an opportunity to bring an application.  As I have already recorded, ultimately that led to the plaintiffs advancing, in the alternative, an application for the remedies identified in annexure B to these reasons.
  4. I received evidence and submissions directed to this possibility.  The thrust of the proposal developed by the plaintiffs was that, subject to certain exceptions, it would oblige each defendant:
    1. first, not to dispose of or deal with its assets without providing the plaintiffs at least 7 business days’ prior written notice before they carried out any transaction which had the effect of diminishing or further diminishing the unencumbered value of its assets below particular amounts; and
    2. second, within 7 business days of the date of the order, to inform the plaintiffs in writing of all of the defendant’s assets and the extent of their interests in those asset.
  5. Jurisdiction to make such an order would exist either in the inherent jurisdiction or under the UCPR, on the basis that it was an order ancillary to a prospective freezing order, there being an evidentiary basis warranting the conclusion that it was within the bounds of reasonable expectation that a freezing order would be made in the future, and a strong argument as to the sufficiency of the prospects of that occurring.  
  6. However, I formed the judgment that having regard to the evidence and the submissions filed by the defendants (in particular Mr Palmer’s eighteenth affidavit[67]) concerning the breadth of their business operations –
    1. the burden of compliance with such orders would have made compliance oppressive; and
    2. there was too high a prospect of inadvertent breach of the orders, to warrant any formation of view that an order in the proposed form would be appropriate.
  7. I would not regard the prospect of making orders in the form of annexure B as appropriate where there are available and less intrusive remedies.

Impact on the defendants and on innocent third parties

  1. In his oral evidence before me, and with one caveat, Mr Palmer said that the extent of his assets was such that compliance with a freezing order directed to him personally would not cause him any difficulty.  The caveat was that the principal difficulty would be the reputational damage that an order of this nature would cause.  That would cause prejudice across his whole business.  So far as the corporate defendants were concerned, his position seemed to be the same, except that he did assert that the potential impact on the corporate defendants was such that it would cause difficulty with the people involved in their businesses.  
  2. I accept that a degree of reputational stigma would attach the making of orders such as those sought in the freezing application.  However I think the proposition that further reputational damage would be caused by the making of the orders sought additional to the reputational damage which must already have been caused by the insolvency of Queensland Nickel and associated termination of employees is speculative.  I was unpersuaded by the evidence adduced by the defendants in this respect.  The evidence of the suggested damage to the businesses conducted by the defendants was similarly unpersuasive, either of its nature (which was either speculative, expressed at a high level of generality, or in argumentative or inflammatory terms), or because it turned on choices which Mr Palmer said he would make if orders were made against him and the defendants (e.g. not to proceed with the itself speculative possibility of his re-opening the Refinery).  I was unpersuaded by the Mr Palmer’s argument that if orders were made he would make decisions not to proceed with business opportunities, and the adverse consequences of those decisions made by him, should be regarded as prejudice caused by the orders. 
  3. If Mr Palmer has the wealth that he says he has, then the harm caused by the making of the orders to his business interests and those of his companies, is not likely to significant.  

Conclusion

  1. On balance, I think that the interests of justice favour the grant of an order.  

Overall evaluation

  1. The plaintiffs have a good arguable case that they will recover significant judgments against Mr Palmer and his various companies.  
  2. For the reasons I have articulated, there are particular aspects of Mr Palmer’s previous conduct and decision making which would lead a prudent, sensible commercial person to infer that there is a real risk that he would take, or cause to be taken, steps outside court processes to attempt to frustrate or inhibit the prospects of enforcement or execution of any significant judgment against him or any of his companies.  
  3. There is no certainty that that is what would occur.  Indeed, I am not in a position to conclude that it is more probable than not that that is what Mr Palmer would do.  But, endeavouring to take account of all the evidence before me, and conscious of the degree of care that I am obliged to take in applications of this nature, I nevertheless conclude that there is a real risk that he would.  
  4. I think it is a risk against which the plaintiffs should be protected, notwithstanding the risk of harm to Mr Palmer, his companies, and the people involved in the businesses they conduct.  Indeed, in assessing which course carries with it the lower risk of injustice, I am comforted, in reaching the conclusion I have, by the evidence which has been adduced touching upon the extent of Mr Palmer’s wealth and that of his companies. 

The appropriate orders

  1. Annexure A to these reasons sets out the orders which have been sought.  As I have explained, the alternative form of orders as set out in annexure B is not appropriate.  I deal below with some matters relevant to the form of the orders (which in large part follow the form of the orders the pro-forma attached to Practice Direction 1 of 2007), including some issues of controversy which were raised.
  2. The reference to the undertakings by the Commonwealth and the first plaintiffs should not be phrased in the manner expressed in annexure A because it is ambiguous.  The undertakings which have been offered should be as set out in a schedule to the order.  I have done that in the form of order which I will make, adopting the form of undertaking which has in fact already been offered (see [321] below).  
  3. One objection by the defendants was that the plaintiffs had deleted a proposed form of order (which was expressed in the original application), which would have limited the operation of orders made against all defendants by stating that the orders would not operate to prevent removal of an aggregate of $219,050,352 measured by reference to the aggregate of the unencumbered value of the assets within Australia.  The idea behind that order was that the real interest of the plaintiffs was to avoid the risk of an overall recovery against all defendants being less than the amount required to meet Queensland Nickel’s liabilities.  The complaint then is absent any such order, if one aggregates all the amounts to be frozen for all defendants as proposed in annexure A, the total figure frozen is much more than that amount.  As to this:
  1. The plaintiffs’ response was that the order was justified so as to ensure that an eventual judgment would not be frustrated regardless of the combination of defendants against whom that judgment is made.  Especially is that so, contend the plaintiffs, because they cannot seek an order requiring each of the defendants to make its frozen assets available to the other defendants in satisfaction of a judgment, or to meet an eventual judgment on behalf of another defendant.  
  2. I agree that an appropriate response is seek to freeze assets against each defendant to the extent of the claim made against that defendant.  It is difficult to see how one could make the idea behind the original but now deleted form of order work, given the need to recognize the separate cases against the defendants.
  1. The definition of “assets” in proposed order 15(b) may result in the corporate defendants being bound by a freezing order against Mr Palmer, even if no freezing order were made against them individually.  As I propose to make orders against each of the companies individually, this complaint falls away.  In any event, proposed order 15(b) again follows the form of the practice direction.  Moreover, it would lie within the power of Mr Palmer, if he truly has the wealth he says he has, to organize the affairs of himself and his companies in such a way as to completely ameliorate this concern.  
  2. A complaint was made that the proposed order 19(a) requires the Court to determine what legal expenses are “reasonable” for a defendant to incur, and in any event are not limited to legal expenses incurred in this proceeding.  It was submitted, and I accept, that it is notorious that many of the defendants are involved in legal disputes.  As to this:
    1. I agree that this Court ought not be involved in making an order which will involve it in the minutiae of settling disputes over the quantum of reasonable legal expenses of the defendants.  Nor should the defendants be put in the position of having to disclose their legal budgets to the plaintiffs.  I will amend the wording of that order so that it does not prohibit the payment of reasonable legal expenses.  
    2. I will make a similar alteration to the terms of proposed order 18 which would have required this Court to become involved in determining the reasonable amount for Mr Palmer’s ordinary living expenses.  I will amend the wording of that order so that it does not prohibit the payment by Mr Palmer of his ordinary living expenses.
    3. The foregoing choices seem to me to strike a proper balance between giving the plaintiffs appropriate protection and preventing the turning of the order into an instrument of oppression.  It will involve the defendants making assessments of what are “ordinary living expenses” and “reasonable legal expenses”.  But in the event they have any concern as to the judgments they make, the defendants can apply to the court for directions.  And it is worth noting that there are well known avenues by which the confidentiality of supporting evidence for such applications might be preserved.
  3. A complaint was made that the exception to the freezing orders in proposed order 19(c) for dealings in the ordinary course of a defendant’s business applies to all of a defendant’s assets rather than just to the restrained amount.  There is nothing in this complaint.  The result of the exception in proposed order 19(c) is to make it clear that any assets above the restrained amount may be dealt with in the usual course of business.  It comes directly from the proforma attached to Practice Direction 1 of 2007.  
  1. I will order in terms of annexure A to these reasons, with the following modifications:
    1. Amend the opening paragraph of the annexure so that it reads as follows:

UPON THE UNDERTAKINGS OF THE COMMONWEALTH AND THE FIRST PLAINTIFFS BEING GIVEN TO THE COURT AS SET OUT IN SCHEDULE A TO THIS ORDER, THE ORDER OF THE COURT IS THAT:

  1. Change subsequent references in the order to “Schedule A” so that they are references to “Schedule B”.
  2. Amend order 18 to read as follows:
    1. This order does not prohibit the Fourth Defendant, Mr Palmer, from paying his ordinary living expenses.
  3. Amend order 19(a) to read as follows:
    1. This order does not prohibit any of the Defendants from:

(a) paying their reasonable legal expenses;

  1. Insert a new schedule A as follows:

Schedule A

Undertaking by the Commonwealth

1. The Commonwealth of Australia (Commonwealth) hereby undertakes to the Supreme Court of Queensland (the Court) and to the defendants in proceeding BS6593/17:

  1. to submit to such order (if any) as the Court may consider just for the payment of damages (to be assessed by the Court or as it may direct) to any person (whether or not a party) affected by the operation of this order; 
  2. to pay any orders of costs (as assessed or agreed with the Commonwealth’s

consent or taxed) which the Court makes in proceeding BS6593/17, against the first plaintiffs and/or the second plaintiff, in favour of the defendants; and

  1. the Commonwealth’s undertaking does not extend to any order of costs that may be made against John Park, Stefan Dopking, Kelly-Anne Trenfield and Quentin Olde in their capacity as joint and several liquidators of the second plaintiff (general purpose liquidators) or against the second plaintiff in respect of actions or claim made on its behalf by the general purpose liquidators including in circumstances where proceeding BS6593/17 (or claims made in proceeding BS6593/17) have been consolidated with other proceedings and/or claims.
Undertakings by the first plaintiffs

2. Stephen James Parbery, for, and on behalf of the first plaintiff, the special purpose liquidators (SPLs of Queensland Nickel Pty Ltd (in Liquidation) ACN 009 842 068, hereby undertake to the Supreme Court of Queensland, and to the defendants in proceeding BS6593/17, that:

  1. The SPLs undertake to submit to such order (if any) as the Court may consider just for the payment of compensation (to be assessed by the Court or as it may direct) to any person (whether or not a party) affected by the operation of the order;
  2. As soon as practicable, the SPLs will cause anyone notified of this order to be given a copy of it;
  3. The SPLs will pay the reasonable costs of anyone other than the respondents which have been incurred as a result of this order, including the costs of finding out whether that person holds any of the respondents’ assets;
  1. If this order ceases to have effect the SPLs will promptly take all reasonable steps to inform in writing anyone who has been notified of this order, or who the SPLs have reasonable grounds for supposing may act upon this order, that is has ceased to have effect;
  2. The SPLs will not, without leave of the Court, use any information obtained as a result of this order for the purpose of any civil or criminal proceedings, either in or outside Australia, other than in this proceeding;
  3. The SPLs will, to the extent obligations are owed in their favour by the Commonwealth of Australia as to damages, enforce those obligations if damages are awarded against the respondents;
  4. The SPLs will notify the respondents if any existing fund arrangements with the Commonwealth are terminated.

  

Annexure A – Form of orders sought by plaintiffs

 

UPON THE UNDERTAKINGS OF THE COMMONWEALTH AND THE FIRST PLAINTIFFS GIVEN TO THE COURT, THE ORDER OF THE COURT IS THAT:

INTRODUCTION

1  In this order:

  1. a corporation ordered to do something must do it personally or through its directors, officers, employees or agents;
  2. a person or corporation ordered not to do something must not do it personally or through its directors, officers, partners, employees, agents or in any other way;
  3. the term “Defendant” or “Defendants” refers to the Defendant or Defendants as the case may be identified in paragraphs 2 to 11 below. 
FREEZING ORDER

2  The First Defendant, QNI Metals Pty Ltd, must not remove from Australia or in any way dispose of, deal with or diminish the value of any of its assets in Australia up to the unencumbered value of AUD$49,993,120.74, until judgment or further order.

3  The Second Defendant, QNI Resources Pty Ltd, must not remove from Australia or in any way dispose of, deal with or diminish the value of any of its assets in Australia up to the unencumbered value of AUD$199,972.482.97, until judgment or further order.

4  The Fourth Defendant, Clive Frederick Palmer, must not remove from Australia or in any way dispose of, deal with or diminish the value of any of his assets in Australia up to the unencumbered value of AUD$204,943,664.39 AUD$219,050,604.30, until judgment or further order.

5  The:

  1. Ninth Defendant, Palmer Leisure Coolum Pty Ltd;
  2. Twelfth Defendant, Coeur de Lion Investments Pty Ltd; and (c) Thirteenth Defendant, Coeur de Lion Holdings Pty Ltd,  must not remove from Australia or in any way dispose of, deal with or diminish the value of any of their assets in Australia up to an aggregate unencumbered value of AUD$67,039,694.27 AUD $67,145,594.27, until judgment or further order.

6  The Seventh Defendant, Mineralogy Pty Ltd, must not remove from Australia or in any way dispose of, deal with or diminish the value of any of its assets in Australia up to the unencumbered value of AUD$14,458,217.94 AUD$16,425,535.54, until judgment or further order.

7  The Eighth Defendant, Palmer Leisure Australia Pty Ltd, must not remove from Australia or in any way dispose of, deal with or diminish the value of any of its assets in Australia up to the unencumbered value of AUD$375,000.00, until judgment or further order.

8  The Tenth Defendant, Fairway Coal Pty Ltd, must not remove from Australia or in any way dispose of, deal with or diminish the value of any of its assets in Australia up to the unencumbered value of AUD$9,163,066.73, until judgment or further order.

9  The Eleventh Defendant, Cart Provider Pty Ltd, must not remove from Australia or in any way dispose of, deal with or diminish the value of any of its assets in Australia up to the unencumbered value of AUD$324,999.68, until judgment or further order.

10  The Fourteenth Defendant, Closeridge Pty Ltd, must not remove from Australia or in any way dispose of, deal with or diminish the value of any of its Australian Assets up to the unencumbered value of AUD$77,800.00, until judgment or further order.

11  The Fifteenth Defendant, Waratah Coal Pty Ltd, must not remove from Australia or in any way dispose of, deal with or diminish the value of any of its assets in Australia up to the unencumbered value of AUD$2,000,000.00, until judgment or further order.

12  In each case in paragraphs 2 to 11:

  1. the assets of the Defendant in Australia are referred to herein in relation to that defendant, as his or its (as the case may be) Australian Assets;
  2. the amount which a Defendant may not remove from Australia, dispose of, deal with or diminish the value of, is referred to herein in relation to that Defendant, as the Relevant Amount.

13  If the unencumbered value of the Australian Assets of any of the Defendants exceeds the Relevant Amount in respect of that Defendant, then that Defendant may remove any of those assets from Australia or dispose of or deal with them or diminish their value, so long as the total unencumbered value of that Defendant’s Australian Assets still exceeds the Relevant Amount.

14  If the unencumbered value of the Australian Assets of any Defendant is less than the Relevant Amount in respect of that Defendant, and if that Defendant has assets outside Australia (Ex-Australian Assets):

  1. that Defendant must not dispose of, deal with or diminish the value of any of that Defendant’s Australian Assets and Ex-Australian Assets up to the unencumbered value of that Defendant’s Australian and Ex-Australian assets of the Relevant Amount; and
  2. that Defendant may dispose of, deal with or diminish the value of any of that Defendant’s ExAustralian assets, so long as the unencumbered value of that Defendant’s Australian Assets and ExAustralian Assets still exceeds the Relevant Amount.

15  For the purposes of this order, each Defendant’s assets include:

  1. all its assets, whether or not they are in its name and whether they are solely owned or co-owned;
  2. any asset which it has the power, directly or indirectly, to dispose of or deal with as if the asset were

its own (a Defendant is to be regarded as having such power if a third party holds or controls the asset in accordance with the Defendant’s direct or indirect instructions); and

  1. in particular the assets listed against the name of that Defendant in Schedule A to this application.
PROVISION OF INFORMATION

16  Subject to order 17, each of the Defendants must:

  1. within 7 clear business days of the date of these orders (the Provision Date), to the best of their ability inform the Plaintiffs in writing of all their assets, giving their value, location and details (including any mortgages, charges or other encumbrances to which they are subject) and the extent of their interest in the assets; and
  2. by 4.00 pm on 7 clear business days following the Provision Date, swear an affidavit setting out the above information and serve it on the Plaintiffs’ solicitors.

17  This paragraph applies if:

  1. any of the Defendants is not a corporation and they wish to object that compliance with order 16 may tend to incriminate them or make them liable to a civil penalty; or
  2. any of the Defendants is a corporation and all of the persons who are able to comply with order 16 on its behalf and with whom it has been able to communicate, wish to object that compliance may tend to incriminate them respectively or make them respectively liable to a civil penalty.
  1. The Defendants must, on or before the Provision Date (or within such further time as the Court may allow), notify the Plaintiffs in writing that they wish to take such objection and identify the extent of the objection.
  2. If such notice is given, the Defendants need only comply with order 16 to the extent, if any, that it is possible to do so without disclosure of the material in respect of which the objection is taken.
  3. If such notice is given, the Plaintiff may seek directions as to the filing and service of affidavits setting out such matters as the Defendants wish to place before the Court in support of the objection.
EXCEPTIONS 

18  This order does not prohibit the Fourth Defendant, Mr Palmer, from paying a reasonable amount to be determined by the Court on account of living expenses.

19  This order does not prohibit any of the Defendants from:

  1. paying a reasonable amount to be determined by the Court on account of reasonable legal expenses;
  2. providing financial support to any of the Defendants by way of loans which are repayable on not more than 1 months’ notice;
  3. dealing with or disposing of any of that Defendant’s assets in the ordinary and proper course of its business, including paying business expenses bona fide and properly incurred; and 
  4. in relation to matters not falling within (a), (b) or (c), dealing with or disposing of any of its assets in discharging obligations bona fide and properly incurred under a contract entered into before this order was made, provided that before doing so the Defendant gives the Plaintiffs at least 2 working days’ written notice of the particulars of the obligation.

20  The parties may agree in writing that the exceptions in the preceding paragraph are to be varied.  In that case, the parties must as soon as practicable file with the Court and serve on the other a minute of a proposed consent order recording the variation signed by or on behalf of the each of them, and the Court may order that the exceptions are varied accordingly.

21  This order does not prevent any Defendant from disposing of an asset the subject of the order with:

  1. the Plaintiffs’ prior written consent; or
  2. an order from the Court releasing that asset from this order, provided that the Plaintiffs have been given at least 7 days’ notice of any application to the Court for such an order to be made.

22  This order will cease to have effect in relation to a Defendant if that Defendant:

  1. pays the Relevant Amount into Court; or
  2. pays that sum into a joint bank account in the name of the Defendant, (or Defendant’s solicitor) and the solicitor for the Plaintiffs, as agreed in writing between them; or
  3. provides security in that sum by a method agreed in writing with the Plaintiffs to be held subject to the order of the Court.

23  Any such payment and any such security will not provide the Plaintiffs with any priority over the Defendant’s other creditors in the event of the Defendant’s insolvency.

24  If this order ceases to have effect pursuant to sub-paragraph 22(a), the individual Defendant must, as soon as practicable, file with the Court and serve on the Plaintiffs notice of that fact.

PERSONS OTHER THAN THE PLAINTIFFS AND DEFENDANTS

25  This order does not prevent any bank from exercising any right of set off it has in respect of any facility which it gave a Defendant before it was notified of this order.

26  No bank need inquire as to the application or proposed application of any money withdrawn by a Defendant if the withdrawal appears to be permitted by this order.

27  Except as provided in paragraph 28 below, the terms of this order do not affect or concern anyone outside Australia.

28  The terms of this order will affect the following persons outside Australia:

  1. a Defendant, its directors, commissioners, officers, employees and agents (except banks and financial institutions);
  2. any person (including a bank or financial institution) who:
    1. is subject to the jurisdiction of this Court; and
    2. has been given written notice of this order, or has actual knowledge of the substance of the order and of its requirements; and
    3. is able to prevent or impede acts or omissions outside Australia which constitute or assist in a disobedience of the terms of this order; and
  3. any other person (including a bank or financial institution), only to the extent that this order is declared enforceable by or is enforced by a court in a country or state that has jurisdiction over that person or over any of that person’s assets.

29  Nothing in this order shall, in respect of assets located outside Australia, prevent any third party from complying or acting in conformity with what it reasonably believes to be its bona fide and properly incurred legal obligations, whether contractual or pursuant to a court order or otherwise, under the law of the country or state in which those assets are situated or under the proper law of any contract between a third party and any of the Defendants, provided that in the case of any future order of a court of that country or state made on the one of the Defendant’s or the third party’s application, reasonable written notice of the making of the application is given to the Plaintiffs.

OTHER ORDERS

30  The parties have leave to apply.

31  The Defendants pay the Applicants’ costs of the application.

Signed:

SCHEDULE A

PARTICULAR ASSETS

This table identifies particular assets owned by various Respondents to this application, as referred to in paragraph 15(c).

First Defendant

QNI Metals Pty Ltd

Yabulu Refinery and associated assets

Second Defendant

QNI Resources Pty Ltd

Yabulu Refinery and associated assets

Fourth Defendant

Clive Frederick Palmer

Super yacht “Maximus”

Cessna Citation aircraft 750-0021 registration VP-CFP

Vintage cars as pleaded in Statement of Claim

100% shareholding in Nickel House Pty Ltd

100% shareholding in Nickel Processing Pty Ltd

100% shareholding in Nickel Consolidated Pty Ltd

100% shareholding in Palmer Leisure Australia Pty Ltd

100% shareholding in Palmer Leisure Coolum Pty Ltd

100% shareholding in Cart Provider Pty Ltd 99.93% shareholding in Closeridge Pty Ltd Real property as follows:

  • Lot 20 on Survey Plan 144728 (the location of ‘Palmer Sea Reef’)
  • Lot 23 on Survey Plan 178025 (the location of ‘Avica Resort’)
  • Lot 10 on Registered Plan 88417
  • Lot 129 on Registered Plan 188143
  • Lot 130 on Registered Plan 188143
  • Lot 75 on Registered Plan 201947
  • Lot 64 on Building Unit Plan 8847
  • Lot 4 on Building Unit Plan 8856
  • Lot 10 on Group Titles Plan 1975
  • Registered Licensee on Lot 1 Crown Plan AP9928
  • Registered Licensee on Lot 2 Crown Plan AP14402
  • Registered Permittee on Lot 1 Crown Plan AP13574
  • Lot 20 on Survey Plan 105450
  • Lot 174 on Registered Plan 29439
  • Lot 5 of Survey Plan 214289

Seventh Defendant Mineralogy Pty Ltd

Mining tenements held in Western Australia

Choses in action in respect of the Sino Mining Right and Site Agreement Choses in action in respect of the Korean Mining Right and Site Lease

Agreement

57.45% shareholding in China First Pty Ltd 100% shareholding in Cold Mountain Stud Pty Ltd Real property as follows:

  • Cold Mountain Stud, 769 Mahons Road, Patrick Estate, Queensland
  • Lot 6 on Group Titles Plan 101950
  • Lot 104 on Registered Plan 906918
  • Lot 5 on Survey Plan 109850 (first registered mortgage in favour of National Australia Bank)
  • Lot 6 on Survey Plan 109850 (first registered mortgage in favour of National Australia Bank)
  • Lot 1 on Survey Plan 183984

Eighth Defendant

Palmer Leisure Australia

Pty Ltd

Palmer Gold Coast Golf Course

Palmer Colonial Golf Course

Palmer Sea Reef Golf Club (pleaded as ‘Sea Temple Golf and Country Club’) Residential lots at Palmer Sea Reef Golf Course

Ninth Defendant

Palmer Leisure Coolum Pty

Ltd

Security interest in Palmer Coolum Resort

98% shareholding in Coeur de Lion Holdings Pty Ltd

Tenth Defendant

Fairway Coal Pty Ltd

Exploration Permit for Coal, EPC No 1029

1% interest in Mineral Development Licence MDL 468

Eleventh Defendant

Cart Provider Pty Ltd

65 G29-E 8V Yamaha Golf Carts

Twelfth Defendant

Coeur de Lion Investments

Pty Ltd

Real property and improvements and Palmer Coolum Resort

Thirteenth Defendant

Coeur de Lion Holdings Pty Ltd

100% shareholding in Coeur de Lion Investments Pty Ltd

Fourteenth Defendant Closeridge Pty Ltd

2% shareholding in Coeur de Lion Holdings Pty Ltd Real property as follows:

  • Lot 27 on Survey Plan 238215
  • Lot 14 on Survey Plan 238214

Fifteenth Defendant Waratah Coal Pty Ltd

Shares in:

  • GCL Projects Pty Ltd;
  • Waratah Projects Pty Ltd; W
  • Waratah Coking Coal Pty Ltd; 
  • Coal Exports Pty Ltd; 
  • Thermal Australia Pty Ltd; 
  • Jericho Coal Pty Ltd;
  • Australasian Coal Pty Ltd; 
  • Degulla Coal Pty Ltd; 
  • Barcaldine Coal Pty Ltd; and
  • Lennox Coal Pty Ltd.

Annexure B – Alternative form of orders sought by plaintiffs

INTRODUCTION

1  In this order:

  1. a corporation ordered to do something must do it personally or through its directors, officers, employees or agents;
  2. a person or corporation ordered not to do something must not do it personally or through its directors, officers, partners, employees, agents or in any other way;
  3. the term “Defendant” or “Defendants” refers to the first, second, fourth, seventh, eighth, ninth, tenth, eleventh, twelfth, thirteenth, fourteenth and fifteenth defendants as the case may be. 
NOTIFICATION REQUIREMENT

2  For the purposes of the paragraphs 3 to 12:

  1. “transaction” means:
    1. any disposal of the defendant’s assets to any person; or
    2. any dealing or transaction which otherwise diminishes the value of the defendant’s assets; and
  2. notice is to be given in writing to the Plaintiffs’ Australian solicitors, King & Wood Mallesons, by email to emma.costello@au.kwm.com.  

QNI Metals Pty Ltd

3  Until judgment or earlier order, QNI Metals Pty Ltd must provide the Plaintiffs with at least 7 business days’ prior notice before carrying out any transaction which has the effect of diminishing or further diminishing the unencumbered value of its assets below $49,993,120.74.  

QNI Resources Pty Ltd

4  Until judgment or earlier order, QNI Resources Pty Ltd must provide the Plaintiffs with at least 7 business days’ prior notice before carrying out any transaction which has the effect of diminishing or further diminishing the unencumbered value of its assets below $199,972.482.97.  

Clive Frederick Palmer (Mr Palmer)

5  Until judgment or earlier order, Mr Palmer must provide the Plaintiffs with at least 7 business days’ prior notice before carrying out any transaction which has the effect of diminishing or further diminishing the unencumbered value of his assets below $204,943,664.39.  

Mineralogy Pty Ltd

6  Until judgment or earlier order, Mineralogy Pty Ltd must provide the Plaintiffs with at least 7 business days’ prior notice before carrying out any transaction which has the effect of diminishing or further diminishing the unencumbered value of its assets below $14,458,217.94.   Palmer Leisure Australia Pty Ltd

7  Until judgment or earlier order, Palmer Leisure Australia Pty Ltd must provide the Plaintiffs with at least 7 business days’ prior notice before carrying out any transaction which has the effect of diminishing or further diminishing the unencumbered value of its assets below $375,000.  

Palmer Leisure Coolum Pty Ltd, Coeur de Lion Investments Pty Ltd and Coeur de Lion Holdings Pty Ltd (Coolum Entities)

8  Until judgment or earlier order, each of the Coolum Entities must provide the Plaintiffs with at least 7 business days’ prior notice before any of them carry out any transaction which has the effect of diminishing or further diminishing the aggregate unencumbered value of their assets below $67,039,694.27.  

Fairway Coal Pty Ltd

9  Until judgment or earlier order, Fairway Coal Pty Ltd must provide the Plaintiffs with at least 7 business days’ prior notice before carrying out any transaction which has the effect of diminishing or further diminishing the unencumbered value of its assets below $9,163,066.73.  

Cart Provider Pty Ltd

10  Until judgment or earlier order, Cart Provider Pty Ltd must provide the Plaintiffs with at least 7 business days’ prior notice before carrying out any transaction which has the effect of diminishing or further diminishing the unencumbered value of its assets below $324,999.68.  

Closeridge Pty Ltd

11  Until judgment or earlier order, Closeridge Pty Ltd must provide the Plaintiffs with at least 7 business days’ prior notice before carrying out any transaction which has the effect of diminishing or further diminishing the unencumbered value of its assets below $77,800.   Waratah Coal Pty Ltd

12  Until judgment or earlier order, Waratah Coal Pty Ltd must provide the Plaintiffs with at least 7 business days’ prior notice before carrying out any transaction which has the effect of diminishing or further diminishing the unencumbered value of its assets below $2,000,000.  

PROVISION OF INFORMATION

13  Subject to the exceptions in paragraph 4 and 5 below, each of the Defendants must:

  1. within 7 clear business days of the date of these orders (the Provision Date), to the best of their ability, inform the Plaintiffs, in writing, of all their assets, providing their value, location and details (including any mortgages, charges or other encumbrances to which they are subject) and the extent of their interest in the assets; and
  2. by 4.00 pm on 7 clear business days following the Provision Date, swear and serve on the Plaintiff’s solicitors an affidavit setting out the information required by the preceding subparagraph.
EXCEPTIONS 

14  This paragraph applies if:

  1. any of the Defendants is not a corporation and that Defendant wishes to object to complying with paragraph 3 above because doing so may tend to incriminate them or make them liable to a civil penalty; or
  2. any of the Defendants is a corporation and all of those persons who are able to comply with paragraph 3 on its behalf, and with whom the Defendant has been able to communicate, wish to object to complying with paragraph 3 above because doing so may tend to incriminate them respectively or make them respectively liable to a civil penalty.

15  The Defendants must, on or before the Provision Date (or within such further time as the Court may allow), notify the Plaintiffs in writing that they wish to take such objection and identify the extent of the objection.

16  If such notice is given: 

  1. the Defendants need only comply with paragraph 3 to the extent, if any, that it is possible to do so without disclosure of the material in respect of which the objection is taken.
  2. the Plaintiff may seek directions for the filing and service of affidavits that set out such matters as the Defendants wish to place before the Court in support of the objection.

17  This order does not require notification by:

  1. the fourth defendant, Mr Palmer, of his living expenses;
  2. any of the Defendants, when paying their own reasonable legal expenses; and / or 
  3. any of the Defendants, in dealing with or disposing of any of that Defendant’s assets in the ordinary and proper course of its business, including by paying business expenses bona fide and properly incurred. 
ASSETS

18  For the purposes of this order, each Defendant’s assets include:

  1. all its assets, whether or not they are in its name and whether they are solely owned or co-owned;
  2. any asset which it has the power, whether directly or indirectly, to dispose of or deal with as if the

asset were its own (a Defendant is to be regarded as having such power if a third party holds or controls the asset in accordance with the Defendant’s direct or indirect instructions); and

  1. in particular, the assets listed beside the name of that Defendant in Schedule A to this order.
OTHER ORDERS

19  The parties have leave to apply.

20  The Defendants pay the Applicants’ costs of the application.

Signed:

SCHEDULE A

PARTICULAR ASSETS

This table identifies particular assets owned by various Respondents to this application, as referred to in paragraph 6(a).

First Defendant

QNI Metals Pty Ltd

Yabulu Refinery and associated assets

Second Defendant

QNI Resources Pty Ltd

Yabulu Refinery and associated assets

Fourth Defendant

Clive Frederick Palmer

Cessna Citation aircraft 750-0021 registration VP-CFP

Vintage cars as pleaded in Statement of Claim

100% shareholding in Nickel House Pty Ltd

100% shareholding in Nickel Processing Pty Ltd

100% shareholding in Nickel Consolidated Pty Ltd

100% shareholding in Palmer Leisure Australia Pty Ltd

100% shareholding in Palmer Leisure Coolum Pty Ltd

100% shareholding in Cart Provider Pty Ltd 99.93% shareholding in Closeridge Pty Ltd Real property as follows:

  • Lot 20 on Survey Plan 144728 (the location of ‘Palmer Sea Reef’)
  • Lot 23 on Survey Plan 178025 (the location of ‘Avica Resort’)
  • Lot 10 on Registered Plan 88417
  • Lot 129 on Registered Plan 188143
  • Lot 130 on Registered Plan 188143
  • Lot 75 on Registered Plan 201947
  • Lot 64 on Building Unit Plan 8847
  • Lot 4 on Building Unit Plan 8856
  • Lot 10 on Group Titles Plan 1975
  • Registered Licensee on Lot 1 Crown Plan AP9928
  • Registered Licensee on Lot 2 Crown Plan AP14402
  • Registered Permittee on Lot 1 Crown Plan AP13574
  • Lot 20 on Survey Plan 105450
  • Lot 174 on Registered Plan 29439
  • Lot 5 of Survey Plan 214289

Seventh Defendant Mineralogy Pty Ltd

Mining tenements held in Western Australia

Choses in action in respect of the Sino Mining Right and Site Agreement Choses in action in respect of the Korean Mining Right and Site Lease

Agreement

57.45% shareholding in China First Pty Ltd 100% shareholding in Cold Mountain Stud Pty Ltd Real property as follows:

  • Cold Mountain Stud, 769 Mahons Road, Patrick Estate, Queensland
  • Lot 6 on Group Titles Plan 101950
  • Lot 104 on Registered Plan 906918
  • Lot 5 on Survey Plan 109850 (first registered mortgage in favour of National Australia Bank)
  • Lot 6 on Survey Plan 109850 (first registered mortgage in favour of National Australia Bank)
  • Lot 1 on Survey Plan 183984

Eighth Defendant

Palmer Leisure Australia

Pty Ltd

Palmer Gold Coast Golf Course

Palmer Colonial Golf Course

Palmer Sea Reef Golf Club (pleaded as ‘Sea Temple Golf and Country Club’) Residential lots at Palmer Sea Reef Golf Course

Ninth Defendant

Palmer Leisure Coolum Pty

Ltd

Security interest in Palmer Coolum Resort

98% shareholding in Coeur de Lion Holdings Pty Ltd

Tenth Defendant

Fairway Coal Pty Ltd

Exploration Permit for Coal, EPC No 1029

1% interest in Mineral Development Licence MDL 468

Eleventh Defendant

Cart Provider Pty Ltd

65 G29-E 8V Yamaha Golf Carts

Twelfth Defendant

Coeur de Lion Investments

Pty Ltd

Real property and improvements and Palmer Coolum Resort

Thirteenth Defendant

Coeur de Lion Holdings Pty Ltd

100% shareholding in Coeur de Lion Investments Pty Ltd

Fourteenth Defendant Closeridge Pty Ltd

2% shareholding in Coeur de Lion Holdings Pty Ltd Real property as follows:

  • Lot 27 on Survey Plan 238215
  • Lot 14 on Survey Plan 238214

Fifteenth Defendant Waratah Coal Pty Ltd

Shares in:

  • GCL Projects Pty Ltd;
  • Waratah Projects Pty Ltd; W
  • Waratah Coking Coal Pty Ltd; 
  • Coal Exports Pty Ltd; 
  • Thermal Australia Pty Ltd; 
  • Jericho Coal Pty Ltd;
  • Australasian Coal Pty Ltd; 
  • Degulla Coal Pty Ltd; 
  • Barcaldine Coal Pty Ltd; and
  • Lennox Coal Pty Ltd.

Annexure C – form of undertakings

Form of undertaking given on 30 October 2017

Undertaking by QNI Metals Pty Ltd (QM) and QNI Resources Pty Ltd (QR)

1. On the giving by the Commonwealth of the Australia (sic) of the undertaking recorded in paragraph 3 below, and on the giving of the undertakings by Stephen James Parbery for and on behalf of the First Plaintiffs in paragraph 4 below, QM and QR undertake, until 4pm on the date of delivery of judgment in this application:

  1. not to remove from Australia, or in any way dispose of, deal with or diminish the value of the Yabulu Refinery and their other assets in Australia (Assets) up to the unencumbered value of AUD$220,000,000 (Unencumbered Value) (save that for the avoidance of doubt QM and QR may undertake negotiations in connection with any possible sale of the Refinery but no contract of sale for the Refinery may be entered into without three business days’ notice in writing to the plaintiffs, including providing to them the terms of the proposed contract); 
  2. to make the Assets up to the Unencumbered Value available to meet any final orders made by this Honourable Court requiring any of the respondents to the Application to pay any debts, damages or other compensation to the Plaintiffs in Proceeding BS6593/17 which have not been met by any Respondent within the time period set by this Honourable Court for such award to be met;
  3. if the unencumbered value of the Assets exceeds $220,000,000, QM or QR may remove any of those assets from Australia, or dispose of or deal with them or diminish their value, so long as the total unencumbered value of their Assets still exceeds $220,000,000, (the undertaking at 1(a) to (c) above being the QR/QM Undertaking).
Undertaking by Waratah Coal Pty Ltd and China First Pty Ltd
  1. On the giving by the Commonwealth of the Australia (sic) of the undertaking recorded in paragraph 3 below, and on the giving of the undertakings by Stephen James Parbery for an on behalf of the First Plaintiffs in paragraph 4 below, Waratah Coal Pty Ltd and China First Pty Ltd undertake to this Honourable Court, not to exercise any rights under any charge or security over the Assets until 4pm on the date of delivery of judgment in this application.  Undertaking by the Commonwealth
  2. The Commonwealth of Australia (Commonwealth) undertakes to this Honourable Court and to the Defendants:
    1. to submit to such order (if any) as the Court may consider just for the payment of damages (to be assessed by the Court or as it may direct) to any person (whether or not a party) affected by the QR/QM Undertaking;
    2. to pay any orders of costs (as assessed or agreed with the Commonwealth’s consent or taxed) which the Court makes in Proceedings BS6593/17, against the First Plaintiffs, in favour of the Defendants; Undertakings by the First Plaintiffs
  3. Stephen James Parbery, for, and on behalf of the First Plaintiff, the Special Purpose Liquidators (SPLs of Queensland Nickel Pty Ltd (in Liquidation) ACN 009 842 068, hereby undertake to the Supreme Court of Queensland, and to the Defendants in Proceedings BS6593/17, that:
    1. The SPLs undertake to submit to such order (if any) as the Court may consider just for the payment of compensation (to be assessed by the Court or as it may direct) to any person (whether or not a party) affected by the operation of the order;
    2. As soon as practicable, the SPLs will cause anyone notified of this order to be given a copy of it;
    3. The SPLs will pay the reasonable costs of anyone other than the respondents which have been incurred as a result of this order, including the costs of finding out whether that person holds any of the respondents’ assets;
  1. If this order ceases to have effect the SPLs will promptly take all reasonable steps to inform in writing anyone who has been notified of this order, or who the SPLs have reasonable grounds for supposing may act upon this order, that is has ceased to have effect;
  2. The SPLs will not, without leave of the Court, use any information obtained as a result of this order for the purpose of any civil or criminal proceedings, either in or outside Australia, other than in this proceeding;
  3. The SPLs will, to the extent obligations are owed in their favour by the Commonwealth of Australia as to damages, enforce those obligations if damages are awarded against the respondents;
  4. The SPLs will notify the respondents if any existing fund arrangements with the Commonwealth are terminated. 

Form of Commonwealth undertaking of 2 March 2018

The Commonwealth of Australia (Commonwealth) hereby undertakes to the Supreme Court of Queensland (the Court) and to the Defendants in Proceedings BS6593/17 that:

  1. the Commonwealth will pay any order of costs (as assessed or agreed with the Commonwealth’s consent or taxed) which the Court makes in Proceedings BS6593/17, against the First Plaintiffs and/or the Second Plaintiff, in favour of the Defendants;
  2. it will submit to such order (if any) as the Court may consider just for the payment of damages (to be assessed by the Court or as it may direct) to any person (whether or not a party) affected by the operation of the freezing orders made by the Court at the request of the First Plaintiffs by way of interlocutory application dated 2 August 2017 and amended on 11 August 2017 and further amended on 14 September 2017; and
  3. The Commonwealth’s undertaking does not extend to any order of costs that may be made against John Park, Stefan Dopking, Kelly-Anne Trenfield and Quentin Olde in their capacity as joint and several liquidators of the Second Plaintiff (General Purpose Liquidators) or against the Second Plaintiff in respect of actions or claim made on its behalf by the General Purpose Liquidators including in circumstances where Proceeding BS6593/17 (or claims made in Proceeding BS6593/17) are consolidated with other proceedings and/or claims.

Footnotes

[1] Mr Palmer’s ownership of the corporate defendants whether directly or indirectly is 100% with two exceptions. First, he owns a little over 99% of the shares in the fourteenth defendant, Closeridge Pty Ltd. Second, as Closeridge is one of the shareholders of Mineralogy, Mr Palmer’s direct and indirect ownership of Mineralogy is slightly diluted, but still over 99%.

[2] ASIC records reveal he was appointed as a director of Queensland Nickel during the period 2009 to 2012 and for discrete periods in 2013, 2014, and 2015.

[3] On 27 February 2017, I made an order pursuant to s 459A of the Corporations Act 2001 (Cth), which had this effect.

[4] The source of the first plaintiffs’ authority as liquidators of Queensland Nickel lies in the Federal Court order, but also in my order of 27 February 2017, which as well as converting the creditors’ winding up of Queensland Nickel into a winding up in insolvency, also confirmed the continuation of the existing regime of general purpose liquidators and special purpose liquidators as the liquidators in the winding up in insolvency.

[5] In accordance with my judgment in Re Queensland Nickel (in liq) [2017] QSC 258 the plaintiffs have delivered a consolidated statement of claim which encompasses allegations advanced in four separate proceedings, but for present purposes (and because it is consistent with the position which obtained when most of the argument was advanced in relation to the present application) it is sufficient to refer to the statement of claim which existed prior to the consolidated version was filed.

[6] The form of order identifies amounts which are slightly less than the amounts which the evidence before me supports. That is because the amounts claimed in the consolidated statement of claim are less than the amounts which were sought when the application was argued. The reasons for the slight reductions were unexplained.

[7] Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 per Gaudron, McHugh, Gummow and Callinan JJ at [25].

[8] cf CSR Ltd v Cigna Insurance Ltd (1997) 189 CLR 345 per Dawson, Toohey, Gaudron, McHugh, Gummow and Kirby JJ at 392.

[9] (2015) 258 CLR 1 at [64].

[10] This is a slight modification (so as to elevate the generality) of the famous observation by Brennan J in Jackson v Sterling Industries Ltd (1987) 162 CLR 612 at 621 that “A judicial power to make an interlocutory order in the nature of a Mareva injunction may be exercised according to the exigencies of the case and, the schemes which a debtor may devise for divesting himself of assets being legion, novelty of form is no objection to the validity of such an order.”, cited with approval in Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1 per Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ at [35] and Cardile v LED Builders Pty Ltd per Gaudron, McHugh, Gummow and Callinan JJ at [41] – [42].

[11] Cardile v LED Builders Pty Ltd per Gaudron, McHugh, Gummow and Callinan JJ at [25], [40]; PT Bayan Resources TBK v BCBC Singapore Pte Ltd per French CJ, Kiefel, Bell, Gageler and Gordon JJ at [43] and per Keane and Nettle JJ at [64] – [65].

[12] Supabarn Supermarkets Pty Ltd v Cotrell Pty Ltd [2016] ACTSC 49 per Refshauge J at [12].

[13] after Mareva Compania Naviera SA v International Bulkcarriers SA [1980] 1 All ER 213. Note also that in Cardile v LED Builders Pty Ltd per Gaudron, McHugh, Gummow and Callinan JJ at [25], the High Court explained that the term “injunction” is an inappropriate identification of the area of legal discourse within which the Mareva order is to be placed and that the term “Mareva order” was more appropriate.

[14] As to this see [64]-[69] below.

[15] cf Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia per Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ at [35], cited with approval in Cardile v LED Builders Pty Ltd per Gaudron, McHugh, Gummow and Callinan JJ at [41] – [42] and also in PT Bayan Resources TBK v BCBC Singapore Pte Ltd per French CJ, Kiefel, Bell, Gageler and Gordon JJ at [43].

[16] Cardile v LED Builders Pty Ltd per Gaudron, McHugh, Gummow and Callinan JJ at [25].

[17] PT Bayan Resources TBK v BCBC Singapore Pte Ltd per French CJ, Kiefel, Bell, Gageler and Gordon JJ at [46] and per Keane and Nettle JJ [66] – [67], restating the High Court’s approval of observations made by Lord Nicholls of Birkenhead in Mercedes Benz AG v Leiduck [1996] AC 284 at 306.

[18] (2015) 258 CLR 1 per Keane and Nettle JJ at [77].

[19] Samimi v Seyedabadi at [69].

[20] [1984] 1 All ER 398 at 404.

[21] His Honour’s description has been referred to with approval multiple times: see SBA Music Pty Ltd v Hall [2014] FCA 1038 per Wigney J at [14]; Brentwood Village Ltd (in liq) v Terrigal Grosvenor Lodge Pty Ltd [2014] FCA 1203 per Gleeson J at [24]; Platinum Mortgage Securities (Vic) Limited [2015] FCA 633 per Flick J at [7]; Brentwood Village Ltd (in liq) v Terrigal Grosvenor Lodge Pty Ltd (No 2) [2015] FCA 944 per Gleeson J at [56]; Australian Competition and Consumer Commission v Unique International College Pty Ltd (No 4) [2016] FCA 628 per Flick J at [14]; Australian Competition and Consumer Commission v Get Qualified Australia Pty Ltd (2016) 244 FCR 538 per Beach J at [33]; RRG Nominees Pty Ltd v Visible Temporary Fencing Australia Pty Ltd [2017] FCA 1352 per White J at [6].

[22] See Northcorp Limited v Allman Properties (Australia) Pty Ltd [1994] 2 Qd R 405. The binding status of Northcorp was recognized in Fletcher v Fortress Credit Corporation (Australia) II Pty Limited per McMurdo J at [28].

[23] Peter Biscoe, Freezing and Search Orders (LexisNexis Butterworths, 2nd Ed, 2008).

[24] Supabarn Supermarkets Pty Ltd v Cotrell Pty Ltd per Refshauge J at [58].

[25] (1999) 198 CLR 380 per Gaudron, McHugh, Gummow and Callinan JJ at [50]-[51], citations omitted.

[26] Cardile v LED Builders Pty Ltd per Gaudron, McHugh, Gummow and Callinan JJ at [52].

[27] Cardile v LED Builders Pty Ltd per Gaudron, McHugh, Gummow and Callinan JJ at [52].

[28] Cardile v LED Builders Pty Ltd per Gaudron, McHugh, Gummow and Callinan JJ at [53].

[29] see further my discussion as to the way in which I will approach the question of the evaluation of evidence for the purpose of this application at [71]-[75] below.

[30] Uniform Civil Procedure Amendment Rule (No 1) 2007 (Qld) s 9.

[31] I have omitted from the quote of r 260D the provisions which deal with judgment debtors.

[32] Candy v Holyoake [2016] EWHC 970 (Ch) at [1].

[33] See, for example, Deputy Commissioner of Taxation v Gashi (2010) 27 VR 127 per Bell J at [61]; Creswick v Creswick [2012] QSC 174 per Martin J at [7].

[34] see [16]-[49] above.

[35] Peter Biscoe, Freezing and Search Orders (LexisNexis Butterworths, 2nd Ed, 2008) at 78.

[36] I have said “reasonable expectation” because it could hardly have been intended that it be within the bounds of unreasonable expectation.

[37] See Cardile v LED Builders Pty Ltd per Gaudron, McHugh, Gummow and Callinan JJ at [51], in which, amongst other things, the High Court agreed with remarks remade by the Court of Appeal of New South Wales (Mason P, Sheller JA, Sheppard A-JA) in Frigo v Culhaci in which a Mareva order was described at an interlocutory order.

[38] Lord Diplock delivered the judgment of the Judicial Committee of the Privy Council which was also comprised of Lord Morris of Borth-y-Gest, Lord Hailsham of St. Marylebone, Lord Edmund-Davies and Lord Fraser of Tullybelton.

[39] Mr Palmer and other defendants contend for an earlier date, namely 18 January 2016, on the hypothesis that the appointment of administrators on that date lead to an automatic termination. It is not presently necessary to determine the correctness of this contention.

[40] see court document numbers 10 to 18 (affidavit of Stephen James Parbery sworn 2 August 2017) at [33] and [201] – [202].

[41] Examples may be found in court document numbers 6 to 8 (affidavit of Emma Susan Costello sworn 31 July 2017) at exhibit ESC-1, pp 29 and 44; ESC-2, p 198; ESC- 4, pp 437-438 and ESC-9, p 704.

[42] Court document numbers 35 to 37.

[43] It is not clear to me whether the signature on the letter is Mr Palmer’s. The point would be stronger if it were.

[44] The plaintiffs also submitted that the proposition that the budget had not been approved was inconsistent with evidence which Mr Wolfe had given in the public examination. However in fact Mr Wolfe gave evidence in the public examination that he recalled Mr Mensink telling him in August 2015 that the budget had not been approved, a proposition which is consistent with the statement to that effect in the entry on p 25.

[45] Court document number 104.

[46] There was a factual dispute as to whether there was approval of a budget for the financial year ended 30 June 2016, but that dispute is not material to the present discussion.

[47] Court document number 204. I should record that this affidavit was expressed in a form which also contained implicit legal characterizations of conduct which was described. I have not had regard to the legal characterizations which Mr Wolfe placed on his descriptions of conduct.

[48] see s 72 of the Trusts Act 1973 (Qld).

[49] Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226 per Brennan CJ, Toohey, Gaudron, McHugh and Gummow JJ at [47]-[51].

[50] The three figures add up to $1,974,451.57. I have assumed that the smaller amount claimed was because there must have been some repayment.

[51] Court document numbers 10 to 18.

[52] I have referred to Mr Wolfe. Mr Mensink and Mr Palmer shared that view.

[53] Mr Parbery’s affidavit does not expressly state that the period in which the debts listed in Schedule K were incurred ended on the date of the administration, but I have inferred from the context that that was what his evidence conveyed.

[54] Court document numbers 10 to 18.

[55] Court document number 99.

[56] Court document number 104.

[57] Literally the definition stated that the QN Parties were “the Company” (namely China First) and the two Joint Venturers, but in context that was an obvious mistake.

[58] I have edited the quotation from the transcript, for sense.

[59] Transcript 14 September 2017 p 1-89 at lines 37 to 42.

[60] Although the mechanism by which 2 million shares became 2 billion shares was not explained, the discrepancy does not presently matter. There is no indication that the proportions of 2 is to 2.7 were not maintained.

[61] Court document numbers 97 and 113 to 115.

[62] Exhibit 5 is a letter from Mr Palmer dated 23 October 2017 which states “It is my intention and all Palmer defendants’ intention to rely on the Martino Releases and bar to [the present proceeding] as part of their defence.” Senior Counsel for the corporate defendants were not able to confirm that was how their clients would conduct the litigation, because they had not yet turned their minds to pleading. However it is evident from the letter from Mr Palmer (a director and the ultimate beneficial owner of each of their corporate clients) what their instructions are.

[63] The footnote references in the quote are from the original.

[64] Court document number 10 (affidavit of Stephen James Parbery sworn 2 August 2017) at [56].

[65] Court document number 10 (affidavit of Stephen James Parbery sworn 2 August 2017) at [55].

[66] In this regard it is notable that an undertaking was initially offered but was withdrawn without explanation.

[67] Court document number 211.

Close

Editorial Notes

  • Published Case Name:

    Parbery & Ors v QNI Metals Pty Ltd & Ors

  • Shortened Case Name:

    Parbery v QNI Metals Pty Ltd

  • MNC:

    [2018] QSC 107

  • Court:

    QSC

  • Judge(s):

    Bond J

  • Date:

    25 May 2018

  • White Star Case:

    Yes

Litigation History

Event Citation or File Date Notes
Primary Judgment [2018] QSC 107 25 May 2018 Upon undertakings made by the Commonwealth, and the special purpose liquidators, freezing orders made with respect to the first, second, fourth, seventh, eighth, ninth, tenth, eleventh, twelfth, fourteenth and fifteenth defendants: Bond J.
Primary Judgment [2018] QSC 125 25 May 2018 Application to stay orders made in [2018] QSC 107 for 21 days dismissed, save for orders 16 and 17 which are stayed until further order: Bond J.
Primary Judgment [2018] QSC 141 11 Jun 2018 Stay of operation of orders 16 and 17 ordered 25 May 2018 discharged; order 16 set aside and in lieu thereof order that each defendant must swear an affidavit setting out their assets and details about those assets: Bond J.
Primary Judgment [2018] QSC 176 27 Jul 2018 Defendants' agitation that nothing should be determined until a proposed recusal application heard and determined rejected: Bond J.
Primary Judgment [2018] QSC 177 27 Jul 2018 Plaintiffs' application for disclosure adjourned to 3 August 2018: Bond J.
Primary Judgment [2018] QSC 178 03 Aug 2018 Defendants' application for a stay of orders dismissed: Bond J.
Primary Judgment [2018] QSC 180 03 Aug 2018 Plaintiffs' application for disclosure granted: Bond J.
QCA Interlocutory Judgment [2018] QCA 139 26 Jun 2018 Fourth defendant's application to stay orders made in [2018] QSC 107 allowed in part and otherwise dismissed: Gotterson JA.

Appeal Status

No Status