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Queensland Nickel Pty Ltd (in liq) v QNI Metals Ltd[2021] QCA 138

Queensland Nickel Pty Ltd (in liq) v QNI Metals Ltd[2021] QCA 138

SUPREME COURT OF QUEENSLAND

CITATION:

Queensland Nickel Pty Ltd (in liq) v QNI Metals Ltd & Ors [2021] QCA 138

PARTIES:

QUEENSLAND NICKEL PTY LTD (in liquidation)

ACN 009 842 068

(appellant)

v

QNI METALS LTD

ACN 066 656 175

(first respondent)

QNI RESOURCES PTY LTD

ACN 054 117 921

(second respondent)

MINERALOGY PTY LTD

ACN 010 582 680

(third respondent)

FILE NO/S:

Appeal No 7119 of 2020

SC No 6593 of 2017

DIVISION:

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:

Supreme Court at Brisbane – [2020] QSC 143 (Mullins J)

DELIVERED ON:

25 June 2021

DELIVERED AT:

Brisbane

HEARING DATES:

25-26 February 2021

JUDGES:

Fraser and Morrison JJA and Burns J

ORDERS:

  1. Appeal allowed.
  2. Set aside order No. 1 made on 3 June 2020.
  3. Judgment be entered for the plaintiffs against the seventh defendant in the sum of $102,884,346.26.
  4. The appellants file any submissions they wish to make, in light of these reasons, as to the further disposition of the appeal, by 4 pm on 16 July 2021.
  5. The respondents file any submissions in response by 4 pm on 16 July 2021.

CATCHWORDS:

EQUITY – TRUSTS AND TRUSTEES – EXPRESS TRUSTS CONSTITUTED INTER VIVOS – CONTRACTS AND COVENANTS – where two companies entered into a joint venture agreement for the operation of a nickel refinery – where the joint venturers appointed a manager to conduct the operations of the refinery – where the manager was a company wholly owned by the joint venturers and a party to the joint venture agreement – where the powers and responsibilities of the manager were set out in the joint venture agreement – whether the relationship was one of trustee and beneficiary

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – PARTIES – GENERAL PRINCIPLES – where two companies which owned a nickel refinery entered into a joint venture agreement for the operation of the refinery – where the joint venturers appointed a manager which was a subsidiary of both joint venturers to conduct the operations of the refinery as their agent – where the manager conducted bank accounts in its name for the purpose of the joint venture – where a related company to the joint venturers borrowed funds that were paid by the manager from the joint venture accounts – where under the joint venture agreement the funds in the accounts belonged to the joint venturers – whether the joint venturers or the manager was the lender to the related company

CGU Insurance Ltd v One.Tel Ltd (In liq) (2010) 242 CLR 174; [2010] HCA 26, applied

Corumo Holdings Pty Ltd v C Itoh Ltd (1991) 24 NSWLR 370, applied

Herdegen v Federal Commissioner of Taxation (1988) 84 ALR 271; [1988] FCA 419, applied

Kelly v The Queen (2004) 218 CLR 216; [2004] HCA 12, applied

COUNSEL:

A M Pomerenke QC, with N J Derrington, for the appellant

P Dunning QC, with M Karam and K Byrne, for the respondents

SOLICITORS:

HWL Ebsworth Lawyers for the appellant

Alexander Law for the respondents

  1. [1]
    THE COURT:  This appeal seeks to challenge orders made on 3 June 2020,[1] dismissing a claim brought by the Liquidator of Queensland Nickel Pty Ltd (QNI) to retrieve moneys from the Third Respondent (Mineralogy).
  2. [2]
    The Appellant, QNI, was the manager of a joint venture between the First Respondent (Metals) and the Second Respondent (Resources) (collectively, the JVCs).[2]
  3. [3]
    As manager, QNI sold nickel products which it manufactured to third parties.  It received money from those sales, which was deposited into a bank account and held pursuant to clause 6.4(f) of the Joint Venture Agreement (the JVA) under which it was appointed the manager.
  4. [4]
    Clause 6.4(f) required QNI to hold the money for the payment of the joint venture expenses, but also conferred upon it powers of investment in respect of the funds.
  5. [5]
    In the period before it went into liquidation, QNI made payments totalling $102,884,346.26 out of its bank account to or for the benefit of Mineralogy, a related company.  Those payments were recorded in an account described as the “Mineralogy Loan Account”.
  6. [6]
    QNI’s claim was for the recovery of that money on the basis that it was paid by way of loan and was repayable with interest.
  7. [7]
    The learned primary judge dismissed that claim because her Honour found that the loan was made by the JVCs to Mineralogy.
  8. [8]
    On the appeal QNI contends that the conclusion by the primary judge was affected by two errors.
  9. [9]
    The first error (reflected in Ground 1 of the appeal) was her Honour’s finding that the money held in the bank account pursuant to clause 6.4(f) of the JVA was held on a bare trust, such that payment by QNI out to Mineralogy collapsed the trust.[3]  The essential contention was that the powers and duties conferred on QNI by clause 6.4(f) meant that finding was not open.  Her Honour should have found that the money held pursuant to that clause was held on trust, and that the JVA similarly intended to create an express or inferred trust in respect of the “Joint Venture Property”, being the balance of the property of the JVCs held in the name of QNI.
  10. [10]
    The second error (Ground 2 of the appeal) involved the process of reasoning which her Honour adopted to reach the conclusion that, notwithstanding that there was no doubt that the money paid to Mineralogy was QNI’s money, the lenders were the JVCs.  In undertaking that analysis, the primary judge’s task was to ascertain, having regard to the objective evidence, who the parties were to the loan agreement.  It was contended that the primary judge reasoned incorrectly because her Honour:
    1. (a)
      gave primacy to the subjective evidence of witnesses, as to who they thought the loan was between, and as to their understanding of the books of QNI;
    2. (b)
      failed to have regard to objective evidence, including a written loan agreement between QNI and Mineralogy, which her Honour (without explanation) assumed was inoperative; and
    3. (c)
      misconstrued the financial documents which were in evidence.
  11. [11]
    QNI contended that her Honour ought to have found that the lender was the party that had in fact paid money to Mineralogy; namely QNI.

Nature of the case

  1. [12]
    In the corporate defendants’ address at the trial it was accepted that QNI’s position in relation to the funds in the bank account was that of a “bare trustee”.[4]
  2. [13]
    Thus, leaving aside the contention that the bank account funds were not Joint Venture Property, the issue joined at the trial was not that there was no trust in respect of the funds in the account, or more properly the chose in action as against the bank, but only as to the nature of that trust.  The significance of that issue was highlighted in the plaintiffs’ submissions:[5]

“296. It remains an issue on the pleadings.

  1. (a)
    The defendants assert it was not a trustee (though also contend it was, but as a bare trustee).
  1. (b)
    The plaintiffs, in reply, contend it was trustee.
  1. However, this is a relevant and significant issue. If QNI was trustee it is not only the right plaintiff to recover the loan, it is the only correct party to recover the loan. The beneficiaries:
  1. (a)
    have a right to the due administration of the trust;
  1. (b)
    may well be able to terminate the trust and vest the property (a step which was not alleged to have been taken, but which in any case requires the debts of the trustee to be paid);
  1. (c)
    may be able (in certain circumstances) to authorise what would otherwise be a breach of trust;
  1. (d)
    but cannot, even if fully entitled, direct the trustee how to act or give a discharge to any party for the release or transfer of trust property.”

The Joint Venture agreements

  1. [14]
    The relationship between the parties was governed by the JVA and an Administration Agreement (the AA).  The relevant clauses of the JVA are set out below.
  2. [15]
    Where necessary we will add the relevant clauses of the AA, though neither party suggested that anything turned on its terms.  There was good reason for that as clause 5 of the AA provided:

“This Agreement is to be construed subject to the terms and conditions of the Joint Venture Agreement. If there is any inconsistency between the provisions of this Agreement and the provisions of the Joint Venture Agreement, the latter shall prevail to the extent of the inconsistency.”

  1. [16]
    The purposes of the joint venture are set out in clause 2.1 of the JVA.  They include:
    1. (a)
      mining, developing and otherwise exploiting the joint venture area so as to produce lateritic ore;
    2. (b)
      transporting the ore to, and processing it at, the Yabulu treatment facility;
    3. (c)
      by that process, producing nickel oxide and nickel and cobalt sulphide products for delivery to, or as directed by, each of the joint venturers;
    4. (d)
      purchasing ore from third parties;
    5. (e)
      processing ore supplied by or on behalf of the joint venturers at the treatment facilities to produce products for delivery to, or as directed by, each of the joint venturers (provided such supply of ore is in proportion to the respective participating interests of the joint venturers); and
    6. (f)
      exercising the rights, titles, interests, claims and benefits comprised in the Joint Venture Property (as defined in the JVA).
  2. [17]
    Clause 2.2 specifies that the purposes are to be carried out by the JVCs in conformity with the Queensland Nickel Agreement Act 1970 (Qld) (the Agreement Act) and the agreement that was entered into by the State of Queensland dated 17 December 1970 (as amended from time to time) with MEQ Nickel Pty Ltd and Greenvale Queensland Nickel Inc.
  3. [18]
    Clause 3.1 of the JVA relevantly provides:

“All the Joint Venture Property shall at all times be made available for the purpose and duration of the Joint Venture and during such duration shall not be used for any other purpose. All the Joint Venture Property and, subject to Clause 3.3, all estate and interest in Products produced at the Treatment Facilities shall be beneficially owned by the Joint Venturers as tenants in common, and all liabilities of the Joint Venture shall be severally borne by such Joint Venturers, in the following percentages (such percentages being the parties’ respective Participating Interests as at the Effective Date):

Joint Venturer Participating Interest

QNR 80%

NRNQ[6] 20%”

  1. [19]
    Clause 1.1 of the JVA sets out a comprehensive definition of “Joint Venture Property”.  It includes specified mining leases and other rights and titles pursuant to the Agreement Act or the Mineral Resources Act 1989 (Qld), specified land, the Yabulu treatment facilities, all technology and know-how developed or to be developed on behalf of the joint venture, and all other rights, titles, interests or property of whatsoever kind held, constructed or acquired for the purpose of the joint venture.
  2. [20]
    Clause 1.1 also defines the terms “Products” and “Subject Products”:

“‘Products’ means the nickel oxide and nickel and cobalt sulphide products (whether mixed or separated) produced or to be produced at the Treatment Facilities and any other products which may be produced from time to time at the Treatment Facilities;.”

‘Subject Products’ means in relation to a Joint Venturer:

  1. (a)
    all that Joint Venturer’s right, title and interest, both present and future, as tenant in common in Products produced at the Treatment Facilities and not yet received in kind by any Joint Venturer; and
  1. (b)
    all that Joint Venturer’s right, title and interest, both present and future, in Products produced at the Treatment Facilities and received in kind by that Joint Venturer.”
  1. [21]
    Clause 3.2 of the JVA deals with the holding of titles to the Joint Venture Property in the Manager’s name as the nominee for both JVCs:

“For purposes of convenience, title to any of the Joint Venture Property may be held at the request of the Joint Venturers solely in the name of either of the Managers as nominee for both Joint Venturers in proportion to their respective Participating Interests; provided, however, that all Real Property Titles and Mining Titles shall be held in the names of both Joint Venturers in accordance with their Participating Interests. If at any time any of the Joint Venture Property is not vested at law in the names of the Joint Venturers in proportion to their Participating Interests, the Joint Venturer or Joint Venturers in whose names such Joint Venture Property is vested shall hold such Joint Venturer Property for the use and benefit of the Joint Venturers in proportion to their Participating Interests and, if requested to do so by the Manager or the other Joint Venturer (as the case may be), but at the expense of the Joint Venture, shall take all such steps as may be necessary to vest the Joint Venture Property in question in the names of the Joint Venturers in proportion to their Participating Interests.”

  1. [22]
    Clause 3.3 of the JVA provides that “[e]ach 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”.  Each JVC is then made solely responsible for the payment of any royalties on account of the marketing or disposal of its subject products.
  2. [23]
    Clause 5.1(a) of the JVA confirmed the appointment of QNI as the General Manager of the joint venture.
  3. [24]
    The AA dealt with QNI’s provision, as General Manager, of “Management Services” in AA clause 3:

“3.1 QNPL is hereby severally appointed by the Joint Venturers to perform the Management Services for and on behalf of the Joint Venturers in relation to the participation and involvement of each of the Joint Venturers in the Joint Venture.

3.2 The Management Services which QNPL shall perform on behalf of the Joint Venturers are as follows:

  1. (a)
    The management of all debtors of the Joint Venturers in relation to the sale of their Subject Products, including the:
  1. (i)
    collection by payment to the credit of such bank account of the relevant Joint Venturer as that Joint Venturer may direct;
  1. (ii)
    satisfaction; or
  1. (iii)
    discounting,

of those debts.

  1. (b)
    The promotion of nickel and cobalt products in world markets on behalf of the Joint Venturers, including participation in the Nickel development Institute and other similar bodies.

  1. (e)
    The provision of treasury, tax planning and risk management advice and functions in connection with each Joint Venturer's involvement in the Joint Venture.”
  1. [25]
    Clause 5.2 of the JVA sets out the responsibilities of the General Manager in extensive detail.  Clause 5.2(a) provides:

“The General Manager shall, subject to the directions of the JVOC, be in charge of and responsible for:

  1. (i)
    the overall management, operation and administration of the Joint Venture;
  1. (ii)
    managing the funds of the Joint Venture;
  1. (iii)
    maintaining the accounting records of the Joint Venture and, to the extent set out herein, the Joint Venturers;
  1. (iv)
    in conjunction with the Ore Purchase and Shipping Manager, co-ordinating the supply of ore for the Joint Venture;
  1. (v)
    conducting planning, engineering feasibility and project evaluation and managing design and construction for the Joint Venture and its Development Programmes;
  1. (vi)
    medium and long term planning for the Joint Venture; and
  1. (vii)
    the management and control of the Joint Venture Property and all operations hereunder as agent for, and for the account of, the Joint Venturers.

In the exercise of such rights and duties the General Manager shall act subject to and consistently with the provisions of this Deed. The General Manager shall be subject to the supervision of the Joint Venturers acting through the JVOC and shall carry out all directions and decisions of the JVOC. Subject to the provisions set out herein, the General Manager shall use its best endeavours to produce Products at the lowest possible unit cost and to keep working capital at the lowest possible level consistent with prudent management.

The General Manager shall also have such other duties and responsibilities as are set out in Clause 5.2 (b) and (c), as well as the obligation to perform the ‘Management Services’ as described in the Administration Agreement.”

  1. [26]
    The detailed activities required of the General Manager[7] in connection with the operation of the joint venture are specified in clause 5.2(b).  Under clause 5.2(b)(xiii) one of those activities is the proper disbursing of all funds provided by the JVCs to carry out the operation of the joint venture, including the paying of all sums payable by the General Manager with respect to its acquisition of all services and supplies, materials, equipment and other property necessary or appropriate in connection with the operation of the joint venture.
  2. [27]
    Clause 5.2(b)(xvi) contemplates that the General Manager will, at the request of a JVC, pay on behalf of that JVC any costs or expenses payable by that JVC in relation to the joint venture.
  3. [28]
    Under clause 5.2(b)(xvii), the General Manager must undertake:

“the preparation and maintenance, in accordance with accounting principles generally accepted in Australia, of complete books and accounting records describing each Joint Venturer’s financial involvement in the Joint Venture.

Such books and records shall be prepared so as to enable each Joint Venturer to meet its reporting, accounting, statutory and taxation requirements.”

  1. [29]
    Under clause 5.2(c) of the JVA, the General Manager is required to act as the agent of the JVCs in the purchase and shipping of nickel ore from overseas sources for processing at the Yabulu refinery.  Under clause 5.2(g) of the JVA, it is specified that the duties and responsibilities of the General Manager shall not include any activities relating to the sale or marketing of any Products.
  2. [30]
    Under clause 5.3(a) of the JVA, the General Manager is required to furnish to each JVC within 14 days at the end of each month a reasonably detailed financial and performance report concerning activities undertaken pursuant to the JVA and the AA since the previous report.  The requirements for the report are:

“The report shall summarise Joint Venture operations during such month and shall include an unaudited statement reflecting in reasonable detail, but in summary form, all charges and credits incurred or accrued to the Joint Venture and showing the financial position of each Joint Venturer (with respect to its involvement in the Joint Venture), as well as a comparison thereof with the relevant programmes, budgets, estimates and schedules adopted by the JVOC.”

  1. [31]
    Clause 5.3(h) to (j) of the JVA deal with the obligations of the General Manager to keep the books, accounts and records of the operations and business of the joint venture and to arrange the audits of the accounts of the joint venture:

“(h) A Manager shall maintain, in accordance with accounting principles generally accepted in Australia, consistently applied, complete books, accounts and records of and relating to the operations and business of the Joint Venture (including all costs incurred pursuant to this Deed) and the Joint Venture Property. A Manager shall provide to each Joint Venturer from time to time such information from such books, accounts and records as the Joint Venturer reasonably requires in order to enable it to carry out the procedures, and file and otherwise distribute the information, as is necessary to meet the reporting, accounting and taxation requirements imposed on the Joint Venturer concerned. Each Joint Venturer shall have the right, at all reasonable times and after giving reasonable notice to the Manager, to inspect such books, accounts and records and all or any of the Joint Venture Property.

  1. (i)
    The General Manager shall keep such other records and accounts in respect of the Joint Venture as any Joint Venturer may reasonably require.
  1. (j)
    The General Manager shall cause annual audits of the Joint Venture accounts to be carried out, at the cost of the Joint Venture, by the General Manager’s auditor. If by reason of a particular Joint Venturer having a financial year which is different from that covered by the annual audit of the Joint Venture accounts, it is necessary for a supplementary audit of the Joint Venture accounts to be conducted, the General Manager shall cause the General Manager’s auditor to carry out such supplementary audit at the cost of the Joint Venture. Copies of such audits shall be furnished by the General Manager to each of the Joint Venturers within 45 days of the end of the relevant financial year.”
  1. [32]
    Clause 5.5(b) of the JVA prohibits the General Manager from carrying on, or being interested in, any other business or activity or other operation.[8]  Clause 5.5(i) precludes the General Manager from mortgaging, pledging, charging, encumbering or creating any lien over or trust in respect of the Joint Venture Property (except for liens arising in the normal and ordinary course of business).
  2. [33]
    Under clause 6.1 of the JVA, the General Manager is responsible for the preparation of all financial reports and budgets relating to the joint venture.
  3. [34]
    Clause 6.2 then sets out in detail the requirement imposed on the General Manager to submit to the Joint Venture Owners Committee (JVOC) annually for review and approval as provided in clause 4.1 a proposed financial plan for the operations of the joint venture for the next cost year.  Clause 6.2 also requires the General Manager to prepare and submit to the joint venturers for their approval a new business plan for the forthcoming five-year period.  Clause 6.3 then imposes on the General Manager an obligation to submit to the JVOC a proposed budget for development capital expenditures for any development programme approved by the JVOC pursuant to clause 4.1.
  4. [35]
    In that context one comes to clause 6.4 of the JVA.
  5. [36]
    Pursuant to clause 6.4(a) of the JVA, the Manager which is entitled to make calls on the JVCs for funds to meet joint venture expenses (being all costs, liabilities and expenses of the joint venture properly incurred including funds to meet financial plans approved under clause 6.2 and approved development budgets).  In that respect the General Manager is referred to as the “Calling Manager”.  The timing of calls is dealt with in clauses 6.4(b) to (e).
  6. [37]
    Then clause 6.4(f) of the JVA provides:

“The Calling Manager shall deposit Called Sums and other moneys received from or for the account of the Joint Venturers in a working capital bank account and shall not deposit any other moneys in such account. Such account shall be in the name of the Calling Manager but the moneys standing to the credit of the account shall belong to the Joint Venturers in proportion to the amounts respectively paid to such account by or on behalf of them and the Calling Manager shall keep sufficient records as will enable the respective entitlements of the Joint Venturers to such moneys (and to any interest or income accrued on those moneys) from time to time to be determined. Payments shall be made from such account to meet Joint Venture Expenses payable or accrued or to become payable or to be accrued in respect of the Joint Venturer concerned. Moneys standing to the credit of the account may be invested by the Calling Manager in a prudent manner for a term not exceeding one week (in the case of moneys paid pursuant to a weekly call and any interest thereon) or one month (in the case of moneys paid pursuant to a monthly call and any interest thereon). All bank interest and other income derived from the investment of the moneys paid by or attributable to a Joint Venturer shall be for the account of that Joint Venturer. Such moneys, bank interest and other income shall be applied promptly to meet Joint Venture Expenses to the intent that calls made under paragraphs (b) or (d) of this Clause 6.4 be reduced to the maximum extent possible.”

  1. [38]
    Clause 8.1 gives QNI as Manager power to compel the payment of any moneys the subject of a call.  It relevantly provides:

“Subject to the provisions of this Clause 8, each Unpaid Called Sum payable under Clause 6.4 or Clause 7.2, together with interest thereon at the Applicable Rate of Interest from the date on which the Unpaid Called Sum was due for payment until it is paid under Clause 8.3 or until the default in payment thereof has been remedied, shall:

  1. (a)
    constitute a debt due and payable to the relevant Manager by the Defaulting Joint Venturer obliged to pay the Unpaid Called Sum; and
  1. (b)
    be recoverable by the relevant Manager from that Defaulting Joint Venturer (without prejudice to any other means of enforcement available to the Manager) in any court of competent jurisdiction.

For the purposes of this Clause 8, the relevant Manager shall mean:

  1. (i)
    the General Manager or the Ore Purchase and Shipping Manager, in the case of an Unpaid Called Sum payable under Clause 6.4 or Clause 8.1; and
  1. (ii)
    the General Manager, in the case of an Unpaid Called Sum payable under Clause 7.2.

Any such interest recovered shall belong to the Joint Venturer other than the Defaulting Joint Venturer.”

  1. [39]
    Of particular note is the fact that the Manager can recover interest on the outstanding call, but that interest “shall belong to” the non-defaulting JVC.
  2. [40]
    Clause 13 of the JVA provides:

“The full extent of the joint venture between the Joint Venturers is set forth in this Deed and such other agreements relating to the Joint Venture as are executed and, where applicable, delivered on the date hereof or on the Effective Date. Nothing in this Deed shall be construed to constitute a Joint Venturer an agent or representative of the other Joint Venturer, and no Joint Venturer shall have any authority to act for or to assume any obligation, liability, indebtedness or responsibility on behalf of the other Joint Venturer except as set forth in this Deed. The rights, duties, obligations and liabilities of the Joint Venturers arising out of this Deed shall be several in proportion to their respective Participating Interests and not joint or collective, it being the expressed purpose and intention of the Joint Venturers that their ownership of their respective Interests shall be as tenants in common and that this Deed shall not be construed as constituting an association, corporation, trust, mining partnership or any other kind of partnership.”

Practical operation of the Joint Venture

  1. [41]
    The general process of the joint venture was described by the learned primary judge in terms which drew no challenge:[9]

“The Yabulu refinery was operated by QNI by sourcing ore from overseas third parties to be used at the refinery. The ore was unloaded at QNI’s material handling facility at the Port of Townsville and then delivered by rail to the refinery. The joint venture also sourced ore from its own mine in central Queensland. The domestic ore and coal were also transported by rail to the refinery. The ore was processed at the refinery where nickel was separated from cobalt and nickel products and cobalt produced by the refinery were transported by rail to Townsville or Brisbane for export. QNI operated the bank accounts in its name into which it deposited the revenues generated by the refinery business and met the liabilities incurred in operating the refinery business from the revenues deposited into its bank accounts. During the period from the acquisition of the refinery by the Palmer interests until 18 January 2016, it was common ground that QNI did not receive any income for the services it provided as general manager to the joint venture ….”

  1. [42]
    It was common ground at the trial that the money held in the QNI bank account did not come from calls made on the JVCs under clause 6.4(a).  Rather, it came from QNI’s selling the product it made and collecting the proceeds.  As with many joint venture arrangements, though the JVCs had the right to sell the products themselves and collect the revenue thus generated, they did not do so, and left that to the Manager, in this case QNI.
  2. [43]
    Once the money was deposited into the bank account QNI used it for joint venture purposes.

Approach of the primary judge

  1. [44]
    The learned primary judge held that the entitlement to the funds in the QNI bank account fell to be determined by applying clause 6.4(f) of the JVA.[10]  There was no challenge to that finding on appeal.
  2. [45]
    Her Honour then set out the primary contention on behalf of Mineralogy and its related parties as to ownership of those funds:[11]

[88] The corporate defendants accept that each bank account in QNI’s name that was operated by QNI for the purpose of the joint venture meant that QNI owned the chose in action against the bank represented by the funds in the account, in order to be able to claim the funds against the bank. See Croton v The Queen (1967) 117 CLR 326, 330. The corporate defendants submit, however, that the funds were at all times the property of Metals and Resources pursuant to the JVA and the fact they were held for convenience in the bank account in the name of QNI, as agent of each of the joint venturers, did not convert the funds to the property of QNI, but created a bare trust for the benefit of Metals and Resources which ended when the funds were disbursed from the account at the direction of Metals and Resources or in accordance with the authority conferred on QNI under the JVA for dealing with the liabilities of the joint venture.”

  1. [46]
    Her Honour accepted Mineralogy’s contention that the money in QNI’s bank account was held on a bare trust pursuant to clause 6.4(f).  In doing so her Honour relied on what was said by Gummow J in Herdegen v Federal Commissioner of Taxation as to the nature of a “bare trust”.[12]
  2. [47]
    Her Honour also adopted what was said of that discussion by the New South Wales Court of Appeal in Corumo Holdings Pty Ltd v C Itoh Ltd,[13] in this passage:[14]

“That discussion was considered in Corumo Holding Pty Ltd v C Itoh Ltd (1991) 24 NSWLR 370, 398 where the expression “bare trustee” for the purpose of a provision of the Companies (New South Wales) Code that disregarded the relevant interest in a share if it were held by a trustee who was a bare trustee was construed. It was held to mean no more than “a nominee or cypher, in a commonsense commercial view” that would apply to a person who, in a practical sense, had no say in the utilisation of the powers attaching to the shares. See also the commentary in paragraph 3-15 in Jacobs’ Law of Trusts in Australia, 8th ed (2016).”

  1. [48]
    The learned primary judge’s ultimate conclusion on this point was expressed thus:[15]

“[94] As between the bank and QNI, QNI was the legal owner of the funds in the relevant bank account, but on a bare trust for Resources and Metals to which the funds belonged. As between QNI and Resources and Metals, QNI had no role to perform as bare trustee, as any action it took in relation to the funds in the bank account was pursuant to the JVA – either to pay joint venture expenses or to disburse the funds to Resources and Metals, as directed by them. I therefore accept as accurate the corporate defendants’ analysis that the bare trust was collapsed when QNI disbursed the funds from its bank accounts whether it was for the purpose of making payments on account of the joint venture or for distributing to Metals and Resources at their request their respective shares of the funds to which they were entitled.”

Principles applicable to the trust issue

  1. [49]
    The learned primary judge found that QNI held the money in the bank account on a “bare trust”.  That was the position urged below by the corporate defendants, and again before this court.
  2. [50]
    There are statements of authority on what a bare trust is.
  3. [51]
    In Herdegen v Federal Commissioner of Taxation the nature of a “bare trust” was the subject of comment by Gummow J:[16]

“Today the usually accepted meaning of ‘bare’ trust is a trust under which the trustee or trustees hold property without any interest therein, other than that existing by reason of the office and the legal title as trustee, and without any duty or further duty to perform, except to convey it upon demand to the beneficiary or beneficiaries or as directed by them, for example, on sale to a third party.”

  1. [52]
    Gummow J explained what was meant by saying that a bare trustee was without any duty or further duty to perform, except to convey it to or as the beneficiary directs:[17]

“What is meant in these situations by saying that the trustee holds the property without any duties to perform other than that to convey the property to the beneficiary or as the beneficiary directs? The answer is supplied by Professor Waters in his work "Law of Trusts in Canada", 2nd ed, 1984, p 27:

‘It is of course true that so long as a trustee holds property on trust he always retains his legal duties, namely to exercise reasonable care over the property, either by maintaining it or by investing it; he cannot divest himself of these duties. The reference, however, is to duties which the settlor has enumerated. For example, the settlor may have required that the beneficiary be maintained until he reaches the age of majority, when he is entitled to call for capital and income. The trustee is then bare or naked of these active duties decreed by the settlor. If the trustee possesses his legal duties only for the purpose of guarding the property, prior to conveyance to the beneficiary, these duties are said to be passive.’”

  1. [53]
    Herdegen was the subject of discussion by the New South Wales Court of Appeal in Corumo Holdings Pty Ltd v C Itoh Ltd:[18]

A ‘bare trust’ is one in which the trustee has no active duties to perform and is usually contrasted with a trust where there are such active duties. A recent discussion of the topic may be found in Gummow J’s judgment in Herdegen v Commissioner of Taxation (Cth) (1988) 84 ALR 271; 20 ATR 24. In that case, his Honour points out that the precise nuances of the phrase must depend on the context in which it is found. [Then, referring to the expression “bare trustee” in the Companies (New South Wales) Code)] The applicants would have the phrase confined to situations where the trustee was immediately bound to transfer the share to his beneficiary. But this, in my view, is too narrow a construction, and would result in reading down the phrase so that it applied only to situations which almost never occur. Bearing in mind the evident statutory purpose, and particularly bearing in mind that s 230 imposes criminal penalties for breach, I think the expression must be related to situations where a trustee is no more than a nominee or cypher, in a commonsense commercial view.”

  1. [54]
    The position of a bare trustee was more recently expressed by the High Court in CGU Insurance Ltd v One.Tel Ltd (In liq):[19]

“The trustee of a bare trust has no interests in the trust assets other than those which exist by reason of the office of trustee and the holding of legal title. Further, the trustee of a bare trust has no active duties to perform other than those which exist by virtue of the office of the trustee, with the result that the property awaits transfer to the beneficiaries or awaits some other disposition at their direction. One obligation of a trustee which exists by virtue of the very office is the obligation to get the trust property in, protect it, and vindicate the rights attaching to it. That obligation exists even if no provision of any statute or trust instrument creates it. It exists unless it is negated by a provision of any statute or trust instrument.”

  1. [55]
    The presence of active duties, or the absence of active duties, has long been held a distinguishing feature in trust law as to the modern conception of a bare trust.[20]
  2. [56]
    The principles that can be drawn from Herdegan, Corumo and GCU v One.Tel are:
    1. (a)
      if the trustee has any active duties beyond those that exist by virtue of the office, they will not be a bare trustee;
    2. (b)
      active duties beyond those that exist by virtue of the office of trustee include duties enumerated by the settlor, that is, duties enumerated in the terms of the trust;
    3. (c)
      an obvious and important duty that any trustee is to obey the terms of the trust; and
    4. (d)
      a duty to disburse funds in accordance with the terms of the trust is an active duty such that the trustee with that duty will not be a bare trustee.

Proper construction of the JVA

  1. [57]
    Ultimately the parties before this court accepted that the question of whether QNI was a “bare trustee” depended upon the proper construction of the JVA.
  2. [58]
    Clauses 3.1 and 3.2 of the JVA has an impact on this issue.  In our view, the language used in them is that of trustee and beneficiary.
  3. [59]
    Clause 3.1 relevantly provides:

“All the Joint Venture Property shall at all times be made available for the purpose and duration of the Joint Venture and during such duration shall not be used for any other purpose. All the Joint Venture Property and, subject to Clause 3.3, all estate and interest in Products produced at the Treatment Facilities shall be beneficially owned by the Joint Venturers as tenants in common, and all liabilities of the Joint Venture shall be severally borne by such Joint Venturers, in the following percentages (such percentages being the parties’ respective Participating interests as at the Effective Date):

Joint Venturer Participating Interest

QNR 80%

NRNQ 20%”

  1. [60]
    There are a number of features about clause 3.1 that should be noted.
  2. [61]
    First, the term “Joint Venture Property” includes the chose in action constituted by the rights against the bank holding the Manager’s account: clause 1.1.  Broadly put the money in the bank account is Joint Venture Property.
  3. [62]
    Secondly, that chose in action must be “at all times made available for the purpose and duration of the Joint Venture”.  As QNI operates the bank account its duty was to make the money in the account available at all times during the existence of the joint venture.  And, it had to be made available for the purpose of the joint venture.  The Manager as trustee of the funds in the account is therefore obliged to make those funds available at all times for the purpose of the joint venture.
  4. [63]
    As noted above the JVA defines the purpose of the joint venture: clause 2.1.  The purposes include: mining, developing and exploiting the joint venture area so as to produce ore;  transporting the ore and processing it; producing nickel oxide and nickel and cobalt sulphide products; purchasing ore from third parties; processing ore supplied by or on behalf of the joint venturers to produce products for delivery to, or as directed by, each of the joint venturers; and exercising the rights, titles, interests, claims and benefits comprised in the Joint Venture Property (as defined in the JVA).
  5. [64]
    Thirdly, the Joint Venture Property is not to be used for any other purpose.  As holder of the funds in the bank the Manager was therefore obliged to resist any effort to use the funds for a purpose which was not a joint venture purpose.
  6. [65]
    Fourthly, the Joint Venture Property is stipulated to be “beneficially owned by the Joint Venturers as tenants in common … in the following percentages (such percentages being the parties’ respective Participating Interests …)”.  On its face that has the effect that Joint Venture Property is held for the JVCs in proportion to their interest in the joint venture (Resources, 80: Metals, 20).
  7. [66]
    In so far as the legal title to Joint Venture Property was held in the name of QNI as Manager, this part of clause 3.1 points plainly to the relationship between QNI and the JVCs.  In our view, it makes it clear that there is a trust relationship in that case.  The legal title is held by QNI, but the beneficial ownership lies with the JVCs.
  8. [67]
    However, other provisions in the JVA stipulate that those percentages do not apply to all Joint Venture Property.  The funds in the Manager’s bank account is the prime example for present purposes.
  9. [68]
    Where the Manager is required to establish and maintain a bank account into which funds from the joint venture are deposited, the rights against the bank are a chose in action that comes within paragraph (h) of the definition of Joint Venture Property, which relevantly provides:

“all other property of whatsoever kind and wheresoever situate (including, without limitation, … choses in action … from time to time hereafter held, … or acquired for the purposes of the Joint Venture …”

  1. [69]
    In the case of the funds held in the bank account required to be brought into existence and maintained under clause 6.4(f) the chose in action constituting the rights as between the Manager and the bank is held by the Manager, who has legal title.  The beneficial ownership, however, rests with the JVCs, according to the proportion of the amounts paid into the account.  That proportionate beneficial ownership may not reflect the percentages of the Participating Interests in the joint venture overall.[21]
  2. [70]
    In our view, the use of language distinguishing between the legal title on the one hand, and the beneficial title on the other, points clearly to an intention on the JVCs’ part that the relationship is one of trustee and beneficiary.[22]
  3. [71]
    Clause 3.2 deals with how Joint Venture property was to be held, providing that if the JVCs requested it, title to any of the Joint Venture property may be solely in the name of the Manager.  It then relevantly provides:

“If at any time any of the Joint Venture Property is not vested at law in the names of the Joint Venturers in proportion to their Participating Interests, the Joint Venturer or Joint Venturers in whose names such Joint Venture Property is vested shall hold such Joint Venture Property for the use and benefit of the Joint Venturers.”

  1. [72]
    The highlighted words are the language of trusts, distinguishing between legal title which is vested in one party while beneficial title resides with someone else.
  2. [73]
    One of the factors taken into account by her Honour in reaching the conclusion that the JVA did not create the trust for which the appellants contended, under which QNI had the powers and duties conferred upon it by clause 6.4(f), was that the word “trust” is not used in the JVA.[23]  However, as her Honour recognised, the absence of such a term is not decisive.  Rather, what is called for is the construction of the document (here, the JVA) in order to discern if the parties’ intention was to create a trust.[24]  In our respectful view, the absence of the term “trust” is not determinative when one has regard to the use of words making a distinction between legal ownership and beneficial ownership of Joint Venture Property, particularly in clause 3.1 and 3.2.
  3. [74]
    Further, though not in the JVA, the parties did use the phrase “create any … trust in respect of … the Joint Venture Property” in clause 4.7 of the AA.  Clause 4.7 of the AA provided that QNI “shall not have any right or power (except for liens arising in the normal and ordinary course of business) to mortgage, pledge, charge, encumber or create any lien over or trust in respect of (or purport or attempt to do any of the same) the Joint Venture Property or any of it”.  But, AA clause 4.8 immediately thereafter provided that QNI:

“ … shall not have authority to act for or to assume any obligation or liability on behalf of the Joint Venturers, or any of them, except such authority as is conferred on QNPL by or pursuant to the Joint Venture Agreement …”

  1. [75]
    Thus, even the AA did not prevent a trust from arising if that is the effect of the proper construction of the JVA.
  2. [76]
    Her Honour also considered that clauses 3.1 and 3.2 were equally consistent with there being no express trust, because clause 3.2 contemplated that one JVC might hold property for the other JVC.[25]  However, that concerns the relationship between the JVCs and says nothing as to the position of the Manager, particularly in light of clauses 3.1 and 6.4(f).
  3. [77]
    Clause 5.2 does not, in our view, alter the position.  Particular reliance was placed on clause 5.2(a)(vii), which provides:

“The General Manager shall, subject to the directions of the JVOC, be in charge of and responsible for:

  1. (vii)
    the management and control of the Joint Venture Property and all operations hereunder as agent for, and for the account of, the Joint Venturers.

In the exercise of such rights and duties the General Manager shall act subject to and consistently with the provisions of this Deed….”

  1. [78]
    As to that, whilst the words say “management and control of the Joint Venture Property and all operations hereunder as agent”, the clause also stipulates that in doing so the Manager “shall act subject to ... the provisions of this Deed”.  If the JVA provides that in respect of certain Joint Venture Property the Manager shall be trustee, there is no inconsistency.  Further, “management and control” applies no matter who holds legal title to the Joint Venture Property.  In other words, even where the legal title is vested in the Manager as trustee the management and control is assigned to the Manager.  It is thus a different concept to the question of whether certain property is held on trust.  And, finally, there are specific provisions of clause 3.1 and 3.2 which resolve the question of title to property.

Construction of clause 6.4(f)

  1. [79]
    There are a number of matters to note about the provisions in clause 6.4(f) of the JVA.
  2. [80]
    First, the clause deals with moneys received by way of calls but also other money.  That is apparent from the first sentence which refers to “Called Sums and other moneys received from or for the account of the Joint Venturers”.  Calls can be made on the JVCs under clause 6.4(a) by the General Manager, who for the purposes of clause 6.4(f) was termed the “Calling Manager”.  In this case that was QNI.
  3. [81]
    Money received from the JVCs, but which is not in response to a call, can fall under either of the categories: money “received from” the JVCs, or money “for the account of” the JVCs.
  4. [82]
    Secondly, there is an evident difference between money that is “from” the JVCs and money that is “for the account of” the JVCs.  The former connotes a payment from the JVCs themselves.  The latter being money from another source but for the account of the JVCs.  The latter comprehends the proceeds of sale of the joint venture products.
  5. [83]
    Thirdly, the money so received must be deposited into the Manager’s bank account.[26]  The clause uses the phrase “shall deposit”, which permits of no course other than to deposit the money received.  What can be done with that money is the subject of further provision.
  6. [84]
    Fourthly, the moneys deposited are to be constituted only by call money, or money received from the JVCs, or for the account of the JVCs.  The Manager shall not deposit any other moneys in that account.  The prohibition on intermixing funds is a hallmark of a trust relationship.[27]
  7. [85]
    Fifthly, the account must be in the name of the Calling Manager (QNI) but the moneys in the account “shall belong to the Joint Venturers in proportion to the amounts respectively paid to such account by or on behalf of them”.  There is no suggestion of moneys paid into the account by the JVCs themselves, only the revenue from sales.  Thus the money in the account was money “paid to such account … on behalf of” the JVCs.
  8. [86]
    The consequence of these provisions is that the moneys in the account are held in the name of the Manager (QNI) but are beneficially owned by the JVCs.
  9. [87]
    Sixthly, the money in the account shall belong to the JVCs “in proportion to the amounts respectively paid to such account by or on behalf of them”.  By this provision the money in the account is not held in proportion to the JVCs’ respective interest in the joint venture.  This provision recognises that the money in the account may have been paid into the account in a way that requires it to be treated differently from Joint Venture Property otherwise.  The Joint Venture Property is held for the JVCs according to their percentage interests in the joint venture: clause 3.1.  Here that was 80 Resources, 20 Metals.  But that did not necessarily reflect the proportion of the amounts paid into the account by the JVCs, or paid into the account on behalf of the JVCs.  To the extent that the proportions did not match the joint venture interests, the Manager (QNI) held the funds on the distinct proportions, not 80:20, and had to keep “sufficient records as will enable the respective entitlements … to be determined”.
  1. [88]
    Seventhly, the Manager (QNI) is obliged to use the money in the account “to meet Joint Venture Expenses payable or accrued or to become payable or to be accrued”.  This Court has adopted the principle in Kelly v The Queen[28] that the proper course of statutory construction is to import the words of a definition into the substantive enactment and only then construe the substantive enactment.[29]  The same principles have been applied to construction of contracts.[30]  Therefore, in order to properly construe clause 6.4(f) the definition of certain terms must be read in first.
  1. [89]
    The definition of “Joint Venture Expenses” is in clause 6.4(a): “all costs, liabilities and expenses of the Joint Venture properly incurred”.
  2. [90]
    Reading that definition into clause 6.4(f), the third and last sentences read:

“Payments shall be made from such account to meet all costs, liabilities and expenses of the Joint Venture properly incurred [and] payable or accrued or to become payable or to be accrued in respect of the Joint Venturer concerned.

Such moneys, bank interest and other income shall be applied promptly to meet all costs, liabilities and expenses of the Joint Venture properly incurred to the intent that calls made under paragraphs (b) or (d) of this Clause 6.4 be reduced to the maximum extent possible.”

  1. [91]
    Thus, the Manager’s obligation is to meet all costs, liabilities and expenses of the Joint Venture properly incurred, and from the money in the account.  Those costs, liabilities and expenses fall into two broad categories.  One is those “payable or accrued”.  Plainly that refers to costs, liabilities and expenses which have already accrued and are payable.  The second is those which are “to become payable or to be accrued”.  That plainly comprehends future costs, liabilities and expenses, that is, which have yet to become payable or yet to accrue.
  2. [92]
    This part of clause 6.4(f) is consistent with clause 6 in the AA, which provides that the “costs, liabilities and expenses properly incurred by [QNI] in the performance of its responsibilities, duties and obligations … shall be deemed for all purposes to be Joint Venture Expenses”.  In a practical sense the JVA envisages that the JVCs cannot deprive the Manager of the ability to meet joint venture expense.
  3. [93]
    Eighthly, the clause also provides that “Such moneys, bank interest and other income shall be applied promptly to meet Joint Venture Expenses”.  The Manager must use the money in the account for meeting all costs, liabilities and expenses of the Joint Venture properly incurred and do so “promptly”.  The rationale in the clause is that prompt meeting of the costs, liabilities and expenses will reduce the necessity for a call: “to the intent that calls made under paragraphs (b) or (d) of this Clause 6.4 be reduced to the maximum extent possible”.
  4. [94]
    Ninthly, the clause permits investment of the money in the account.  Where the money comes from calls on JVCs, the money must be invested “in a prudent manner for a term not exceeding” the term of the call (weekly or monthly).  However, it is plain that account money from other sources can be invested as well, as the clause provides that “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”.  Therefore, if the JVCs paid money into the account, it could be invested.  The same applies to money that comes into the account and is “attributable to” a JVC.  The proceeds of sale of nickel products would fall into that category.
  5. [95]
    That clause 6.4(f) comprehends investment of money beyond that derived from calls is, in our view, plain on the face of the words.  However, the words which follow the phrase “prudent manner” deal only with matching the term of investment for call moneys.  Because of that, and because clause 6.4(f) goes beyond investment of call moneys, the preferable construction of the clause is that the words “prudent manner” should be read as governing all investments, not just those using call money.  That is done by reading that part of clause 6.4(f) as though there was a comma after the phrase “prudent manner”, thus:

“Moneys standing to the credit of the account may be invested by the Calling Manager in a prudent manner, for a term not exceeding one week (in the case of moneys paid pursuant to a weekly call and any interest thereon) or one month (in the case of moneys paid pursuant to a monthly call and any interest thereon).”

  1. [96]
    In our view, there can be no doubt that the legal title to the funds in the QNI bank account was held by QNI as Manager, and that the chose in action against the bank in respect of the funds was held by QNI.  But, equally clear is the fact that those interests were held beneficially by the JVCs.
  2. [97]
    Under clause 6.4(f) the obligations on QNI as holder of the bank account were:
    1. (a)
      to maintain the account;
    2. (b)
      to deposit sums into the account which came from the JVCs or were paid to the account of the JVCs;
    3. (c)
      not to deposit any other funds in the account;
    4. (d)
      hold those funds for the JVCs in proportion to the amount paid by the particular JVC, whether by the JVCs themselves or on their behalf;
    5. (e)
      to invest the funds in the bank account in a prudential manner;
    6. (f)
      to hold the returns on investment of the funds paid by or attributable to a particular JVC to the account of that JVC;
    7. (g)
      keep sufficient records to enable the JVCs’ respective entitlements to be determined;
    8. (h)
      use the funds (including the returns on investing) to meet all costs, liabilities and expenses of the Joint Venture properly incurred, whether already payable or accrued, or to become accrued and be payable in the future; and
    9. (i)
      to meet the costs, liabilities and expenses of the Joint Venture promptly.
  3. [98]
    Once that is understood it becomes evident, in our view, that QNI holds the funds in the bank account on trust for the JVCs.  Legal title remains with QNI but the beneficial interest remains with the JVCs.
  4. [99]
    The learned primary judge reasoned, in part, that clause 13 pointed against the JVA having created the trust for which the appellants contended between the Manager and the JVCs as to the funds in the bank account.  Her Honour focussed on that part of clause 13 which said “this Deed shall not be construed as constituting an association, corporation, trust, mining partnership or any other kind of partnership”.  Clause 13 provides (with the excerpt highlighted):

“The full extent of the joint venture between the Joint Venturers is set forth in this Deed and such other agreements relating to the Joint Venture as are executed and, where applicable, delivered on the date hereof or on the Effective Date. Nothing in this Deed shall be construed to constitute a Joint Venturer an agent or representative of the other Joint Venturer, and no Joint Venturer shall have any authority to act for or to assume any obligation, liability, indebtedness or responsibility on behalf of the other Joint Venturer except as set forth in this Deed. The rights, duties, obligations and liabilities of the Joint Venturers arising out of this Deed shall be several in proportion to their respective Participating Interests and not joint or collective, it being the expressed purpose and intention of the Joint Venturers that their ownership of their respective interests shall be as tenants in common and that this Deed shall not be construed as constituting an association, corporation, trust, mining partnership or any other kind of partnership.”

  1. [100]
    In our respectful view, that conclusion is in error.  The first sentence of clause 13 is akin to an entire agreement clause.  It specifies the documents which set out the “full extent” of the joint venture.  The second sentence deals with the relationship of the JVCs inter se, limiting the extent to which one JVC can represent or bind another.  The third sentence then contains several parts: (i) it first provides that the rights, duties and obligations of the JVCs are “several in proportion to their respective Participating Interests”; (ii) secondly, it then makes clear that the rights, duties and obligations of the JVCs are not joint or collective; (iii) thirdly, it then explains the purpose of those provisions, namely that the purpose and intention of the JVCs is that their ownership of their interests “shall be as tenants in common” and “this Deed shall not be construed as constituting an association, corporation, trust, mining partnership or any other kind of partnership”.
  2. [101]
    The use of the conjunctive “and” in the last sentence makes it plain that the subject matter of the last part is the same as the earlier part of that sentence, namely the relationship of the JVCs inter se.  It says nothing about the position of the Manager in relationship to the JVCs.
  3. [102]
    The final reason for her Honour’s holding that the JVA did not create the trust for which the appellants contended was that the prohibition in clause 6.4(f), on QNI depositing money into the account, was of limited significance because QNI could not operate another business anyway.[31]  However, the fact that the money in that account was to be held on a different basis from other Joint Venture Property, in proportion to contributions to the account rather than reflecting the percentage Participating Interests, shows the JVA distinguished this category of Joint Venture property for a reason.  The Manager thereby had to treat one JVC differently from the other, all the while using the mixed funds to meet the costs and expenses of the joint venture, which had to be borne severally by the JVCs according to their percentage Participating Interests: clause 3.1.  The fact that QNI could not operate another business does not take the matter anywhere.
  4. [103]
    Further, it cannot be said that QNI is in a position where it holds the funds without any interest therein, other than that existing by reason of the office of Manager and the legal title as trustee, and without any duty or further duty to perform, except to convey it upon demand to the JVCs or as directed by them.  QNI’s duties included: (i) investing the funds; (ii) determining for that purpose what moneys were call moneys, and what were not; (iii) determining which investment returns belonged to which JVC; (iv) determining where the differential interests of the JVCs lay; (v) promptly applying the accrued funds in the account to meet all costs, liabilities and expenses of the Joint Venture, both currently accrued and to accrue in the future; and (vi) maintaining records that would permit the JVCs’ differential interests to be determined.
  5. [104]
    Consistently with the duty to hold the funds to meet properly incurred joint venture expenses, QNI was obliged to resist any effort of the JVCs to direct payment of the funds to meet expenses which were not that.
  6. [105]
    Those duties compel the conclusion, in our respectful view, that QNI was not, to adopt what was said in Corumo Holdings, a “nominee or cypher, in a commonsense commercial view”, that is, a person who, in a practical sense, had no say in the utilisation of the powers attaching to the trust funds.  Nor do QNI’s duties fit within the description of a bare trust given by Gummow J in Herdegen or in CGU v One.Tel.
  7. [106]
    The duties which the JVA (and thereby, the JVCs) enumerated required that the bank account funds be augmented by investment, the earnings from investment were held on a differential basis for the JVCs, the Manager had to account to the JVCs for all the money, and in doing so the Manager had to maintain accounts from which the differential interests of the JVCs could be determined.
  8. [107]
    More importantly for present purposes clause 6.4(f) required the trustee (QNI) to disburse the trust property, by applying the funds in meeting the present and future “costs, liabilities and expenses of the Joint Venture properly incurred”.  For that purpose the trustee had to satisfy itself that: (i) the costs, liabilities and expenses were joint venture costs, liabilities and expenses; (ii) the costs, liabilities and expenses were properly incurred; and (iii) that they were payable or accrued, or would be payable or to be accrued.
  9. [108]
    In our view, the fact that the bank account funds were impressed with the trust to pay the (present and future) expenses of the joint venture necessarily means that whilst those expenses remained unpaid the trust could not be defeated or “collapsed” by the beneficiaries (the JVCs) calling the money back to them, or directing it to someone else (such as Mineralogy).  On one view, that is what occurred here, with distribution of the funds to Mineralogy at the direction of Resources and Metals.  On the finding of the learned primary judge, however, the distribution was at Mineralogy’s request.[32]  For present purposes the difference does not matter.  By either means the JVCs argue that the bare trust was “collapsed”.  That argument does not explain how the trust could have been brought to an end without the joint venture expenses being first met, as required by the express terms of the trust created by the JVA.
  10. [109]
    In our view, it cannot be said that QNI possessed its legal duties only for the purpose of guarding the funds prior to conveyance to the JVCs.
  11. [110]
    Therefore, in our respectful view, the learned primary judge erred in concluding that QNI held the bank account funds on a bare trust.
  12. [111]
    That conclusion is not inconsistent with the fact that for some purposes under the JVA QNI was an agent only for the JVCs.  QNI had obligations to manage the joint venture[33] but had no vote on the JVOC,[34] and only some of the Joint Venture Property was to be held on trust for the JVCs.  For example, clause 3.2 provided that real property and mining titles were to be held by the JVCs, and not QNI:

“For purposes of convenience, title to any of the Joint Venture Property may be held at the request of the Joint Venturers solely in the name of either of the Managers as nominee for both Joint Venturers in proportion to their respective Participating Interests; provided, however, that all Real Property Titles and Mining Titles shall be held in the names of both Joint Venturers in accordance with their Participating Interests. If at any time any of the Joint Venture Property is not vested at law in the names of the Joint Venturers in proportion to their Participating Interests, the Joint Venturer or Joint Venturers in whose names such Joint Venture Property is vested shall hold such Joint Venturer Property for the use and benefit of the Joint Venturers in proportion to their Participating Interests and, if requested to do so by the Manager or the other Joint Venturer (as the case may be), but at the expense of the Joint Venture, shall take all such steps as may be necessary to vest the Joint Venture Property in question in the names of the Joint Venturers in proportion to their Participating Interests.”

  1. [112]
    Further, the JVA did stipulate that QNI was the agent for the JVCs in some particular instances, for example “in the purchase and shipping of nickel ore from overseas sources”: clause 5.2(c).

Loan between QNI and Mineralogy?

  1. [113]
    The evidence at the trial concerning the loans to Mineralogy was in two forms.  The first comprised the contemporaneous documents, starting in 2011.  The second was oral evidence from the witnesses Wolfe and Sorenson[35] as to what the accounting treatment in QNI’s books of account signified.
  2. [114]
    It is, in our view, useful to set out the contemporaneous documentary evidence before turning to that of the witnesses.
  3. [115]
    The first loans to Mineralogy were on 25 February 2011.[36]
  4. [116]
    That day QNI’s Financial Controller (Fitzsimmons) emailed Wolfe (QNI’s Chief Financial Officer) saying that “We have created new loan account 127600 for urgent bills which we need to pay on behalf of Mineralogy P/L which we will claim back from them in the future.”
  5. [117]
    On 27 May 2011, QNI’s Contract Accountant emailed the Financial Controller (and others) attaching the Mineralogy Loan balance report saying “The total balance owed by Mineralogy to QNPL is now A$12.14M”.[37]
  6. [118]
    That email was forwarded to “Terry Smith” (an alias for Palmer[38]) on 28 May 2011.[39]  It addressed Palmer, saying:

“When we initially spoke about this reimbursement of expenses, you had indicated up to A$10M.

The balance is now A$12.14, can you please advise whether you want it to continue and whether you want to place a revised limit on it?”

  1. [119]
    The response from Palmer was short: “No limit continue clive”.[40]
  2. [120]
    That email chain was passed to Wolfe later on 28 May 2011.[41]
  3. [121]
    On 21 June 2011 a written loan agreement was executed.[42]  The document was entitled “Loan Agreement between Queensland Nickel Pty Ltd and Mineralogy Pty Ltd”.  The terms of the document are:

 Loan Agreement

THIS LOAN AGREEMENT (“Agreement”) dated this twenty-first day of June 2011

BETWEEN

Queensland Nickel Pty Ltd of 1 Greenvale Street, Yabulu, Queensland (“Lender”)

AND

Mineralogy Pty Ltd of Level 8, 380 Queen Street, Brisbane, Queensland (“Borrower”)

IN CONSIDERATON OF the Lender loaning certain monies (“Loan”) to the Borrower, and the Borrower repaying the Loan to the Lender, both parties agree to keep, perform and fulfil the promises and conditions set out in this Agreement.

  1. The Lender promises to provide a Loan of up to $AUD10,000,000.00 (Ten Million Australian Dollars) to the Borrower and the Borrower promises to repay the Loan to the Lender.
  2. The Loan plus any outstanding interest shall be repaid by the Borrower upon written demand by the Lender.
  3. Interest shall accrue on any outstanding balance at the end of each calendar month at a rate equal to the Reserve Bank of Australia Cash Rate.
  4. Subject to written requests from Professor Clive Palmer and / or Mr Derek Payne, the Borrower shall be entitled to draw down amounts of the Loan from time to time, and in doing so, may direct such amounts be paid directly by the Lender to third parties.

Signed on behalf of Queensland Nickel

Pty Ltd by its duly authorised officer

in the presence of

Signed on behalf of Mineralogy Pty Ltd by

its duly authorised officer in the presence of …”

  1. [122]
    Palmer signed as authorised officer of both lender and borrower.  The witness was Ahyick, a director of QNI at the time.
  2. [123]
    Mineralogy repaid to QNI the sum of $14,883,183.64 out of funds lent.[43]  QNI’s Mineralogy Loan Account shows repayments of $12,738,383.64 to 31 May 2011;[44] and $2,000,000 on 24 August 2011.[45]
  3. [124]
    Correspondence at the time revealed that the parties treated the loan as being between QNI and Mineralogy, not from the JVCs.  That included:
    1. (a)
      an email from Wolfe on 26 July 2011, attaching a copy of the “Loan Agreements”, with the subject matter “Loan Agreements btwn QNPL and Mineralogy and btwn QNPL and Closeridge”;[46]
    2. (b)
      a response to that email from Payne of Mineralogy, saying that “For accounting purposes, the formalised loan agreement means we should pay interest and possibly principal on amounts you have paid at our request, that is, to creditors you pay for use each week”;[47]
    3. (c)
      the email exchange referred to in paragraphs [117] to [120]  above;
    4. (d)
      an email from the QNI Contract Accountant to Mineralogy on 19 August 2011; it attached the “Mineralogy Loan balance report” and said “The total balance owed by Mineralogy to QNPL is now A$9.3M”;[48]
    5. (e)
      an email from Wolfe (QNI) to Payne (Mineralogy) on 19 August 2011, forwarding the email just mentioned, and asking Payne to discuss with Palmer “whether / when some or all of this balance will be repaid”;[49]
    6. (f)
      an email from the QNI Contract Accountant to Mineralogy on 2 September 2011; it attached the “Mineralogy Loan balance report” and said “The total balance owed by Mineralogy to QNPL is now A$7.7M”;[50]
    7. (g)
      an email from Zhong (Group Finance, Mineralogy) to Wolfe (and others) on 5 September 2011, asking for a response to give to the auditor, as to “the Mineralogy-QNI Loan Balance before 30th June 2011”;[51] the response was an email on 7 September, attaching the “loan balance between QN and Mineralogy”;[52] the attached confirmation was on QN letterhead, stating “Loan Confirmation as at 30th June 2011 … Amount owing from Mineralogy … $3,840,093.60”;[53]
    8. (h)
      an email from Wolfe to Payne on 5 September 2011, in which he said that at a Board meeting on 24 August “QN was then authorised to utilise the loan facility to make payment on behalf of Mineralogy” during periods when Palmer was absent;[54]
    9. (i)
      an email from the QNI Contract Accountant to Mineralogy on 9 September 2011; it attached the “Mineralogy Loan balance report” and said “The total balance owed by Mineralogy to QNPL is now A$7.8M”;[55] and
    10. (j)
      a letter dated 1 February 2013 on QNI letterhead from Wolfe to the Chief Financial Officer of Mineralogy; its subject was “Loan Balance Confirmation as at 30th June 2012”, and recorded “A$12,703,121.45 owing to Queensland Nickel Pty Ltd by Mineralogy Pty Ltd”;[56]
    11. (k)
      an email from Richards (Financial Accountant of QNI) to Zhou (Mineralogy) on 23 July 2014, asking for Mineralogy to “confirm the balance of the loan between Queensland Nickel and Mineralogy in your accounts as at 30/06/2014”; the response was a confirmation of “the balance of the loan between Mineralogy and QN …”.[57]
  4. [125]
    QNI issued invoices to Mineralogy from time to time, recoding the loan as being from QNI.[58]  Each invoice:
    1. (a)
      was on QNI letterhead, stating QNI’s name and its ABN and ACN;[59]
    2. (b)
      was addressed to Mineralogy;
    3. (c)
      stated the item as “Interest on Loan between Mineralogy Pty Ltd and Queensland Nickel Pty Ltd”; and
    4. (d)
      offered to take payment by cheque made out to “Queensland Nickel Pty Ltd”;
    5. (e)
      stipulated QNI’s bank account in which the joint venture funds were held.
  5. [126]
    What is notable about the evidence referred to above is that it contains no suggestion that the loans were between the JVCs and Mineralogy.
  6. [127]
    The most significant of those documents is the executed Loan Agreement between QNI and Mineralogy.  There was no suggestion at the trial that this document was other than what it purported to be.  On its face:
    1. (a)
      it records a loan agreement between QNI and Mineralogy, and no one else;
    2. (b)
      it contains a promise to lend money, by QNI and no one else;
    3. (c)
      it contains a promise by Mineralogy to repay the loan moneys to QNI, and no one else;
    4. (d)
      it contains a promise by Mineralogy to pay interest to QNI, and no one else;
    5. (e)
      it was signed by Mineralogy’s authorised officer; and
    6. (f)
      it was signed by QNI’s authorised officer; and
    7. (g)
      those signatures were witnessed by “Basil Ahyick”, a director of QNI.[60]
  7. [128]
    In our view, that document is a powerful piece of objective evidence showing that the loan was not between Mineralogy and the JVCs, but between Mineralogy and QNI.  It was executed soon after the individual loan payment began.  There was evidence to support the inference that it was an operative document.  Wolfe (QNI’s Chief Financial Officer) sent an email on 26 July 2011, to Payne (Mineralogy’s Finance Director) and Fitzsimmons (Financial Controller of QNI), and copied it to Ahyick (a director of QNI).  Its subject matter was “Loan Agreements btwn QNPL and Mineralogy and btwn QNPL and Closeridge”, and it attached a copy of the “Loan Agreements”.[61]  QNPL was a reference to QNI.  Payne’s response said “For accounting purposes, the formalised loan agreement means we should pay interest and possibly principal on amounts you have paid at our request, that is, to creditors you pay for use each week”.[62]  That exchange plainly recognises that the loan agreement was on foot, moneys were being advanced under it by QNI, and interest was payable to QNI.
  8. [129]
    Also significant in that respect are the invoices that were sent periodically.  There was no suggestion at the trial that these documents were other than they purported to be.  They reveal that QNI was charging interest on the loan and demanded that it be paid to QNI.
  9. [130]
    Further, the documents support the inference that steps were taken to keep the loan balance under the $10m referred to the Loan Agreement itself.  In that respect, for example, QNI’s Contract Accountant sent a Mineralogy Loan balance report to Ahyick, Fitzsimmons and others on 2 September 2011.[63]  The attached report showed that Mineralogy had made a repayment of $2m, which resulted in a loan balance of $7.7m.[64]
  10. [131]
    In our respectful view, the compelling inference was that the loan agreement was an operative agreement, governing the loan, and that loan was between QNI and Mineralogy, not between QNI and the JVCs.  That inference may be more easily drawn because of the failure to call witnesses to the Loan Agreement such as Palmer and Ahyick, and the fact that Wolfe said nothing at all about it in any of his affidavits or orally.
  11. [132]
    It is notable that neither Palmer nor Ahyick (the two signatories to the Loan Agreement) were called at the trial.  Whilst they could not offer an opinion on legal questions such as was the agreement binding, there was evidence they could have given about how it came to be signed and to explain how it was not operative, if that was the case.  Nor, for that matter, did Wolfe give any evidence about the Loan Agreement, even though he was the person who sent it to the Mineralogy officers on 26 July 2011.  The failure to call those witnesses on the Loan Agreement permits an inference to be drawn that their evidence would not have assisted the corporate defendants.[65]  But even disregarding that consideration, the contemporaneous documents compelled the conclusion that the relevant payments out of QNI’s bank account were loans from QNI to Mineralogy.
  12. [133]
    The learned primary judge referred to the loan agreement briefly.  The first time was to record that Sorenson had not seen it:[66]

“[83] Mr Sorensen was shown the loan agreement dated 29 June 2011 between QNI and Mineralogy (exhibit QNK.014.001.0223) whereby QNI as lender promised to provide a loan of up to A$10m to Mineralogy as the borrower and said that he had not seen that document before (at Transcript 18-26). That would only be relevant, if it were an operative loan agreement.”

  1. [134]
    The second time was only to note the plaintiff’s and defendants’ arguments as to its effect.[67]  Her Honour then turned to a consideration of the evidence of the accounting witnesses, saying:[68]

“[98] A critical issue to be resolved is whether the recording of a loan by QNI to Mineralogy in the SAP system reflected a transaction that accorded with that description or whether that was a convenient way of recording loans that were in fact made by Metals and Resources, rather than QNI, to Mineralogy. The plaintiffs’ claims cannot succeed unless they show that it was QNI that lent or paid the money to Mineralogy and not Metals and Resources.”

  1. [135]
    For the purpose of resolving the issue so identified, it was necessary to determine whether the loan agreement was operative, and if it was, what the impact of that finding was.  Approaching the issue in a way that placed primary reliance on the evidence of the SAP system necessarily had the consequence that little or no weight was placed on the evidence provided by the contemporaneous documents, and there was no finding as to whether the loan agreement was operative.
  2. [136]
    In our respectful view, it was an error not to take the objective evidence, and in particular the loan agreement, into account when determining whether the loan was between QNI and Mineralogy, rather than, as was contended by the corporate defendants, between the JVCs and Mineralogy.
  3. [137]
    The question which arises is whether the inference arising from the objective evidence is diminished by the evidence from the accounting witnesses.

Evidence as to accounting records

  1. [138]
    The principal evidence relied on by her Honour came from Wolfe and Sorenson.  That evidence was as to what was meant by codes used in the accounting systems of QNI.

Evidence of Wolfe

  1. [139]
    Wolfe gave evidence by a number of affidavits,[69] upon which he was cross-examined.
  2. [140]
    The essence of Wolfe’s evidence was that the accounting systems for the QN Group used certain codes to record transactions.  He referred to a system called SAP, a software system used by QNI whereby financial records were kept and day to day transactions of the QN Group were recorded.  Those records supported the preparation of monthly management reports for the QN Group and the audit of accounts.
  3. [141]
    The SAP system contained several profit centres identified by codes.  That for QNI was “5710QNPL”.  The code “5710QNPL” was the profit centre in the SAP system for all transactions of the refinery.
  4. [142]
    The profit centre for Resources had the code “5710QNIR” and that for Metals with the code “5710QNIM”.
  5. [143]
    It was accepted at the trial that the 5710 company code used in the SAP system referred to the QN Group and the company code was in the name of QNI, because it owned the SAP licence.  A document used to train finance staff at QNI[70] stated that the “5710QNPL” code was “Queensland Nickel P/ L (main entity - for refinery operations) For entries shared exactly 80/20 between the JV owners”.
  6. [144]
    It seems to have been accepted at the trial that the use of a code for a profit centre did not determine the question of ownership or legal title to assets.  In cross-examination of Packer, it was raised by reference to the “5710QNPL” code:[71]

“Yes, but I just want to make sure we’re not apart on this. The 5710QNPL profit centre is capturing the costs of the refinery and is not capturing solely the costs of Queensland Nickel as the manager?---I see them as the same capacity. If Queensland Nickel is doing things in its capacity as a general manager, isn’t it doing that for the purposes of the refinery?

Well, the question I’ve been trying to test with you all along is that, under this particular profit centre, the whole value, the entire value of the refinery is recorded on the balance sheet, and you’ve agreed a number of times that no one says that Queensland Nickel owns the refinery?---Correct.

So it’s inconsistent with the 5710QNPL profit centre only capturing the costs and assets and liabilities of Queensland Nickel?---That’s right.

And it’s more consistent with that profit centre capturing all of the costs and assets and liabilities of the refinery, broadly speaking?---That’s correct, but it doesn’t necessarily mean that it determines ownership, or legal title.

Either way, does it? It doesn’t determine it either way?---That’s right.”

  1. [145]
    Exhibit 37 was a document entitled Procedure for Profit Centre Balancing.  Its operation was the subject of Packer’s evidence.[72]  She said that it operated with the SAP system, but there was no ability within the SAP system to undo or amend transactions once posted into the SAP system.  What was required was that adjustments would have to be made via secondary entries, which would be done at the end of a month.[73]
  2. [146]
    According to Wolfe the sequence was:[74]
    1. (a)
      in the SAP system the term “profit centre” was used to reflect financial balances within a particular legal entity;
    2. (b)
      when payments were made out of QNI’s account to Mineralogy the SAP system recorded that in the loan account “QNPL to Mineralogy”;
    3. (c)
      there was a procedure document for profit centre balancing after other reports had been run;[75]
    4. (d)
      the SAP accounting system did a monthly profit centre balancing process during which any general ledger account balance which did not have a profit centre was allocated one; and
    5. (e)
      anything that was allocated to the “5710QNPL” profit centre was understood to be split 80:20 when it came time to preparing the statutory financial accounts.
  3. [147]
    Wolfe said:[76]

“There was a general understanding within the finance team – and I think across the side of those who had corporate knowledge – that, under the joint venture agreement, Queensland Nickel Proprietary Limited acted as – as the manager and as agent for Resources and Metals. So references therefore in relation to QNPL were in the financial accounts split 80 per cent/20 per cent Resources and Metals.

I understand that. But are you saying that that to in the account name loan QNPL with Mineralogy, really means loan QNR and QNM with Mineralogy?---That’s my understanding.”

  1. [148]
    He said that there was a limitation in SAP as to the number of letters that were allowed in the general ledger account description.  As a result:[77]

“I’m suggesting that to be properly correct, you’d therefore have to [write] QN R80 per cent, QN M20 per cent. QNPL, in the way that the accounting team treated those entries, was split 80 per cent/20 per cent to the joint venture partners. That’s the understanding.”

  1. [149]
    Wolfe explained that the use of that method to record the accounts was for efficiency in management of accounts.[78]
  2. [150]
    Wolfe explained his own understanding in this way:[79]

“In my understanding, the debts were always with Resources and Metals, so with Queensland Nickel, it was essentially the agent of Resources and Metals.”

  1. [151]
    Wolfe did not give any evidence that he had seen, let alone taken into account, the June 2011 Loan Agreement.

Evidence of Sorenson

  1. [152]
    One important feature of Sorenson’s evidence was that he never saw the loan agreement executed in June 2011.  It follows that he could have had nothing to say as to whether moneys were advanced under it.
  2. [153]
    Sorenson was an accountant at PricewaterhouseCoopers who acted as tax advisor for Palmer from 2007.  In that capacity he liaised with Wolfe (Chief Financial Officer of QNI) and Fitzsimmons (QNI’s Financial Controller).
  3. [154]
    He gave evidence of his understanding that assets within the QNI Group were held by the JVCs, and that income received from the joint venture was accounted for as being income of Metals and Resources.[80]  Because of his view that QNI was operator of the joint venture and therefore “acting merely as a nominee or agent”, it had not filed tax returns.[81]
  4. [155]
    Apart from that his evidence in chief largely concerned the 245-90 loan forgiveness agreements entered into between Metals and Resources.
  5. [156]
    In cross-examination he was shown the loan agreement executed in June 2011, and said he had not seen it before.[82]

Consideration

  1. [157]
    Sorenson’s evidence provided nothing to disturb the inference that the June 2011 Loan Agreement was effective and genuinely recorded an agreement between QNI and Mineralogy, and neither of the JVCs.
  2. [158]
    As for Wolfe, the essence of his evidence was that the QNI Group adopted some accounting practices and conventions which allocated ledger entries to particular profit centres, and thereby to the JVCs.[83]  Based on that it was his understanding that the loans to Mineralogy were allocated to Metals and Resources.
  3. [159]
    However, his evidence did not affect the conclusions that should follow if it should be the case that the June 2011 Loan Agreement was a valid document recording a loan between QNI and Mineralogy, and not between QNI and the JVCs.  In so far as he ventured an opinion as to the legal relationship between QNI and the JVCs, or in what capacity assets were held by QNI,[84] those opinions were irrelevant.
  4. [160]
    The SAP system was an accounting treatment applied by the internal accounting personnel for the joint venture.  As such it was a system to record transactions for accounting purposes, and to record transactions rather than to create them.  It seems plain that it was in operation prior to May 2011.  Furthermore, there was no evidence that in applying it to the loans to Mineralogy anyone paused to consider the legal effect of the Loan Agreement in June 2011, or the legal position of QNI in relation to the funds it was using.  That is, no one gave consideration to whether, in relation to the funds used to make the loans, QNI held them as trustee.  Nor whether the June 2011 Loan Agreement was an agreement into which QNI had entered its capacity as trustee of the funds in the bank account.
  5. [161]
    Once that is understood the significance of the way in which the SAP system allocated balances to particular profit centres ceases to be something that can overcome the legal relationships actually created.

Findings of the primary judge

  1. [162]
    The learned primary judge found that the loan to Mineralogy was made by the JVCs.  In essence her Honour held that to be so because doing so was a means of disbursing the funds to the JVCs’ ultimate owner (Mineralogy) in a tax effective way.  That was done through the several loan forgiveness transactions.[85]
  2. [163]
    However, in doing so the learned primary judge did not bring to account the objective evidence referred to in paragraphs [115] to [137] above.  That evidence compelled the inference that the loan agreement was between QNI as trustee and Mineralogy.  Importantly, that evidence existed long before the first loan forgiveness transaction in 2013.[86]  And, not only had loan funds been distributed to Mineralogy before the first forgiveness agreement, Mineralogy had paid off part of the loan before that time as well: see paragraph [130] above.
  3. [164]
    Wolfe gave evidence that references to “QNPL” in the SAP system, including in the Mineralogy loan account, were only used for the convenience of recording liabilities and expenses of the JVCs.  His evidence was as follows:[87]

“Yes. Thank you. Is it your evidence that the reference to QNPL in that account name was really a reference to Resources and Metals?---There was a general understanding within the finance team – and I think across the side of those who had corporate knowledge – that, under the joint venture agreement, Queensland Nickel Proprietary Limited acted as – as the manager and as agent for Resources and Metals. So references therefore in relation to QNPL were in the financial accounts split 80 per cent/20 per cent Resources and Metals.

I understand that. But are you saying that that to in the account name loan QNPL with Mineralogy, really means loan QNR and QNM with Mineralogy?---That’s my understanding.”

  1. [165]
    That passage highlights the difficulty in accepting what Wolfe said as determinative of the legal status on the loan agreement and its parties.  First, Wolfe did not say that any instructions had been sought or obtained as to the underlying legal relationship under the loan agreement.  Nor had any advice been sought on that issue.
  2. [166]
    Secondly, he referred to the “general understanding” of persons apart from himself.  That evidence could not establish anything as to the true state of affairs on the loan.
  3. [167]
    Thirdly, it contains Wolfe’s irrelevant opinion that under the JVA it was the fact that QNI acted as “manager and as agent” for Resources and Metals.  That could not and did not offer any acceptable evidence as to the true legal status of the Loan Agreement and the legal relationship of the parties to the loan.
  4. [168]
    Fourthly, Wolfe’s opinion as to what the entries under the heading “QNPL” meant was affected by that irrelevant opinion.  The next sentence in his evidence betrays the truth.  Having said what the general understanding was, he said “So references thereforeweresplit …”[88]
  5. [169]
    Fifthly, his subsequent evidence that there was a limit on the characters that could be used in the SAP system did not advance matters.  He added that the limitation was why the accounting team used the “QNPL” reference for convenience.  But that evidence serves to confirm that no one turned their mind to the question of the legal status of the loan parties, nor the legal effect of the Loan Agreement.
  6. [170]
    When the learned primary judge came to deal with the evidence of Sorenson and Wolfe and the legal position of the loans, her Honour said:[89]

“Implicit in the plaintiffs’ submissions is the assertion that Mineralogy believed it was dealing with QNI. It was, on a practical level, as the bank accounts for the joint venture were in QNI’s name. It cannot be ignored that Mineralogy, Metals and Resources had the same ultimate owner of Mr Palmer. Even without Mr Palmer giving evidence in this proceeding, it is a reasonable inference to draw that Mineralogy knew that Metals and Resources were the owners of the joint venture property and that QNI was the operator of the joint venture business on their behalf. It is apparent from the description of the transactions that are subject to the plaintiffs’ claims against Mineralogy that the funds paid to Mineralogy from QNI’s accounts were not for the purpose of the joint venture business. It was a means of disbursing the funds of Metals and Resources to a company with the same ultimate owner which was done by way of loan, as the loan forgiveness provisions of the ITAA that applied to related companies enabled the profits of Metals and Resources to be distributed to Mineralogy in a tax effective way. The loan of funds to Mineralogy by Metals and Resources was a means of disbursement by QNI to Metals and Resources of their entitlement to the funds in the bank accounts operated by QNI for them and were disbursed by being paid to Mineralogy at their request.”

  1. [171]
    Mineralogy may well have known that Resources and Metals were the owners of the “joint venture property” in a general sense.  But that inference does not extend to Mineralogy’s knowledge concerning the legal relationship governing the basis on which the account funds were held.  If it was held on trust, at least in part to meet legitimate joint venture expenses both present and future, any loan had to be with QNI as trustee, not between Mineralogy and the JVCs.
  2. [172]
    The corporate defendants (respondents on the appeal) relied not only on the SAP system of recording, but also on Special Purpose Financial Reports of Resources and Metals.[90]  But that reliance is misplaced when it is realised that: (i) those who prepared those reports did not investigate the legal relationship which underlay the loans; (ii) they reflected the SAP system method of reporting; (iii) they recorded assets and liabilities of both the individual JVCs and QNI, without distinguishing between them; and (iv) they recorded each JVC’s position by including its interest in the joint venture, thereby including assets and liabilities of QNI, and not identifying which company was the creditor for the item noting related company loans.[91]
  3. [173]
    As a consequence, in our respectful view, the conclusion that the loans were made by the JVCs to Mineralogy cannot be sustained.[92]  They were made by QNI as trustee and QNI is entitled to have them repaid.

Disposition

  1. [174]
    The appellant has succeeded in demonstrating that the judgment below should be set aside, and in lieu Mineralogy should be ordered to repay the loans to QNI.  The total of the loans was $102,884,346.26.  However, there may be questions concerning the interest due on those loans, and how the costs of the proceedings below might be dealt with, given that there were certain issues which involved parties other than those on the appeal, and certain issues on which the appellants did not succeed.
  2. [175]
    We propose the following orders:
  1. Appeal allowed.
  2. Set aside order No. 1 made on 3 June 2020.
  3. Judgment be entered for the plaintiffs against the seventh defendant in the sum of $102,884,346.26.
  4. The appellants file any submissions they wish to make, in light of these reasons, as to the further disposition of the appeal, by 4 pm on 16 July 2021.
  5. The respondents file any submissions in response by 4 pm on 16 July 2021.

Footnotes

[1]Parbery & Ors v QNI Metals Pty Ltd & Ors [2020] QSC 143.

[2]In these reasons we shall refer to them individually as Metals and Resources respectively, and collectively as the Joint Venture Companies or JVCs.

[3]Reasons below [94].

[4]AB 3/986, paras [4]-[5]; AB 3/990, para [23]; see also 3/992-993, paras [33]-[34]; 3/996-997, paras [55]-[56]; AB 6/2243 lines 41-43; AB 6/2250 lines 27-38; 6/2251 line 18.

[5]AB 4/1224, paras 296-297.

[6]Metals acquired NRNQ’s interest in the joint venture in January 1995.

[7]To be undertaken either itself or through independent contractors.

[8]This clause has a complementary provision in the Administration Agreement: AA clause 4.2.

[9]Reasons below [41].

[10]Reasons below [92].

[11]Reasons below [88].

[12]Herdegen v Federal Commissioner of Taxation (1988) FCA 699; 84 ALR 271, 281 at [37].

[13]Corumo Holdings Pty Ltd v C Itoh Ltd (1991) 24 NSWLR 370 at 398.

[14]Reasons below [93].

[15]Reasons below [94].

[16]Herdegen v Federal Commissioner of Taxation [1988] FCA 419; 84 ALR 271 at [37] 281.

[17]Herdegen v Federal Commissioner of Taxation at [38] 281.

[18]Corumo Holdings Pty Ltd v C Itoh Ltd (1991) 24 NSWLR 370 at 398 per Meagher JA, Samuels JA concurring.  Emphasis added.

[19]CGU Insurance Ltd v One.Tel Ltd (In liq) (2010) 242 CLR 174; [2010] HCA 26, at 182 [36].

[20]Herdegen [37], [38]; CGU v One.Tel [36]; Underhill and Hayton, Law of Trusts and Trustees, 19th Ed., 2016 at [4.1], [4.2] and [4.4]; Snell’s Equity, 32nd Ed., 2015 at [21-027]-[21-028]; and Scott on Trusts, 4th Ed., 2012, at 77.

[21]That could arise where, for example, one JVC decides not to contribute to a call: see clause 7.2.

[22]See Hardoon v Belilios [1901] AC 118 at 123, approved in Harmer v Federal Commissioner of Taxation (1989) 91 ALR 550 at 558; DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties [1980] 1 NSWLR 510 at 518-519.

[23]Reasons below [19], [48], [52], [54] and [55].

[24]Korda v Australian Executor Trustee (SA) Limited (2015) 255 CLR 62; [2015] HCA 6, [5], [7], [109], [227].

[25]Reasons below [19].

[26]Here that was QNI’s bank account.

[27]Jessup v Queensland Housing Commission [2002] 2 Qd R 270, 274 [12].

[28](2004) 218 CLR 216; [2004] HCA 12, at [84] and [103].

[29]Watson v Scott [2015] QCA 267 at [50]-[51]; Farnham v Pruden [2016] QCA 18 at [23].

[30]Watson v Scott [2015] QCA 267 at [51].

[31]Reasons below [56].

[32]Reasons below [122].

[33]Clause 5.1.

[34]Clauses 4.3 and 4.4(e).

[35]In these reasons, for convenience only, and without intending any disrespect, we intend to use surnames when referring to those involved.

[36]AB 24/9656; 13/4944.

[37]AB 13/5084.

[38]AB 2424, para 54.

[39]AB 13/5084.

[40]AB 13/5084.

[41]AB 13/5084.

[42]AB 13/5097-5098.

[43]AB 7/2690; 1/456; 24/9656.

[44]AB 24/9670.

[45]AB 24/9684.

[46]AB 13/5105; emphasis added.

[47]AB 13/5105; emphasis added.

[48]AB 13/5113; emphasis added.

[49]AB 13/5113.

[50]AB 13/5118; emphasis added.

[51]AB 13/5120; emphasis added.

[52]AB 13/5126; emphasis added.

[53]AB 13/5129; emphasis added.

[54]AB 13/5124; emphasis added.

[55]AB 13/5144; emphasis added.

[56]AB 15/5851; emphasis added.

[57]AB 15/7162; emphasis added.

[58]Examples are at AB 13/5100; 13/5110; 13/5123; 13/5130.  Emphasis added.

[59]An ASIC search confirms that QNI’s registered ABN and ACN are the same as those appearing on those invoices: AB 23/9563.

[60]A search of QNI’s corporate details held by ASIC revealed Basil Ahyick was a director of QNI between 25 March 2008 and 3 April 2012: AB 23/9568.

[61]AB 13/5105; emphasis added.

[62]AB 13/5105; emphasis added.

[63]AB 13/5118.

[64]AB 13/5118, 5119.

[65]Commercial Union Insurance Company of Australia Limited v Ferrcom Pty Ltd [1991] 22 NSWLR 389, 418-419.

[66]Reasons below [83].

[67]Reasons below [96]-[97].

[68]Reasons below [98].

[69]Exhibit 30, dated 22 August 2017 (excluding paras 62-69); Exhibit 31, 19 January 2018 (only paras 19-44); Exhibit 32, 14 February 2018 (only paras 8-18); Exhibit 33, 28 September 2018 (only paras 20-35); Exhibit 34, 6 March 2019 (only paras 15-21 and 25-28); Exhibit 35, 7 June 2019 (except paras 12-16); and Exhibit 36, 28 June 2019.

[70]Exhibit QNM.007.001.0002.

[71]AB 5/1723 lines 5-23.

[72]AB 5/1724-1726.  Packer was an investigating accountant called by the liquidator.

[73]AB 5/1726 lines 4-20.

[74]AB 6/2019 – 2020, and 6/2131 line 28 – 2132 line 20.

[75]Exhibit 37.

[76]AB 6/2113 lines 33-43.

[77]AB 6/2114 lines 5-8.

[78]AB 6/2114 lines 13-16.

[79]AB 6/2115 lines 20-22.

[80]AB 5/1945-1946.

[81]AB 5/1947; 5/1964-1965.

[82]AB 5/1958 lines 42-45.

[83]See, for example, AB 7/2787, para 25(b).

[84]For example: in his affidavits, paragraph 24 on 6/2384, paragraphs 16 and 20 on 8/2785, paragraph 25(b) on AB 7/2787, and paragraph 18 on AB8/3206; and that funds in the QNI bank accounts were maintained by QNI “as agent for each of the Joint venturers”: AB 8/3206, para 18.

[85]Reasons below [121]-[122].

[86]The loan forgives transactions were dated July 2012, April 2014, 30 June 2014 and 30 June 2015.  However, that dated July 2012 does not appear in records until October 2013: AB 15/6285-6286.

[87]AB 6/2113 lines 33-43.

[88]Emphasis added.

[89]Reasons below [121]; emphasis added.

[90]The 2015 Special Purposes Financial Report for Metals was Exhibit QNK.002.008.9330, AB 21/8463; and that for Resources was Exhibit QNK.002.008.9477, AB 21/8498.

[91]See Note 1 for Metals at AB 21/8471, and Note 1 for Resources at AB 21/8507.

[92]Reasons below [122].

Close

Editorial Notes

  • Published Case Name:

    Queensland Nickel Pty Ltd (in liq) v QNI Metals Ltd & Ors

  • Shortened Case Name:

    Queensland Nickel Pty Ltd (in liq) v QNI Metals Ltd

  • MNC:

    [2021] QCA 138

  • Court:

    QCA

  • Judge(s):

    Fraser JA, Morrison JA, Burns J

  • Date:

    25 Jun 2021

  • White Star Case:

    Yes

Appeal Status

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