In this rather detailed decision, the court considers the effect of a disclaimer pursuant to s 568(1) of the Corporations Act 2001 (Cth) on liabilities under an Environmental Protection Order (EPO) issued under s 358 of the Environmental Protection Act 1994. That the land had been validly disclaimed was not in issue. The court found that this particular EPO imposed liabilities on the land as the company’s continued enjoyment of the land depended on it meeting its obligations under the EPO. Therefore, once the property had been disclaimed, any liabilities attached to that property were terminated and that included the liabilities under the EPO.
Gotterson and McMurdo JJA and Bond J
9 March 2018
The appellants were the liquidators of Linc. Linc operated a pilot underground coal gasification project on land which it owned at Chinchilla. . The project was operated pursuant to a mineral development licence (“MDL”), a petroleum facility licence (“PFL”), and environmental authorities issued under the Environmental Protection Act 1994. .
Prior to the appointment of the appellants as liquidators, the Chief Executive of the Department of Environment and Heritage Protection (“the respondent”) issued an Environmental Protection Order (“EPO”) directed to Linc pursuant to s 358 of the EPA. . In June 2016, the appellants gave notice disclaiming the land, the MDL, the PFL, and the environmental authorities, pursuant to s 568(1) of the Corporations Act 2001 (Cth). . Consequently, the appellants claimed that Linc was relieved from the requirements of the EPO, because they were “liabilities … in respect of the disclaimer”, within the meaning of s 568D of the Corporations Act. .
Before the primary judge, the appellants sought directions that they would be justified in not causing the company to comply with an EPO issued by the respondent and any further order which might be issued. . In those proceedings (in which the Attorney-General for the State of Queensland intervened), the respondent and the Attorney-General “accepted that the appellants had validly disclaimed the land, including any plant and equipment on the land, and Linc’s MDL”. . They disputed, however, that the environmental authority was property, capable of being disclaimed. .
The primary judge held that Linc remained obliged to meet the requirements of the EPO and that the appellants were obliged to cause Linc to do so. . His Honour reasoned that:
“there was a direct inconsistency between the operation of ss 568 and 568D of the [Corporations Act] and the operation of ss 319 and 358 of the EPA, and it was to be resolved by giving effect to the EPA provisions. The State law would have been invalid to the extent of the inconsistency, except that … s 5G of the [Corporations Act] rolled back the operation of its provisions, so that there was no inconsistency.” .
The Court of Appeal, however, reached the opposite conclusion. McMurdo JA (with whom Gotterson JA agreed, and Bond J generally agreed) held that:
- “[O]nce the land, the plant and equipment and the MDL had been disclaimed, there was no cause, and indeed no entitlement, for Linc to carry out any activity on the site, so that there was no occasion for it to perform the general environmental duty”;
- “Linc was no longer obliged to perform the requirements of the EPO, because they were liabilities in respect of disclaimed property and thereby terminated upon the disclaimer, according to s 568D”;
- “the effects of a valid disclaimer could not be severed from the others, so that s 5G [could not] be applied to roll back the effect of the disclaimer in terminating the liabilities under the EPO”; and
- “[I]n any case, upon its proper construction, s 5G did not affect the operation and constitutional paramountcy of the disclaimer provisions”. .
On the first issue, McMurdo JA recognised that there had been “unambiguous admissions” by the respondents that the land and the MDL had been disclaimed under s 568 of the Corporations Act. .
As for the second issue, his Honour explained that it “must be accepted that … the requirements of an EPO will not have the requisite connection with property, such that its requirements would be liabilities in respect of property under s 568D, in every case”. . The issue was whether this EPO imposed liabilities in respect of the disclaimer property. . McMurdo JA held that the EPO did have this effect. His Honour noted in particular that “Linc’s continued enjoyment of the disclaimed property depended upon meeting the ongoing obligations under the EPO”. .
Turning to the third issue, McMurdo JA noted the appellants’ argument that once the conclusion was reached that the requirements of the EPO were liabilities in respect of property which was disclaimed, there was no further question to be determined, “because the disclaimer of the property necessarily involved the termination of those liabilities” – “there cannot be disclaimers of varying effects”. . His Honour agreed with this submission, describing it as having “force”, and also agreed that “s 5G(11) could be applied in this case only by impugning the disclaimer itself”. . Accordingly, “the primary judge erred in not recognising the effect of the respondents’ admissions”. .
Finally, McMurdo JA considered the potential operation of s 5G of the Corporations Act, only in case it were incorrect to hold the respondents to their admission of a valid disclaimer. –.
In the result, the appeal was allowed. McMurdo JA also considered the appeal by the appellants against the costs order made by the primary judge, pursuant to which the costs of the respondent were to be costs in the liquidation of Linc. . After considering whether the proceeding was adversarial in nature, his Honour held that the interests of justice favoured an order that the Chief Executive bear his own costs. .