This decision will be critically important to liquidators and those advising them. It sets out the interaction between disclaimers of property by liquidators under s 568(1) and 568D(1) of the Corporations Act 2001 (Cth) and a company’s obligations under an environmental protection order issued pursuant to the Environmental Protection Act 1994 (the EPA). In summary, Jackson J held that the EPA, by virtue of the terms of the environmental protection order in this case, impaired the liquidators’ right to disclaim the relevant property. His Honour also determined that, on proper interpretation and contrary to the finding in Loo v DPP, the relevant provisions of the EPA were not to be read down as inoperative by reason of inconsistency with the Corporations Act provisions. As a result, the disclaimer by the liquidators did not discharge the company’s future obligations under the relevant environmental protection order.
13 April 2017
This matter concerned whether a liquidator’s exercise of a power of disclaimer pursuant to ss 568(1) and 568D(1) of the Corporations Act 2001 (Cth) operated to relieve Linc Energy Ltd (in liq) (“the company”) from complying with an environmental protection order (“the EPO”) issued under the Environmental Protection Act 1994 (“the EPA”). In the result, Jackson J found that despite the notice of disclaimer the company and its liquidators remained bound by the EPO.
The applicants were the liquidators of the company. . They applied for directions under s 511 of the Corporations Act in relation to the company’s liabilities under the EPA. . Specifically, the applicants sought directions that they would be justified in not causing the company to comply with an EPO issued by the Chief Executive of the Department of Environment & Heritage Protection (“the respondent”) and any further orders the respondent might issue. .
The questions arose from the company’s “pilot underground coal gasification project at Chinchilla”. . The company owned land in respect of which it held a Mineral Development Licence and Petroleum Facility Licence. . The company also held Environmental Authorities (“the EAs”) in respect of the Mineral Development Licence. .
In June 2016, the applicants gave notice, pursuant to s 568(1) of the Corporations Act, disclaiming the land, the licences and the EAs. –. The respondent contended that notwithstanding this the company was obliged to comply with the EPO, and that by virtue of s 493 of the EPA, which requires “executive officers” to ensure that a company complies with the Act, the applicants were required to ensure that the company complied with the EPO. .
The central issue was “whether the disclaimer … had the effect of discharging the company from future compliance with any obligations under the EPO”. .
The parties joined issue in several respects.
1.First, the parties disagreed over the relevant disclaimer property.
2.Second, the parties disputed whether any liabilities under the EPO were “in respect of” the relevant property. .
3.Third, the respondent and the Attorney-General submitted that “even if any of the liabilities under the EPO [were] liabilities in respect of relevant disclaimer property … those liabilities were not terminated by the applicant’s disclaimer”. .
Whether EAs were property
As to the first and second issues, it was accepted that the land and relevant licences could all constitute property capable of being disclaimed. . The parties’ submissions largely focused “on whether either of the EAs was property”. . The applicants submitted that the EAs were property within the meaning of s 568(1) of the Corporations Act because “a holder who satisfies certain conditions is entitled to carry out relevant valuable activity, the [EA] is transferable and it has value”. . In contrast, the respondent submitted that the EAs were not property because they did not confer property rights; rather, an EA “confers a freedom [or Hohfeldian immunity] from liability (for carrying out otherwise prohibited activity)”. .
Jackson J ultimately found that it was unnecessary to consider this issue. –. His Honour concluded, based on the terms of the EPO, that the EPO directly prohibited the disposal of, and obliged the company to maintain, the “site infrastructure” that was the property stated to be disclaimed in the notice of disclaimer. , . The terms of the EPO and the relevant provisions of the EPA therefore had “the effect of impairing the liquidators’ right to disclaim the site infrastructure as disclaimer property”. .
Whether the provisions of the EPA were inconsistent with the Corporations Act
As to the third issue, the applicants argued that if the provisions of the EPA operated to make the company liable to comply with the EPO they were “inconsistent with the termination of that liability by s 568D” of the Corporations Act and, to the extent of the inconsistency, invalid by reason of s 109 of the Constitution. . The respondent and the Attorney-General submitted that even if s 568D of the Corporations Act was directly inconsistent with the relevant section of the EPA, s 5G(11) of the Corporations Act had the effect that s 568D would not operate in Queensland to the extent necessary to ensure that no inconsistency under s 109 of the Constitution arose. .
Jackson J noted s 5G(11) of the Corporations Act provides that a provision of the Act does not operate in a State or Territory “to the extent necessary to ensure that no inconsistency arises” between the provision of the Corporations Act and the provision of the law of the State or Territory. However, the section only applied, among other things, where a State provision operated immediately before the Corporations Act commenced, despite the provision of the Corporations Law of the State, as in force at that time (s 5G(3) Item 1). . Sections 568 and 568D of the Corporations Law, as part of the Corporations Law of Queensland, contained the same provisions as were re-enacted as laws of the Commonwealth in ss 568 and 568D of the Corporations Act.
The “precise question” under s 5G(3) Item 1 was whether the relevant provisions of the EPA, ss 358 and 361, “operated despite ss 568 and 568D” of the Corporations Law of Queensland (as in force before the Corporations Act commenced). .
His Honour considered the general rules as to inconsistency. –. He then considered s 5 of the Corporations (Queensland) Act 1990, which introduced the Corporations Law of Queensland, provided:
“An Act enacted, or an instrument made under an Act, after the commencement of this section is not to be interpreted as amending or repealing, or otherwise altering the effect or operation of, this Act or the applicable provisions of Queensland.” .
His Honour noted that s 5 of this Act did not exclude the possibility of an implied repeal. . Nonetheless, it would have “supported the conclusion that ss 568 and 568D of the Corporations Law were intended to operate so that ss 358 and 361 of the EPA would not repeal or otherwise alter or affect their operation”. . This in turn would have meant that “ss 358 and 361 of the EPA would not have operated despite the provisions of the Corporations Law immediately before the commencement of the [Corporations Act] for the purposes of s 5G(3) Item 1”. . His Honour noted that a similar process of reasoning, based on the equivalent provision in Victoria, was accepted by the Victorian Court of Appeal in Loo v Director of Public Prosecutions (2005) 12 VR 665. .
The effect of this would have been that s 5G of the Corporations Act would not apply, and it would have been necessary to consider whether ss 358 and 361 of the EPA were inoperative by reason of s 109 of the Constitution. . However, the respondent and Attorney-General also relied on s 9 of the Corporations (Ancillary Provisions) Act 2001 (set out at ). The effect of the section was explained at -.
The “ultimate purpose, and effect” of the section was to make certain provisions of State Acts “fall within s 5G(3) Item 1 of the [Corporations Act], so that their operation [would] be protected from the application of direct inconsistency under s 109 of the Constitution by virtue of the other provisions of s 5G, including s 5G(11)”. . Jackson J therefore considered that ss 358 and 361 of the EPA fell within s 5G(3) Item 1. –.
In arriving at this conclusion, his Honour held that Loo v Director of Public Prosecutions was incorrectly decided and “plainly wrong”. –.
In the result, Jackson J directed that the liquidators were not justified in causing the company not to comply with the EPO. .