Australia: Liquidator of a mining company issued with an environmental protection order

Last Updated: 14 June 2017
Article by Damien Butler

IN BRIEF - LIABILITY MAY NOT BE LIMITED TO ASSETS OF COMPANY IN LIQUIDATION

The recent decision of his Honour Justice Jackson of the Queensland Supreme Court in Longley & Ors as liquidators of Linc Energy Limited (In Liquidation) v Department of Environment and Heritage Protection [2017] QSC 53 raises significant issues of the interaction between the Corporations Act 2001 (Cth) and the Environmental Protection Act 1994 (Qld) (EPA), and contains some significant practical implications for liquidators, administrators and receivers.

EPO ISSUED TO LINC ENERGY WHOSE LIQUIDATORS ISSUE DISCLAIMER UNDER SECTION 568(1) OF CORPORATIONS ACT

Linc Energy operated a pilot underground coal gasification project at Chinchilla in Queensland. The company was the proprietor of a parcel of land, and held a Mineral Development Licence (MDL) and a Petroleum Facility Licence (PFL) relating to its operation on the land. In association with the MDL and the PFL, the company held environmental authorities (EAs).

On 15 April 2016, the applicant Liquidators were appointed as administrators to the company. On 13 May 2016, the Department of Environment and Heritage Protection (DEHP) issued an environmental protection order (EPO) to the company in administration as the recipient. On 23 May 2016, the company's creditors resolved that the company be wound up, and the former administrators were appointed as its liquidators.

On 30 June 2016, the Liquidators issued a notice disclaiming the land, site infrastructure, MDL, PFL, and the EAs under section 568(1) of the Corporations Act. Following the disclaimer, the DEHP went into possession of the land and facilities.

DOES DISCLAIMER DISCHARGE COMPANY FROM FUTURE COMPLIANCE WITH EPO, OR MUST LIQUIDATORS CAUSE COMPANY TO COMPLY?

The DEHP contended that, notwithstanding the disclaimer, the company is obliged to comply with the EPO and the Liquidators are obliged to ensure that the company complies with the EPO where there are funds available in the winding up to do so.

In one of those typically convoluted applications arising from the Corporations Act, the Liquidators applied to the Court for directions that they would be justified in:

  • not causing the company to comply with the EPO, and
  • not causing the company to comply with any further EPOs issued by the DEHP

The central question in the dispute was whether the disclaimer had the effect of discharging the company from future compliance with any obligations under the EPO and, if not, whether the liquidators are bound to cause the company to comply.

VALIDITY OF DISCLAIMER AND EPO

There was no significant dispute that the Liquidators' right to disclaim onerous property could be exercised in the context of the land, MDL, PFL and various items of infrastructure situated on the land. There was significant dispute about whether the EAs are property that could be the subject of a disclaimer. Ultimately, his Honour found that he was not required to determine whether the EAs are in fact property because the EPO clearly related to the land and site infrastructure, and due to his findings regarding the basis for the EPO.

His Honour found that the EPO was issued to secure compliance with the general environmental duty under the EPA.

This left a clear inconsistency between the ability of a liquidator to disclaim onerous property under the Corporations Act on the one hand, and the effect of an EPO issued under the EPA on the other, where powers under both appear to have been validly exercised. What, then, is the effect of the disclaimer of the property the subject of the EPO?

STATUTORY INCONSISTENCY DOES NOT INVALIDATE RELEVANT EPA PROVISIONS

After lengthy exposition of interest mainly to lovers of constitutional law, his Honour found that the relevant legislative provisions dealing with inconsistencies between commonwealth and Queensland laws did not operate to invalidate the relevant provisions of the EPA. It is worth noting that both parties advanced arguments that their particular interpretation of the relevant provisions served the public purpose of the legislation, but his Honour declined the opportunity to prefer one public purpose over another.

The outcome of his Honour's reasoning was that the company was not absolved of the obligation to comply with the terms of the EPO by reason of the Liquidators' notice of disclaimer. His Honour then moved to consider the terms of section 493 of the EPA which requires "executive officers" of a corporation to ensure that the corporation complies with the EPA.

His Honour was not minded to accept the Liquidators' submissions that the essential nature of a liquidation is that liquidators are not concerned with or take part in the corporation's management, and accordingly found that Liquidators are executive officers under the EPA. Executive officers commit an offence if they fail to ensure that a corporation complies with the EPA.

LIQUIDATORS SHOULD CONSIDER THE PRINCIPLES WHICH CAN BE DRAWN FROM LINC ENERGY CASE

As this was an application for directions on specific factual grounds, the orders made by his Honour were limited to refusing the directions sought. He specifically did not decide whether EAs are disclaimer property, nor whether the conclusions that he reached would apply to EPOs issued under another ground.

However, some distinct principles can be drawn from the judgment:

  1. Where an EPO is issued to a company to secure compliance with the general environmental duty under section 319 of the EPA, liquidators will not be able to avoid the company's obligation to comply with the EPO by disclaiming the land or infrastructure to which the EPO relates. In this case, the EPO was issued prior to the disclaimer, but his Honour's reasoning implies that the relevant timing of the disclaimer and the issuance of the EPO are irrelevant.
  2. As liquidators are executive officers for the purposes of the EPA, the liquidators are obliged to ensure that the company complies with the EPO.
  3. The liquidators' costs of doing so are expenses of the liquidation ranking in priority to the claims of other creditors of the company under section 556 of the Corporations Act.

CONTINUING UNCERTAINTY FOR LIQUIDATORS, ADMINISTRATORS AND RECEIVERS

While this case was specifically about a company in liquidation, and whether a liquidator is an executive officer, his Honour's reasoning regarding the liability of a liquidator would appear to also apply to administrators, and to receivers of the whole of a company's assets.

By agreement between the parties in this case, any obligation of the liquidator to cause the company to comply with the EPO was limited to the assets of the company. This is a commendable approach by the DEHP, as the potential ramifications of a liquidator having unlimited personal liability under any EPO issued to the company prior to or after the liquidation would most likely lead to a refusal of insolvency practitioners to consent to accepting an appointment to any company with any exposure to environmental harm.

As it is, the priority afforded to the costs and expenses of complying with an EPO must give any insolvency practitioner pause in similar circumstances, as the result of being issued with an EPO could be that those costs would rank in priority to their remuneration, including remuneration incurred in undertaking the work required by compliance with the EPO.

Due to the parties' agreement, the extent of liquidators' personal liability is untested. Nothing in the reasoning of and conclusions reached in this decision imply that a court would limit that liability to the assets of the company.

There are general principles that liquidators are not required to undertake any actions in a liquidation where there are insufficient funds, but whether those principles could apply where a failure to cause the company to comply is an offence is a fascinating, if potentially terrifying, question for liquidators contemplating the liquidation of mining companies and others involved in potentially environmentally damaging industries.

Damien Butler
Restructuring and insolvency
Colin Biggers & Paisley

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Damien Butler
Similar Articles
Relevancy Powered by MondaqAI
Corrs Chambers Westgarth
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Corrs Chambers Westgarth
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions