Australia: Queensland environmental laws prevail over Commonwealth Corporations Act

IN BRIEF

The case of Linc Energy Ltd (in Liq); Longley & Ors v Chief Executive, Department of Environment and Heritage Protection [2017] QSC 53 concerned an application to the Supreme Court by the liquidators for Linc Energy Ltd (Linc) who sought, amongst other things, directions in respect of:

In ultimately refusing to grant the directions sought by the liquidators, the Supreme Court held that, despite the disclaimer of onerous property under section 568 of the Corporations Act, the obligations created by the EP Act prevailed and Linc therefore remained liable to comply with the environmental protection order.

The Supreme Court also held that the liquidators fell within the ambit of the definition of an "executive officer" for the purpose of section 493 of the EP Act. The liquidators were therefore obligated to cause Linc to comply with the environmental protection order, with any failure to do so constituting a breach of duty which may result in the liquidators becoming personally responsible and culpable for any consequential offence.

FACTUAL BACKGROUND

Linc was the proprietor and operator of an underground coal gasification facility at Chinchilla in the local government area of Western Downs.

Linc held a mineral development licence granted under the Mineral Resources Act 1989 and a petroleum facility licence under the Petroleum and Gas (Production and Safety) Act 2004, as well as two associated environmental authorities under the EP Act.

On 15 April 2016, Linc resolved to enter voluntary administration after a series of investigations by the DEHP that led to Linc being committed to stand trial for causing serious environmental harm under the EP Act.

On 13 May 2016, the DEHP issued Linc with an Environmental Protection Order.

On 23 May 2016, the creditors of Linc passed a special resolution to have Linc voluntarily wound up and appointed the liquidators.

On 30 June 2016, the liquidators gave a notice of disclaimer of onerous property under section 568 of the Corporations Act to the DEHP, which purported to have the effect of discharging Linc from future compliance with any obligations under the Environmental Protection Order.
The DEHP rejected the purported disclaimer and contended that the liquidators, as "executive officers" of Linc, were obliged to ensure compliance with the Environmental Protection Order.

Accordingly, the liquidators for Linc made an application to the Supreme Court for directions under section 511 of the Corporations Act as to the effect of the disclaimer and their liabilities in respect of the Environmental Protection Order.

THE EFFECT OF THE DISCLAIMER OF ONEROUS PROPERTY IN DISCHARGING LINC FROM COMPLIANCE WITH THE ENVIRONMENTAL PROTECTION ORDER

The dominant issue in dispute was whether the disclaimer of onerous property issued by the liquidators had the effect of discharging Linc from compliance with the environmental protection order. To resolve this issue, the Supreme Court had to reconcile an apparent inconsistency between:

  • section 361 of the EP Act, which creates the offence for contravention of an environmental protection order;
  • sections 568 and 568D of the Corporations Act, which confers the right of a liquidator to disclaim onerous property with the effect of terminating the corporation's rights, interests and liabilities in or in respect of the environmental protection order.

The significance of this inconsistency required the Supreme Court to further consider the interaction between section 109 of the Commonwealth of Australia Constitution Act and section 5G of the Corporations Act, namely in regard to whether the general proposition enunciated in section 109 of the Commonwealth of Australia Constitution Act, being that "when a law of a State is inconsistent with a law of the Commonwealth the latter shall prevail and the former to the extent of the inconsistency be invalid", was displaced by section 5G of the Corporations Act.

In this regard, the Supreme Court held that the EP Act met the conditions set out in section 5G of the Corporations Act and therefore, by virtue of its operation immediately before the commencement of the Corporations Act on 15 July 2001 and despite the provisions of the Corporations (Queensland) Act 1990, was protected from the application of direct inconsistency under section 109 of the Commonwealth of Australia Constitution Act.

In reaching the conclusion that the environmental protection order remained operative despite the disclaimer of onerous property, the Supreme Court conceded that their decision represented a significant departure from the existing, albeit scarce, common law on point. However, the Supreme Court nonetheless felt that such a departure was warranted and justified their decision on the basis of commentary from the High Court of Australia in Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485, which relevantly stated as follows:

"[a]lthough the considerations applying are somewhat different from those applying in the case of Commonwealth legislation, uniformity of decision in the interpretation of uniform national legislation such as the [Corporations] Law is a sufficiently important consideration to require that an intermediate appellate court — and all the more so a single judge — should not depart from an interpretation placed on such legislation by another Australian intermediate appellate court unless convinced that that interpretation is plainly wrong." [emphasis added]

THE "EXECUTIVE OFFICERS" OF A CORPORATION MUST ENSURE THAT THE CORPORATION COMPLIES WITH THE EP ACT

A further issue in dispute was whether the liquidators fell within the ambit of the definition of an "executive officer" for the purpose of section 493 of the EP Act and were therefore obligated to cause Linc to comply with Environmental Protection Order, with any failure to do so constituting a breach of duty which may result in the liquidators becoming personally responsible and culpable for any consequential offence.

In ultimately finding that the imposition by statute of an obligation of a corporation to an "executive officer" does not, of itself, differentiate between obligations incurred before the commencement of the winding up and post-commencement obligations, the Supreme Court held that the liquidators were "executive officers" and were therefore obligated to cause Linc to comply with the Environmental Protection Order.

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.

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Authors
Ian Wright
 
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