Federal Court of Australia

Queensland Nickel Sales Pty Ltd v Park (Liquidators) of Queensland Nickel Pty Ltd (in liq) [2025] FCAFC 129

ORDERS

THE COURT ORDERS THAT:

1.    The notice of appeal in QUD 575 of 2024 stand as a draft notice of appeal in this proceeding.

2.    The application for an extension of time to file the application for leave to appeal is granted.

3.    The application for leave to appeal is refused.

4.    The applicants are to pay the third respondent’s costs of and incidental to the application for leave to appeal.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be dismissed as incompetent.

2.    The appellants are to pay the third respondent’s costs of and incidental to the appeal.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ORDERS

THE COURT ORDERS THAT:

1.    The appeal is dismissed as incompetent.

2.    The appellants are to pay the third respondent’s costs of and incidental to the appeal.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

Introduction

1    On 9 August 2024, the primary judge made an order that the Liquidators of Queensland Nickel Pty Ltd (in liquidation) (QNI) are justified in paying an amount from certain trust assets to Prony Resources New Caledonia (formerly Vale Nouvelle-Calédonie SAS) in the liquidation of QNI (Payment Order): Park, in the matter of Queensland Nickel Pty Ltd (in liq) [2024] FCA 912 (Prony Judgment or PJ).

2    Subsequently, on 25 October 2024, the primary judge relevantly made an order that, subject to a surplus of trust assets being available, the plaintiffs would be justified in paying interest pursuant to s 563B of the Corporations Act 2001 (Cth) (Act) to a certain list of creditors, which included Prony (Interest Order): Park, in the matter of Queensland Nickel Pty Ltd (in liq) (Statutory Interest) [2024] FCA 1300 (Statutory Interest Judgment or SIJ).

3    By an application for an extension of time and leave to appeal, and two notices of appeal, Queensland Nickel Sales Pty Ltd, QNI Resources Pty Ltd and QNI Metals Pty Ltd (Palmer Parties), who were the first, second and third interested persons respectively below, seek to challenge the Payment Order and the Interest Order (together, Orders).

4    Prony appeared at the hearing before the primary judge on 9 August 2024 and made submissions relevant to the Interest Order. Prony is the third respondent in the proceedings before this Court and actively participated in the hearing.

5    On 12 February 2025, the Liquidators, with the consent of the Palmer Parties and Prony, were excused from participating in the proceedings before this Court and submitted to any order that the Court may make, save as to costs.

6    Although the Palmer Parties have filed an application for an extension of time and leave to appeal from the Payment Order, they have not sought leave to appeal the Interest Order. Their primary position is that leave to appeal neither of the Orders is required, as the legal effect of the Orders is to determine substantive rights in respect of the construction of a settlement deed and the orders made necessarily followed from the primary judge’s determinations and findings.

7    Prony submits that leave to appeal both of the Orders is required, and there is insufficient doubt in the primary judge’s reasons to warrant a grant of leave.

8    For the following reasons, we have concluded that both of the Orders were interlocutory, leave to appeal is required and, insofar as leave was sought, leave to appeal should be refused.

Background

Insolvency of QNI

9    On 18 January 2016, QNI entered into voluntary administration.

10    On 20 April 2016, Prony submitted a proof of debt dated 18 April 2016 (Prony proof of debt) in the amount of USD 4,953,649.04 which stated that the debt was due pursuant to a sale agreement between Prony and QNI dated 13 February 2013 (Supply Agreement), which was secured by a Security Deed entered into on 13 July 2015 between QNI and Prony.

11    On 22 April 2016, at a creditors’ meeting of QNI, the creditors resolved that QNI be wound up.

12    On 11 December 2019, QNI, Prony and the Liquidators entered into an agreement headed Settlement Deed and Release (Prony Settlement Deed).

13    On 19 February 2024, the Liquidators admitted the Prony proof of debt in an amount of AUD 4,150,139.40.

Application by Liquidators for directions and orders

14    On 29 May 2024, the Liquidators filed an originating process under s 480 of the Act and s 90-15 and s 90-20(1)(d) of the Insolvency Practice Schedule (Corporations) (IPSC) seeking certain directions and orders (May Application). Relevantly, the Liquidators sought directions that they were or would be justified:

(a)    in making payments from specified trust assets to identified creditors for their admitted proofs of debt, including Prony; and

(b)    subject to a surplus of those trust assets being available, in paying interest pursuant to s 563B of the Act to those identified creditors (in respect of admitted amounts), including Prony.

15    The term Trust Assets was defined in the May Application and in the Orders as:

…the balance of the Judgment Sum that continues to be held by the Second Plaintiff and all assets of the Second Plaintiff held by it as trustee for QNIM and QNIR.”

16    The term Judgment Sum was also defined in the May Application and in the Orders as:

…the sum of $102,884,346.26 paid by Mineralogy Pty Ltd to the Second Plaintiff in satisfaction of the judgment of the Queensland Court of Appeal delivered on 25 June 2021, any further payment made in respect of that sum, and any interest earned by the Second Plaintiff on that sum.

17    On 13 June 2024 and 8 July 2024, the primary judge conducted case management hearings in relation to the May Application.

Determination of the May Application

18    On 9 August 2024, the May Application was again before the primary judge for a case management hearing. On that occasion, the Liquidators sought a direction that they were justified in making certain payments to admitted creditors, including Prony. Prony (without objection) was granted leave to appear and supported the orders sought by the Liquidators.

19    The Palmer Parties opposed the orders sought by the Liquidators. They submitted that (a) on a proper construction of the Prony Settlement Deed, a new charter of rights was created which replaced the rights that had existed under the Supply Agreement and the Security Deed and therefore, the debt the subject of the Prony proof of debt was not a trust debt, and (b) it was a question of construction of the Prony Settlement Deed, but not one which ought to be determined at a case management hearing.

20    On the basis of the principles distilled in Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth (2019) 268 CLR 524; [2019] HCA 20 (Kiefel CJ, Bell, Gageler, Keane, Nettle, Gordon and Edelman JJ), the Palmer Parties submitted that the Court would not give the direction sought that the Liquidators would be justified in paying the amount of Prony’s admitted proof from Trust Assets if the amount to be paid was not a “trust debt”.

21    The Liquidators submitted that the Prony Settlement Deed did not change the characterisation of the debt owed to Prony but rather that it remained a trust debt and the Prony Settlement Deed did not create a new debt. Prony supported that position. Both the Liquidators and Prony submitted that the amount of the Prony proof of debt was reduced to the amount identified in the Prony Settlement Deed, and the Prony proof of debt should be admitted for that reduced amount.

22    The primary judge observed that given the historical position of the Palmer Parties, it was understandable that the Liquidators sought an order that they were justified in paying the amount to Prony from the Trust Assets: PJ [23].

23    Her Honour observed at PJ [29] that cl 3.2 of the Prony Settlement Deed:

… therefore reduces and quantifies the value of the existing debt, which debt was incurred when QNI was trustee of the Trust Assets, for the purposes of admission of the proof of debt in the liquidation; for this reason, it is plain that the Settlement Deed does not create a “new” debt. There was no need for the proper construction of the Settlement Deed to be deferred to another day.

24    The primary judge considered that there was no genuine dispute raised by the Palmer Parties that would justify delaying the consideration of the issue and therefore made the Payment Order at the case management hearing on 9 August 2024: PJ [33]. The Payment Order was made in the following terms:

The Plaintiffs are justified in paying from the Trust Assets the amount of $4,150,139.40 to Prony Resources New Caledonia (formerly Vale Nouvelle-Calédonie SAS), being the amount admitted by the First Plaintiffs in respect of the proof of debt lodged by Prony Resources New Caledonia (formerly Vale Nouvelle-Calédonie SAS) in the liquidation of the Second Plaintiff. on 9 August 2024.

25    The Interest Order, made on 25 October 2024 and the subject of reasons in the Statutory Interest Judgment, is as follows:

2.    Subject to a surplus of Trust Assets being available, the Plaintiffs would be justified in paying interest pursuant to section 563B of the Act:

(a)    to the creditors set out in Annexure A to this order, in respect of the amounts set out therein; and

(b)    to the creditors, in respect of the amounts paid on 14 April 2023, as set out in Annexure B to this order.

26    Prony was included in the list of creditors in Annexure A.

27    The Palmer Parties submitted that “any judicial advice concerning Prony” should be deferred until completion of the appeal process regarding the Prony Judgment: SIJ [21]. The primary judge disagreed and set out her reasons for doing so at SIJ [22]-[24]. Further, the primary judge stated that given the absence of authority on s 563B of the Act and the dispute raised about its application, it was appropriate for judicial advice to be sought by the Liquidators: SIJ [44].

Requirement for leave to appeal

Legal Principles

28    Leave to appeal is required pursuant to s 24(1A) of the Federal Court of Australia Act 1976 (Cth) (FCA Act) if the judgment sought to be appealed is an interlocutory judgment. Although s 4 of the FCA Act provides a definition of “judgment”, it does not define “interlocutory judgment”.

29    The test for determining whether a judgment or order appealed from is final or interlocutory is whether the judgment or order, as made, finally determines the rights of the parties: Australia Bay Seafoods Pty Ltd v Northern Territory of Australia (2022) 295 FCR 443; [2022] FCAFC 180 at [70] (Besanko, Charlesworth and O’Bryan JJ) citing Cubillo v Commonwealth of Australia (2001) 112 FCR 455; [2001] FCA 1213 at [182] (Sackville, Weinberg and Hely JJ), applying Carr v Finance Corp of Australia Ltd (No 1) (1981) 147 CLR 246 at 248 (Gibbs CJ) and 253-254 (Mason J) and Sanofi v Parke Davis Pty Ltd (No 1) (1982) 149 CLR 147 at 153 (Gibbs CJ, Stephen and Mason JJ).

30    The test depends on whether the legal, not the practical, effect of the judgment is final; the legal effect of a judgment is not final where it would be open to a party to bring a second application, even if it would be doomed to fail: Australia Bay Seafoods at [70], citing Carr at 248, 256 and Brouwer v Titan Corp Ltd (1997) 73 FCR 241 at 242.

31    The question of whether a judgment or an order is final or interlocutory is determined by reference to the legal effect of the judgment or order, not by reference to the findings which formed part of the reasons for making the judgment or order: Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (2000) 104 FCR 564; [2000] FCA 1572 at [45] (French J, with whom Beaumont and Finkelstein JJ agreed at [1] and [99], respectively). The question is determined by the nature of the order actually made, not the nature of the application made to the Court: Licul v Corney (1976) 180 CLR 213 at 225 (Gibbs J).

Position of the Palmer Parties

32    The Palmer Parties submit that the only issue of substance is the proper construction of the Prony Settlement Deed. They submit that they only seek leave to appeal “against the possibility” that the Payment Order is interlocutory. However, their primary position is that leave is not required, due to the nature of the primary proceeding and the involvement of the Palmer Parties.

33    The Palmer Parties advance the following submissions in support of that position.

Legal effect of the Orders

34    First, the Palmer Parties submit that the legal effect of the Payment Order was to finally determine substantive rights in respect of the construction of the Prony Settlement Deed. They submit that the Payment Order was not only an order by which the Court authorised the Liquidators to proceed on a certain basis but also had the legal effect of determining the underlying competing entitlements of Prony and the Palmer Parties under the Prony Settlement Deed that was binding on all the parties or interested parties in that dispute. They submit that an issue estoppel would arise in relation to the construction of the Prony Settlement Deed as between the parties and the interested parties, such that even if the Payment Order was determined to be interlocutory, none of the parties or interested parties would be able to re-agitate the issue.

35    The Palmer Parties submit that the fact that the May Application was brought at the end of the administration by the Liquidators in relation to a surplus that was held also supports the proposition that the Orders were final. They seek to rely on the primary judge’s finding that the May Application was being “brought to finalise the liquidation and resolve the remaining issues…”: PJ [7].

36    Neither of the Orders, on their face, amounted to a determination of substantive rights. Each commenced by referring to the Liquidators, as being “justified” in doing a certain thing. That language is the usual way in which external administrators (or trustees) seek directions, by way of judicial advice from a court. They do so in order to obtain protection by way of exoneration from personal liability for acting in accordance with the direction, provided that full and frank disclosure has been made to the court: GB Nathan and Co Pty Ltd (in liq) (1991) 24 NSWLR 674 at 679.

37    Contrary to a submission advanced by the Palmer Parties, the reasoning of the Court of Appeal of the Supreme Court of New South Wales in One T Development Pty Ltd v Krejci [2023] NSWCA 120 (Ward P, Leeming and Mitchelmore JJA) at [36], [40] and [42] is supportive of the proposition that a direction that a liquidator is “justified” in doing a certain thing will usually not finally determine the substantive rights or liabilities of any party. A liquidator is able to depart from acting in accordance with judicial advice, should they so choose. While it might be unusual for a liquidator not to act in accordance with the direction, as the point of a liquidator seeking such advice is for protection from personal liability in acting in a certain way (and in accordance with the advice), a liquidator is not bound to so act. That is the legal, rather than the practical effect, of such an order. Furthermore, such directions do not bind third parties, even if such parties were heard as to whether the direction sought ought to be made. This is because of the nature of such orders.

38    The Palmer Parties also rely on the primary judge’s reasoning at PJ [29] and [31] to submit that the primary judge made a final determination regarding the proper construction of the Prony Settlement Deed. They submit that this reasoning supports the position that the issue was determined inter partes and finally determined, such that when the issue regarding statutory interest was subsequently considered, the construction of the Prony Settlement Deed was not sought to be re-argued.

39    We do not accept the Palmer Parties’ submission that the primary judge’s approach to the question of statutory interest supports the final nature of the Payment Order. Even if the practical effect was that the primary judge did not (or even would not) revisit any suggested construction of the Prony Settlement Deed in determining whether interest should be paid, that does not relevantly inform the nature of the Payment Order.

40    Nor do we accept the Palmer Parties’ submission that the fact that the parties who will be affected by an order have been given the opportunity to be heard is determinative of the nature of the orders made or is a “crucial matter” in determining whether orders affect substantive rights and hence are final. Although it can be accepted that a Court will not determine substantive rights without affording potentially affected parties or persons an opportunity to be heard, it does not then follow that because such persons were heard, the orders made finally determine substantive rights.

41    Even if the Palmer Parties’ submission that there was an issue estoppel as between the parties, such that those parties were bound by the construction of the Prony Settlement Deed, was accepted, such an order can still be interlocutory: Fidelitas Shipping Co Ltd v V/O Exportchleb [1966] 1 QB 630 at 642 (Diplock LJ). As we have observed above, it is the nature of the orders made which must be considered in determining whether they are final or interlocutory.

42    Further, the Palmer Parties seek to characterise the Interest Order as a “conditional grant of advice” and therefore consistent with the character of a final order. We do not accept this submission. It was the granting of advice which was only applicable if there was a surplus of Trust Assets. The conditional nature of the order does not support the view that it was final. It was framed as a direction that the Liquidators would be justified to do certain things, but only in particular circumstances.

Breadth of s 90-15 of the IPSC

43    Second, the Palmer Parties submit that earlier authorities which relied upon the now repealed s 479(3) of the Act sought to confine the language of s 90-15 of the IPSC. They submit that the reading down sought by Prony should not be accepted, as s 90-15 is broader than its predecessor. The Palmer Parties referred to the breadth of the heading to s 90-15, “Court may make orders in relation to external administration”, and the express terms of s 90-15(1). They submit that (a) the power in s 90-15 allows for the making of both final and interlocutory orders, and (b) it would do violence to Parliament’s choice to decide to expand the powers to conclude that these orders were interlocutory, referring in particular to s 90-15(3)(a). The Palmer Parties suggest that if Prony’s submissions were accepted, there would never be a circumstance where s 90-15 of the IPSC could be used to finally determine substantive rights.

44    Contrary to the Prony submissions that both of the Orders were a matter of judicial advice, the Palmer Parties contend that, as compared with s 96 of the Trusts Act 1973 (Qld), the statutory formulation of s 90-15 of the IPSC is quite different, as it (a) is not limited to the power to provide directions concerning any property, and (b) confers a broad power to make any order the Court sees fit in relation to an external administration.

45    The Palmer Parties accept that s 90-15 of the IPSC would include an application for judicial advice, and if that were, in truth, what was being sought instead of the determination of any substantive rights, then in those circumstances, any orders made would be interlocutory. They submit, however, that in the circumstances of this matter, the Orders involved the determination of substantive rights and, as such, were final.

46    Section 90-15 of the IPSC confers a broad discretionary power on the Court, which must be exercised judicially, in all of the relevant circumstances: Sino Group International Ltd v Toddler Kindy Gymabroo Pty Ltd (in liq) (final orders) [2023] FCAFC 119 at [63] (Farrell, Cheeseman and Feutrill JJ). It is broader that its predecessors, the now repealed s 479(3) and s 511 of the Act, and extends to conferring power on the Court, in appropriate circumstances, to finally determine substantive rights and liabilities: One T at [33]-[35]; In the matter of Hawden Property Group Pty Ltd (in liq) [2018] NSWSC 481 at [6]-[8] (Gleeson JA).

47    The fact that the Court is able to determine matters finally on an application under s 90-15 of the IPSC, however, is not determinative of the nature of the order actually made. Just as the nature of the application made to the Court is not determinative, neither will the statutory provision pursuant to which the order is made be determinative of the nature of the order made. In the same vein, s 90-15 also permits an external administrator to seek directions or, as sometimes referred to, judicial advice from the Court, but it does not follow that every order made under this provision will necessarily be in a form of a judicial advice.

2023 Judgment

48    Third, the Palmer Parties submit that the circumstances of this case are relevantly indistinguishable from those in Queensland Nickel Sales Pty Ltd v Park in his capacity as liquidator of Queensland Nickel Pty Ltd (in liq) (2023) 299 FCR 169; [2023] FCAFC 150 (Markovic, Banks-Smith and Halley JJ) (2023 Judgment), where leave to appeal was not required at [9].

49    The principal issues for determination on that appeal are described in the 2023 Judgment at [4] and include whether “the Palmer Parties were precluded by a settlement deed from seeking the declaratory relief they sought before the primary judge”. The principal passage of the 2023 Judgment relied on by the Palmer Parties to contend that leave is likewise not required in the present case is at [9]. Relevantly at [6]-[9] the Full Court said:

B.    Leave to appeal

6    A preliminary issue arose as to whether the Palmer Parties required leave to appeal the primary judge’s decision to provide judicial advice as they had not been joined as parties to that application.

7    The Palmer Parties submitted that leave to appeal was not necessary because they were parties for relief in the proceeding before the primary judge (primary proceeding). They submitted, that if leave was necessary, then leave should be granted because they (a) participated in an unconstrained capacity in the primary proceeding, (b) were served with the originating process and made applications for relief, (c) are the current trustee and beneficiaries of the trust the subject of the primary proceeding, and (d) are persons aggrieved or sufficiently interested in the primary proceeding as they had an interest in the assets of the trust.

8    To the extent leave might be required, the respondents do not oppose such leave being granted.

9    We are satisfied that leave to appeal is not required. The Palmer Parties might not have been formally joined as parties to the judicial advice application but they (a) appeared before the primary judge in the primary proceeding as the second to fourth interested persons, (b) sought relief in the form of declarations relevant to the judicial advice sought by the GPL Parties, and (c) made extensive submissions in support of that relief and in opposition to the application for judicial advice.

50    The matters the subject of the 2023 Judgment relevantly included relief in the form of declarations. It is well established that declarations are generally regarded as final: Monash Health v Singh (2023) 327 IR 196; [2023] FCAFC 166 at [27]–[44] (Katzmann, Snaden and Raper JJ). That is sufficient to distinguish the 2023 Judgment from the issues presently before the Court.

51    Moreover, as was accepted by the Palmer Parties in this proceeding, the argument regarding the character of judicial advice was not raised at the hearing of the appeal which resulted in the 2023 Judgment. The 2023 Judgment, therefore, cannot provide any legal rule in relation to this issue: Coleman v Power (2004) 220 CLR 1; [2004] HCA 39 at [79] (McHugh J); CSR Ltd v Eddy (2005) 226 CLR 1; [2005] HCA 64 at [13] (Gleeson CJ, Gummow and Heydon JJ). It is therefore neither necessary nor appropriate to consider whether the 2023 Judgment is “plainly wrong”: Telstra Corp Ltd v Treloar (2000) 102 FCR 595; [2000] FCA 1170 at [26] (Branson and Finkelstein JJ); NATB v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 133 FCR 506; [2003] FCAFC 292 at [61] (Wilcox, Lindgren and Bennett JJ).

Conclusion – Leave to Appeal is required

52    The Payment Order and the Interest Order were interlocutory orders. Neither finally determined the substantive rights of the parties or the interested parties. The directions were provided to the Liquidators by way of judicial advice. We adopt the succinct statement of Murphy J in Georges v Seaborn International (Trustee); Re Sonray Capital Market Pty Ltd (in liq) [2012] FCA 294 at [27], as follows:

[27]    …… the better view is that directions under s 511 or s 63 operate to offer protection for the liquidator or trustee who complies with such directions, but do not affect or in any way finally determine the substantive rights of creditors and beneficiaries: Re G.B. Nathan & Co Pty Ltd (In liq) (1991) 24 NSWLR 674 at 677-679 per McLelland CJ in Eq; Meadow Springs Fairway Resort Ltd (in liq) v Balanced Securities Ltd (2007) 25 ACLC 1,433 at [48] per French J; and Primary Securities Ltd (recs & mgrs. apptd) (in liq) v Saker (2010) 191 FCR 277. ... The decision is therefore interlocutory and leave to appeal is required.

53    Therefore, leave to appeal is required in relation to each of the Payment Order and the Interest Order.

54    In QUD574/2024, the Palmer Parties have filed an application for an extension of time and leave to appeal as against the Payment Order but have not filed a draft notice of appeal. In QUD575/2024, the Palmer Parties have also filed a notice of appeal against the Payment Order. We will treat this as the relevant draft notice of appeal on a consideration of whether leave should be granted, as sought in QUD574/2024.

55    In QUD715/2024, the Palmer Parties have filed a notice of appeal as against the Interest Order, to the extent that it concerns Prony, but have not sought leave to appeal.

Leave to appeal

Legal principles

56    The principles governing an application for leave to appeal from an interlocutory decision are well established. In general, the tests to be applied are (a) whether, in all the circumstances, the decision is attended with sufficient doubt to warrant its reconsideration, and (b) whether substantial injustice would result if leave were refused, supposing the decision to be wrong: Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398-400 (Sheppard, Burchett and Heerey JJ); Deputy Commissioner of Taxation v Miraki [2022] FCAFC 96, at [5] (Perram, Moshinsky an Hespe JJ). These considerations should not be isolated in separate compartments, as they bear upon each other, so that the degree of doubt sufficient for leave to be granted in one case may be insufficient in another: Decor at 398-399. Ultimately, it is a matter of discretion, which is not constrained by rigid rules: Miraki at [5].

57    The consideration of each of the limbs is cumulative such that leave should not be granted unless each limb is made out: Rawson Finances Pty Ltd v DCT [2010] FCAFC 139 at [4] (Ryan, Stone and Jagot JJ).

58    The Palmer Parties have only sought leave to appeal the Payment Order but have not done so in relation to the Interest Order, despite leave being required.

Decision of the primary judge

59    We have set out the Payment Order above. It was necessary for the primary judge, on giving the judicial advice, to be satisfied that the proposed payment to Prony from Trust Assets was proper. To do so, the primary judge considered the terms of the Prony Settlement Deed. This was to ascertain whether, in this context, it supported the position advanced by the Liquidators that it did not create a new debt but simply reduced the amount of the Prony proof of debt or whether, as contended by the Palmer Parties, it created a new debt.

60    The primary judge commenced with the original position that the debt the subject of the Prony proof of debt arose from the Supply Agreement: PJ [14].

61    Then her Honour observed at PJ [15]:

By a Deed of Settlement and Release dated 11 December 2019 (Settlement Deed) agreed between the plaintiffs and Prony, Prony agreed (inter alia) to reduce the amount claimed in its proof of debt in the liquidation of QNI to $4,150,139.40. In return, the first plaintiffs agreed to admit that proof of debt in the liquidation, and that has occurred.

62    The primary judge set out the position as follows at PJ [24]-[25]:

[24]    The Palmer Parties resisted the order being made on the basis that there needed to be a hearing which would involve the proper construction of the Settlement Deed. By the Settlement Deed, the supply agreement was terminated and, subject to Prony being able to prove its debt in the liquidation of QNI, Prony released and discharged the plaintiffs from claims arising out of, in relation to or in connection with that agreement.

[25]    The Palmer Parties submitted that the Settlement Deed resulted in a “new charter of rights” between the plaintiffs and Prony. Counsel for the Palmer Parties relied upon various clauses of the Deed to support this submission. The Palmer Parties further submitted that the Settlement Deed created a “new” debt, that “new” debt replacing the original debt which had arisen under the supply agreement. They submitted that, as the Settlement Deed was entered into after the replacement of QNI as trustee of the trust, the new debt had been incurred at that time as well, with the consequence that the plaintiffs cannot have recourse to the Trust Assets in paying that debt. In support of this contention, they cited Hillam v Iacullo (2015) 90 NSWLR 422; [2015] NSWCA 196 and Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth (2019) 268 CLR 524; [2019] HCA 20.

63    The primary judge identified cl 3.2 of the Prony Settlement Deed as relevant and concluded (see [23] above) that the construction of that deed supported the Liquidators’ position that the payment proposed was indeed proper: PJ [29].

Sufficient doubt

Submissions of the Palmer Parties

64    The Palmer Parties submit that the original obligation or claim by Prony under the Supply Agreement, secured by the Security Deed, was irrevocably replaced by the Prony Settlement Deed that created a new suite of rights.

65    The Palmer Parties submit that the primary judge erred in determining the proper construction of the Prony Settlement Deed. They submit that this erroneous construction was the underlying basis on which her Honour was satisfied that the course of conduct proposed by the Liquidators was proper.

66    The Palmer Parties submit that the Prony Settlement Deed was part of a suite of new rights and obligations which replaced and discharged the debt Prony allegedly had accrued under the Supply Agreement. This new right, pursuant to the Prony Settlement Deed, arose at a later point in time, in the liquidation of QNI. The Palmer Parties submit that in accordance with the principles of “accord and satisfaction”, where there is an agreement to accept a promise in satisfaction of the cause of action, the original cause of action is discharged from the date the promise is made, the former contract is replaced with the new contract, and the only remedies remaining are under the new agreement.

67    The Palmer Parties submit that the Prony Settlement Deed recorded the “satisfaction” and replaced Prony’s original claim in debt under the Supply Agreement and security interest under the Security Deed, and the “accord” was Prony’s agreement to accept the “satisfaction” (that is the Prony Settlement Deed) in lieu of its claim in debt under the Supply Agreement.

68    The Palmer Parties contend that the primary judge erred on the construction of cl 3.2 of the Prony Settlement Deed. They contend that the Prony Settlement Deed, as is evident by cl 3.2, created a “new” debt and, contrary to the primary judge’s reasons, it did not reduce and quantify the value of the existing debt. They submit that the primary judge’s construction of the Prony Settlement Deed is not open because it is inconsistent with cl 10(b) of the Prony Settlement Deed. They submit that the inconsistency arises because (a) “VNC’s Debt” is defined as the “…total net debt due…” under the Supply Agreement, (b) cl 10(b) provides that nothing in the deed is to be construed as an admission of liability, and therefore, (c) the words “debt due” cannot be construed as an admission of liability by QNI or the Liquidators in relation to a debt in connection with the Supply Agreement and should instead be construed as referring to the debt alleged by Prony. They contend that this is consistent with the Recitals to the Prony Settlement Deed.

69    The Palmer Parties submit that the following specific features of the Prony Settlement Deed support its contention that the Prony Settlement Deed should be construed as replacing and discharging the debt Prony alleged had accrued under the Supply Agreement.

70    First, the Palmer Parties submit that (a) QNI agreeing to pay AUD 2,750,000 to Prony (cl 3.1), (b) QNI relinquishing its claim to certain containers under the Supply Agreement (cl 4.5), (c) the Liquidators agreeing to admit the proof of debt for AUD 4,150,139.40 (cl 3.2), and (d) the parties giving extensive mutual releases and discharges (cl 8), constituted the satisfaction agreed by Prony under the Prony Settlement Deed, in lieu of its claimed indebtedness under the Supply Agreement, secured by the Security Deed, that constituted the accord. That is, prior to the Prony Settlement Deed, the Liquidators had not accepted the proof of debt lodged by Prony but, pursuant to the Prony Settlement Deed, the amount and the security interest claimed were compromised, and the Liquidators agreed to admit the proof for a certain amount.

71    Second, the Palmer Parties rely on the release and discharge of QNI by Prony under the Supply Agreement (cl 8.1(a)) subject to Prony “…being able to prove in the liquidation of QNI in the amount provided for in clause 3.2…”. They submit that cl 3.2, as part of a wider suite of rights, replaces Prony’s accrued rights under the Supply Agreement and the Security Deed with a right exercisable against the Liquidators to be admitted to proof in the liquidation in a reduced amount. They submit that Prony could sue on a breach of that promise, but that would be a claim under the Prony Settlement Deed (cl 8.2 of the Prony Settlement Deed).

72    Third, the Palmer Parties submit that the Prony Settlement Deed provides that nothing was to be construed as an admission of liability by any party in relation to any “claim” (broadly defined) arising out of, or in connection with, the Supply Agreement (cl 10.1(b)). They submit that this is inconsistent with a construction of cl 3.2 that the Liquidators had agreed to admit the existing debt of Prony for a reduced amount, as being a debt arising out of, or in relation to, the Supply Agreement.

73    Fourth, the Palmer Parties submit that the Prony Settlement Deed provides that it contains the entire agreement between the parties and supersedes all other representations, arrangements or agreements (cl 14.12). They submit that cl 3.2, which provides that Prony had agreed to “reduce the amount claimed in its proof of debt made in the liquidation of QNI to AUD 4,150,139.40”, should not be construed as an agreement to reduce the amount claimed in the proof of debt, as the amount that was the subject of the proof of debt had not been accepted by the Liquidators. The Palmer Parties submit that the original proof of debt lodged on the basis of the Supply Agreement was replaced by another proof of debt based on the Prony Settlement Deed. They rely on a letter from the Liquidators dated 19 February 2024, together with a notice admitting the formal proof of debt, which relevantly says:

Take notice that your formal proof of debt or claim of $4,150,139.40 dated 11 December 2019 has been admitted in full.

74    The Palmer Parties submit that it necessarily follows that neither the 2016 proof of debt nor an amended version of the 2016 proof of debt was adjudicated upon. Rather, they submit that it was the Prony Settlement Deed which provided the foundation for the Prony proof of debt.

75    Further, the Palmer Parties submit that s 553 of the Act does not provide any barrier to their construction of the Prony Settlement Deed. They submit that provable debts for the purposes of s 553 of the Act are not only those debts which existed prior to the commencement of the winding up because of the breadth of the words in the section of “circumstances giving rise to”. They submit that the Supply Agreement and Security Deed existed prior to the relevant date and therefore constituted “circumstances giving rise to” prior to the relevant date that led to the subsequent dispute that was compromised by entry into a new agreement, being the Prony Settlement Deed, that created a new suite of rights giving rise to the relevant debt.

76    In support of their submission about the breadth of s 553, the Palmer Parties rely on the following statements by Hayne J in Sons of Gwalia Ltd v Margaretic (2007) 231 CLR 160; [2007] HCA 1 at [172] (Gleeson CJ; Gummow, Kirby, Hayne, Heydon and Crennan JJ; Callinan J dissenting):

In construing the temporal limit that is imposed by s 553, it is important to recognise the generality of other expressions used in s 553 in defining what debts and claims are to be admissible to proof. The section speaks of “all debts payable by, and all claims against, the company”. It amplifies those expressions by the parenthetical reference: “present or future, certain or contingent, ascertained or sounding only in damages”. If the words of the section were not wholly sufficient (as they are) to indicate an intention to define provable claims very widely, the Report of the Australian Law Reform Commission on the General Insolvency Inquiry (the Harmer Report), read with the Explanatory Memorandum for the Bill that became the 1992 Act, puts the point beyond any doubt. The Harmer Report identified a basic aim of insolvency laws as being “to deal comprehensively with all of the debts and liabilities of the insolvent” and said that, “[i]n the case of a company, the aim is to deal with all the claims against a company so that its affairs can be fully wound up or so that it can resume trading” (emphasis added). The Harmer Report concluded that “[t]he categories of claims which are admissible should be as wide as possible so that the financial affairs of the insolvent are dealt with comprehensively”. Otherwise, as the Harmer Report pointed out , “if the creditors are unable to make their claims in the insolvency, they are unable to recover at all (unless they have a basis for action against either directors of the company or a guarantor of the company’s debts or unless the winding up is stayed)”. The Explanatory Memorandum for the Bill that became the 1992 Act said that the reforms embodied in the new provisions of ss 553-553E “reflect[ed] the recommendations of the Harmer Report”.

(Footnotes omitted.)

Consideration

77    The principles governing the construction of a contract are well established. For present purposes, it is sufficient to provide the following distillation of those principles from the decision in Mount Bruce Mining v Wright Prospecting (2015) 256 CLR 104; [2015] HCA 37 at [46]-[52] (French CJ, Nettle and Gordon JJ):

(a)    the rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context and purpose;

(b)    in relation to the terms of a commercial contract, the query, with consideration of the language used, the circumstances addressed and the commercial purpose or objects to be secured by the contract, is to ask what a reasonable business person would have understood the terms to mean;

(c)    if an expression in a contract is unambiguous (that is, having only one meaning), evidence of the surrounding circumstances cannot be adduced to contradict its plain meaning;

(d)    it may be necessary in identifying the commercial purpose or object to facilitate an understanding of the genesis of the transaction;

(e)    however, each of the matters external to the contract, to which regard may be had, is objectively considered; and

(f)    a commercial contract should be construed so as to avoid a commercial nonsense or working a commercial inconvenience.

78    Clause 3 is relevantly the operative clause in the Prony Settlement Deed. It is expressed in clear and unequivocal terms. It provides (noting references to VNC are to Prony):

3.    Parties’ Acknowledgements

Settlement

3.1    In consideration of VNC agreeing to surrender VNC’s Security Interests, QNI agrees to pay the Settlement Amount to VNC out of the Glencore Proceeds on the terms contained in this Deed.

Proof of Debt

3.2    On the satisfaction of the conditions precedent in clause 5.1 of this Deed:

(a)    VNC agrees to reduce the amount claimed in its proof of debt made in the liquidation of QNI to AUD $4,150,139.40; and

(b)    the Liquidators admit VNC’s Debt to proof of debt in the liquidation of QNI in the amount of AUD $4,150,139.40.

79    The following terms in cl 3 are defined in cl 1:

Glencore Proceeds means the funds paid into the Supreme Court of Queensland by Glencore International AG in the Glencore Proceedings.

Settlement Amount means the amount of AUD$2.75m (inclusive of GST if applicable).

VNC’s Debt means the total net debt due from QNI to VNC in respect of supplies made under the Supply Agreement made between the Parties.

VNC’s Security Interests means:

(a)    The Security Interest created by the Security Deed; and

(b)    The ROT Interest.

80    Clause 5.1 provides:

The obligations in clauses 3 and 4 are conditional on the following conditions being satisfied within 2 months and 2 weeks of the Effective Date:

(a)    an order being made in the Glencore Proceedings to the effect that at least an amount equal to the Settlement Amount be paid out from the Glencore Proceeds to the Liquidators (Payment Order);

(b)    an order being made by a Court of competent jurisdiction to the effect that the Liquidators are justified in paying the Settlement Amount to VNC from the Glencore Proceeds (Justification Order);

(c)    the Payment Order and the Justification Order are not the subject of an appeal (Appeal).

81    Clause 3.1 provides that in return for the payment of an amount of AUD 2.75 million, VNC (that is, Prony) would surrender its security interests that had been created by the Security Deed and the “ROT Interest”.

82    Clause 3.2 provides that on satisfaction of the conditions precedent in cl 5.1, Prony agrees to reduce the amount claimed in “its proof of debt made in the liquidation of QNI to AUD 4,150,139.40”, and the Liquidators agree to admit “VNC’s Debt to proof of debt” in the amount of AUD 4,150,139.40. The only proof of debt lodged by Prony in the liquidation of QNI is the Prony proof of debt. Clause 3.2(b) does not provide for, or require, Prony to lodge a new proof of debt in the liquidation of QNI.

83    Moreover, “VNC’s Debt” is defined to be “the total net debt due from QNI to VNC in respect of supplies made under the Supply Agreement …”. Clause 3.2(b) does not create or purport to create any new debt. The debt being compromised pursuant to the terms of the Prony Settlement Deed is a debt that was incurred under the Supply Agreement.

84    The opening words of cl 5.1 provide that the obligations under cl 3.2 on the part of Prony to reduce the amount claimed in the Prony proof of debt and for the Liquidators to admit it to proof in the reduced sum in the liquidation of QNI are prospective. They only arise once the conditions precedent the subject of the clause are satisfied. The conditions precedent are directed to the surrender of the Security Interests by Prony and the payment of the Settlement Amount to Prony. The Security Deed, in accordance with cl 7.1(b), otherwise remained in full force and effect.

85    Similarly, the releases in cl 8.1 are prospective. They only operate on completion of the Settlement Terms in cl 4, and Prony being admitted to prove in the liquidation of QNI in the amount provided for in cl 3.2.

86    Further, in the context of the liquidation of QNI, it would not make any commercial sense for Prony to give up its claim under the Supply Agreement, being a trust debt, in which the circumstances giving rise to it occurred before the relevant date, for a new debt created by the Prony Settlement Deed, in which the circumstances giving rise to it occurred after the relevant date. In addition, in those circumstances, the claim would not be a trust debt as QNI had ceased to be a trustee by that time.

87    The reliance by the Palmer Parties on the statements made by Hayne J in Sons of Gwalia at [172] is misplaced. While it can be accepted that the words of s 553 of the Act are intended to define provable claims very widely and that the category of claims should be as wide as possible, the provision must be read as a whole. Therefore, it is important to consider whether the circumstances giving rise to the debt or claim occurred before the relevant date: Sons of Gwalia at [161], [168]-[170], [173]-[176] (Hayne J, with whom Gummow, Heydon and Crennan JJ agreed at [46], [261] and [265] respectively).

88    The Palmer Parties’ contentions are based on a strained and untenable construction of the Prony Settlement Deed and application of s 553 of the Act. They accept that the Prony proof of debt is a debt that is provable in the liquidation of QNI for the purposes of s 553 on the basis that the Supply Agreement and Security Deed constituted circumstances giving rise to the debt. They submit, however, that the Prony proof of debt cannot be paid out of the assets held by QNI on trust, being the only assets held by QNI, because it constitutes a new debt arising out of a suite of rights created by the Prony Settlement Deed after QNI ceased to be a trustee. If the Prony proof of debt, in truth arose out of the “new suite of rights” created by the Prony Settlement Deed, then it could not rationally be said that the Supply Agreement and Security Deed constituted circumstances giving rise to the debt.

89    As submitted by senior counsel for the Palmer Parties, the only issue of substance on the proposed appeal was the proper construction of the Prony Settlement Deed. Adopting the nomenclature of accord and satisfaction advanced by the Palmer Parties, we do not accept that any new suite of rights was created by the Prony Settlement Deed that replaced Prony’s original claim in debt under the Supply Agreement, secured by the Security Deed. For the reasons advanced above, the Prony Settlement Deed varied the rights and liabilities and mode of performance of a debt that had accrued under the Supply Agreement. It did not, contrary to the submission of the Palmer Parties, “wholly replace an existing agreement” or “substitute an existing agreement and bring it to an end and replace it with a new suite of rights.”

90    We do not accept that there is sufficient doubt in the primary judge’s decision to make the Orders to warrant reconsideration by the Full Court. We agree with the construction of the Prony Settlement Deed accepted by the primary judge. That construction, which was advanced by the Liquidators, was not only plainly open, but was correct and supported the exercise of discretion by the primary judge to give the judicial advice sought. The power exercised by the primary judge under s 90-15 of the IPSC was a broad discretionary power. Being a discretionary decision, it was for the Palmer Parties to demonstrate that the doubt as to the correctness of the primary judge’s decision involved errors or matters of principle of the kind described in House v The King (1936) 55 CLR 499 at 504-505. They have failed to do so.

91    Further, as explained above, leave to appeal should have also been sought in relation to the Interest Order. It was not. The purported appeal as against the Interest Order is therefore incompetent.

Substantial injustice

92    The Palmer Parties submit that they will suffer substantial injustice, should the Payment Order not be set aside, because at a minimum, “millions of dollars” in interest will be paid to Prony on an erroneous basis, which would have otherwise been payable to them. They accept that if their construction of the Prony Settlement Deed was accepted, the position in relation to principal would be unclear, but submit that the interest issue is sufficient to demonstrate the real prejudice to the Palmer Parties, should leave to appeal not be granted.

93    For the reasons essentially advanced by Prony, we do not accept that a decision not to grant leave to appeal the Payment Order would result in substantial injustice, assuming the decision of the primary judge was wrong. As Prony submits, the Palmer Parties’ conduct in the liquidation of QNI is relevant to the issue of substantial injustice. The Palmer Parties had multiple opportunities (which they failed to take) to raise any substantive objection to the Prony proof of debt, including in 2022 and 2024, when the primary judge made orders that the Liquidators be notified of any opposition to payments being made to creditors out of the Trust Assets and that evidence be filed in support of any opposition. While on the latter occasion, the Palmer Parties did oppose the Prony proof of debt, they (a) failed to file any evidence, (b) subsequently wrote to the Liquidators withdrawing their objection, and (c) attempted to tender a cheque in satisfaction of the Prony proof of debt, which was ultimately not accepted by Prony. Further, as Prony submits, the Palmer Parties have nothing more than an indirect financial interest in the Trust Assets.

94    Moreover, the Orders were interlocutory orders in the nature of judicial advice to the Liquidators, not declarations or any other final determination of legal rights. The Liquidators were not bound to act in accordance with the Orders, and the Palmer Parties were not bound by any form of issue estoppel arising from the making of the Orders. Further, and in any event, the Palmer Parties did not even seek leave, as they were required to do, to appeal the Interest Order.

95    Given we have found that the primary judge’s decision is not attended with sufficient doubt to warrant leave to appeal being granted, and no substantial injustice might result to the Palmer Parties if the decision of the primary judge was wrong, leave to appeal must be refused.

Disposition

96    The application for an extension of time to appeal is to be granted, given it was for a relatively short period and was not opposed by Prony, but leave to appeal from the Payment Order is refused, and the appeals from the Payment Order and the Interest Order should be dismissed as incompetent. As they have been unsuccessful, the Palmer Parties should pay Prony’s costs.

Associate:

Dated:    11 September 2025