On 13 April 2017, the Supreme Court held that the liquidators’ disclaimer powers under the Commonwealth Corporations Act 2001 do not prevail over the relevant provisions to comply with environmental obligations under the Qld Environmental Protection Act 1994 (EP Act), including compliance with the requirements contained in an Environmental Protection Order (EPO).
A summary of the facts are as follows:
- On 13 May 2016, the Department of Environment and Heritage Protection (DEHP) issued an EPO to Linc Energy Limited in relation to the company’s pilot UCG project at Chinchilla.
- Generally, the EPO required Linc to conduct a site audit and do basic environmental monitoring to characterise the current state of the site. The EPO also required that Linc not materially alter or dispose of any infrastructure on the site that was needed to ensure compliance with the EPO’s requirements without the DEHP’s prior written approval.
- On 23 May 2016, Linc’s creditors resolved that the company be wound up. Liquidators were accordingly appointed.
- On 30 June 2016, the liquidators gave notice “disclaiming” the Chinchilla land, the mineral development licence, the petroleum facility licence and the environmental authorities. The notice of disclaimer was made under the Commonwealth Corporations Act. Essentially these provisions enable liquidators to disclaim property and thereby be relieved from all liabilities in respect of the disclaimed property.
Notwithstanding the disclaimer, the DEHP contended that Linc was obliged to comply with the EPO and the liquidators were obliged under section 493 of the EP Act to ensure that the company complies with the EPO where there are funds available in the winding up to do so.
The liquidators applied to the Supreme Court of Queensland for directions in relation to the company’s liabilities under the EP Act.
On 13 April 2017, the Supreme Court published its reasons for judgment in Linc Energy Ltd (in liq); Longley & Ors v Chief Executive Department of Environment and Heritage Protection [2017] QSC 53.
Justice Jackson held that an insolvent company’s environmental obligations under the EP Act were unaffected by the liquidators’ disclaimer of related property and resource tenures. Further, the Judge observed that there was “no support” in the text of section 493 of the EP Act to limit the operation of that section by construing the definition of “executive officer” to exclude a liquidator. Nor was there any support for it in the balance of the EP Act or other relevant materials that may be taken into account when interpreting section 493.
The Court decided that complex provisions in the Commonwealth Corporations Act regarding the priority between inconsistent Commonwealth and State legislation operated to suspend the liquidator’s power to disclaim, because the disclaimer power was inconsistent with the specific provisions used to issue the EPO.
The effect of this case is that liquidators are executive officers for the purposes of the EP Act and as such are required to use available funds to cause the company to comply with its environmental obligations.
It is important to note that an appeal in respect of this decision of the Supreme Court was filed on 10 May 2017. However, based on the current state of the law, where an EPO is issued to a company placed into liquidation, liquidators and other insolvency appointees assume the duties and liabilities of an executive officer under the EP Act. They are therefore at a risk of prosecution if they fail to cause the company to comply with environmental obligations under the EP Act.
We await the Court of Appeal’s consideration of the issues. In the meantime, insolvency practitioners who are assisting a company in receipt of an EPO, or who may receive an EPO themselves, should seek legal advice as to their obligations.
For more information or discussion, please contact HopgoodGanim Lawyers' Planning and Environment team.