Linc Energy’s insolvency, environmental and constitutional issues are off to the High Court

The filing of a High Court special leave application[1] from the decision in Linc Energy[2] concerning the rights of liquidators to disclaim environmentally damaged land seemed inevitable in light of the constitutional, environmental and economic issues raised; as to which, see my earlier comments.

The High Court is a more neutral forum to deal with these issues, assuming special leave is granted, and to respond to and balance the vested interests of the Commonwealth and the States.

Briefly, the special leave application disputes the Queensland Court of Appeal’s finding that Queensland’s admission that the land and the licence has been disclaimed, was effectively an acceptance that the disclaimer terminated the liabilities under the environmental protection order; and it disagrees with the decision of Barrett J in HIH[3] as to the interpretation of s 5G(11), or says it can be distinguished. But the wider importance, necessary to attract special leave attention, is said to be the relationship between the Corporations Act and State and Territory laws.  The High Court had touched upon this in WA’s unfortunate foray in Bell[4] but had not decided on that basis.

Related issues

Travelling along with that application are these related issues:

1. The Senate Committee inquiry into the Rehabilitation of mining and resources projects as it relates to Commonwealth responsibilities. This is now to report by 22 August 2018.

2. The reference by COAG to its Resources and Engagement Working Group to provide a report on two issues, the rights of liquidators to disclaim environmentally damaged land; and the AASB’s view on how or whether a company’s mining rehabilitation costs can be recorded as contingent liabilities in the company’s accounts. This is to report by mid-2018.

3. Then there is the reserved decision of the Canadian Supreme Court, on largely the same issue, being the right of provincial law to prevent Grant Thornton as liquidators from disclaiming abandoned oil wells under the federal Bankruptcy and Insolvency Act.  That matter is slightly ahead of us, having already been heard by the Canadian Supreme Court on 15 February 2018, with its decision remaining reserved. That case attracted many interveners, as potentially will Linc Energy.

Comparable claims

The handling of such costs in the context of an insolvency is not realistic, nor productive, and is disruptive of the insolvency process.

That was one reason why shareholder claims were excluded or relegated as provable debts, following the Sons of Gwalia High Court decision.

The related difficulties of an insolvency dealing with long-tail personal injury liabilities of a company, following the Hardie Inquiry, were the subject of a report by CAMAC in 2008, focusing on personal injury claims from exposure to asbestos and like hazards.  Submissions invited CAMAC to also examine unquantified environmental claims in that they involved “very large remediation costs borne by public authorities and/or private landholders”, but that was outside its reference.  The government never acted upon the CAMAC report, difficult as it was, in any event.

But whether good policy comes out of the appeal process is problematic, given the constraints of s 5G of the Corporations Act. Elements of the section have the hallmarks of a concession offered by the Commonwealth back in 2000 when the States’ references of their corporations powers were being negotiated, in order to enable the Corporations Act 2001 to be enacted.

[1] B12/2018, 6 April 2018

[2] Longley v Chief Executive, Department of Environment and Heritage Protection [2018] QCA 32

[3] HIH Casualty and General Insurance Ltd (in liq) v Building Insurers’ Guarantee Corporation [2003] NSWSC 1083

[4] Bell Group NV (in liq) v Western Australia [2016] HCA 21

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