In the case of Park, Re Queensland Nickel Pty Ltd (in liq) (Statutory Interest) [2024] FCA 1300, the Court was asked to consider, when claims from creditors are ‘admitted’ by a liquidator within the meaning of the Corporations Act 2001 (Cth) (Act), such claims attract interest under 563B of the Act.
This case was one of many cases that arose from the 2016 liquidation of Queensland Nickel Pty Ltd (QNI) (an entity associated with Clive Palmer) and arose from payments made to creditors pursuant to a deed of settlement between a group of entities (which included Mr Palmer and a number of his companies, collectively known as Resources and Metals) and QNI.
The special purpose liquidators appointed to QNI (the SPLs) applied to the Court for judicial directions under section 90-15 of the Insolvency Practice Schedule (being schedule 2 to the Act) (the IPS) as to whether interest was owed on the amounts that were paid to creditors by Resources and Metals.
General purpose liquidators were appointed to QNI on 22 April 2016, followed by the SPLs, who were appointed by court order to QNI on 18 May 2016. The SPLs received copies of proofs of debt that had been submitted to the general purpose liquidators and the administrators in the external administration of QNI.
The SPLs commenced proceedings against Resources and Metals, alleging that QNI was liable to pay a certain class of creditors (the Creditors) and that Resources and Metals had to indemnify QNI for the payments to the Creditors. As a part of a settlement reached between the parties:
The SPLs sought judicial advice from the Court (under section 90-15 of the IPS) on whether interest should be paid on the Settled Claims from when QNI entered liquidation and until the Settled Claims were paid.
Interest and section 563B – when is a claim ‘admitted’?
The Court considered that, in order for a ‘claim’ to attract interest, it must be an ‘admitted’ claim under section 563B of the Act. The question here was whether the payments made by Resources and Metals to the Creditors were in satisfaction of ‘admitted claims’.
The Court emphasised that the liquidator needed to consciously engage when deciding whether to admit or reject a proof of debt. Downes J quoted the proof of debt procedure as being ‘no less than the standards of a court or judge’, despite there being no real formal procedure to admit claims under the Act or the Corporations Regulations 2001 (Cth). It follows that a liquidator needs to be able to prove ‘conscious engagement’ of a particular debt for it to be adjudicated and admitted.
No adjudication
The applicants argued that by investigating and verifying the Settled Claims, and clarifying whether the amounts claimed were correct in connection with the proceedings against Resources and Metals, the liquidators had ‘admitted’ the Settled Claims within the meaning of section 563B of the Act.
The Court disagreed. In particular:
Accordingly, the payments under the Settled Claims were not in respect of ‘admitted’ debts and did not attract interest under section 563B of the Act. That is, the payments made by Resources and Metals in connection with the settlement were not in respect of ‘admitted’ debts in the liquidation. Rather, they were, in effect, settlements or assessments outside of the adjudication of the statutory proofs of debt process.
This case serves as a useful reminder for liquidators to be aware of their duties in admitting and proving debts in an external administration of a company, which the liquidators in this case did not do.
Further, if proofs of debt to are to be admitted and adjudicated under the Act, liquidators need to consciously engage with and consider the categorisation of a debt, and should advance positive proof when they have done so.
If you have any questions in relation to when a proof of debt is admitted or adjudicated, the experienced Lavan team is here to help.
Thank you to Myles Allen, Solicitor, for his valuable research and assistance with this article.
