13
Mar 2017

Palmer Drama

On 8 February 2017 the High Court of Australia delivered its judgment in the matter of Clive Frederick Palmer v Marcus William Ayres, Steven James Parbery and Michael Andrew Owen in their capacities of Liquidators of Queensland Nickel Pty Ltd (in liquidation) & Ors [2017] HCA 5 which many of you will no doubt recall comprised Clive Palmer’s attempt to declare unconstitutional the issue of examination summonses by the Federal Court of Australia.

Background

Administrators were initially appointed to Queensland Nickel Pty Ltd (in liquidation) (QN) in about January 2016, shortly after which time its creditors resolved that QN be wound up in insolvency at the second meeting held pursuant to section 439A of the Act. Special purpose liquidators were later appointed to QN pursuant to sections 511 and 472(1) of the Act, by order of the Federal Court.

Mr Palmer and the other applicants in the proceedings were former directors of QN and had each been issued with examination summonses by the Federal Court of Australia pursuant to section 596A of the Corporations Act (Act), on the application of the special purpose liquidators of QN.

The thrust of Mr Palmer’s (and his co-directors’) argument was that because, as he asserted, 596A had the effect of conferring non-judicial power on the Federal Court’s and on Court’s exercising federal jurisdiction, section 596A was contrary to Chapter III of the Australian Constitution.

The Arguments

Mr  Palmer and the other applicants put forward several arguments as to why section 596A was unconstitutional, including among others: –

  • that the power conferred under section 596A is not incidental or ancillary to the exercise of judicial power; and
  • that the power conferred by 596A is incompatible with or falls outside the judicial power of the Commonwealth.

It was said that because the exercise of power under 596A does not give rise to any matter capable of judicial determination, because for example an examination can be in the nature of an inquiry rather than a particular dispute, then the section does not engage the judicial power of the Commonwealth and is invalid.

The Decision

The Court determined that because section 596A looks forward using the concept of the “examinable affairs” of the corporation to the possibility that information gathered will support a claim for relief against the examinee or some other person, section 596A contemplates such a potential claim as a matter in the constitutional sense and as such, validly engages the judicial power of the Commonwealth when it is exercised.

Given the power conferred by section 596A is in fact the judicial power of the Commonwealth, Mr Palmer’s argument that non-judicial power had been purportedly conferred, failed.  The High Court accordingly dismissed Mr Palmer’s application with costs.

For more information, please contact ERA Legal.