RSM Australia

Appeal helps liquidators sleep easy

Phew!


Liquidators breathed a small sigh of relief at the decision delivered on 9 March 2018 to the appeal in to the Linc Energy Ltd (In Liquidation): Longley & Ors v Chief Executive Dept of Environment & Heritage Protection decision which was delivered early in 2017.


The impact of the original decision had liquidators shaking in their shoes as the consequences were that an insolvent company’s costs of compliance with environment obligations under Queensland laws were to be incurred by a liquidator in priority to the liquidator’s own remuneration, employee entitlements and the claims of other unsecured creditors.


The 2017 decision also found that as executive officers of the company, the liquidators were obliged to ensure that Linc complied with an Environmental Protection Order (EPO), where there were funds in the winding up to do so, and that the liquidator’s disclaimer was not effective to enable them to avoid such compliance.


Saved by the bellAppeal helps liquidators rest easy


The court, on appeal overturned that decision, and found that the liquidators were justified in not causing the company in liquidation to comply with the EPO, thereby removing the super priority which had been artificially granted under the EPO by the earlier decision.


More importantly, the personal liability which potentially attached to liquidators in the event of their non-compliance, exposed them to the risk of prosecution.


This decision may well be destined for the High Court, however for the moment liquidators can comfortably take appointments to mining companies, service stations, contaminated sites and the like, something that most likely won’t happen if last week’s decision is overturned on appeal.


We understand that applications have been made to the High Court of Australia for special leave to appeal.


A costly exercise


The costs of remediation can be extreme, and the time taken to remediate can also be extraordinary, so the ability to disclaim in those circumstances means that liquidations won’t be held up for potentially years, and more importantly at the expense of liquidators, employees and other creditors.


Watch this space for more news on the appeal – however in the meantime the liquidators of Australia can rest somewhat easier.



FOR MORE INFORMATION FROM OUR LIQUIDATORS

If you have any concerns or questions related to the obligations of our liquidators, please contact one of our Restructuring and Recovery specialists.



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